<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 7, 1996
REGISTRATION NO. 333-09429
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
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. / /
------------------------
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.
<PAGE>
Prospectus Subject to Completion
Dated October 7, 1996
5,000,000 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 $26.00 and $29.00 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 $ $ $
- -------------------------------------------------------------------------------------------
Total(3) $ $ $
- -------------------------------------------------------------------------------------------
</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 $2,610,000.
(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 $30.9
million in cash. The Sun Group holds franchises for Acura, Audi, BMW, Land
Rover, Lexus and Porsche and, in 1995, had $154.5 million in sales (including
$17.0 million in sales from one Jaguar franchise, which the Company will not
acquire contemporaneously with the Offering).
Pursuant to two stock purchase agreements dated August 5, 1996, the Company will
acquire the Evans Automotive Group (the "Evans Group"), located in Duluth and
Conyers, Georgia, for an aggregate purchase price of $12.0 million in cash. The
Evans Group holds franchises for BMW and Nissan and, in 1995, had $81.7 million
in sales.
Pursuant to a stock purchase agreement dated September 5, 1996, the Company will
acquire Standefer Motor Sales, Inc. ("Standefer Motor"), located in Chattanooga,
Tennessee, for a purchase price of $18.2 million in cash. Standefer Motor holds
one Nissan franchise and, in 1995, had $65.8 million in sales.
Risk Factors
An investment in the Common Stock also involves certain risks associated with
the Company's business and the automotive retailing industry, including the
following: (i) the Company is subject to the influence of the various
Manufacturers whose franchises it holds; (ii) many of the Company's franchise
agreements impose restrictions upon the transferability of the Common Stock;
(iii) the Company's growth depends in large part on its ability to manage
expansion, control costs in its operations and consolidate dealership
acquisitions; (iv) the Company will require substantial additional capital to
acquire automobile dealerships and purchase inventory; (v) unit sales of motor
vehicles historically have been cyclical; (vi) the automotive retailing industry
is a mature industry; (vii) the Company's success depends to a significant
extent on key members of its personnel; (viii) the Company's business is
seasonal; and (ix) the automotive retailing industry is highly competitive. For
a fuller discussion of these and other risk factors, see "Risk Factors."
The Offering
<TABLE>
<S> <C>
Common Stock Offered........................ 5,000,000 shares
Common Stock Outstanding after the Offering 15,028,684 shares
(1)........................................
Use of Proceeds............................. The net proceeds from the Offering are
estimated to be $125.3 million, of which
approximately $62.5 million will be used to
pay the consideration and related transaction
costs for the Contemporaneous Acquisitions,
approximately $43.6 million to repay
outstanding indebtedness and approximately
$15.0 million to fund the expansion of its
automobile finance business. The balance will
be used for working capital and general
corporate purposes, including other potential
acquisitions. See "-- Contemporaneous
Acquisitions" and "Use of Proceeds."
Dividend Policy............................. The Company anticipates that it will not pay
dividends on the Common Stock for the
foreseeable future. See "Dividend Policy."
NYSE Symbol................................. "UAG"
</TABLE>
- ------------------------------
(1) Does not include 873,000 and, assuming an initial public offering price of
$27.50 per share, 254,545 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>
-----------------------------------------------------------------------
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) 18,425 (5,727) 9,404 16,789
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
Pro forma net income (loss) per common share $ .05 $ (.44) $ (.63) $ .55 $ (1.05) $ .46 $ .55
</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 $ 250,847
Current liabilities 117,494 125,825 139,447 128,027 181,317 215,711
Property and equipment, net 8,845 12,072 12,146 11,814 14,609 17,975
Intangible assets, net 22,832 23,018 48,774 22,700 66,131 154,214
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 154,218 170,342 236,027 176,945 311,104 464,438
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 66,709 227,603
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
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% 2.1%
New cars sold at retail 18,608 22,464 25,138 37,358 11,088 17,509 21,180
Used cars sold at retail 7,891 8,340 8,953 22,060 3,674 8,542 11,192
</TABLE>
7
<PAGE>
Risk Factors
Prospective investors should consider carefully the principal risk factors set
forth below as well as the other information set forth in this Prospectus in
evaluating the Company and its business before purchasing the shares of Common
Stock offered hereby.
Influence of Automobile Manufacturers
Each of the Company's dealerships operates pursuant to a franchise agreement
between the applicable automobile manufacturer (or authorized distributor
thereof, referred to herein as the "Manufacturer") and the subsidiary of the
Company that operates such dealership, and the Company is dependent to a
significant extent on its relationship with such Manufacturers. Manufacturers
exercise a great degree of control over dealerships, and the franchise agreement
provides for termination or non-renewal for a variety of causes. The Company
from time to time has been in non-compliance with certain provisions of certain
of its franchise agreements, such as the obligation to obtain prior Manufacturer
approval of changes in dealership management. Actions taken by Manufacturers to
exploit their superior bargaining position could have a material adverse effect
on the Company. For example, Saturn Corporation's refusal to grant its approval
for the Offering and its assertion of an alleged right of first refusal with
respect to one franchise necessitated the Company's transfer of the two Saturn
franchises in its DiFeo Group to an affiliated holding company. See "-- Stock
Ownership/Issuance Limits" and "Business -- Franchise Agreements." Furthermore,
prior Manufacturer approval is required with respect to acquisitions of
automobile dealerships, and a Manufacturer may deny the Company's application to
make an acquisition or seek to impose further restrictions on the Company as a
condition to granting approval of an acquisition. See "-- Risks Associated with
Acquisitions."
Many Manufacturers attempt to measure customers' satisfaction with their sales
and warranty service experiences through systems, which vary from Manufacturer
to Manufacturer, generally known as the consumer satisfaction index ("CSI").
These Manufacturers may use a dealership's CSI scores as a factor in evaluating
applications for additional dealership acquisitions and other matters. Certain
dealerships of the Company have had difficulty from time to time meeting their
Manufacturers' CSI standards. The components of CSI have been modified from time
to time in the past, and there is no assurance that such components will not be
further modified or replaced by different systems in the future. Failure of the
Company's dealerships to comply with the standards imposed by Manufacturers at
any given time may have a material adverse effect on the Company.
The success of each of the Company's franchises is, in large part, dependent
upon the overall success of the applicable Manufacturer. Accordingly, the
success of the Company is linked to the financial condition, management,
marketing, production capabilities and distribution 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
Common Stock (on a fully diluted basis) may be freely tradable and unrestricted
at any time. Upon consummation of the Offering, 32.1% 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 Common 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, Honda
restricts the Company from holding more than seven Honda or more than three
Acura franchises and restricts 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
10
<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
11
<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 23.5%, 18.9% and 12.3% of the
outstanding Common Stock, respectively. As a result, such persons will have the
ability to control the Company and direct its affairs and business. Such
concentration of ownership, as well as certain provisions of the Company's
franchise agreements, its Certificate of Incorporation and the Delaware General
Corporation Law (the "DGCL"), could have the effect of delaying or preventing a
change in control of the Company. These provisions include the stock ownership
limits imposed by various Manufacturers, the classified structure of the
Company's Board of Directors, the Company's ability to issue "blank check"
preferred stock and the "interested stockholder" provisions of Section 203 of
the DGCL. In addition, 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."
Shares Eligible for Future Sale
Upon consummation of the Offering, the Company will have outstanding 15,028,684
shares of Common Stock. All of the 5,000,000 shares of Common Stock to be sold
in the Offering will be eligible for immediate sale in the public
12
<PAGE>
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 254,545 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 66.7% 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 $22.93 per share in net tangible book
value per share. See "Dilution."
13
<PAGE>
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.
14
<PAGE>
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 $30.9 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. The Sun Group holds franchises for
Acura, Audi, BMW, Land Rover, Lexus and Porsche and, in 1995, had $154.5 million
in sales (including $17.0 million in sales from one Jaguar franchise, which the
Company will not acquire contemporaneously with the Offering).
Contemporaneously with the 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. 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 $125.3 million ($144.4 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 $27.50 per share. Of such net proceeds, (i)
approximately $62.5 million will be used to pay the consideration for the
Contemporaneous Acquisitions and related transaction costs, (ii) approximately
$38.6 million will be used to repay all the Company's outstanding Senior Notes
($3.6 million of which represents a required prepayment premium, which will be
reflected in the Company's financial statements as a charge against earnings in
the quarter in which such prepayment occurs), (iii) approximately $5.0 million
will be used to repay all the loans under the Company's revolving credit
agreement, (iv) approximately $15.0 million will be used to fund the expansion
of the Company's automobile finance business and (v) the balance of
approximately $4.2 million will be used for working capital and other general
corporate purposes, including other potential acquisitions. Pending such uses,
the net proceeds will be invested in short-term, investment grade securities or
used to temporarily reduce floor plan indebtedness.
The Senior Notes were issued in several series pursuant to Securities Purchase
Agreements, dated as of September 22, 1995, between the Company and the
investors named therein (the "Securities Purchase Agreements"). They bear
interest at a weighted average interest rate of 11.94% and mature on September
15, 2003. The proceeds of the Senior Notes were used primarily to finance
acquisitions and for investments in Atlantic Finance. The revolving loans were
made under the Credit Agreement, dated February 28, 1996, between the Company
and Morgan Guaranty, 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 $ 8,585
Current portion of long-term debt 2,463 2,825
--------- -----------
Total short-term debt $ 20,048 $ 11,410
--------- -----------
--------- -----------
Long-term debt (excluding current portion):
Senior Notes (2) $ 27,988 $ --
Other 10,706 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, 15,029 shares issued and outstanding, as adjusted (3) 1 1
Non-voting common stock, $0.0001 par value; 1,025 shares authorized,
no shares issued and outstanding, actual; 1,125 shares authorized, no
shares issued and outstanding, as adjusted
Additional paid-in capital 68,319 236,539
Accumulated deficit (1,612) (8,937)
--------- -----------
Total stockholders' equity 66,709 227,603
--------- -----------
Total capitalization $ 122,299 $ 240,025
--------- -----------
--------- -----------
</TABLE>
- ------------------------
(1) As of June 30, 1996, an aggregate of $129.0 million was outstanding under
the Company's floor plan facilities.
(2) As of July 31, 1996, there were Senior Notes outstanding in the aggregate
principal amount of $33.2 million, net of unamortized discount of $1.8 million.
(3) Does not include 873,000 and 254,545 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 $27.50 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 $73.4 million, or approximately $4.57 per
share. This represents an immediate dilution of approximately $22.93 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 $ 27.50
---------
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 4.74
---------
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 4.57
---------
Dilution per share to new investors in the Offering $ 22.93
---------
---------
</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
$27.50 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 68.8% $ 114,430,697 45.4% $ 10.36
New investors in the Offering 5,000,000 31.2 137,500,000 54.6 27.50
----------- --- -------------- ---
Total 16,044,783 100% $ 251,930,697 100%
----------- --- -------------- ---
----------- --- -------------- ---
</TABLE>
- ------------------------------
(1) Does not include 873,000 and, assuming an initial offering price of $27.50
per share, 254,545 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
--------- ---------- --------- --------- --------- ---------- ---------- ---------
--------- ---------- --------- --------- --------- ---------- ---------- ---------
Pro forma net income (loss)
per common share $(.63)
---------
---------
Shares used in computing net
income (loss) per common
share 5,461
---------
---------
<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) 137,145
(9,877) (3)
867 (4)
873 (5)
(1,763) (6)
2,016 (7)
(3,121) (8)
575 (9)
---------
Operating income (loss) 18,425
Related party interest
income (3,039) (4) --
Other income (expense), net (1,050) (10) (891)
1,248 (11)
1,100 (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
---------
---------
Pro forma net income (loss)
per common share $ .55
---------
---------
Shares used in computing net
income (loss) per common
share 11,140(14) 16,601
---------
---------
</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
518
(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
700
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
--------- --------- --------- ---------- ---------- ---------
--------- --------- --------- ---------- ---------- ---------
Pro forma net income per common share $.46
---------
---------
Shares used in computing net income
(loss) per common share 8,479 8,122
---------
---------
<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) 75,561
expenses
(3)
(4)
(5)
(6)
(7)
(9)
---------
Operating income 16,789
Related party interest income (4) --
Other income (expense), net (10) (319)
(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
---------
---------
Pro forma net income per common share $.55
---------
---------
Shares used in computing net income
(loss) per common share (14) 16,601
---------
---------
</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 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 reduction in interest expense at acquired dealerships due to the
repayment of 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 $6,457 for the year ended December 31, 1995
and $(3,351) for the six months ended June 30, 1996, the impact of the
conversion of certain acquired entities from an S corporation to a C corporation
for tax purposes of $2,364 for the year ended December 31, 1995 and $90 for the
six months ended June 30, 1996 and the elimination of the decrease in the
valuation allowance of $745 for the year ended December 31, 1995 since a
deferred tax asset valuation allowance would not have existed at January 1, 1995
if the pro forma transactions detailed above occurred at that date.
(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 $125,265 (1)
11,531 (2)
(11,350) (2)
(31,550) (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 (8,214) (3)
(652) (11)
Intangible assets, net 66,131 -- 1,137 -- -- 9,832 (2)
19,799 (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 $11,742
Accounts receivable 65,061
Inventories 162,141
Deferred income taxes 8,784
Other current assets 3,119
----------
Total current assets 250,847
Property and equipment, net 17,975
Intangible assets, net 154,214
Due from related parties 699
Other assets 9,136
----------
Total Auto Dealership assets 432,871
----------
Auto Finance
Cash and cash equivalents 16,530
Finance assets, net 775
Other assets 14,262
----------
Total Auto Finance assets 31,567
----------
Total assets $464,438
----------
----------
</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 -- -- -- -- (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 (50) (2)
(7,228) (3)
(2) (4)
(1) (5)
Non-voting Common Stock -- -- -- -- 9 (9) (5)
Additional paid-in capital 68,319 1 -- 897 -- 125,265 (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 6,069
Accounts payable 24,523
Accrued expenses 18,330
Current portion of long-term debt 2,825
----------
Total current liabilities 215,711
Long-term debt 12,422
Due to related party 1,191
Deferred income taxes 3,493
----------
Total Auto Dealership liabilities 232,817
----------
Auto Finance
Short-term debt 2,516
Accounts payable and other liabilities 1,502
----------
Total Auto Finance liabilities 4,018
----------
Minority interests subject to repurchase --
Stock purchase warrants --
Commitments and contingent liabilities
Stockholders' equity
Convertible Preferred Stock --
Common Stock 1
Non-voting Common Stock --
Additional paid-in capital 236,539
Retained earnings (accumulated (8,937)
deficit)
----------
Total stockholders' equity 227,603
----------
Total liabilities, minority interests
subject to repurchase, stock
purchase warrants and stockholders'
equity $464,438
----------
----------
</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, payments of long-term debt and the elimination of
historical equity accounts.
(4) Represents the acquisition of Evans Group for cash, including estimated
expenses of $350, and the related preliminary purchase price allocations to
inventories, property and equipment and excess of cost over net assets acquired,
payments of long-term debt and the elimination of historical equity accounts.
(5) Represents the acquisition of Standefer Motor for cash, including estimated
expenses of $350, and the related preliminary price allocation to
inventories, property and equipment and excess of costs over net assets
acquired, payments of long-term debt and the elimination of historical equity
accounts.
(6) Represents the repayment 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
Pro forma 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. 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
30
<PAGE>
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.
31
<PAGE>
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.
32
<PAGE>
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 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.
33
<PAGE>
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.
34
<PAGE>
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.
35
<PAGE>
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
36
<PAGE>
UAG in the future and (iii) using its presence in its local operating markets to
cultivate relationships with additional unaffiliated dealerships. Atlantic
Finance's goal is to ultimately purchase up to 50% of its finance contracts from
non-UAG dealers.
Operating Strategy
EMPHASIZE CUSTOMER SERVICE
Central to UAG's overall philosophy is customer-oriented service designed to
meet the needs of an increasingly sophisticated and demanding automotive
consumer. The Company seeks to provide its customers with a satisfying, pleasant
and informative retailing experience, which entails "one-stop" shopping
convenience, competitive pricing and a sales staff that is knowledgeable about
product offerings and responsive to a customer's particular needs. The Company's
goal is to establish lasting relationships with its customers, which it believes
enhance its reputation in the community and create the opportunity for
significant repeat and referral business.
The quality of customer service provided by dealerships' sales and service
departments are measured by CSI scores, which are derived from data accumulated
by Manufacturers through individual customer surveys. UAG relies on this data to
improve dealership operations and uses it as a factor in determining the
compensation of general managers and sales and service personnel in all its
dealerships. CSI coordinators are responsible for ensuring top quality customer
service at the Company's dealerships. Training of the sales force focuses on
providing skills that improve its interaction with the customer. Additional
training is provided by organizations with superior reputations for customer
service, which the Company has engaged in its ongoing effort to refine the
automobile purchasing experience. The Company's most recent CSI scores indicate
that most of its dealerships ranked at or above the average CSI scores for their
regions.
EMPLOY PROFESSIONAL MANAGEMENT TO IMPROVE OPERATIONS
The Company implements professional management practices throughout its business
operations. To ensure "best practices" are promoted throughout the organization,
the Company has established an Operating Committee comprised of the Company's
Chairman and Chief Executive Officer and select dealership managers, which meets
monthly to share business experiences and ideas. See "Management -- Operating
Committee."
The Company believes it applies financial controls which exceed those required
by Manufacturers and those customarily found at the typical dealership.
Currently, the Company's dealerships' management information systems collect
operational data such as customer records, invoicing, payroll and inventory, as
well as routine accounting information. The dealerships also maintain customer
data bases that track information such as showroom traffic, aftermarket product
purchases and service and parts usage, which are utilized in pursuing follow-on
sales opportunities.
Industry Overview
With more than $660 billion in 1995 sales, automotive retailing is the third
largest domestic industry group in the United States, representing nearly 5% of
U.S. gross domestic product. The industry is highly fragmented and largely
privately held with approximately 22,000 automobile dealerships representing
more than 48,000 franchises. In 1995, U.S. franchised automobile dealers sold
14.8 million new vehicles and 15.7 million used vehicles for sales of
approximately $290 billion and $180 billion, respectively.
Manufacturers originally established franchised dealer networks for the
distribution of their vehicles as single-dealership, single-owner operations. In
return for exclusive distribution rights within specified territories,
Manufacturers exerted significant influence over such matters as a dealer's
location, inventory size and composition and merchandising programs, as well as
the identity of owners and managers. This strict control contributed to the
proliferation of small dealerships, which at their peak in the late 1940s
numbered in excess of 49,000. Several Manufacturers went out of business in the
1950s, and the number of dealerships decreased to 36,000 by 1960.
Significant industry changes took place in the 1970s when the oil embargo forced
dramatic increases in gasoline prices and foreign Manufacturers increased their
penetration of the U.S. market with fuel-efficient, low-cost vehicles. These
competitive pressures offered dealers a platform for stronger negotiating
positions with Manufacturers thereby fostering a change in the traditional
distribution system. Dealers began to add foreign franchises and the phenomenon
of the multi-franchise automobile dealer, or "megadealer," emerged, prompting
both significant acquisition activity
37
<PAGE>
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
45
<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
The Company presently leases or subleases all its facilities and seeks to
structure its acquisitions in a way to avoid the ownership of real property. Set
forth in the table below is certain information relating to the Company's leases
and subleases.
<TABLE>
<CAPTION>
---------------------------------------------------------------------
Occupant Location Use Expiration
- --------------------- --------------------- ---------------------- ----------------------
<S> <C> <C> <C>
DiFeo Group
Fair Chevrolet-Geo 102 Federal Road New and used car October 1, 2010
Danbury, CT sales; general
office; service
Fair 100C Federal Road New and used car October 1, 2010
Hyundai/Isuzu/Suzuki Danbury, CT sales; service
Fair Used Car 102A and 104 Federal Used car sales October 1, 2010
Corner Road
Danbury, CT
DiFeo Lexus 1550 Route 22 East New and used car October 1, 2010
Bound Brook, NJ sales; service
DiFeo Chevrolet-Geo 599 Route 440W New and used car October 1, 2010
& J&F Oldsmobile Jersey City, NJ sales; service
DiFeo Hudson Mall on Route New and used car October 1, 2010
Chrysler-Plymouth/ 440 sales; service
Jeep-Eagle/Hyundai Jersey City, NJ
Hudson Toyota 585 Route 440W New and used car October 1, 2010
Jersey City, NJ sales; service;
general office
DiFeo BMW (a) 301 County Road New and used car sales January 5, 2002,
Tenafly, NJ renewable to 2012
(b) 64 North Summit Service July 1, 2016,
Street renewable to 2036
Tenafly, NJ
Rockland Mitsubishi 75 N. Highland Avenue New and used car October 1, 2010
Nyack, NY sales; service
Rockland Toyota 115 Route 59 New and used car October 1, 2002,
Nyack, NY sales; service renewable to 2012
DiFeo Nissan (a) 977 Communipaw New and used car sales October 1, 2010
Avenue
Jersey City, NJ
(b) 909-921 Service October 1, 2010
Communipaw Ave.
Jersey City, NJ
Fair Honda 102D Federal Road New and used car October 1, 2010
Danbury, CT sales; service
Fair Dodge 100B Federal Road New and used car March 27, 2000,
Danbury, CT sales; service renewable to 2008
Gateway Mitsubishi Route 37 & Batchelor New car sales; service October 1, 2010
St.
Toms River, NJ
Gateway Toyota Route 37 & Batchelor New and used car October 1, 2010
St. sales; service
Toms River, NJ
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------
Occupant Location Use Expiration
- --------------------- --------------------- ---------------------- ----------------------
<S> <C> <C> <C>
Landers Auto
Landers (a) 7800 Alcoa Road New car sales; service August 31, 2016,
Jeep-Eagle/Chrysler- Benton, AR renewable to 2026
Plymouth/Dodge
(b) 7800 Alcoa Road Used car sales
Benton, AR
Landers 17821 I-30 New and used car August 31, 2016,
Oldsmobile-GMC Benton, AR sales; service renewable to 2026
Truck
Landers 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 6725 E. McDowell New and used car October 31, 2016
Porsche/Scottsdale Scottsdale, AZ sales; service
Audi
Scottsdale Acura 6825 E. McDowell New and used car October 31, 2016
Scottdsale, AZ sales; service
Scottsdale Lexus (a) 6905 E. McDowell New and used car October 31, 2016
Scottsdale, AZ sales; service
(b) 6905 E. McDowell New and used car December 31, 2005,
Scottsdale, AZ sales; service renewable to 2010
Land Rover 6925 E. McDowell New and used car August 10, 2000,
Scottsdale Scottsdale, AZ sales; service renewable to 2020
Scottsdale Paint & 1111 N. Miller Auto painting; auto December 15, 1998,
Body Shop Scottsdale, AZ repairs renewable to 2013
Camelback BMW 1144 E. Camelback New and used car February 27, 2005
Scottsdale, AZ sales; service
Land Rover Phoenix 1127 E. Camelback New and used car June 30, 2005,
Phoenix, AZ sales; service renewable to 2010
Evans Group
Evans BMW 3624 Commerce Ave. New and used car March 31, 1998(1)
Duluth, GA sales; service
Evans Nissan 1420 Iris Drive New and used car March 31, 1998(2)
Conyers, GA sales; service
Standefer Motor 2121 Chapman Road New and used car October 31, 2016,
Chattanooga, TN sales; service renewable to 2026
UAG 375 Park Avenue Headquarters June 29, 2000
New York, NY
Atlantic Finance 800 Perinton Hills Offices August 31, 1999
Office Park
Fairport, NY
</TABLE>
- ------------------------------
(1) This lease requires the Company to purchase the property at any time prior
to the expiration date for $2.9 million. The Company expects to designate an
unaffiliated third party to purchase the property prior to such date and
simultaneously enter into a 20-year lease with the Company.
(2) This lease requires the Company to purchase the property prior to the
expiration date for $7.5 million (with a discount if purchased earlier). The
Company expects to designate an unaffiliated third party to purchase the
property prior to such date and simultaneously enter into a 20-year lease with
the Company.
47
<PAGE>
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."
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) 1,729,460 4,382,792
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(5) 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, 1993.
55
<PAGE>
Certain Relationships and Related Transactions
Jules B. Kroll, a director of the Company, is Chairman of Kroll Associates, a
corporate investigation and consulting firm which performs services for the
Company from time to time.
Richard Sinkfield, a director of the Company, is a member of the law firm of
Rogers & Hardin, which represents the Company in connection with various
business transactions.
Pursuant to Stock Purchase Agreements, dated October 15, 1993 (as amended, the
"Equity Facility"), among the Company and the investors named therein (the
"Initial Stockholders"), the Initial Stockholders purchased an aggregate of
8,504,750 shares of Common Stock in multiple closings and were granted
registration rights in respect of such shares. Such registration rights also
apply to an additional 306,346 shares of Common Stock subsequently purchased by
the Initial Stockholders and to 10,000 shares of Common Stock held by Richard
Sinkfield, a director of the Company. See "Shares Eligible for Future Sale."
Among the Initial Stockholders are Trace, Aeneas and AIF, each of which is a
significant stockholder of the Company, Carl Spielvogel, Chairman of the Board
and Chief Executive Officer of the Company, Ezra P. Mager, a former executive
officer of the Company, and Jules Kroll, a director of the Company. See
"Principal Stockholders." In addition, as of June 30, 1996, the Company owes
Trace approximately $1.2 million, which was incurred for working capital
purposes. Such indebtedness is subject to offset against a $2 million guaranty
by Trace of a third party's indebtedness to the Company.
The Company is the tenant under a number of lease agreements with employees of
the Company. All such leases are on terms no less favorable to the Company than
would be obtained in arm's-length negotiations with unaffiliated third parties.
For information regarding the Company's lease agreements, see "Business --
Facilities." In addition, the Company intends to enter into a Broker's Agreement
with an entity controlled by Steven Knappenberger, which provides for payment by
the Company of brokerage fees for assistance in acquiring or opening automobile
dealerships in Arizona, Colorado, New Mexico, Utah and certain counties in
California.
Pursuant to agreements with the holders of minority interests (the "Minority
Interests") in certain of the Company's subsidiaries, immediately prior to the
consummation of the Offering, such holders will exchange (the "Minority
Exchange") their Minority Interests for shares of Common Stock. The
consideration to be paid by the Company for the Minority Interest in the DiFeo
Group will also include (i) an option to purchase up to 54,545 shares of Common
Stock at the public offering price set forth on the cover page of this
Prospectus, (ii) the settlement of certain advances made by the Company for the
benefit of the holders of such Minority Interest for certain business
acquisitions and for working capital for dealerships owned solely by such
holders and (iii) the minority interests owned by the Company in a group of
dealerships in Jersey City, New Jersey. Upon consummation of the Minority
Exchange, all of the Company's 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
Minority to be Issued in
Division Interest Minority 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
56
<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 23.5
375 Park Avenue
New York, New York 10152
Aeneas Venture Corporation........................ 2,843,656 18.9
(an affiliate of Harvard Private Capital)
600 Atlantic Avenue
Boston, Massachusetts 02210
AIF II, L.P....................................... 1,843,656 12.3
c/o Apollo Advisors, L.P.
Two Manhattanville Road
Purchase, New York 10577
Carl Spielvogel (2)............................... 226,118 1.5
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 23.5
Michael R. Eisenson (5)........................... 2,843,656 18.9
John J. Hannan (6)................................ 1,843,656 12.3
Jules Kroll....................................... 104,474 *
Robert H. Nelson (7).............................. 3,544,756 23.6
John M. Sallay (8)................................ 2,843,656 18.9
Richard Sinkfield................................. 10,000 *
All directors and Named Executive Officers, 8,764,500 58.3
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, and 100,000 shares of Preferred Stock, par value $0.0001 per
share. References herein to "Common Stock" refers to the Company's Voting Common
Stock.
Common Stock
As of July 31, 1996, as adjusted to reflect the Preferred Stock Conversion,
there were 8,821,096 shares of Common Stock outstanding, owned of record by 16
stockholders. Holders of Common Stock have no pre-emptive, redemption,
conversion or sinking fund rights. Holders of Common Stock are entitled to one
vote per share on all matters submitted to a vote of stockholders and do not
have any cumulative voting rights. In the event of a liquidation, dissolution,
or winding-up of the Company, the holders of Common Stock are entitled to share
equally and ratably in the assets of the Company, if any, remaining after
provision for the payment of creditors and after payment of any liquidation
preference to holders of Preferred Stock. Upon completion of the Offering, all
outstanding shares of Common Stock will be validly issued, fully paid and
nonassessable. Holders of Common Stock will receive such dividends, if any, as
may be declared by the Board out of funds legally available for such purposes.
See "Dividend Policy."
Non-voting Common Stock
No shares of Non-voting Common Stock have been issued. The Company created the
class of Non-voting Common Stock in connection with the Securities Purchase
Agreements. The investors party to the Securities Purchase Agreements are
subject to various regulations that restrict their ability to own in excess of a
given percentage of the voting power of any company or that impose burdensome
requirements in respect of investments above a given threshold. Accordingly, the
Company granted such investors the right to convert, at any time and from time
to time, any number of shares of Voting Common Stock into an equal number of
shares of Non-voting Common Stock. Each holder of shares of Non-voting Common
Stock is entitled to convert, at any time and from time to time, any number of
such shares into an equal number of shares of Voting Common Stock, provided that
such holder, as a result of such conversion, would not own shares of the
Company's voting securities in excess of the applicable threshold. Holders of
Non-voting Common Stock are not entitled to vote on matters submitted to a vote
of stockholders, except that they are entitled to vote as a separate class on
any modification of the Certificate of Incorporation that adversely affects
their rights. Except with respect to such voting rights, the Voting Common Stock
and the Non-voting Common Stock are equivalent in every respect.
Preferred Stock
Pursuant to the Preferred Stock Conversion, upon the date of this Prospectus,
all 5,227,346 shares of the Company's Class A Preferred Stock, par value $0.0001
per share, outstanding prior to the Offering will convert into an equal number
of shares of Common Stock, and such class of Preferred Stock will be retired.
Upon consummation of the Offering, the Company will be authorized to issue up to
100,000 shares of Preferred Stock. The Board of Directors will have the
authority to issue this Preferred Stock in one or more series and to fix the
rights, preferences, privileges and restrictions thereof, including dividend
rights, dividend rates, conversion rights, voting rights, terms of redemption,
redemption prices, liquidation preferences and the number of shares constituting
any series or the designation of such series, without further vote or action by
the stockholders. The issuance of Preferred Stock may have the effect of
delaying, deferring or preventing a change in control of the Company without
further action by the stockholders and may adversely affect the voting and other
rights of the holders of Common Stock, including the loss of voting control to
others.
Warrants
In connection with the issuance and sale of Senior Notes from time to time
pursuant to the Securities Purchase Agreements, the Company issued warrants (the
"Warrants") to purchase up to 1,016,099 shares of Common Stock, as adjusted
through the date of this Prospectus and subject to further adjustment upon
certain events. The Warrants will become exercisable upon consummation of the
Offering at a nominal exercise price and expire on September 22,
58
<PAGE>
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 Common 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 22.0 million
shares of Common Stock and 100,000 shares of Preferred Stock available for
future issuance without stockholder approval. These additional shares may be
utilized for a variety of corporate purposes, including future public offerings
to raise additional capital or to facilitate corporate acquisitions. The Company
currently does not have any plans to issue additional shares of Common Stock or
Preferred Stock.
One of the effects of the existence of unissued and unreserved Common Stock and
Preferred Stock of the Company may be to enable the Board of Directors to issue
shares to persons supportive of current management, which could render more
difficult or discourage an attempt to obtain control of the Company by means of
a merger, tender offer, proxy contest or otherwise, and thereby protect the
continuity of the Company's management and possibly deprive the stockholders of
opportunities to sell their shares of Common Stock at prices higher than
prevailing market prices. Such additional shares also could be used to dilute
the stock ownership of persons seeking to obtain control of the Company pursuant
to the operation of a shareholders' rights plan or otherwise.
59
<PAGE>
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 15,028,684 shares of Common Stock outstanding immediately after the
consummation of the Offering, the 5,000,000 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 150,287 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 the shares of Common Stock issuable upon
exercise of all such options. Options to purchase up to 54,545 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
61
<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............................................... 5,000,000
---------------
---------------
</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.
Derek Lemke-von Ammon, Frank Dunlevy and Jerome Markowitz are affiliated with
Montgomery Securities and own 2,786, 2,786 and 5,572 shares of Common Stock,
respectively, which shares are entitled to registration rights granted to the
Initial Stockholders in connection with the Equity Facility. See "Shares
Eligible for Future Sale." The aggregate ownership interest in the Company
represented by such shares is less than 1%.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, and to contribute
to payments which the Underwriters may be required to make in respect thereof.
Legal Matters
The validity of the Common Stock offered hereby will be passed upon for the
Company by Willkie Farr & Gallagher, New York, New York. Certain legal matters
in connection with the Offering will be passed upon for the Underwriters by
Cahill Gordon & Reindel (a partnership including a professional corporation),
New York, New York.
Experts
The (i) consolidated financial statements of UAG and its subsidiaries as of
December 31, 1994 and 1995 and for each of the three years in the period ended
December 31, 1995, (ii) financial statements of Landers Auto as of December 31,
1994 and July 31, 1995 and for each of the two years in the period ended
December 31, 1994 and the seven-month period ended July 31, 1995, (iii)
financial statements of Atlanta Toyota as of December 31, 1994 and 1995 and for
each of the three years in the period ended December 31, 1995, (iv) financial
statements of United Nissan as of December 31, 1994 and 1995 and for the period
from inception (April 5, 1993) to December 31, 1993 and each of the two years in
the period ended December 31, 1995, (v) financial statements of Hickman Nissan
as of December 31, 1995 and for the year ended December 31, 1995, (vi) combined
financial statements of the Sun Group as of December 31, 1994 and 1995 and for
each of the three years in the period ended December 31, 1995, (vii) financial
statements of Standefer Motor as of December 31, 1994 and 1995 and for each of
the three years in the period ended December 31, 1995 and (viii) combined
financial statements of the Evans Group as of December 31, 1995 and for the year
ended December 31, 1995 included in this Registration Statement have been
included in reliance upon the reports of Coopers & Lybrand L.L.P., independent
accountants, given on the authority of that Firm as experts in accounting and
auditing.
64
<PAGE>
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
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Pro forma net income (loss) per common share
(see note 2 for historical net income
(loss) per common share) $ .05 $ (.44) $ (.63) $ (1.05) $ .46
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Shares used in computing pro forma net
income (loss) per common share 1,873 3,852 5,461 4,661 8,479
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
UNITED AUTO GROUP, INC.
Consolidated Statements of Stockholders' Equity
(Dollars in thousands)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A
Convertible Preferred
Stock Common Stock
---------------------- ---------------------- Additional Total
Issued Issued Paid-in Accumulated Stockholders'
Shares Amount Shares Amount Capital Deficit Equity
--------- ----------- --------- ----------- ----------- ----------- ----------
Balances, December 31, 1992 0 $ -- 1,281,250 $ 1 $ 15,999 $ (449) $ 15,551
Issuance of stock for cash 1,570,000 1 62,500 -- 14,616 -- 14,617
Distribution to stockholder -- -- -- -- (5,000) -- (5,000)
Net income for 1993 -- -- -- -- -- 96 96
--------- --- --------- --- ----------- ----------- ----------
Balances, December 31, 1993 1,570,000 1 1,343,750 1 25,615 (353) 25,264
Issuance of stock for cash 401,611 -- 185,486 -- 5,212 -- 5,212
Net loss for 1994 -- -- -- -- -- (1,691) (1,691)
--------- --- --------- --- ----------- ----------- ----------
Balances, December 31, 1994 1,971,611 1 1,529,236 1 30,827 (2,044) 28,785
Issuance of stock for cash 1,679,118 -- 1,053,549 -- 23,921 -- 23,921
Net loss for 1995 -- -- -- -- -- (3,466) (3,466)
--------- --- --------- --- ----------- ----------- ----------
Balances, December 31, 1995 3,650,729 1 2,582,785 1 $ 54,748 (5,510) 49,240
Issuance of stock for cash
(Unaudited) 840,325 -- 717,017 -- 13,571 -- 13,571
Net income for the six months
ended June 30, 1996 (Unaudited) -- -- -- -- -- 3,898 3,898
--------- --- --------- --- ----------- ----------- ----------
Balances, June 30, 1996
(Unaudited) 4,491,054 $ 1 3,299,802 $ 1 $ 68,319 $ (1,612) $ 66,709
--------- --- --------- --- ----------- ----------- ----------
--------- --- --------- --- ----------- ----------- ----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
UNITED AUTO GROUP, INC.
Consolidated Statements of Cash Flows
(Dollars in thousands)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
(Unaudited)
Years ended December 31, Six months ended June 30,
----------------------------------------------------- ------------------------------------------
1993 1994 1995 1995 1996
--------- -------------------- -------------------- -------------------- --------------------
Auto Auto Auto Auto Auto Auto Auto Auto Auto
Dealerships Dealerships Finance Dealerships Finance Dealerships Finance Dealerships Finance
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operating
activities:
Net income
(loss) $ 96 $ (1,075) $ (616) $ (2,084) $ (1,382) $ (4,201) $ (701) $ 4,247 $ (349)
Adjustments to
reconcile net
income (loss)
to net cash
used in
operating
activities:
Depreciation
and
amortization 924 2,225 20 2,536 284 1,109 62 1,619 90
Deferred
income tax
benefit -- -- -- (2,374) -- -- -- -- --
Related party
interest
income -- -- -- (3,039) -- -- -- -- --
Accrued
interest
related
parties...... -- -- -- -- -- (1,519) -- (1,548) --
Loss on sale
of interest
in uncombined
investee -- 117 -- 348 -- 253 -- -- --
Equity in
income (loss)
of uncombined
investee -- 2,782 -- 483 -- 255 -- (75) --
Gain on sales
of loans -- -- -- -- (129) -- -- -- (510)
Loans
originated -- -- -- -- (18,769) -- (3,219) -- (44,075)
Loans repaid
or sold -- -- -- -- 11,236 -- 339 -- 37,456
Minority
interests 117 887 -- (366) -- (917) -- 1,734 --
Changes in
operating
assets and
liabilities:
Accounts
receivable (8,315) (7,042) -- (1,524) -- (2,343) -- (16,091) --
Inventories (23,982) (12,417) -- 16,319 -- (2,054) -- (2,494) --
Floor plan
notes payable 22,458 14,874 -- (14,753) -- 3,020 -- 16,651 --
Accounts
payable and
accrued
expenses (4,431) (1,239) 288 5,240 302 4,223 (79) 8,430 910
Other 460 (879) (5) (90) 411 (499) 38 (598) 2,670
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Net cash
provided by
(used in)
operating
activities (12,673) (1,767) (313) 696 (8,047) (2,673) (3,560) 11,875 (3,808)
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Investing
activities:
Purchase of
equipment and
improvements (1,624) (4,675) (562) (1,496) (243) (1,158) (117) (1,916) (153)
Dealership
acquisitions (1,975) (755) -- (19,921) -- (92) -- (20,803) --
Investment in
auto finance
subsidiary -- (907) 907 (4,592) 4,592 (4,125) 4,125 (9,400) 9,400
Funding for
subsequent
acquisition -- -- -- (1,840) -- -- -- -- --
Advances to
related parties (1,775) (5,923) -- (1,496) -- (64) -- 400 --
Investment and
advances to
uncombined
investee -- (4,087) -- (799) -- 102 -- (1,438) --
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Net cash
provided by
(used in)
investing
activities (5,374) (16,347) 345 (30,144) 4,349 (5,337) 4,008 (33,157) 9,247
--------- --------- --------- --------- --------- --------- --------- --------- ---------
</TABLE>
F-7
<PAGE>
UNITED AUTO GROUP, INC.
Consolidated Statements of Cash Flows (Continued)
(Dollars in thousands)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------
(Unaudited)
Six months
ended June
Years ended December 31, 30,
-------------------------------------------------------- ----------
1993 1994 1995 1995
---------- --------------------- --------------------- ----------
Auto Auto Auto Auto Auto Auto
Dealerships Dealerships Finance Dealerships Finance Dealerships
---------- ---------- --------- ---------- --------- ----------
Financing activities:
Proceeds from issuance of stock 15,209 5,450 -- 25,220 -- 10,079
Proceeds from borrowings of long-term debt 2,320 4,299 -- 16,300 -- 410
Deferred financing costs -- -- -- (2,549) -- --
Net borrowings (repayments) of short-term debt 11,023 9,027 -- (3,863) -- (3,129)
Payments of long-term debt and capitalized lease
obligations (2,680) (1,139) -- (2,073) -- (1,063)
Distribution to stockholders and minority interest (5,328) (42) -- -- -- --
Advances from affiliates 6,162 -- -- 359 -- 1,187
Advances to affiliates -- (7,389) -- -- -- --
Borrowings of warehouse credit line -- -- -- -- 14,202 --
Payments of warehouse credit line -- -- -- -- (10,005) --
---------- ---------- --------- ---------- --------- ----------
Net cash provided by financing activities 26,706 10,206 0 33,394 4,197 7,484
---------- ---------- --------- ---------- --------- ----------
Net increase (decrease) in cash and cash
equivalents 8,659 (7,908) 32 3,946 499 (526)
Cash and cash equivalents, beginning of year 0 8,659 0 751 32 751
---------- ---------- --------- ---------- --------- ----------
Cash and cash equivalents, end of year $ 8,659 $ 751 $ 32 $ 4,697 $ 531 $ 225
---------- ---------- --------- ---------- --------- ----------
---------- ---------- --------- ---------- --------- ----------
<CAPTION>
1996
---------------------
Auto Auto Auto
Finance Dealerships Finance
--------- ---------- ---------
Financing activities:
Proceeds from issuance of stock -- 15,986 --
Proceeds from borrowings of long-term debt -- 13,220 --
Deferred financing costs -- (908) --
Net borrowings (repayments) of short-term debt -- (1,118) --
Payments of long-term debt and capitalized lease
obligations -- (1,376) --
Distribution to stockholders and minority interest -- -- --
Advances from affiliates -- 82 --
Advances to affiliates -- -- --
Borrowings of warehouse credit line 45 -- 30,880
Payments of warehouse credit line -- -- (35,320)
--------- ---------- ---------
Net cash provided by financing activities 45 25,886 (4,440)
--------- ---------- ---------
Net increase (decrease) in cash and cash
equivalents 493 4,604 999
Cash and cash equivalents, beginning of year 32 4,697 531
--------- ---------- ---------
Cash and cash equivalents, end of year $ 525 $ 9,301 $ 1,530
--------- ---------- ---------
--------- ---------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-8
<PAGE>
UNITED AUTO GROUP, INC.
(Information related to the six months ended June 30, 1995 and 1996 is
unaudited)
Notes to Consolidated Financial Statements
(Dollars in thousands)
1. Organization:
United Auto Group, Inc. ("UAG" or the "Company") is engaged in the sale of new
and used motor vehicles, finance and insurance products, vehicle service and
parts and aftermarket products. Through its wholly-owned consumer finance
subsidiary, Atlantic Auto Finance Corporation ("AAFC"), UAG also purchases,
sells and services financing contracts on new and used vehicles originated by
both UAG and third party dealerships.
The Company has through its wholly owned subsidiaries, DiFeo Partnership, Inc.
and United Landers, Inc., a 70% interest in the partnerships within the United
DiFeo Automotive Group (the "DiFeo Group") and an 80% interest in the
corporations of Landers Auto Sales, Inc. ("Landers"), respectively. The DiFeo
Group is comprised of twenty-seven automobile dealerships, organized as
partnerships, and a management partnership. These partnerships operate in
Connecticut, New Jersey and New York and are under common ownership, management
and control. Landers is comprised of two automobile dealerships organized as
corporations, operating in Arkansas.
The Company operates dealerships which hold franchise agreements with a number
of automotive manufacturers. In accordance with the individual franchise
agreement, each dealership is subject to certain rights and restrictions typical
of the industry. The ability of the manufacturers to influence the operations of
the dealerships or the loss of a franchise agreement could have a negative
impact on operating results of the Company.
2. Summary of Significant Accounting Policies:
ESTIMATES:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The accounts which require the
use of significant estimates are receivables, inventory, taxes, intangibles and
accrued expenses.
INTERIM FINANCIAL STATEMENTS (UNAUDITED):
The interim unaudited financial statements reflect adjustments, consisting only
of normal recurring accruals, which are, in the opinion of the Company's
management, necessary for a fair presentation of the financial position and
results of operations for the periods presented. Operating results for any
interim period are not necessarily indicative of the results for a full year.
PRINCIPLES OF CONSOLIDATION:
These consolidated financial statements include all significant majority-owned
subsidiaries and reflect the operating results, assets, liabilities and cash
flows for two business segments: auto dealerships and financial services. The
assets and liabilities of the auto dealerships segment are classified as current
or noncurrent and those of the financial services segment are unclassified. All
material accounts and transactions among the consolidated affiliates have been
eliminated. Affiliated companies that are 20% to 50% owned are accounted for
under the equity method of accounting.
RECLASSIFICATIONS:
Certain reclassifications have been made to 1993 and 1994 amounts to conform
them to the 1995 presentation.
CASH AND CASH EQUIVALENTS:
Cash and cash equivalents include all highly-liquid investments that have an
original maturity of three months or less at the date of purchase.
F-9
<PAGE>
UNITED AUTO GROUP, INC.
(Information related to the six months ended June 30, 1995 and 1996 is
unaudited)
Notes to Consolidated Financial Statements (Continued)
(Dollars in thousands)
2. Summary of Significant Accounting Policies: (Continued)
REVENUE RECOGNITION -- AUTO DEALERSHIPS:
Revenue is recognized by the Company when vehicles are delivered to consumers or
motor vehicle service work is performed and parts are delivered. Finance and
insurance revenues are recognized upon the sale of the finance or insurance
contract. An allowance for chargebacks against revenue recognized from Company
originated and sold customer finance contracts is established during the period
in which the related revenue is recognized.
REVENUE RECOGNITION --AUTO FINANCE:
Revenue from finance receivables is recognized over the term of the receivable
using the interest method. Certain loan origination costs are deferred and
amortized over the term of the related receivable as a reduction in financing
revenue. Generally, finance receivables are accumulated by the Company until
they attain a value in excess of $5,000, at which time they are sold into a
commercial paper conduit (loan warehouse facility). An allowance for financing
losses on receivables is provided for the period from the date of purchase to
the date of sale. This allowance is shown as a reduction in receivables held for
sale. Revenue is recognized upon sale to the conduit. Interest is received and
credited to interest income based on the daily principal balance of the
receivables outstanding. Loan servicing fees on receivables sold to the conduit
are recognized as collected.
INVENTORY VALUATION:
Inventories are stated at the lower of cost or market with cost determined by
the following methods:
<TABLE>
<CAPTION>
------------------------
<S> <C>
Inventory Component Valuation Method
- --------------------------- ------------------------
New vehicles Last in, first out
(LIFO)
Used vehicles Specific identification
Parts, accessories and Factory list price
other
</TABLE>
New vehicle and parts inventories are purchased primarily from the related
vehicle manufacturer.
PROPERTY AND EQUIPMENT:
Property and equipment are recorded at cost and depreciated over their estimated
useful lives, primarily using the straight-line method. Useful lives for
purposes of computing depreciation are:
<TABLE>
<S> <C>
Leasehold improvements and -- Economic life or life of
equipment under capital the lease, whichever is
lease shorter.
Equipment, furniture and -- 5 to 7 years
fixtures
</TABLE>
Expenditures for repairs and maintenance which increase the useful life or
substantially increase serviceability of the asset are capitalized. When
equipment is sold or otherwise disposed of, the cost and related accumulated
depreciation are removed from their respective accounts, and any resulting gain
or loss is included in the statement of operations.
INCOME TAXES:
The Company provides for income taxes in accordance with Statement of Financial
Accounting Standard No. 109 "Accounting for Income Taxes" ("SFAS 109") which
requires the asset and liability method of accounting for income taxes. Deferred
tax assets or liabilities are computed based upon the difference between the
financial statement and income tax basis of assets and liabilities using enacted
tax rates. The Company provides a valuation allowance for net deferred tax
assets when it will be more likely than not that taxable income will not be
sufficient to realize such assets.
F-10
<PAGE>
UNITED AUTO GROUP, INC.
(Information related to the six months ended June 30, 1995 and 1996 is
unaudited)
Notes to Consolidated Financial Statements (Continued)
(Dollars in thousands)
2. Summary of Significant Accounting Policies: (Continued)
INTANGIBLE ASSETS:
Intangible assets consists of excess of cost over net assets acquired which is
being amortized on a straight-line basis over the estimated benefit period of 40
years. The Company periodically reviews these costs to assess recoverability.
Losses in value, if any, are charged to operations in the period such losses are
determined to be permanent. Amortization expense was $549, $570 and $904 for the
years ended December 31, 1993, 1994 and 1995.
The Company's policy with respect to assessing whether there has been a
permanent impairment in the value of excess cost over net assets acquired is to
compare the carrying value of a business' excess cost over net assets acquired
with the anticipated undiscounted future cash flows from operating activities of
the business. Factors considered by the Company in performing this assessment
include current operating income, trends and other economic factors.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
The Company's financial instruments consist of cash and cash equivalents and
debt. The carrying amount of these financial instruments approximates fair value
due either to length of maturity or existence of variable interest rates that
approximates prevailing market rates.
LONG-LIVED ASSETS:
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of" ("SFAS
121") requires that long-lived assets be reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of the asset in
question may not be recoverable. SFAS 121 was adopted in 1996 and did not have a
material effect on the Company's results of operations, cash flows or financial
position.
AUTO FINANCE -- FINANCE ASSETS:
All finance receivables are sold principally into a commercial paper conduit
through the issuance of a certificate indicating ownership of the contracts by
CXC Incorporated ("CXC"), a Citibank, N. A. related entity. These contracts are
carried at the lower of their principal balance outstanding or market value.
Market value is estimated based on the characteristics of the finance
receivables held for sale and the terms of recent sales of similar finance
receivables computed by the Company. While finance receivables are being
accumulated for sale into the conduit, they are pledged against a liquidity
credit line with Citibank, N.A. As of December 31, 1995, none of the finance
receivables qualified as impaired, subject to the terms set forth in Statement
of Financial Accounting Standards No. 114, "Accounting by Creditors for
Impairment of a Loan."
The Company is required to hedge each pool of finance receivables sold to CXC.
Swaps against the commercial paper rate have been used to provide protection for
the net yield in each pool as required by CXC. The differential to be paid or
received as interest rates change is included in the calculation of excess
servicing and amortized over the life of the pool. The notional amounts of
outstanding hedges were $0 and $10,987 at December 31, 1994 and 1995,
respectively. There were no swap agreements outstanding as of December 31, 1994.
The fair value of interest rate swap agreements represented an unrecorded
liability of $170 as of December 31, 1995.
The Company has credit and interest rate risk on finance receivables held for
sale. The Company has a program of credit review prior to final approval of
specific loans and maintains reserves as appropriate. Interest rate risk is
mitigated by the short period of time that receivables are held.
NET INCOME (LOSS) AND PRO FORMA NET INCOME (LOSS) PER COMMON SHARE:
The computations of historical net income (loss) per share are based on the
weighted average number of common shares, the weighted average number of
preferred shares and warrants outstanding to the extent dilutive.
F-11
<PAGE>
UNITED AUTO GROUP, INC.
(Information related to the six months ended June 30, 1995 and 1996 is
unaudited)
Notes to Consolidated Financial Statements (Continued)
(Dollars in thousands)
2. Summary of Significant Accounting Policies: (Continued)
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 pro forma 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 $27.50 per share.
Historical net income (loss) per common share data 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>
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
Pro forma 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
Pro forma 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 pro forma 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 pro forma 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.................................................... $ 59,483
NASD Fees............................................................... 17,750
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.................................................. 5,767
----------
Total........................................................... $2,610,000
----------
----------
</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.
**10.2.1.1 Honda Automobile Dealer Sales and Service Agreement, dated October 5, 1995, between
American Honda Motor Co. Inc. and Danbury Auto Partnership (standard provisions are in
Exhibit 10.2.1.2 hereto).
**10.2.1.2 American Honda Motor Co. Standard Provisions.
*10.2.2.1 Lexus Dealer Agreement, dated October 5, 1992, between Lexus, a division of Toyota Motor
Sales, U.S.A., Inc. and Somerset Motors Partnership (standard provisions are in Exhibit
10.2.2.2 hereto).
*10.2.2.2 Lexus Dealer Agreement Standard Provisions.
*10.2.3.1 Mitsubishi Motor Sales of America, Inc. Dealer Sales and Service Agreement, dated August
29, 1994, between Mitsubishi Motor Sales of America, Inc. and Rockland Motors Partnership,
as amended August 20, 1996 (standard provisions are in Exhibit 10.2.3.2 hereto).
*10.2.3.2 Mitsubishi Motor Sales of America, Inc. Dealer Sales and Service Agreement Standard
Provisions.
10.2.4.1 BMW of North America, Inc. Dealer Agreement, dated January 1, 1994, between BMW of North
America, Inc. and DiFeo BMW Partnership, as amended July 25, 1996 (standard provisions are
in Exhibit 10.2.4.2 hereto).
10.2.4.2 BMW of North America, Inc. Dealer Standard Provisions Applicable to Dealer Agreement.
10.2.5.1 Term Dealer Sales and Service Agreement, dated July 3, 1996, between American Suzuki Motor
Corporation and Fair Hyundai Partnership, as amended September 6, 1996 (standard
provisions are in Exhibit 10.2.5.2)
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
No. Description
- ------------ ------------------------------------------------------------------------------------------
10.2.5.2 Suzuki Dealer Sales and Service Agreement Standard Provisions.
<C> <S> <C>
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).
*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.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
No. Description
- ------------ ------------------------------------------------------------------------------------------
*10.3.1 Receivables Purchase Agreement, dated as of June 28, 1995, between Atlantic Auto Funding
Corporation and Atlantic Auto Finance Corporation.
<C> <S> <C>
*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).
*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).
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
No. Description
- ------------ ------------------------------------------------------------------------------------------
*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).
<C> <S> <C>
*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).
*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).
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
No. Description
- ------------ ------------------------------------------------------------------------------------------
*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.
<C> <S> <C>
**10.7.2 Nissan Dealer Term Sales and Service Agreement, between the Nissan Division of Nissan
Motor Corporation in U.S.A. and Peachtree Nissan, Inc. (substantially similar to Exhibit
10.6.4).
*10.7.3 Automotive Wholesale Financing and Security Agreement, dated July 12, 1996, between Nissan
Motor Acceptance Corporation and Peachtree Nissan, Inc.
*10.7.4 Guaranty of the Company and UAG Atlanta III, Inc., dated July 12, 1996, in favor of Nissan
Motor Acceptance Corporation.
*10.7.5 Promissory Note of UAG Atlanta III, Inc., dated July 12, 1996, in favor of Lynda Jane
Hickman, as Executrix under the will of James Franklin Hickman, Jr.
*10.7.6 Guaranty of Note of Hickman Nissan, Inc., dated July 12, 1996, in favor of Lynda Jane
Hickman, as Executrix under the will of James Franklin Hickman, Jr.
*10.7.7 Guaranty of Note of the Company, dated July 12, 1996, in favor of Lynda Jane Hickman, as
Executrix under the will of James Franklin Hickman, Jr.
*10.7.8 Lease Agreement, dated July 12, 1996, between Lynda Jane Hickman, as Executrix under the
will of James Franklin Hickman, Jr., and Hickman Nissan, Inc.
*10.7.9 Lease Agreement, dated July 12, 1996, between Argonne Enterprises, Inc. and Hickman
Nissan, Inc.
10.7.10 Guaranty of Lease of the Company, dated July 12, 1996, in favor of Lynda Jane Hickman, as
Executrix under the will of James Franklin Hickman, Jr.
*10.7.11 Guaranty of Lease of the Company, dated July 12, 1996, in favor of Argonne Enterprises,
Inc.
10.8.1 Stock Purchase Agreement, dated as of June 6, 1996, among the Company, UAG West, Inc.,
Scottsdale Jaguar, LTD., SA Automotive, LTD., SL Automotive, LTD., SPA Automotive, LTD.,
LRP, LTD., Sun BMW, LTD., Scottsdale Management Group, LTD., 6725 Dealership, LTD., Steven
Knappenberger Revocable Trust Dated April 15, 1983, as amended, Brochick 6725 Trust dated
December 29, 1992, Beskind 6725 Trust dated December 29, 1992, Steven Knappenberger, Jay
P. Beskind December 29, 1992, Knappenberger 6725 Trust dated and George W. Brochick.
10.8.2 Purchase and Sale Agreement, 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.
10.9.1 Stock Purchase Agreement, dated August 5, 1996, among the Company, UAG Atlanta IV, Inc.,
Charles Evans BMW, Inc. and Charles F. Evans.
10.9.2 Stock Purchase Agreement, dated August 5, 1996, among the Company, UAG Atlanta IV, Inc.,
Charles Evans Nissan, Inc. and Charles F. Evans.
10.10.1 Stock Purchase Agreement, dated September 5, 1996, among the Company, UAG Tennessee, Inc.,
Standefer Motor Sales, Inc., Charles A. Standefer and Charles A. Standefer and Karen S.
Nicely, trustees under the Irrevocable Trust Agreement of Charles B. Standefer for the
primary benefit of children, dated December 21, 1992.
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.
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
No. Description
- ------------ ------------------------------------------------------------------------------------------
23.2 Consent of Willkie Farr & Gallagher (included in Exhibit 5.1).
<C> <S> <C>
*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, 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-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Amendment No. 2 to be signed on its behalf by the undersigned,
thereunto duly authorized, in New York, New York on October 7, 1996.
UNITED AUTO GROUP, INC.
By: /s/ CARL SPIELVOGEL
-----------------------------------
Carl Spielvogel
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment No. 2
has been signed by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
Signature Title Date
- ------------------------------------------ --------------------------------------------------- ----------------
<C> <S> <C>
/s/ CARL SPIELVOGEL
--------------------------------- Chairman of the Board and Chief Executive Officer October 7, 1996
Carl Spielvogel (Principal Executive Officer)
/s/ ARTHUR J. RAWL
--------------------------------- Executive Vice President and Chief Financial October 7, 1996
Arthur J. Rawl Officer (Principal Financial Officer)
/s/ ROBERT W. THOMPSON
--------------------------------- Vice President-Finance (Principal Accounting October 7, 1996
Robert W. Thompson Officer)
/s/ MARSHALL S. COGAN
--------------------------------- Director October 7, 1996
Marshall S. Cogan
*
--------------------------------- Director October 7, 1996
Michael R. Eisenson
*
--------------------------------- Director October 7, 1996
John J. Hannan
*
--------------------------------- Director October 7, 1996
Jules B. Kroll
/s/ ROBERT H. NELSON
--------------------------------- Director October 7, 1996
Robert H. Nelson
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
- ------------------------------------------ --------------------------------------------------- ----------------
<C> <S> <C>
*
--------------------------------- Director October 7, 1996
John M. Sallay
*
--------------------------------- Director October 7, 1996
Richard Sinkfield
*By: /s/ CARL SPIELVOGEL
----------------------------
Attorney-in-fact
</TABLE>
<PAGE>
Report of Independent Accountants on Financial Statement Schedule
In connection with our audits of the consolidated financial statements of United
Auto Group, Inc. and Subsidiaries as of December 31, 1995 and 1994, and for each
of the three years in the period ended December 31, 1995, which financial
statements are included in this Registration Statement, we have also audited the
financial statement schedule listed in Item 16 herein.
In our opinion, the financial statement schedule, when considered in relation to
the basic financial statements taken as a whole, presents fairly, in all
material respects, the information required to be included therein.
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Princeton, New Jersey
June 17, 1996
S-1
<PAGE>
SCHEDULE II
UNITED AUTO GROUP, INC.
Valuation and Qualifying Accounts
For the years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Additions
----------------------------------
Balance Charged to Balance
beginning costs and Charged to end of
of period expenses other accounts Deductions period
----------- ----------------- --------------- ----------- -----------
1995
- --------------------------------------------
Allowance for uncollectibles................ $ 678 $ 500 $ (678) $ 500
Allowance for finance income chargebacks.... 2,123 3,634 (3,451) 2,306
1994
- --------------------------------------------
Allowance for uncollectibles................ 393 285 -- 678
Allowance for finance income chargebacks.... 2,564 1,176 (1,617) 2,123
1993
- --------------------------------------------
Allowance for uncollectibles................ 0 393 393
Allowance for finance income chargebacks.... 0 3,136 (572) 2,564
</TABLE>
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
No. Description
- ------------ ------------------------------------------------------------------------------------------
<C> <S> <C>
1.1 Form of Underwriting Agreement.
3.1 Form of Restated Certificate of Incorporation.
3.2 Form of Restated Bylaws.
4.1 Specimen Common Stock certificate.
5.1 Opinion of Willkie Farr & Gallagher.
*10.1.1.1 Registration Rights Agreement, dated as of October 15, 1993, among the Company and the
investors listed therein.
*10.1.1.2 Amendment to Registration Rights Agreement, dated as of July 31, 1996, among the Company
and the investors listed therein.
*10.1.2 Waiver, Consent and Modification Agreement, dated as of September 22, 1995, among the
Company and its stockholders.
*10.1.3 Letter Agreement, dated September 22, 1996, between the Company and J.P. Morgan Capital
Corporation.
*10.1.4 Form of Warrant.
*10.1.5 Form of Additional Warrant.
*10.1.6 Employment Agreement, dated as of June 21, 1996, between the Company and Carl Spielvogel.
*10.1.7 Severance Agreement, dated April 5, 1996, among the Company, Trace and Ezra P. Mager.
10.1.8 Stock Option Plan of the Company.
**10.1.9 Registration Rights Agreement, dated as of August 1, 1995, among the Company and the
parties listed on Schedule I thereto.
*10.1.10 Sublease, dated August 1994, between Overseas Partners, Inc. and the Company.
*10.1.11 Letter, dated July 24, 1996, from Chrysler Corporation to the Company.
*10.1.12 Agreement, dated July 24, 1996, between the Company and Toyota Motor Sales U.S.A., Inc.
10.1.13 Non-employee Director Compensation Plan of the Company.
**10.2.1.1 Honda Automobile Dealer Sales and Service Agreement, dated October 5, 1995, between
American Honda Motor Co. Inc. and Danbury Auto Partnership (standard provisions are in
Exhibit 10.2.1.2 hereto).
**10.2.1.2 American Honda Motor Co. Standard Provisions.
*10.2.2.1 Lexus Dealer Agreement, dated October 5, 1992, between Lexus, a division of Toyota Motor
Sales, U.S.A., Inc. and Somerset Motors Partnership (standard provisions are in Exhibit
10.2.2.2 hereto).
*10.2.2.2 Lexus Dealer Agreement Standard Provisions.
*10.2.3.1 Mitsubishi Motor Sales of America, Inc. Dealer Sales and Service Agreement, dated August
29, 1994, between Mitsubishi Motor Sales of America, Inc. and Rockland Motors Partnership,
as amended August 20, 1996 (standard provisions are in Exhibit 10.2.3.2 hereto).
*10.2.3.2 Mitsubishi Motor Sales of America, Inc. Dealer Sales and Service Agreement Standard
Provisions.
10.2.4.1 BMW of North America, Inc. Dealer Agreement, dated January 1, 1994, between BMW of North
America, Inc. and DiFeo BMW Partnership, as amended July 25, 1996 (standard provisions are
in Exhibit 10.2.4.2 hereto).
10.2.4.2 BMW of North America, Inc. Dealer Standard Provisions Applicable to Dealer Agreement.
10.2.5.1 Term Dealer Sales and Service Agreement, dated July 3, 1996, between American Suzuki Motor
Corporation and Fair Hyundai Partnership 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.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
No. Description
- ------------ ------------------------------------------------------------------------------------------
*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).
<C> <S> <C>
**10.2.9.1 Nissan Dealer Term Sales and Service Agreement, between the Nissan Division of Nissan
Motor Corporation in U.S.A. and DiFeo Nissan Partnership (standard provisions are in
Exhibit 10.2.9.2 hereto).
**10.2.9.2 Nissan Dealer Sales and Service Agreement Standard Provisions.
10.2.10.1 Chrysler Corporation Term Sales and Service Agreement, between Fair Chrysler Plymouth
Partnership and Chrysler Corporation dated August 16, 1995 (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.
*10.3.1 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.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
No. Description
- ------------ ------------------------------------------------------------------------------------------
*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.
<C> <S> <C>
*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).
*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.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
No. Description
- ------------ ------------------------------------------------------------------------------------------
10.4.21 Agreement, dated July 31, 1995, between the Company and General Motors Corporation,
Oldsmobile Division.
<C> <S> <C>
*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).
*10.6.5 Wholesale Floor Plan Security Agreement, dated April 29, 1996, between World Omni
Financial Corp. and United Nissan, Inc. (substantially similar to Exhibit 10.5.9).
10.6.6 Continuing Guaranty of the Company, dated April 29, 1996, in favor of World Omni Financial
Corp. and certain affiliates (substantially similar to Exhibit 10.5.10).
*10.7.1 Stock Purchase Agreement, dated as of June 7, 1996, among the Company, UAG Atlanta III,
Inc., Hickman Nissan, Inc., Lynda Jane Hickman and Lynda Jane Hickman as Executrix under
the will of James Franklin Hickman, Jr., deceased.
**10.7.2 Nissan Dealer Term Sales and Service Agreement, between the Nissan Division of Nissan
Motor Corporation in U.S.A. and Peachtree Nissan, Inc. (substantially similar to Exhibit
10.6.4).
*10.7.3 Automotive Wholesale Financing and Security Agreement, dated July 12, 1996, between Nissan
Motor Acceptance Corporation and Peachtree Nissan, Inc.
*10.7.4 Guaranty of the Company and UAG Atlanta III, Inc., dated July 12, 1996, in favor of Nissan
Motor Acceptance Corporation.
*10.7.5 Promissory Note of UAG Atlanta III, Inc., dated July 12, 1996, in favor of Lynda Jane
Hickman, as Executrix under the will of James Franklin Hickman, Jr.
*10.7.6 Guaranty of Note of Hickman Nissan, Inc., dated July 12, 1996, in favor of Lynda Jane
Hickman, as Executrix under the will of James Franklin Hickman, Jr.
*10.7.7 Guaranty of Note of the Company, dated July 12, 1996, in favor of Lynda Jane Hickman, as
Executrix under the will of James Franklin Hickman, Jr.
*10.7.8 Lease Agreement, dated July 12, 1996, between Lynda Jane Hickman, as Executrix under the
will of James Franklin Hickman, Jr., and Hickman Nissan, Inc.
*10.7.9 Lease Agreement, dated July 12, 1996, between Argonne Enterprises, Inc. and Hickman
Nissan, Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
No. Description
- ------------ ------------------------------------------------------------------------------------------
10.7.10 Guaranty of Lease of the Company, dated July 12, 1996, in favor of Lynda Jane Hickman, as
Executrix under the will of James Franklin Hickman, Jr.
<C> <S> <C>
*10.7.11 Guaranty of Lease of the Company, dated July 12, 1996, in favor of Argonne Enterprises,
Inc.
10.8.1 Stock Purchase Agreement, dated as of June 6, 1996, among the Company, UAG West, Inc.,
Scottsdale Jaguar, LTD., SA Automotive, LTD., SL Automotive, LTD., SPA Automotive, LTD.,
LRP, LTD., Sun BMW, LTD., Scottsdale Management Group, LTD., 6725 Dealership, LTD., Steven
Knappenberger Revocable Trust Dated April 15, 1983, as amended, Brochick 6725 Trust dated
December 29, 1992, Beskind 6725 Trust dated December 29, 1992, Steven Knappenberger, Jay
P. Beskind December 29, 1992, Knappenberger 6725 Trust dated and George W. Brochick.
10.8.2 Purchase and Sale Agreement, 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.
10.9.1 Stock Purchase Agreement, dated August 5, 1996, among the Company, UAG Atlanta IV, Inc.,
Charles Evans BMW, Inc. and Charles F. Evans.
10.9.2 Stock Purchase Agreement, dated August 5, 1996, among the Company, UAG Atlanta IV, Inc.,
Charles Evans Nissan, Inc. and Charles F. Evans.
10.10.1 Stock Purchase Agreement, dated September 5, 1996, among the Company, UAG Tennessee, Inc.,
Standefer Motor Sales, Inc., Charles A. Standefer and Charles A. Standefer and Karen S.
Nicely, trustees under the Irrevocable Trust Agreement of Charles B. Standefer for the
primary benefit of children, dated December 21, 1992.
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>
UNITED AUTO GROUP, INC.
____________ Shares of Common Stock
Underwriting Agreement
, 1996
J.P. Morgan Securities Inc.
Montgomery Securities
Smith Barney Inc.
As Representatives of several underwriters
listed in Schedule I hereto
c/o J.P. Morgan Securities Inc.
60 Wall Street
New York, New York 10260
Ladies and Gentlemen:
United Auto Group, Inc., a Delaware corporation (the "COMPANY"), proposes
to issue and sell to the several Underwriters listed in Schedule I hereto (the
"UNDERWRITERS"), for whom you are acting as representatives (the
"REPRESENTATIVES"), an aggregate of ___________ shares of Voting Common Stock,
par value $0.0001 per share (the "VOTING COMMON STOCK"), of the Company (the
"UNDERWRITTEN SHARES") and, for the sole purpose of covering over-allotments in
connection with the sale of the Underwritten Shares, at the option of the
Underwriters, up to an additional ________ shares of Voting Common Stock of the
Company (the "OPTION SHARES"). The Underwritten Shares and the Option Shares
are herein referred to as the "SHARES." The shares of Voting Common Stock of
the Company to be outstanding after giving effect to the sale of the Shares are
herein referred to as the "STOCK."
The Company has prepared and filed with the Securities and Exchange
Commission (the "COMMISSION") in accordance with the provisions of the
Securities Act of 1933, as amended, and the rules and regulations of the
Commission thereunder (collectively, the "SECURITIES ACT"), a registration
statement on Form S-1 (No. 333-09429), including a prospectus, relating to the
Shares. The registration statement as amended at the time of its effectiveness,
including information (if any) deemed to be part of the registration statement
at the time of effectiveness
<PAGE>
-2-
pursuant to Rule 430A under the Securities Act, is referred to in this Agreement
as the "REGISTRATION STATEMENT," and the prospectus in the form first used to
confirm sales of Shares is referred to in this Agreement as the "PROSPECTUS."
If the Company has filed an abbreviated registration statement pursuant to Rule
462(b) under the Securities Act (the "RULE 462 REGISTRATION STATEMENT"), then
any reference herein to the term "Registration Statement" shall be deemed to
include such Rule 462 Registration Statement.
The Company hereby agrees with the Underwriters as follows:
1. The Company agrees to issue and sell the Underwritten Shares to the
several Underwriters as hereinafter provided, and each Underwriter, upon the
basis of the representations and warranties herein contained, but subject to the
conditions hereinafter stated, agrees to purchase, severally and not jointly,
from the Company the respective number of Underwritten Shares set forth opposite
such Underwriter's name in Schedule I hereto at a purchase price per share (the
"PURCHASE PRICE") of $____________. The public offering price of the Shares is
not in excess of the price recommended by Smith Barney Inc. ("SMITH BARNEY"),
acting as a "qualified independent underwriter" within the meaning of the
Conduct Rules of the National Association of Securities Dealers, Inc. (the
"NASD").
In addition, the Company agrees to issue and sell the Option Shares to the
several Underwriters as hereinafter provided, and the Underwriters on the basis
of the representations and warranties herein contained, but subject to the
conditions hereinafter stated, shall have the option to purchase, severally and
not jointly, from the Company up to an aggregate of ________ Option Shares at
the Purchase Price, for the sole purpose of covering over-allotments (if any) in
the sale of Underwritten Shares by the several Underwriters.
If any Option Shares are to be purchased, the number of Option Shares to be
purchased by each Underwriter shall be the number of Option Shares which bears
the same ratio to the aggregate number of Option Shares being purchased as the
number of Underwritten Shares set forth opposite the name of such Underwriter in
Schedule I hereto (or such number increased as set forth in Section 9 hereof)
bears to the aggregate number of Underwritten Shares being purchased from the
Company by the several Underwriters, subject, however, to such adjustments to
eliminate any fractional shares as the Representatives in their sole discretion
shall make.
<PAGE>
-3-
The Underwriters may exercise the option to purchase the Option Shares at
any time (but not more than once) on or before the thirtieth day following the
date of this Agreement, by written notice from the Representatives to the
Company. Such notice shall set forth the aggregate number of Option Shares as
to which the option is being exercised and the date and time when the Option
Shares are to be delivered and paid for, which may be the same date and time as
the Closing Date (as hereinafter defined) but shall not be earlier than the
Closing Date or later than the tenth full Business Day after the date of such
notice (unless such time and date are postponed in accordance with the
provisions of Section 9 hereof). Any such notice shall be given at least two
Business Days prior to the date and time of delivery specified therein. As used
herein, the term "BUSINESS DAY" means any day other than a day on which banks
are permitted or required to be closed in New York City.
2. The Company understands that the Underwriters intend (i) to make a
public offering of the Shares as soon after (A) the Registration Statement has
become effective and (B) the parties hereto have executed and delivered this
Agreement, as in the judgment of the Representatives is advisable and (ii)
initially to offer the Shares upon the terms set forth in the Prospectus.
3. Payment for the Shares shall be made by wire transfer in immediately
available funds to the account specified by the Company to the Representatives
(which account shall be specified no later than noon the Business Day prior to
the Closing Date), in the case of the Underwritten Shares, on , 199_, or
at such other time on the same or such other date, not later than the fifth
Business Day thereafter, as the Representatives and the Company may agree upon
in writing or, in the case of the Option Shares, on the date and time specified
by the Representatives in the written notice of the Underwriters' election to
purchase such Option Shares. The time and date of such payment for the
Underwritten Shares is referred to herein as the "CLOSING DATE," and the time
and date for such payment for the Option Shares, if other than the Closing Date,
is herein referred to as the "ADDITIONAL CLOSING DATE."
Payment for the Shares to be purchased on the Closing Date or the
Additional Closing Date, as the case may be, shall be made against delivery to
the Representatives for the respective accounts of the several Underwriters of
the Shares to be purchased on such date registered in such names and in such
denominations as the Representatives shall request in writing not later than two
full Business Days prior to the Closing Date or the Additional Closing Date, as
the case may be, with any transfer taxes payable in connection with the transfer
to the
<PAGE>
-4-
Underwriters of the Shares duly paid by the Company. The certificates for the
Shares will be made available for inspection and packaging by the
Representatives at the office of J.P. Morgan Securities Inc. ("J.P. MORGAN
SECURITIES") set forth above not later than 1:00 P.M., New York City time, on
the Business Day prior to the Closing Date or the Additional Closing Date, as
the case may be.
4. The Company represents and warrants to each Underwriter that:
(a) no order preventing or suspending the use of any preliminary
prospectus has been issued by the Commission, and each preliminary prospectus
filed as part of the Registration Statement as originally filed or as part of
any amendment thereto, or filed pursuant to Rule 424 under the Securities Act,
complied when so filed in all material respects with the Securities Act, and did
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,
in the light of the circumstances under which they were made, not misleading;
PROVIDED, HOWEVER, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with information
relating to any Underwriter furnished to the Company in writing by such
Underwriter through the Representatives expressly for use therein;
(b) no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceeding for that purpose has been instituted
or, to the best of the Company's knowledge, threatened by the Commission; and
the Registration Statement and Prospectus and any amendment or supplement
thereto comply, or will comply, as the case may be, in all material respects
with the Securities Act and do not and will not, as of the applicable effective
date as to the Registration Statement and any amendment thereto and as of the
date of the Prospectus and any amendment or supplement thereto, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading,
and the Prospectus, at the Closing Date or Additional Closing Date, as the case
may be, will not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading; PROVIDED, HOWEVER,
that the foregoing representations and warranties shall not apply to statements
or omissions in the Registration Statement or the Prospectus made in reliance
upon and in conformity with information relating to any Underwriter
<PAGE>
-5-
furnished to the Company in writing by such Underwriter through the
Representatives expressly for use therein;
(c) the financial statements, and the related notes thereto, included
in the Registration Statement and the Prospectus present fairly (i) the
consolidated financial position of the Company and its consolidated subsidiaries
as of the dates indicated and the results of their operations and changes in
their consolidated cash flows and stockholders' equity for the periods specified
and (ii) the financial position or the consolidated financial position, as the
case may be, of the other entities listed in the "Index to Financial Statements"
in the Prospectus as of the dates indicated and the results of their operations
and changes in their cash flows or consolidated cash flows, as the case may be,
and, if applicable, stockholders' equity; said financial statements have been
prepared in conformity with generally accepted accounting principles applied on
a consistent basis, and the supporting schedule included in the Registration
Statement presents fairly the information required to be stated therein; and the
pro forma financial statements, and the related notes thereto, and other pro
forma financial information included in the Registration Statement and the
Prospectus have been prepared in accordance with the applicable requirements of
the Securities Act and are based upon good faith estimates and assumptions
believed by the Company to be reasonable;
(d) the statistical and market-related data included in the
Prospectus are based on or derived from sources that the Company believes are
reliable and accurate;
(e) since the respective dates as of which information is given in
the Prospectus, there has not been any change in the capital stock or long-term
debt of the Company or any of the Subsidiaries (as defined below), or any
material adverse change, or any development involving a prospective material
adverse change, in or affecting the general affairs, business, prospects,
management, financial position, stockholders' equity or results of operations of
the Company and the Subsidiaries, taken as a whole (a "MATERIAL ADVERSE CHANGE"
or a "PROSPECTIVE MATERIAL ADVERSE CHANGE"), otherwise than as set forth or
contemplated in the Prospectus; and except as set forth or contemplated in the
Prospectus neither the Company nor any of the Subsidiaries has entered into any
transaction or agreement (whether or not in the ordinary course of business)
material to the Company and the Subsidiaries taken as a whole;
(f) the Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws
<PAGE>
-6-
of its jurisdiction of incorporation, with power and authority (corporate and
other) to own and lease its properties and conduct its business as described in
the Prospectus, and has been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws of each other
jurisdiction in which it owns or leases properties, or conducts any business, so
as to require such qualification, other than where the failure to be so
qualified or in good standing, singly or in the aggregate with all other such
failures, would not have a material adverse effect on the general affairs,
business, prospects, management, financial position, stockholders' equity or
results of operations of the Company and the Subsidiaries, taken as a whole (a
"MATERIAL ADVERSE EFFECT");
(g) each of the subsidiaries of the Company after giving effect to
the Contemporaneous Acquisitions (the "SUBSIDIARIES") has been duly incorporated
and is validly existing as a corporation under the laws of its jurisdiction of
incorporation, with power and authority (corporate and other) to own and lease
its properties and conduct its business as described in the Prospectus, and has
been duly qualified as a foreign corporation for the transaction of business and
is in good standing under the laws of each other jurisdiction in which it owns
or leases properties, or conducts any business, so as to require such
qualification, other than where the failure to be so qualified or in good
standing, singly or in the aggregate with all other such failures, would not
have a Material Adverse Effect; and all of the outstanding shares of capital
stock of each Subsidiary have been duly authorized and validly issued, are fully
paid and non-assessable, and (except as otherwise set forth in the Prospectus)
will be owned, as of the Closing Date, by the Company, directly or indirectly,
free and clear of all material liens, encumbrances, security interests or
claims, except that 19% of the Common Stock of SK Motors, Ltd. (d/b/a Scottsdale
Porsche) will be owned by [ ].
(h) this Agreement has been duly authorized, executed and delivered
by the Company;
(i) each of the agreements (collectively, the "TRANSACTION
DOCUMENTS") governing the acquisitions that are contemplated to occur on the
Closing Date (the "CONTEMPORANEOUS ACQUISITIONS") or the exchange of the
minority interests in certain of the Subsidiaries (the "MINORITY EXCHANGE") has
been duly authorized, executed and delivered by each of the parties thereto, and
constitutes a legally valid and binding obligation of each such party and is
enforceable against each such party in accordance with its terms; except as
described in the Prospectus, each of the representations and warranties of the
Company and its
<PAGE>
-7-
subsidiaries and, to the best of the Company's knowledge, of each of the other
parties set forth in the Transaction Documents was true and correct at the time
such representations and warranties were made and will be true and correct at
and as of the Closing Date or the Additional Closing Date, as the case may be,
as if made at and as of such date (other than to the extent any such
representation or warranty is expressly made as to only a certain other date),
except to the extent that the failure of any such representation or warranty to
be true, singly or in the aggregate, would not have a Material Adverse Effect;
(j) as of the Closing Date, the Company will have an authorized
capitalization as set forth in the Prospectus and such authorized capital stock
will conform as to legal matters to the description thereof set forth in the
Prospectus; all of the outstanding shares of capital stock of the Company have
been duly authorized and validly issued, are fully paid and non-assessable and
are not subject to any preemptive or similar rights; and, except as described in
or expressly contemplated by the Prospectus, there are no outstanding rights
(including, without limitation, preemptive rights), warrants or options to
acquire, or instruments convertible into or exchangeable for, any shares of
capital stock or other equity interest in the Company or any of the
Subsidiaries, or any contract, commitment, agreement, understanding or
arrangement of any kind to which the Company or any of the Subsidiaries is a
party relating to the issuance of any capital stock of the Company or any such
Subsidiary, any such convertible or exchangeable securities or any such rights,
warrants or options;
(k) the Shares have been duly authorized and, when issued and
delivered to and paid for by the Underwriters in accordance with the terms of
this Agreement, will be validly issued and will be fully paid and non-assessable
and will conform to the descriptions thereof in the Prospectus; and the issuance
of the Shares is not subject to any preemptive or similar rights;
(l) except as described in the Prospectus, neither the Company nor
any of the Subsidiaries is, or with the giving of notice or lapse of time or
both would be, in violation of or in default under, its Certificate or Articles
of Incorporation or By-Laws or any indenture, mortgage, deed of trust, loan
agreement, franchise agreement or other agreement or instrument to which the
Company or any of the Subsidiaries is a party or by which it or any of them or
any of their respective properties is bound, except for violations and defaults
which singly and in the aggregate are not material to the Company and the
Subsidiaries taken as a whole; the issuance and sale of the Shares and the
performance by the Company of its obligations under this
<PAGE>
-8-
Agreement and the Transaction Documents and the consummation of the transactions
contemplated herein and therein will not conflict with or result in a breach of
any of the terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement, franchise agreement or other agreement
or instrument to which the Company or any of the Subsidiaries is a party or by
which the Company or any of the Subsidiaries is bound or to which any of the
property or assets of the Company or any of the Subsidiaries is subject, and
will not result in any violation of any applicable law or statute or any order,
rule or regulation of any court or governmental agency or body having
jurisdiction over the Company, the Subsidiaries or any of their respective
properties, except any such conflicts, breaches and defaults resulting from the
performance by the Company of its obligations under the Transaction Documents
and the consummation of the transactions contemplated therein that, singly or in
the aggregate, would not have a Material Adverse Effect, and will not result in
any violation of the provisions of the Certificate of Incorporation or By-Laws
of the Company; and no consent, approval, authorization, order, license,
registration or qualification of or with any such court or governmental agency
or body is required for the issuance and sale of the Shares or the consummation
by the Company of the transactions contemplated by this Agreement, except such
consents, approvals, authorizations, orders, licenses, registrations or
qualifications as have been obtained under the Securities Act and as may be
required under state securities or Blue Sky Laws in connection with the purchase
and distribution of the Shares by the Underwriters;
(m) other than as set forth or contemplated in the Prospectus, there
are no legal or governmental investigations, actions, suits or proceedings
(collectively, "PROCEEDINGS") pending or, to the best of the Company's
knowledge, threatened against or affecting the Company or any of the
Subsidiaries or any of their respective properties or to which the Company or
any of the Subsidiaries is or may be a party or to which any property of the
Company or any of the Subsidiaries is or may be the subject which, singly or in
the aggregate, could have, or reasonably could be expected to have, a Material
Adverse Effect and, to the best of the Company's knowledge, no such Proceedings
are threatened or contemplated by governmental authorities or threatened by
others; and there are no statutes, regulations, contracts or other documents
that are required to be described in the Registration Statement or Prospectus or
to be filed as exhibits to the Registration Statement that are not described or
filed as required;
(n) the Company and the Subsidiaries have good and marketable title
in fee simple to all items of real property and
<PAGE>
-9-
good and marketable title to all personal property owned by them, in each case
free and clear of all liens, encumbrances and defects except such as are
described or referred to in the Prospectus and except to the extent as would
not, singly or in the aggregate, have a Material Adverse Effect; and any real
property and buildings held under lease by the Company and the Subsidiaries are
held by them under valid, existing and enforceable leases with such exceptions
as would not, singly or in the aggregate, have a Material Adverse Effect;
(o) no relationship, direct or indirect, exists between or among the
Company or any of the Subsidiaries on the one hand, and the directors, officers,
stockholders, customers or suppliers of the Company or any of the Subsidiaries
on the other hand, which is required by the Securities Act to be described in
the Prospectus which is not so described;
(p) no person has the right to require the Company to register any
securities of the Company or any of the Subsidiaries for offering and sale under
the Securities Act by reason of the filing of the Registration Statement with
the Commission or the issuance and sale of the Shares or the transactions in
connection therewith, except for such rights as have been duly waived;
(q) the Company is not and, after giving effect to the offering and
sale of the Shares, will not be an "investment company" or entity "controlled"
by an "investment company", as such terms are defined in the Investment Company
Act of 1940, as amended (the "INVESTMENT COMPANY ACT");
(r) the Company has complied with all provisions of Section 517.075,
Florida Statutes (Chapter 92 198, Laws of Florida, relating to doing business
with the Government of Cuba or with any person or affiliate located in Cuba;
(s) Coopers & Lybrand, L.L.P., who have certified certain financial
statements of the Company and the Subsidiaries, are independent public
accountants as required by the Securities Act;
(t) the Company and the Subsidiaries have filed all federal, state,
local and foreign tax returns which have been required to be filed and have paid
all taxes shown thereon and all assessments received by them or any of them to
the extent that such taxes have become due and are not being contested in good
faith, except such amounts that are not, singly or in the aggregate, material to
the Company and the Subsidiaries taken as a whole; and there is no tax
deficiency which has been or might reasonably be expected to be asserted or
threatened against the
<PAGE>
-10-
Company or any Subsidiary, other than such tax deficiencies in such amounts that
are not, singly or in the aggregate, material to the Company and the
Subsidiaries taken as a whole;
(u) the Company has not taken nor will it take, directly or
indirectly, any action designed to, or that might be reasonably expected to,
cause or result in stabilization or manipulation of the price of the Stock;
(v) each of the Company and the Subsidiaries owns, possesses or has
obtained all licenses, franchises, permits, certificates, consents, orders,
approvals and other authorizations (collectively, "PERMITS") from, and has made
all declarations and filings with, all federal, state, local and other
governmental authorities (including foreign regulatory agencies), all self-
regulatory organizations, all domestic or foreign courts and other tribunals and
all automobile manufacturers and distributors necessary to own or lease, as the
case may be, and to operate its properties and to carry on its business as
conducted as of the date hereof and as proposed to be conducted, and neither the
Company nor any such Subsidiary has received any actual notice of any proceeding
relating to revocation or modification of any such Permit, except as described
in the Prospectus; and each of the Company and the Subsidiaries is in compliance
with all laws and regulations relating to the conduct of its business as
conducted as of the date hereof, except to the extent that failure to so comply
would not, singly or in the aggregate, have a Material Adverse Effect;
(w) there are no existing or, to the best of the Company's knowledge,
threatened labor disputes with the employees of the Company or any of the
Subsidiaries which, singly or in the aggregate, would have a Material Adverse
Effect;
(x) the Company and the Subsidiaries (i) are in compliance with any
and all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("ENVIRONMENTAL LAWS"), (ii) have received all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct their
respective businesses and (iii) are in compliance with all terms and conditions
of any such permit, license or approval, except, in each case, where such
noncompliance with Environmental Laws, failure to receive required permits,
licenses or other approvals or failure to comply with the terms and conditions
of such permits, licenses or approvals would not, singly or in the aggregate,
have a Material Adverse Effect; and
<PAGE>
-11-
(y) each employee benefit plan, within the meaning of Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), that
is maintained, administered or contributed to by the Company or any of its
affiliates for employees or former employees of the Company and its affiliates
has been maintained in compliance with its terms and the requirements of any
applicable statutes, orders, rules and regulations, including but not limited to
ERISA and the Internal Revenue Code of 1986, as amended (the "CODE"), except to
the extent non-compliance, singly or in the aggregate, would not have a Material
Adverse Effect. No prohibited transaction, within the meaning of Section 406 of
ERISA or Section 4975 of the Code, has occurred with respect to any such plan
excluding transactions effected pursuant to a statutory or administrative
exemption. For each such plan which is subject to the funding rules of Section
412 of the Code or Section 302 of ERISA, no "accumulated funding deficiency" as
defined in Section 412 of the Code has been incurred, whether or not waived, and
the fair market value of the assets of each such plan (excluding for these
purposes accrued but unpaid contributions) exceeded the present value of all
benefits accrued under such plan determined using reasonable actuarial
assumptions.
5. The Company covenants and agrees with each of the several Underwriters
as follows:
(a) to use its best efforts to cause the Registration Statement to
become effective at the earliest possible time and, if required, to file the
Prospectus with the Commission within the time periods specified by Rule 424(b)
and Rule 430A under the Securities Act; and to furnish copies of the Prospectus
to the Underwriters in New York City prior to 10:00 a.m., New York City time, on
the Business Day next succeeding the date of this Agreement in such quantities
as the Representatives may reasonably request;
(b) to deliver, at the expense of the Company, to the Representatives
four copies of the Registration Statement (as originally filed) and each
amendment thereto, in each case including exhibits, and to each other
Underwriter a copy of the Registration Statement (as originally filed) and each
amendment thereto, in each case without exhibits, and, during the period
mentioned in paragraph (e) below, to each of the Underwriters as many copies of
the Prospectus (including all amendments and supplements thereto) as the
Representatives may reasonably request;
(c) before filing any amendment or supplement to the Registration
Statement or the Prospectus, whether before or after
<PAGE>
-12-
the time the Registration Statement becomes effective, to furnish to the
Representatives a copy of the proposed amendment or supplement for review and
not to file any such proposed amendment or supplement to which the
Representatives reasonably object;
(d) to advise the Representatives promptly, and to confirm such
advice in writing (i) when the Registration Statement has become effective, (ii)
when any amendment to the Registration Statement has been filed or becomes
effective, (iii) when any supplement to the Prospectus or any amended Prospectus
has been filed and to furnish the Representatives with copies thereof, (iv) of
any request by the Commission for any amendment to the Registration Statement or
any amendment or supplement to the Prospectus or for any additional information,
(v) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of any order preventing or
suspending the use of any preliminary prospectus or the Prospectus or the
initiation or threatening of any proceeding for that purpose, (vi) of the
occurrence of any event, within the period referenced in paragraph (e) below, as
a result of which the Prospectus as then amended or supplemented would include
an untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances when the Prospectus is delivered to a purchaser, not misleading,
and (vii) of the receipt by the Company of any notification with respect to any
suspension of the qualification of the Shares for offer and sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose; and to use its best efforts to prevent the issuance of any such stop
order, or of any order preventing or suspending the use of any preliminary
prospectus or the Prospectus, or of any order suspending any such qualification
of the shares, or notification of any such order thereof and, if issued, to
obtain as soon as possible the withdrawal thereof;
(e) if, during such period of time after the first date of the public
offering of the Shares as in the opinion of counsel for the Underwriters a
prospectus relating to the Shares is required by law to be delivered in
connection with sales by the Underwriters or any dealer, any event shall occur
as a result of which it is necessary to amend or supplement the Prospectus in
order to make the statements therein, in the light of the circumstances when the
Prospectus is delivered to a purchaser, not misleading, or if it is necessary to
amend or supplement the Prospectus to comply with law, forthwith to prepare and
furnish, at the expense of the Company, to the Underwriters and to the dealers
(whose names and addresses the Representatives will furnish to the Company) to
which Shares may have been sold by the Representatives on behalf of the
Underwriters and to any other
<PAGE>
-13-
dealers upon request, such amendments or supplements to the Prospectus as may be
necessary so that the statements in the Prospectus as so amended or supplemented
will not, in the light of the circumstances when the Prospectus is delivered to
a purchaser, be misleading or so that the Prospectus will comply with law;
(f) to endeavor to qualify the Shares for offer and sale under the
securities or Blue Sky laws of such jurisdictions as the Representatives shall
reasonably request and to continue such qualification in effect so long as
reasonably required for distribution of the Shares; PROVIDED, HOWEVER, that the
Company shall not be required to file a general consent to service of process in
any jurisdiction;
(g) to make generally available to its security holders and to the
Representatives as soon as practicable an earnings statement covering a period
of at least twelve months beginning with the first fiscal quarter of the Company
occurring after the effective date of the Registration Statement, which shall
satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 of
the Commission promulgated thereunder;
(h) until December 31, 2000, to furnish to the Representatives copies
of all reports or other communications (financial or other) furnished to holders
of the Shares, and copies of any reports and financial statements furnished to
or filed with the Commission or any national securities exchange;
(i) for a period of 180 days after the date of the initial public
offering of the Shares not to (x) offer, pledge, sell, contract to sell, sell
any option or contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase or otherwise transfer or dispose
of, directly or indirectly, any shares of Stock or any securities convertible
into or exercisable or exchangeable for Stock or (y) enter into any swap or
other agreement that transfers, in whole or in part, any of the economic
consequences of ownership of the Stock, whether any such transaction described
in clause (x) or (y) above is to be settled by delivery of Stock or such other
securities, in cash or otherwise, or (z) permit the registration under the
Securities Act of any shares of capital stock of the Company, in each case,
without the prior written consent of J.P. Morgan Securities; PROVIDED, HOWEVER,
that the foregoing shall not prohibit (i) the issuance and sale of the Shares
hereunder and the shares of Stock issued in the Minority Exchange, (ii) the
issuance of stock options granted under existing director or employee stock
option plans, (iii) the issuance of any shares of Stock issued upon the exercise
of
<PAGE>
-14-
options, warrants or convertible securities outstanding on the date hereof or
granted under existing director or employee stock option plans, (iv)
registration of the Shares and registration of shares of Voting Common Stock
pursuant to the Form S-8 Registration Statement of the Company to be filed with
the Commission on or about the Closing Date (the "S-8 REGISTRATION STATEMENT")
and (v) the issuance of any shares of Stock or options, warrants or rights to
purchase shares of Stock or securities convertible into shares of Stock, in each
case, in respect of an acquisition of an operating business so long as the
persons receiving the same agree to execute lock-up agreements substantially
similar to those being executed in connection with the offering of the Shares;
(j) to use the net proceeds received by the Company from the sale of
the Shares pursuant to this Agreement in the manner specified in the Prospectus
under the caption "Use of Proceeds" and to file with the Commission such reports
on Form SR as may be required by Rule 463 under the Securities Act;
(k) to use its best efforts to list, subject to notice of issuance,
the Shares on the New York Stock Exchange (the "EXCHANGE");
(l) whether or not the transactions contemplated in this Agreement
are consummated or this Agreement is terminated, to pay or cause to be paid all
costs and expenses incident to the performance of its obligations hereunder,
including without limiting the generality of the foregoing, all costs and
expenses (i) incident to the preparation, issuance, execution and delivery of
the Shares, (ii) incident to the preparation, printing and filing under the
Securities Act of the Registration Statement, the Prospectus and any preliminary
prospectus (including in each case all exhibits, amendments and supplements
thereto), (iii) incurred in connection with the registration or qualification of
the Shares under the laws of such jurisdictions as the Representatives may
designate (including fees of counsel for the Underwriters and its
disbursements), (iv) in connection with the listing of the Shares on the
Exchange, (v) related to the filing with, and clearance of the offering by, the
NASD (including the fees and expenses of Smith Barney acting as a "qualified
independent underwriter" within the meaning of the aforementioned Conduct
Rules), (vi) in connection with the printing (including word processing and
duplication costs) and delivery of the Blue Sky Survey and the furnishing to the
Underwriters and dealers of copies of the Registration Statement and the
Prospectus, including mailing and shipping, as herein provided, (vii) any
expenses incurred by the Company in connection with a "road show" presentation
to potential investors, (viii) the cost of preparing
<PAGE>
-15-
stock certificates and (ix) the cost and charges of any transfer agent and any
registrar.
6. The several obligations of the Underwriters hereunder to purchase the
Shares on the Closing Date or the Additional Closing Date, as the case may be,
are subject to the performance by the Company of its obligations hereunder and
to the following additional conditions:
(a) The Registration Statement shall have become effective (or if a
post-effective amendment is required to be filed under the Securities Act, such
post-effective amendment shall have become effective) not later than 5:00 P.M.,
New York City time, on the date hereof; and no stop order suspending the
effectiveness of the Registration Statement or any post-effective amendment
shall be in effect, and no proceedings for such purpose shall be pending before
or threatened by the Commission; the Prospectus shall have been filed with the
Commission pursuant to Rule 424(b) within the applicable time period prescribed
for such filing by the rules and regulations under the Securities Act and in
accordance with Section 5(a) hereof; and all requests from the Commission for
additional information shall have been complied with to the satisfaction of the
Representatives.
(b) The representations and warranties of the Company contained
herein are true and correct in all material respects on and as of the Closing
Date or the Additional Closing Date, as the case may be, as if made on and as of
the Closing Date or the Additional Closing Date, as the case may be, and the
Company shall have complied in all material respects with all agreements and all
conditions on its part to be performed or satisfied hereunder at or prior to the
Closing Date or the Additional Closing Date, as the case may be.
(c) subsequent to the execution and delivery of this Agreement and
prior to the Closing Date or the Additional Closing Date, as the case may be,
there shall not have occurred any downgrading, nor shall any notice have been
given of (i) any downgrading, (ii) any intended or potential downgrading or
(iii) any review or possible change that does not indicate an improvement, in
the rating accorded any securities of or guaranteed by the Company or any of the
Subsidiaries by any "nationally recognized statistical rating organization," as
such term is defined for purposes of Rule 436(g)(2) under the Securities Act;
(d) Since the respective dates as of which information is given in
the Prospectus, there shall not have been any change in the capital stock or
long-term debt of the Company or any of
<PAGE>
-16-
the Subsidiaries or any Material Adverse Change, or any development involving a
Prospective Material Adverse Change, otherwise than as set forth or contemplated
in the Prospectus, the effect of which in the judgment of the Representatives
makes it impracticable or inadvisable to proceed with the public offering or the
delivery of the Shares on the Closing Date or the Additional Closing Date, as
the case may be, on the terms and in the manner contemplated in the Prospectus;
and neither the Company nor any of the Subsidiaries has sustained since the date
of the latest audited financial statements included material loss or
interference with its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the Prospectus.
(e) The Representatives shall have received on and as of the Closing
Date or the Additional Closing Date, as the case may be, a certificate of two
executive officers of the Company (such certificate not to impose personal
liability on such officer), with specific knowledge about the Company's
financial matters, satisfactory to the Representatives, to the effect set forth
in subsections (a) through (d) of this Section and to the further effect that
there has not occurred any Material Adverse Change, or any development involving
a Prospective Material Adverse Change.
(f) Willkie Farr & Gallagher, counsel for the Company, shall have
furnished to the Representatives their written opinion, dated the Closing Date
or the Additional Closing Date, as the case may be, in form and substance
satisfactory to the Representatives, to the effect that:
(i) the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its jurisdiction of
incorporation, with power and authority (corporate and other) to own and lease
its properties and conduct its business as described in the Prospectus;
(ii) each of the Subsidiaries has been duly incorporated and is
validly existing as a corporation under the laws of its jurisdiction of
incorporation, with power and authority (corporate and other) to own and lease
its properties and conduct its business as described in the Prospectus; and all
of the outstanding shares of capital stock of each Subsidiary have been duly
authorized and validly issued, are fully paid and non-assessable, and (except as
otherwise set forth in the Prospectus) are owned by the Company, directly or
indirectly, free and clear (to the best of such counsel's knowledge) of all
liens, encumbrances, security interests or claims;
<PAGE>
-17-
(iii) other than as set forth or contemplated in the Prospectus,
to the best of such counsel's knowledge, there are no Proceedings pending or
threatened against or affecting the Company or any of the Subsidiaries or any of
their respective properties or to which the Company or any of the Subsidiaries
is or may be a party or to which any property of the Company or any of the
Subsidiaries is or may be the subject which, singly or in the aggregate, could
have a Material Adverse Effect and, to the best of such counsel's knowledge, no
such Proceedings are threatened or contemplated by governmental authorities or
threatened by others; and to the best of such counsel's knowledge, there are no
statutes, regulations, contracts or other documents that are required to be
described in the Registration Statement or Prospectus or to be filed as exhibits
to the Registration Statement that are not described or filed as required;
(iv) this Agreement has been duly authorized, executed and
delivered by the Company;
(v) each of the Transaction Documents has been duly authorized,
executed and delivered by the Company and each Subsidiary which is a party
thereto, and constitutes a legally valid and binding obligation of each such
party and is enforceable against each such party in accordance with its terms;
(vi) all of the shares of capital stock of the Company (other
than the Shares) issued or to be issued (including by conversion or exchange)
and outstanding on the Closing Date have been duly authorized and if issued, are
validly issued, fully paid and non-assessable or when issued, will be validly
issued, fully paid and non-assessable; all of such shares of capital stock of
the Company (other than shares of Stock covered by the S-8 Registration
Statement) have been, or will have been, issued without registration under the
Securities Act pursuant to an exemption therefrom;
(vii) the Shares to be issued and sold by the Company hereunder
have been duly authorized, and when delivered to and paid for the Underwriters
in accordance with the terms of this Agreement, will be validly issued, fully
paid and non-assessable, and the issuance of the Shares is not subject to any
preemptive or similar rights under any contract, agreement or instrument known
to such counsel or under applicable law;
(viii) to the best of such counsel's knowledge, neither the
filing of the Registration Statement nor the offer and sale of the Shares to the
Underwriters in the manner contemplated in this Agreement and the transactions
in connection
<PAGE>
-18-
therewith give rise to any rights for or relating to the registration under the
Securities Act of any other securities of the Company or any of the
Subsidiaries, except for such rights as have been duly waived;
(ix) the statements in the Prospectus under "Business --
Franchise Agreements," "Description of Capital Stock," "Shares Eligible for
Future Sale" and "Underwriting" and in Items 14 and 15 of Part II of the
Registration Statement, insofar as such statements constitute a summary of the
terms of the capital stock of the Company, legal matters, documents or
proceedings referred to therein, fairly present the information called for with
respect to such terms, legal matters, documents or proceedings;
(x) based on a telephone call with the Staff of the Commission,
the Registration Statement has been declared effective under the Securities Act
and to the best of such counsel's knowledge, no stop order proceedings with
respect thereto are pending or threatened under the Securities Act; the
registration statement on Form 8-A registering the Stock under the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), has been declared
effective by the Commission;
(xi) the issuance and sale of the Shares and the performance by
the Company of its obligations under this Agreement and the Transaction
Documents and the consummation of the transactions contemplated herein and
therein will not conflict with or result in a breach of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed of
trust, loan agreement, franchise agreement or other agreement or instrument, in
each case, known to such counsel, to which the Company or any of the
Subsidiaries is a party or by which the Company or any of the Subsidiaries is
bound or to which any of the property or assets of the Company or any of the
Subsidiaries is subject, or the terms of any applicable law or statute or any
order, rule or regulation of any court or governmental agency or body having
jurisdiction over the Company, the Subsidiaries or any of their respective
properties, except for such conflicts, breaches, or defaults that, singly or in
the aggregate, would not have a Material Adverse Effect, nor will any such
action result in any violation of the provisions of the Certificate of
Incorporation or By-Laws of the Company;
(xii) no consent, approval, authorization, order, license,
registration or qualification of or with any court or governmental agency or
body is required for the issuance and sale of the Shares or the consummation of
the other transactions contemplated by this Agreement, except such consents,
approvals,
<PAGE>
-19-
authorizations, orders, licenses, registrations or qualifications as have been
obtained under the Securities Act and as may be required under state securities
or Blue Sky laws in connection with the purchase and distribution of the Shares
by the Underwriters;
(xiii) the Company is not and, after giving effect to the
offering and sale of the Shares, will not be an "investment company" or entity
"controlled" by an "investment company," as such terms are defined in the
Investment Company Act;
(xiv) each of the Company and the Subsidiaries owns, possesses
or has obtained all required consents and approvals from all automobile
manufacturers and distributors with respect to the Contemporaneous
Acquisitions and the issuance and sale of the Shares hereunder; and
(xv) such counsel is of the opinion that the Registration
Statement and the Prospectus and any amendments and supplements thereto (other
than the financial statements and related schedules therein, as to which such
counsel need express no opinion) appear on their face to be appropriately
responsive in all material respects with the requirements of the Securities Act
and believes that (other than the financial statements and related schedule
therein, as to which such counsel need express no belief) the Registration
Statement and the prospectus included therein at the time the Registration
Statement became effective did not contain any 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, and that neither the Prospectus
nor any amendment or supplement thereto contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
In rendering such opinions, such counsel may rely (A) as to matters
involving the application of laws other than the laws of the United States and
the State of New York and the General Corporation Law of the State of Delaware,
to the extent such counsel deems proper and to the extent specified in such
opinion, if at all, upon an opinion or opinions (in form and substance
reasonably satisfactory to Underwriters' counsel) of other counsel reasonably
acceptable to Underwriters' counsel, familiar with the applicable laws; (B) as
to matters of fact, to the extent such counsel deems proper, on certificates of
responsible officers of the Company and certificates or other written statements
of officials of jurisdictions having custody of documents respecting
<PAGE>
-20-
the corporate existence or good standing of the Company; and (C) the opinion of
Rogers & Hardin being delivered on or prior to the Closing Date. The
Representatives understand that such counsel's opinion may be limited in scope
in respect of certain customary matters, including, without limitation, the
availability of equitable remedies, the limitation on enforceability arising
from bankruptcy and insolvency laws, that such counsel is only qualified to
opine on the laws of the United States and the State of New York and the General
Corporation Law of the State of Delaware, that such counsel is not rendering any
opinion as to breaches of agreements arising from breaches of financial
covenants or from breaches of cross-default provisions triggered by breaches in
any agreements not known to such counsel, that the opinion in clause (xiii) and
(insofar as it relates to the application of any law, statute, order, rule or
regulation) clause (xi) is limited to laws, statutes, orders, rules or
regulations usually applicable to transactions such as the offering of the
Shares, the Minority Exchange, the Contemporaneous Acquisitions and the
Preferred Stock Conversion and that opinions made to the knowledge of such
counsel are limited to the actual knowledge of those lawyers regularly engaged
on matters for the Company. The opinion of such counsel for the Company shall
state that the opinion of any such other counsel upon which they relied is in
form satisfactory to such counsel and, in such counsel's opinion, the
Underwriters and they are justified in relying thereon. With respect to the
matters to be covered in subparagraph (xv) above counsel may state their opinion
and belief is based upon their participation in the preparation of the
Registration Statement and the Prospectus and any amendment or supplement
thereto and review and discussion of the contents thereof but is without
independent check or verification except as specified.
The opinion of Willkie Farr & Gallagher described above shall be rendered
to the Underwriters at the request of the Company and shall so state therein.
(g) Philip N. Smith, Jr., general counsel of the Company, shall have
furnished to the Representatives his written opinion, dated the Closing Date or
the Additional Closing Date, as the case may be, in form and substance
satisfactory to the Representatives, to the effect that:
(i) the Company and each of the Subsidiaries has been duly
qualified as a foreign corporation for the transaction of business and is in
good standing under the laws of each other jurisdiction in which it owns or
leases properties, or conducts any business, so as to require such
qualification, other than where the failure to be so qualified or in good
standing, singly or in the
<PAGE>
-21-
aggregate with all other such failures, would not have a Material Adverse
Effect;
(ii) neither the Company nor any of the Subsidiaries is, or with
the giving of notice or lapse of time or both would be, in violation of or in
default under, its Certificate or Articles of Incorporation or By-Laws or any
indenture, mortgage, deed of trust, loan agreement, franchise agreement or other
agreement or instrument, in each case, known to such counsel, to which the
Company or any of the Subsidiaries is a party or by which it or any of them or
any of their respective properties is bound, except for violations and defaults
which singly and in the aggregate are not material to the Company and the
Subsidiaries taken as a whole;
(iii) except as described in the Prospectus, each of the Company
and the Subsidiaries owns, possesses or has obtained all Permits from all
automobile manufacturers and distributors necessary to own or lease, as the case
may be, and to operate its properties and to carry on its business as conducted
as of the Closing Date and as proposed to be conducted, and neither the Company
nor any such Subsidiary has received any actual notice of any proceeding
relating to revocation or modification of any such Permit, in each case, other
than any Permit that is material to the Company and the Subsidiaries taken as a
whole; to the best of such counsel's knowledge, except as described in the
Prospectus, each of the Company and the Subsidiaries owns, possesses or has
obtained all Permits from, and has made all declarations and filings with, all
federal, state, local and other governmental authorities (including foreign
regulatory agencies), all self-regulatory organizations and all domestic or
foreign courts and other tribunals necessary to own or lease, as the case may
be, and to operate its properties and to carry on its business as conducted as
of the Closing Date and as proposed to be conducted, and neither the Company nor
any such Subsidiary has received any actual notice of any proceeding relating to
revocation or modification of any such Permit, in each case, other than any
Permit that is material to the Company and the Subsidiaries taken as a whole;
and to the best of such counsel's knowledge, each of the Company and the
Subsidiaries is in compliance with all laws and regulations relating to the
conduct of its business as conducted as of the date of the Prospectus, except as
described in the Prospectus and except to the extent failure to so comply would
not, singly or in the aggregate, have a Material Adverse Effect;
(iv) to the best of such counsel's knowledge, each of the
Company and the Subsidiaries owns, possesses or has the right to use the
intellectual property employed by it in connection with the business conducted
by it as of the date hereof other than
<PAGE>
-22-
any such intellectual property that is not material to the Company and the
Subsidiaries taken as a whole;
(v) to the best of such counsel's knowledge, the Company and the
Subsidiaries have good and marketable title in fee simple to all real property
and good and marketable title to all personal property owned by them, in each
case free and clear of all liens, encumbrances and defects except such as are
described or referred to in the Prospectus and except to the extent as would not
simply or in the aggregate, have any Material Adverse Effect; and to the best of
such counsel's knowledge, any real property and buildings held under lease by
the Company and the Subsidiaries are held by them under valid, existing and
enforceable leases with such exceptions as would not have a Material Adverse
Effect;
(vi) to the best of such counsel's knowledge, each of the
Company and the Subsidiaries is in compliance with all Environmental Laws,
except, in each case, where noncompliance, singly or in the aggregate, would not
have a Material Adverse Effect; there are no Proceedings pending or, to the best
of such counsel's knowledge, threatened against or affecting the Company or any
of the Subsidiaries under any Environmental Law which, singly or in the
aggregate, would have a Material Adverse Effect; and
(vii) such counsel believes that (other than the financial
statements and related schedule therein, as to which such counsel need express
no belief) the Registration Statement and the prospectus included therein at the
time the Registration Statement became effective did not contain any 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, and
that neither the Prospectus nor any amendment or supplement thereto contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(h) On the effective date of the Registration Statement and the
effective date of the most recently filed post-effective amendment to the
Registration Statement and also on the Closing Date or Additional Closing Date,
as the case may be, Coopers & Lybrand, L.L.P. shall have furnished to you
letters, dated the respective dates of delivery thereof, in form and substance
satisfactory to you, containing statements and information of the type
customarily included in accountants' "comfort letters" to underwriters with
respect to the financial statements and certain financial information contained
in the Registration Statement and the Prospectus.
<PAGE>
-23-
(i) The Representatives shall have received on and as of the Closing
Date or Additional Closing Date, as the case may be, an opinion of Cahill Gordon
& Reindel, counsel to the Underwriters, with respect to the due authorization
and valid issuance of the Shares, the Registration Statement, the Prospectus and
other related matters as the Representatives may reasonably request, and such
counsel shall have received such papers and information as they may reasonably
request to enable them to pass upon such matters.
(j) The Shares to be delivered on the Closing Date or Additional
Closing Date, as the case may be, shall have been approved for listing on the
Exchange, subject to official notice of issuance.
(k) The "lock-up" agreements, each substantially in the form of
Exhibit A hereto, of each of the Company's officers, directors and stockholders
and certain other equity holders relating to sales and certain other
dispositions of shares of Stock or certain other securities, delivered to you on
or before the date hereof, shall be in full force and effect on the Closing Date
or Additional Closing Date, as the case may be.
(l) Each of the conditions to closing of the Contemporaneous
Acquisitions and the Minority Exchange shall have been satisfied or waived at
the date hereof, and the Contemporaneous Acquisitions and the Minority Exchange
shall be consummated prior to or simultaneously with the consummation of the
offering of Shares hereunder.
(m) On or prior to the Closing Date or Additional Closing Date, as
the case may be, the Company shall have furnished to the Representatives such
further certificates and documents as the Representatives shall reasonably
request.
7. The Company agrees to indemnify and hold harmless each Underwriter and
each person, if any, who controls any Underwriter within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act, from and
against any and all losses, claims, damages and liabilities (including, without
limitation, the legal fees and other expenses incurred in connection with any
suit, action or proceeding or any claim asserted) caused by any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement or any preliminary prospectus or the Prospectus or any amendment or
supplement thereto, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages or
<PAGE>
-24-
liabilities are caused by any untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in conformity with information
relating to any Underwriter furnished to the Company in writing by such
Underwriter through the Representatives expressly for use therein.
The Company also agrees to indemnify and hold harmless Smith Barney and
each person, if any, who controls Smith Barney within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act, from and
against any and all losses, claims, damages and liabilities incurred as a result
of Smith Barney's participation as a "qualified independent underwriter" within
the meaning of the Conduct Rules of the NASD in connection with the offering of
the Shares.
Each Underwriter agrees, severally and not jointly, to indemnify and hold
harmless the Company, its directors, its officers who sign the Registration
Statement and each person, if any, who controls the Company within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act to the
same extent as the foregoing indemnity from the Company to each Underwriter, but
only with reference to information relating to such Underwriter furnished to the
Company in writing by such Underwriter through the Representatives expressly for
use in the Registration Statement, the Prospectus, any amendment or supplement
thereto, or any preliminary prospectus.
If any suit, action, proceeding (including any governmental or regulatory
investigation), claim or demand shall be brought or asserted against any person
in respect of which indemnity may be sought pursuant to any of the three
preceding paragraphs, such person (the "INDEMNIFIED PERSON") shall promptly
notify the person against whom such indemnity may be sought (the "INDEMNIFYING
PERSON") in writing, and the Indemnifying Person, upon request of the
Indemnified Person, shall retain counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Person may designate in such proceeding and shall pay the fees and
expenses of such counsel related to such proceeding. In any such proceeding,
any Indemnified Person shall have the right to retain its own counsel, but the
fees and expenses of such counsel shall be at the expense of such Indemnified
Person unless (i) the Indemnifying Person and the Indemnified Person shall have
mutually agreed to the contrary, (ii) the Indemnifying Person has failed within
a reasonable time to retain counsel reasonably satisfactory to the Indemnified
Person or (iii) the named parties in any such proceeding (including any
impleaded parties) include both the Indemnifying Person and the Indemnified
Person and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing
<PAGE>
-25-
interests between them. It is understood that the Indemnifying Person shall not,
in connection with any proceeding or related proceeding in the same
jurisdiction, be liable for the fees and expenses of more than one separate firm
(in addition to any local counsel) for all Indemnified Persons, and that all
such fees and expenses shall be reimbursed as they are incurred; PROVIDED,
HOWEVER, that if indemnity may be sought pursuant to the second paragraph of
this Section 7 in respect of such proceeding, then in addition to such separate
firm of the Underwriters and such control persons of the Underwriters the
indemnifying party shall be liable for the fees and expenses of not more than
one separate firm (in addition to any local counsel) for Smith Barney in its
capacity as a "qualified independent underwriter" and all persons, if any, who
control Smith Barney within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act. Any such separate firm for the
Underwriters and such control persons of Underwriters shall be designated in
writing by J.P. Morgan Securities and any such separate firm for the Company,
its directors, its officers who sign the Registration Statement and such control
persons of the Company shall be designated in writing by the Company. The
Indemnifying Person shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the Indemnifying Person agrees to
indemnify any Indemnified Person from and against any loss or liability by
reason of such settlement or judgment. Notwithstanding the foregoing sentence,
if at any time an Indemnified Person shall have requested an Indemnifying Person
to reimburse the Indemnified Person for fees and expenses of counsel as
contemplated by the second and third sentences of this paragraph, the
Indemnifying Person agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 30 days after receipt by such Indemnifying Person of the
aforesaid request and (ii) such Indemnifying Person shall not have reimbursed
the Indemnified Person in accordance with such request prior to the date of such
settlement. No Indemnifying Person shall, without the prior written consent of
the Indemnified Person, effect any settlement of any pending or threatened
proceeding in respect of which any Indemnified Person is or could have been a
party and indemnity could have been sought hereunder by such Indemnified Person,
unless such settlement includes an unconditional release of such Indemnified
Person from all liability on claims that are the subject matter of such
proceeding.
If the indemnification provided for in the first, second or third
paragraphs of this Section 7 is unavailable to an Indemnified Person in respect
of any losses, claims, damages or liabilities referred to therein, then each
Indemnifying Person under such paragraph, in lieu of indemnifying such
Indemnified Person
<PAGE>
-26-
thereunder, shall contribute to the amount paid or payable by such Indemnified
Person as a result of such losses, claims, damages or liabilities (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Underwriters and Smith Barney in its capacity as
a "qualified independent underwriter" on the other hand from the offering of the
Shares or (ii) if the allocation provided by clause (i) above is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company on the one hand and the Underwriters and Smith Barney in its
capacity as a "qualified independent underwriter" on the other hand in
connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Underwriters and Smith Barney in its capacity as a "qualified
independent underwriter" on the other hand shall be deemed to be in the same
respective proportions as the net proceeds from the offering (before deducting
expenses) received by the Company and the total underwriting discounts and the
commissions received by the Underwriters, in each case as set forth in the table
on the cover of the Prospectus, bear to the aggregate public offering price of
the Shares. The relative fault of the Company on the one hand and the
Underwriters and Smith Barney in its capacity as a "qualified independent
underwriter" on the other hand shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company, by the Underwriters or by Smith Barney in its capacity
as a "qualified independent underwriter" and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by PRO RATA
allocation (even if the Underwriters were treated as one entity for such
purposes) or by any other method of allocation that does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an Indemnified Person as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses incurred by such Indemnified Person in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, in no event shall an
Underwriter be required to contribute any amount in excess of the amount by
which the total price at which the Shares
<PAGE>
-27-
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages that such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute pursuant to this
Section 7 are several in proportion to the respective number of Shares set forth
opposite their names in Schedule I hereto, and not joint.
The remedies provided for in this Section 7 are not exclusive and shall not
limit any rights or remedies which may otherwise be available to any indemnified
party at law or in equity.
The indemnity and contribution agreements contained in this Section 7 and
the representations and warranties of the Company set forth in this Agreement
shall remain operative and in full force and effect regardless of (i) any
termination of this Agreement, (ii) any investigation made by or on behalf of
any Underwriter or any person controlling any Underwriter or by or on behalf of
the Company, its officers or directors or any other person controlling the
Company and (iii) acceptance of and payment for any of the Shares.
8. Notwithstanding anything herein contained, this Agreement (or the
obligations of the several Underwriters with respect to the Option Shares) may
be terminated in the absolute discretion of the Representatives, by notice given
to the Company, if after the execution and delivery of this Agreement and prior
to the Closing Date (or, in the case of the Option Shares, prior to the
Additional Closing Date) (i) trading generally shall have been suspended or
materially limited on or by, as the case may be, any of the Exchange or the
American Stock Exchange, the Nasdaq National Market, the Chicago Board Options
Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade, (ii)
trading of any securities of or guaranteed by the Company shall have been
suspended on any exchange or in any over-the-counter market, (iii) a general
moratorium on commercial banking activities in New York shall have been declared
by either federal or New York State authorities, or (iv) there shall have
occurred any outbreak or escalation of hostilities or any change in financial
markets or any calamity or crisis that, in the judgment of the Representatives,
is material and adverse and which, in the judgment of the Representatives, makes
it impracticable to market the Underwritten Shares or the Option Shares, as the
case may be, on the terms and in the manner contemplated in the Prospectus.
<PAGE>
-28-
9. This Agreement shall become effective upon the later of (x) execution
and delivery hereof by the parties hereto and (y) release of notification of the
effectiveness of the Registration Statement (or, if applicable, any post-
effective amendment) by the Commission.
If on the Closing Date or the Additional Closing Date, as the case may be,
any one or more of the Underwriters shall fail or refuse to purchase Shares
which it or they have agreed to purchase hereunder on such date, and the
aggregate number of Shares which such defaulting Underwriter or Underwriters
agreed but failed or refused to purchase is not more than one-tenth of the
aggregate number of Shares to be purchased on such date, the other Underwriters
shall be obligated severally in the proportions that the number of Shares set
forth opposite their respective names in Schedule I bears to the aggregate
number of Underwritten Shares set forth opposite the names of all such non-
defaulting Underwriters, or in such other proportions as the Representatives may
specify, to purchase the Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase on such date; PROVIDED,
HOWEVER, that in no event shall the number of Shares that any Underwriter has
agreed to purchase pursuant to Section 1 be increased pursuant to this Section 9
by an amount in excess of one-ninth of such number of Shares without the written
consent of such Underwriter. If on the Closing Date or the Additional Closing
Date, as the case may be, any Underwriter or Underwriters shall fail or refuse
to purchase Shares which it or they have agreed to purchase hereunder on such
date, and the aggregate number of Shares with respect to which such default
occurs is more than one-tenth of the aggregate number of Shares to be purchased
on such date, and arrangements satisfactory to the Representatives and the
Company for the purchase of such Shares are not made within 36 hours after such
default, this Agreement (or the obligations of the several Underwriters to
purchase the Option Shares, as the case may be) shall terminate without
liability on the part of any non-defaulting Underwriter or the Company. In any
such case either you or the Company shall have the right to postpone the Closing
Date (or, in the case of the Option Shares, the Additional Closing Date, but in
no event for longer than seven days, in order that the required changes, if any,
in the Registration Statement and in the Prospectus or in any other documents or
arrangements may be effected. Any action taken under this paragraph shall not
relieve any defaulting Underwriter from liability in respect of any default of
such Underwriter under this Agreement.
10. If this Agreement shall be terminated by the Underwriters, or any of
them, because of any failure or refusal on the part of the Company to comply
with its covenants or to fulfill any of the conditions of this Agreement, or if
for any reason the
<PAGE>
-29-
Company shall be unable to perform its obligations under this Agreement or any
condition of the Underwriters' obligations cannot be fulfilled, the Company
agrees to reimburse the Underwriters or such Underwriters as have so terminated
this Agreement with respect to themselves, severally, for all out-of-pocket
expenses (including the fees and expenses of their counsel) reasonably incurred
by such Underwriters in connection with this Agreement or the offering
contemplated hereunder.
11. This Agreement shall inure to the benefit of and be binding upon the
Company, the Underwriters, any controlling persons referred to herein and their
respective successors and assigns. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any other person, firm or
corporation any legal or equitable right, remedy or claim under or in respect of
this Agreement or any provision herein contained. No purchaser of Shares from
any Underwriter shall be deemed to be a successor by reason merely of such
purchase.
12. Any action by the Underwriters hereunder may be taken by the
Representatives jointly or by J.P. Morgan Securities alone on behalf of the
Underwriters, and any such action taken by the Representatives jointly or by
J.P. Morgan Securities alone shall be binding upon the Underwriters. All
notices and other communications hereunder shall be in writing and shall be
deemed to have been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriters shall be given to the
Representatives, c/o J.P. Morgan Securities Inc., 60 Wall Street, New York, New
York 10260 (telecopy: 212/648-5121 or 212/648-5951); Attention: Syndicate
Department. Notices to the Company shall be given to it at 375 Park Avenue, New
York, New York 10152, (telecopy: 212/223-5148); Attention: Chief Executive
Officer.
13. This Agreement may be signed in counterparts, each of which shall be
an original and all of which together shall constitute one and the same
instrument.
14. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, without giving effect to the conflicts of
laws provisions thereof.
<PAGE>
If the foregoing is in accordance with your understanding, please sign and
return four counterparts hereof.
Very truly yours,
UNITED AUTO GROUP, INC.
By:______________________
Name:
Title:
Accepted as of the date first
written above:
J.P. MORGAN SECURITIES INC.
MONTGOMERY SECURITIES
SMITH BARNEY INC.
Acting severally on behalf of
themselves and the several
Underwriters listed in Schedule I
hereto.
By: J.P. MORGAN SECURITIES INC.
By: ________________________
Name:
Title:
<PAGE>
SCHEDULE I
Underwritten
Underwriter Shares
- ----------- ------------
J.P. Morgan Securities Inc.
Montgomery Securities
Smith Barney Inc.
Total
<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").
ARTICLE IV
CAPITAL
1. DESIGNATION.
The total number of shares of capital stock which the Corporation
shall have the authority to issue is 41,225,000, 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" and, collectively with the Voting Common
Stock, the "COMMON STOCK"); and (iii) 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
<PAGE>
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.
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 determination of
stockholders entitled to vote on such matters or, if no such record date is
established, at the date such vote is taken. 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. Except as otherwise provided in this Section 2 or as
otherwise required by law, the holders of shares of Voting 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 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.
3. CONVERSION OF 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.
(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
-2-
<PAGE>
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, 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 (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,
-3-
<PAGE>
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 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 or the Non-voting 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 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
-4-
<PAGE>
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 Common Stock,
irrespective of class, 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 Common
Stock of each class 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 Common Stock into which such 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 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 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.
-5-
<PAGE>
(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 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 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,
-6-
<PAGE>
(ii) Class II directors shall be elected to serve until the 1998
Annual Meeting of Stockholders, and
(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, alter or repeal Bylaws of
the Corporation (except insofar as Bylaws adopted by the stockholders shall
otherwise provide).
-7-
<PAGE>
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.
-8-
<PAGE>
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
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.
-9-
<PAGE>
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.
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>
UNITED AUTO GROUP, INC.
Incorporated Under the General Corporation Law
of the State of Delaware
BYLAWS
(Amended and Restated as of [IPO closing date])
* * * * *
ARTICLE I.
OFFICES
The registered office of UNITED AUTO GROUP, INC. (the "Corporation")
in Delaware shall be at 32 Loockerman Square, Suite L-100 in the City of Dover,
County of Kent, in the State of Delaware, and The Prentice Hall Corporation
System, Inc. shall be the resident agent of the Corporation in charge thereof.
The Corporation may also have such other offices at such other places, within or
without the State of Delaware, as the board of directors of the Corporation (the
"Board of Directors") may from time to time designate or the business of the
Corporation may require.
ARTICLE II.
STOCKHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of stockholders for the
election of directors and the transaction of any other business shall be held on
such date, in such city and state and at such time and place as may be
designated by the Board of Directors, which shall be set forth in the notice of
such meeting. At the annual meeting any business may be transacted and any
corporate action may be taken, whether stated in the notice of meeting or not,
except as otherwise expressly provided by statute, the Certificate of
Incorporation or these Bylaws.
SECTION 2. SPECIAL MEETINGS. Special meetings of the stockholders for any
purpose may be called at any time by the Board of Directors, the Chairman of the
Board or the Chief Executive Officer and shall be called by the Chief Executive
Officer at the request of the holders of a majority of the outstanding shares of
capital stock entitled to vote. Special meetings shall be held at such place or
places within or without the State of Delaware as shall from time to time be
designated by the Board of Directors and stated in the notice of such meeting.
At a special meeting no business shall be transacted and no
<PAGE>
corporate action shall be taken other than that stated in the notice of the
meeting.
SECTION 3. NOTICE OF MEETINGS. Written notice of the time and place of
any stockholders' meeting, whether annual or special, shall be given to each
stockholder entitled to vote thereat, by personal delivery or by mailing the
same to him at his address as the same appears upon the records of the
Corporation at least ten (10) days but not more than sixty (60) days before the
day of the meeting. Notice of any adjourned meeting need not be given except by
announcement at the meeting so adjourned, unless otherwise ordered in connection
with such adjournment. Such further notice, if any, shall be given as may be
required by law.
SECTION 4. QUORUM. Any number of stockholders, together holding at least
a majority of the capital stock of the Corporation issued and outstanding and
entitled to vote, who shall be present in person or represented by proxy at any
meeting duly called, shall constitute a quorum for the transaction of all
business, except as otherwise provided by law, by the Certificate of
Incorporation or by these Bylaws.
SECTION 5. ADJOURNMENT OF MEETINGS. If less than a quorum shall attend at
the time for which a meeting shall have been called, the meeting may be
adjourned from time to time by a majority vote of the stockholders present or
represented by proxy and entitled to vote, without notice other than by
announcement at the meeting until a quorum shall attend. Any meeting at which a
quorum is present may also be adjourned in like manner and for such time or upon
such call as may be determined by a majority vote of the stockholders present or
represented by proxy and entitled to vote. At any adjourned meeting at which a
quorum shall be present, any business may be transacted and any corporate action
may be taken which might have been transacted at the meeting as originally
called.
SECTION 6. VOTING LIST. The officer or agent having charge of the stock
ledger of the Corporation shall prepare and make, at least ten (10) days before
every meeting of stockholders, a complete list of the stockholders entitled to
vote at such meeting, arranged in alphabetical order and showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder, for
any purposes germane to the meeting, during ordinary business hours, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held, for said ten (10) days. The list shall also be
produced and kept at the time and place of meeting during the whole time thereof
and subject to the inspection of any stockholder who may be present.
-2-
<PAGE>
SECTION 7. VOTING. Each stockholder entitled to vote at any meeting may
vote either in person or by proxy, but no proxy shall be voted on or after three
(3) years from its date, unless said proxy provides for a longer period. Each
stockholder entitled to vote shall at every meeting of the stockholders be
entitled to one vote for each share of stock registered in his name on the
record of stockholders. At all meetings of stockholders all matters, except as
otherwise provided by statute, the Certificate of Incorporation or these Bylaws,
shall be determined by the affirmative vote of the majority of shares present in
person or by proxy and entitled to vote on the subject matter. Voting at
meetings of stockholders need not be by written ballot.
SECTION 8. RECORD DATE OF STOCKHOLDERS. The Board of Directors is
authorized to fix in advance a date not more than sixty (60) days nor less than
ten (10) days preceding the date of any meeting of stockholders, or the date for
the payment of any dividend, or the date for the allotment of rights, or the
date when any change or conversion or exchange of capital stock shall go into
effect, or as a record date for the determination of the stockholders entitled
to notice of, and to vote at, any such meeting, and any adjournment thereof, or
entitled to receive payment of any such dividend, or to any such allotment of
rights, or to exercise the rights in respect of any such change, conversion or
exchange of capital stock, and, in such case, such stockholders and only such
stockholders as shall be stockholders of record on the date so fixed shall be
entitled to such notice of, and to vote at, such meeting, and any adjournment
thereof, or to receive payment of such dividend, or to receive such allotment of
rights, or to exercise such rights, as the case may be, notwithstanding any
transfer of any stock on the books of the Corporation, after such record date
fixed as aforesaid.
SECTION 9. NO ACTION WITHOUT MEETING. Any action required or permitted to
be taken at any annual or special meeting of stockholders may be taken only at
such duly called annual or special meeting.
SECTION 10. CONDUCT OF MEETINGS. The Chief Executive Officer or any Vice
President designated by the Chief Executive Officer, shall preside at all
regular or special meetings of stockholders. To the maximum extent permitted by
law, such presiding person shall have the power to set procedural rules,
including but not limited to rules respecting the time allotted to stockholders
to speak, governing all aspects of the conduct of such meetings.
-3-
<PAGE>
ARTICLE III.
DIRECTORS
SECTION 1. NUMBER AND QUALIFICATIONS. On the effective date of these
Bylaws, the Board of Directors shall consist of eight (8) directors and
thereafter shall consist of such number as may be fixed from time to time by
resolution of the Board of Directors. The directors need not be stockholders.
SECTION 2. ELECTION OF DIRECTORS. 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 Class I, Class II and Class III directors shall be
designated and terms of the Board of Directors 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
(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 (3) 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 Section 2 of Article III.
Anything herein to the contrary notwithstanding, the provisions of this
Section 2 of Article III 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 limitation shall be reduced to the extent it was previously
so increased.
-4-
<PAGE>
Notwithstanding any other provisions of these Bylaws or the Certificate of
Incorporation (and notwithstanding the fact that some lesser percentage may be
specified by law or by these Bylaws), the affirmative vote of the holders of
two-thirds (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 Section 2 of Article III.
SECTION 3. REMOVAL AND RESIGNATION OF DIRECTORS. Any director may be
removed from the Board of Directors only for cause by the holders of a majority
of the shares of capital stock entitled to vote, at any special meeting of the
stockholders called for that purpose, and the office of such director shall
forthwith become vacant.
Any director may resign at any time. Such resignation shall take
effect at the time specified therein, and if no time be specified, at the time
of its receipt by the Chief Executive Officer or Secretary. The acceptance of a
resignation shall not be necessary to make it effective, unless so specified
therein.
SECTION 4. FILLING OF VACANCIES. Any vacancy among the directors,
occurring from any cause whatsoever, may be filled by a majority of the
remaining directors, though less than a quorum, or by a sole remaining director;
PROVIDED, HOWEVER, that the stockholders removing any director may at the same
meeting fill the vacancy caused by such removal; and PROVIDED, FURTHER, that if
the directors fail to fill any such vacancy, the stockholders may at any special
meeting called for that purpose fill such vacancy. In case of any increase in
the number of directors, the additional directors may be elected by the
directors in office before such increase.
Any person elected to fill a vacancy shall hold office, subject to the
right of removal as hereinbefore provided, until the stockholders meeting upon
which the term of the directors of such director's class expires and until his
successor is elected and qualifies.
SECTION 5. REGULAR MEETINGS. The Board of Directors shall hold an annual
meeting for the transaction of any business immediately after the annual meeting
of the stockholders, provided a quorum of directors is present. Other regular
meetings may be held at such times as may be determined from time to time by
resolution of the Board of Directors.
SECTION 6. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by the Chairman of the Board of Directors or by the Chief
Executive Officer.
SECTION 7. NOTICE AND PLACE OF MEETINGS. Meetings of the Board of
Directors may be held at the principal office of the
-5-
<PAGE>
Corporation or at such other place as shall be stated in the notice of such
meeting. Notice of any such meeting shall be given in compliance with
applicable law. No notice of the annual meeting of the Board of Directors shall
be required if it is held immediately after the annual meeting of the
stockholders and if a quorum is present.
SECTION 8. BUSINESS TRANSACTED AT MEETINGS, ETC. Any business may be
transacted and any corporate action may be taken at any regular or special
meeting of the Board of Directors at which a quorum shall be present, whether
such business or proposed action be stated in the notice of such meeting or not,
unless special notice of such business or proposed action shall be required by
statute.
SECTION 9. QUORUM. A majority of the Board of Directors at any time in
office shall constitute a quorum. At any meeting at which a quorum is present,
the vote of a majority of the members present shall be the act of the Board of
Directors unless the act of a greater number is specifically required by law or
by the Certificate of Incorporation or these Bylaws. The members of the Board
of Directors shall act only as the Board of Directors and the individual members
thereof shall not have any powers as such.
SECTION 10. COMPENSATION. The directors shall not receive any salary for
their services as directors, but by resolution of the Board of Directors a fee
(payable in cash or securities, as determined by the Board of Directors) and
expenses of attendance may be allowed for attendance at each meeting. Nothing
herein contained shall preclude any director from serving the Corporation in any
other capacity, as an officer, agent or otherwise, and receiving compensation
therefor.
SECTION 11. ACTION WITHOUT A MEETING. Any action required or permitted to
be taken at any meeting of the Board of Directors, or of any committee of the
Board of Directors (each a "Committee"), may be taken without a meeting if all
members of the Board of Directors or Committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
the proceedings of the Board of Directors.
SECTION 12. MEETINGS THROUGH USE OF COMMUNICATIONS EQUIPMENT. Members of
the Board of Directors, or any Committee, shall, except as otherwise provided by
law, the Certificate of Incorporation or these Bylaws, may participate in a
meeting of the Board of Directors, or any Committee, by means of a conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation shall
constitute presence in person at the meeting.
-6-
<PAGE>
ARTICLE IV.
COMMITTEES
SECTION 1. EXECUTIVE COMMITTEE. The Board of Directors may, by resolution
passed by a majority of the whole Board of Directors, designate one (1) or more
of their number to constitute an Executive Committee to hold office at the
pleasure of the Board of Directors, which Committee shall, during the intervals
between meetings of the Board of Directors, have and exercise all of the powers
of the Board of Directors in the management of the business and affairs of the
Corporation, subject only to such restrictions or limitations as the Board of
Directors may from time to time specify, or as limited by law, and shall have
power to authorize the seal of the Corporation to be affixed to all papers which
may require it.
Any member of the Executive Committee may be removed at any time, with
or without cause, by a resolution passed by a majority of the whole Board of
Directors.
Any person ceasing to be a director shall IPSO FACTO cease to be a member
of the Executive Committee.
Any vacancy in the Executive Committee occurring from any cause whatsoever
may be filled from among the directors by a resolution passed by a majority of
the whole Board of Directors.
SECTION 2. OTHER COMMITTEES. Other Committees may be appointed by
resolution of the whole Board of Directors, which Committees shall hold office
for such time and have such powers and perform such duties as may from time to
time be assigned to them by the Board of Directors.
SECTION 3. RESIGNATION. Any member of a Committee may resign at any time.
Such resignation shall be made in writing and shall take effect at the time
specified therein, or, if no time be specified, at the time of its receipt by
the Chief Executive Officer or Secretary. The acceptance of a resignation shall
not be necessary to make it effective unless so specified therein.
SECTION 4. QUORUM. A majority of the members of a Committee shall
constitute a quorum. The act of a majority of the members of a Committee
present at any meeting at which a quorum is present shall be the act of such
Committee. The members of a Committee shall act only as a Committee, and the
individual members thereof shall not have any powers as such.
SECTION 5. RECORD OF PROCEEDINGS, ETC. Each Committee shall keep a record
of its proceedings, which record shall be filed with the minutes of the
proceedings of the Board of Directors.
-7-
<PAGE>
SECTION 6. ORGANIZATION, MEETINGS, NOTICES, ETC. A Committee may hold its
meetings at the principal office of the Corporation, or at any other place which
a majority of the Committee may at any time agree upon. Each Committee may make
such rules as it may deem expedient for the regulation and carrying on of its
meetings and proceedings. Unless otherwise ordered by the Executive Committee,
any notice of a meeting of such Committee may be given by the Secretary of the
Corporation or by the chairman of the Committee and shall be sufficiently given
if mailed to each member at his residence or usual place of business at least
five (5) days before the day on which the meeting is to be held, or if sent to
him at such place by facsimile, telegraph or cable, or delivered personally or
by telephone not later than twenty-four (24) hours before the time at which the
meeting is to be held.
SECTION 7. COMPENSATION. The members of any Committee shall be entitled
to such compensation as may be allowed them by resolution of the Board of
Directors.
ARTICLE V.
OFFICERS
SECTION 1. NUMBER. The officers of the Corporation shall be a Chief
Executive Officer, one or more Vice Presidents, a Secretary, one or more
Assistant Secretaries, a Treasurer, and one or more Assistant Treasurers, and
such other officers as may be appointed in accordance with the provisions of
Section 3 of this Article V. The Board of Directors in its discretion may also
elect a Chairman of the Board of Directors and/or a Vice Chairman of the Board
of Directors.
SECTION 2. ELECTION, TERM OF OFFICE AND QUALIFICATIONS. The officers,
except as provided in Section 3 of this Article V, shall be appointed annually
by the Board of Directors. Each such officer shall, except as herein otherwise
provided, hold office until his successor shall have been chosen and shall
qualify. Except as otherwise provided by law, any number of offices may be held
by the same person.
SECTION 3. OTHER OFFICERS. Other officers, including a president, one or
more additional executive vice presidents, vice presidents, assistant
secretaries or assistant treasurers, may from time to time be appointed by the
Board of Directors or Executive Committee, which other officers shall have such
powers and perform such duties as may be assigned to them by authority
appointing them.
SECTION 4. REMOVAL OF OFFICERS. Any officer of the Corporation may be
removed from office, with or without cause, by a vote of a majority of the Board
of Directors.
-8-
<PAGE>
SECTION 5. RESIGNATION. Any officer of the Corporation may resign at any
time. Such resignation shall be in writing and shall take effect at the time
specified therein, and if no time be specified, at the time of its receipt by
the Chief Executive Officer or Secretary. The acceptance of a resignation shall
not be necessary in order to make it effective, unless so specified therein.
SECTION 6. FILLING OF VACANCIES. A vacancy in any office shall be filled
by the Board of Directors or by the authority appointing the predecessor in such
office.
SECTION 7. COMPENSATION. The compensation of the officers shall be fixed
by the Board of Directors, or by any Committee upon whom power in that regard
may be conferred by the Board of Directors.
SECTION 8. CHAIRMAN AND/OR VICE CHAIRMAN OF THE BOARD OF DIRECTORS. The
Chairman and/or Vice Chairman of the Board of Directors shall be a director and
shall preside at all meetings of the Board of Directors at which he shall be
present, and shall have such power and perform such duties as may from time to
time be assigned to him by the Board of Directors.
SECTION 9. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall,
when present, preside at all meetings of the stockholders. He shall have power
to call special meetings of the stockholders or of the Board of Directors at any
time. He shall be the chief executive officer of the Corporation, and shall
have the general direction of the business, affairs and property of the
Corporation, and of its several officers, and shall have and exercise all such
powers and discharge such duties as usually pertain to the office of Chief
Executive Officer.
SECTION 10. VICE PRESIDENTS. The President, if any, or Vice Presidents,
or any of them, shall, subject to the direction of the Board of Directors, at
the request of the Chief Executive Officer or in his absence, or in case of his
inability to perform his duties for any cause, perform the duties of the Chief
Executive Officer, and, when so acting, shall have all the powers of, and be
subject to all restrictions upon, the Chief Executive Officer. The President,
if any, and the Vice Presidents shall also perform such other duties as may be
assigned to them by the Board of Directors, and the Board of Directors may
determine the order of priority among the Vice Presidents.
SECTION 11. SECRETARY. The Secretary shall perform such duties as are
usually incident to the office of Secretary, or as may from time to time be
assigned to him by the Board of Directors, or as are prescribed by these Bylaws.
SECTION 12. TREASURER. The Treasurer shall perform such duties and have
powers as are usually incident to the office of
-9-
<PAGE>
Treasurer or may from time to time be assigned to him by the Board of Directors.
ARTICLE VI.
CAPITAL STOCK
SECTION 1. ISSUANCE OF CERTIFICATES OF STOCK. Certificates of capital
stock shall be in such form as shall be approved by the Board of Directors.
They shall be numbered in the order of their issuance and shall be signed by (i)
the Chairman of the Board of Directors, the Chief Executive Officer, the
President, if any, or one of the Vice Presidents, and (ii) the Secretary or an
Assistant Secretary or the Treasurer or an Assistant Treasurer, and the seal of
the Corporation or a facsimile thereof shall be impressed or affixed or
reproduced thereon; PROVIDED, HOWEVER, that where such certificates are signed
by a transfer agent or an assistant transfer agent or by a transfer clerk acting
on behalf of the Corporation and a registrar, the signature of any such officers
of the Corporation may be facsimile. In case any officer or officers who shall
have signed, or whose facsimile signature or signatures shall have been used on,
any such certificate or certificates shall cease to be such officer or officers
of the Corporation, whether because of death, resignation or otherwise, before
such certificate or certificates shall have been delivered by the Corporation,
such certificate or certificates may nevertheless be issued and delivered as
though the person or persons who signed such certificate or certificates, or
whose facsimile signature or signatures shall have been used thereon, have not
ceased to be such officer or officers of the Corporation.
SECTION 2. REGISTRATION AND TRANSFER OF SHARES. The name of each person
owning one or more shares of the capital stock of the Corporation shall be
entered on the books of the Corporation together with the number of shares held
by him, the numbers of the certificates covering such shares and the dates of
issuance of such certificates. The shares of stock of the Corporation shall be
transferable on the books of the Corporation by the holders thereof in person,
or by their duly authorized attorneys or legal representatives, on surrender and
cancellation of certificates for a like number of shares, accompanied by an
assignment or power of transfer endorsed thereon or attached thereto, duly
executed, and with such proof of the authenticity of the signature as the
Corporation or its agents may reasonably require. A record shall be made of
each transfer.
The Board of Directors may make other and further rules and
regulations concerning the transfer and registration of certificates for stock
and may appoint a transfer agent or registrar or both and may require all
certificates of stock to bear the signature of either or both.
-10-
<PAGE>
SECTION 3. LOST, STOLEN, DESTROYED AND MUTILATED CERTIFICATES. The
holder of any stock of the Corporation shall immediately notify the Corporation
of any loss, theft, destruction or mutilation of the certificates therefor. The
Corporation may issue a new certificate of stock in the place of any certificate
theretofore issued by it alleged to have been lost, stolen, destroyed or
mutilated, and the Board of Directors may, in its discretion, require the owner
of the lost, stolen, destroyed or mutilated certificate, or his legal
representatives, to give the Corporation a bond, in such sum not exceeding
double the value of the stock and with such surety or sureties as they may
require, to indemnify it against any claim that may be made against it by reason
of the issuance of such new certificate and against all other liability in the
premises, or may remit such owner to such remedy or remedies as he may have
under the laws of the State of Delaware.
ARTICLE VII.
DIVIDENDS, SURPLUS, ETC.
SECTION 1. GENERAL DISCRETION OF DIRECTORS. The Board of Directors shall
have power to fix and vary the amount to be set aside or reserved as working
capital of the Corporation, or as reserves, or for other proper purposes of the
Corporation, and, subject to the requirements of the Certificate of
Incorporation, to determine whether any part of the surplus or net profits of
the Corporation shall be declared as dividends and paid to the stockholders, and
to fix the date or dates for the payment of any dividends.
ARTICLE VIII.
MISCELLANEOUS PROVISIONS
SECTION 1. FISCAL YEAR. The fiscal year of the Corporation shall commence
on the first day of January and end on the last day of December, or such other
dates as may be determined by the Board of the Directors.
SECTION 2. CORPORATE SEAL. The corporate seal shall be in such form as
approved by the Board of Directors and may be altered at their pleasure. The
corporate seal may be used by causing it or a facsimile thereof to be impressed
or affixed or reproduced or otherwise.
SECTION 3. NOTICES. Except as otherwise expressly provided, any notice
required by these Bylaws to be given shall be sufficient if given by depositing
the same in a post office or letter box in a sealed postpaid wrapper addressed
to the person entitled thereto at his address, as the same appears upon the
books of the Corporation, or transmitted by facsimile, telegraph or cable the
same to such person at such address; and such notice
-11-
<PAGE>
shall be deemed to be given at the time it is mailed, transmitted by facsimile,
telegraphed or cabled.
SECTION 4. WAIVER OF NOTICE. Any stockholder or director may at any time,
by writing or by facsimile, telegraph or cable, waive any notice required to be
given under these Bylaws, and if any stockholder or director shall be present at
any meeting his presence shall constitute a waiver of such notice.
SECTION 5. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the Corporation, shall be signed by such officer or officers, agent or
agents of the Corporation, and in such manner, as shall from time to time be
designated by resolution of the Board of Directors.
SECTION 6. DEPOSITS. All funds of the Corporation shall be deposited from
time to time to the credit of the Corporation in such bank or banks, trust
companies or other depositories as the Board of Directors may select, and, for
the purpose of such deposit, checks, drafts, warrants and other orders for the
payment of money which are payable to the order of the Corporation, may be
endorsed for deposit, assigned and delivered by any officer of the Corporation,
or by such agents of the Corporation as the Board of Directors or the Chief
Executive Officer may authorize for that purpose.
SECTION 7. VOTING STOCK OF OTHER CORPORATIONS. Except as otherwise
ordered by the Board of Directors or the Executive Committee, the Chief
Executive Officer or the Secretary shall have full power and authority on behalf
of the Corporation to attend and to act and to vote at any meeting of the
stockholders of any corporation of which the Corporation is a stockholder and to
execute a proxy to any other person to represent the Corporation at any such
meeting, and at any such meeting the Chief Executive Officer or the Secretary or
the holder of any such proxy, as the case may be, shall possess and may exercise
any and all rights and powers incident to ownership of such stock and which
rights and powers the Corporation might have possessed and exercised if present.
The Board of Directors or the Executive Committee may from time to time confer
like powers upon any other person or persons.
SECTION 8. INDEMNIFICATION OF OFFICERS AND DIRECTORS. The Corporation
shall indemnify any and all of its directors or officers, including former
directors or officers, and any employee, who shall serve as an officer or
director of any corporation at the request of the Corporation, to the fullest
extent permitted under and in accordance with the laws of the State of Delaware.
SECTION 9. INTERESTED DIRECTORS; QUORUM. No contract or transaction
between the Corporation and one or more of its directors or officers of a
corporation, partnership, association,
-12-
<PAGE>
or other organization or entity in which one or more of its directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the director or officer is
present at or participates in the meeting of the Board of Directors or Committee
thereof which authorizes the contract or transaction, or solely because his or
their votes are counted for such purpose, if: (1) the material facts as to his
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the Committee, and the Board of Directors
or Committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterest directors, even though the
disinterested directors be less than a quorum; or (2) the material facts as to
his relationship or interest and as to the contract or transaction are disclosed
or are known to the stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the stockholders;
or (3) the contract or transaction is fair as to the Corporation as of the time
it is authorized, approved or ratified by the Board of Directors, a committee
thereof, or the stockholders. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or
of a Committee which authorizes the contract or transaction.
ARTICLE IX.
AMENDMENTS
SECTION 1. Amendments. The Board of Directors shall have the power to
make, rescind, alter, amend and repeal these Bylaws, PROVIDED, HOWEVER, that the
stockholders shall have power to rescind, alter, amend or repeal any bylaws made
by the Board of Directors, and to enact bylaws which if so expressed shall not
be rescinded, altered, amended or repealed by the Board of Directors.
* * * * *
<PAGE>
[VIGNETTE]
NUMBER SHARES
UAG__________ UNITED AUTO GROUP, INC. ______
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
VOTING COMMON STOCK SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP 909440 10 9
This CERTIFIES that _______________ is the owner of _____________
FULLY PAID AND NON-ASSESSABLE SHARES OF THE VOTING COMMON STOCK
OF THE PAR VALUE $0.0001 PER SHARE OF
UNITED AUTO GROUP, INC.
transferable on the books of the corporation by the holder hereof in
person or by a duly authorized attorney upon surrender of this
certificate properly endorsed. This Certificate is not valid until
countersigned and registered by the Transfer Agent and Registrar.
IN WITNESS WHEREOF, the corporation has caused this
Certificate to be signed by the facsimile signatures of its duly
authorized officers and to be sealed with the facsimile seal of the
corporation.
Dated:
/s/ Philip N. Smith, Jr. /s/ Carl Spielvogel
SECRETARY CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
COUNTERSIGNED AND REGISTERED:
THE BANK OF NOVA SCOTIA TRUST COMPANY OF NEW YORK
TRANSFER AGENT AND REGISTRAR
AUTHORIZED SIGNATURE
[SEAL]
<PAGE>
UNITED AUTO GROUP, INC.
THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO
REQUESTS, THE DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR
OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREOF AND THE
QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS,
ANY SUCH REQUESTS MAY BE MADE TO THE CORPORATION OR TO THE TRANSFER AGENT.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
<TABLE>
<CAPTION>
<S> <C> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT -- ...........Custodian.........
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of survivorship and not Under Uniform Gifts to Minors
as tenants in common Act..........................
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, ____________________, hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- --------------------------------------
______________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
______________________________________________________________________________
______________________________________________________________________________
________________________________________________________________________shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
______________________________________________________________________Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated ____________________
X _________________________________
X _________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OF ENLARGEMENT
OR ANY CHANGE WHATEVER.
SIGNATURE(s) GUARANTEED
By _______________________________
THE SIGNATURES SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR
INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND
CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE
MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
<PAGE>
[LETTERHEAD OF WILLKIE FARR & GALLAGHER]
October 1, 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 ________
shares ("Shares") of Voting Common Stock, par value $0.0001 per share, of the
Corporation, of which up to ______ 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 1, 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>
UNITED AUTO GROUP, INC.
STOCK OPTION PLAN
* * *
ARTICLE I
PURPOSE
This Stock Option Plan (the "Plan") is intended to encourage stock
ownership in United Auto Group, Inc. (the "Company") by employees of the Company
and its subsidiaries and affiliates in order to increase their proprietary
interest in the Company's success and to encourage such employees to remain in
the employ of the Company and its subsidiaries or affiliates.
ARTICLE II
CERTAIN DEFINITIONS
"BOARD" shall mean the Board of Directors of the Company.
"CLASS A PREFERRED STOCK" shall mean the Class A Convertible Preferred
Stock of the Company, par value $0.0001 per share.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMMITTEE" shall mean the Stock Option Committee of the Board.
"COMMON STOCK" shall mean the voting common stock of the Company, par
value $0.0001 per share.
"ELIGIBLE EMPLOYEE" shall mean (i) any person employed on a full-time
basis by the Company or any of its subsidiaries or (ii) any person employed by
an affiliate of the Company who performs services for the Company or any of its
subsidiaries.
"EXERCISE PRICE" shall have the meaning assigned to such term in
Article VI hereof.
"IPO" shall mean a "Qualified Public Offering" as such term is defined
in the Company's Restated Certificate of Incorporation as in effect on the date
the Plan is adopted by the
<PAGE>
Board or the completion of a sale of capital stock of the Company (or a
subsidiary of the Company) pursuant to a registration statement which has become
effective under the Securities Act of 1933, as amended, 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 of the Company.
"ISO" shall mean an "incentive stock option" within the meaning of
Section 422 of the Code.
"OPTION" shall mean any option granted under the Plan.
"OPTIONEE" shall mean any holder of an Option.
"OPTION AGREEMENT" shall mean the agreement between an Optionee and
the Company governing Options granted under the Plan, the forms of which shall
be consistent with the terms of the Plan but need not be identical.
"NON-QUALIFIED OPTION" shall mean an Option which is not an ISO.
ARTICLE III
STOCK
The stock to be issued upon the exercise of Options shall be shares of
authorized but unissued Common Stock or previously issued shares of Common Stock
reacquired by the Company. The aggregate number of shares of Common Stock as to
which Options may be granted under the Plan at any time shall not exceed
1,500,838, subject to adjustment from time to time in accordance with the
provisions of Article X hereof.
The number of shares of Common Stock available for grant of Options at
any time under the Plan shall be decreased by the sum of (i) the number of
shares with respect to which Options have been issued and have not lapsed or
been cancelled, in each case, prior to such time and (ii) the number of shares
issued prior to such time upon exercise of Options. In the event that any
outstanding Option under the Plan lapses in accordance with Articles VII or VIII
hereof, prior to the end of the period during which Options may be granted, the
shares of Common Stock subject to the unexercised portion of such Option shall
again be available for the granting of Options under the Plan.
-2-
<PAGE>
ARTICLE IV
PARTICIPATION
Optionees shall be limited to Eligible Employees who have received
written notice of their selection to participate in the Plan and who have
entered into an Option Agreement. Each Option Agreement shall state the total
number of shares of Common Stock which are subject to the Option granted. No
Eligible Employee shall at any time have a right to be selected as a
participant.
ARTICLE V
ADMINISTRATION
The Plan shall be administered by the Committee which shall have sole
authority, in its absolute discretion: (a) to select which Eligible Employees
shall be granted Options; (b) to determine the number of Options to be granted
to such Eligible Employees and whether such Options shall be ISOs or Non-
Qualified Options; (c) to prescribe the form or forms of the Option Agreements
under the Plan; (d) to adopt, amend or rescind such rules and regulations as, in
its opinion, may be advisable for the administration of the Plan; and (e) to
construe and interpret the Plan, and all such rules and regulations, and to make
all other determinations deemed necessary or advisable for the administration of
the Plan. All decisions, determinations and interpretations of the Committee
made in good faith shall be final and binding on all participants. Neither the
Committee nor any member of the Committee shall be liable for any act, omission,
interpretation, construction or determination made in connection with the Plan
in good faith, and the members of the Committee shall be entitled to
indemnification and reimbursement by the Company in respect of any claim, loss,
damage or expense (including, without limitation, counsel fees) arising
therefrom to the full extent permitted by Delaware law and under any directors'
and officers' liability insurance coverage which may be in effect from time to
time.
ARTICLE VI
EXERCISE PRICE
The Exercise Price per share of Common Stock covered by Options
granted under the Plan shall be established on or prior to the date of grant by
the Committee and shall be set forth in
-3-
<PAGE>
the Optionee's Option Agreement. Payment shall be made in full upon exercise of
the Option by delivering to the Company at its principal executive offices cash
or a certified check, bank draft or money order payable to the order of the
Company in the aggregate amount of the Exercise Price, or in accordance with any
cashless exercise procedures adopted by the Committee from time to time.
ARTICLE VII
VESTING OF OPTIONS
All Options granted under the Plan shall vest and become exercisable in
accordance with vesting schedules established by the Committee at the time of
grant.
ARTICLE VIII
TERMINATION OF EMPLOYMENT
Each Option will have a ten-year term from the date of grant, subject
to earlier termination upon termination of the Optionee's employment, as
determined by the Committee. The Committee may also provide that the Company
shall have the right prior to the IPO to repurchase any shares of Common Stock
held by an Optionee whose employment has terminated, at such price as shall be
established by the Committee at the time of grant.
ARTICLE IX
TRANSFERABILITY
Options shall not be transferable, except by will or the laws of
descent and distribution. During the lifetime of the Optionee, Options shall be
exercisable only by the Optionee.
ARTICLE X
ADJUSTMENT FOR RECAPITALIZATION, MERGER, ETC.
The aggregate and maximum number of shares of Common Stock which may
be purchased or acquired pursuant to Options granted hereunder, the number of
shares of Common Stock to which each Option relates and the Exercise Price in
respect of such Option shall be appropriately adjusted for any increase or
-4-
<PAGE>
decrease in the number of outstanding shares of Common Stock resulting from a
stock split or other subdivision or consolidation of shares of Common Stock or
for other capital adjustments or payments of stock dividends or stock
distributions or other increases or decreases in the outstanding shares of
Common Stock effected without receipt of consideration in any form permitted
under Delaware law. Any adjustment shall be conclusively determined by the
Committee.
Except as otherwise provided in the Optionee's Option Agreement:
(i) If the Company is the surviving corporation of any merger,
reorganization or other business combination with any person or entity (such
merger, reorganization or other business combination referred to as a "Merger
Event"), the Optionee shall be entitled to receive, with respect to Options,
substitute stock options to purchase shares of the surviving corporation on such
terms and conditions, both as to the number of shares and otherwise, which shall
substantially preserve the value, rights and benefits of any Option granted
hereunder, as of the date of the execution of the agreement evidencing the
Merger Event.
(ii) If the Company is not the surviving corporation in a Merger
Event, the Committee may at its election cause payment to be made to each
Optionee, in cash, an amount equal to the excess of the fair market value, on
the date of the Merger Event, of the Common Stock subject to such Optionee's
Options (whether vested or unvested, as determined by the Committee) over the
Exercise Price of such Options on such date, and all such Options shall be
cancelled upon receipt by the Optionee of such cash payment, without the need
for obtaining the consent of the Optionee. If, upon such a Merger Event, the
Committee declines to make such cash payment, the surviving or resulting
corporation, as the case may be, or any parent or acquiring corporation thereof,
shall, as a condition to the occurrence of the Merger Event, be obligated by the
Company to grant substitute options to purchase its shares on such terms and
conditions, both as to the number of shares and otherwise, which shall
substantially preserve (in the discretion of the Committee) the value, rights
and benefits of any Option granted hereunder, as of the date of the execution of
the agreement evidencing the Merger Event.
Upon receipt by the Optionee of any substituted options in the
surviving corporation in any Merger Event, all Options for which substituted
options were received shall be cancelled.
-5-
<PAGE>
The foregoing adjustments and the manner of application of the
foregoing provisions, including, without limitation, the issuance of any
substitute Options and any determination of the fair market value of the Common
Stock, shall be determined in good faith by the Committee in its sole
discretion. Any such adjustment may provide for the elimination of any
fractional share which might otherwise become subject to an Option.
ARTICLE XI
RIGHTS AS A STOCKHOLDER
An Optionee or a transferee of an Option shall have no rights as a
stockholder with respect to any shares covered by his Option until he shall have
become the holder of record of such shares, and he shall not be entitled to any
dividends or distributions or other rights in respect of such shares for which
the record date is prior to the date on which he shall have become the holder of
record thereof.
ARTICLE XII
EMPLOYMENT RIGHTS
Nothing in the Plan or in any Option Agreement entered into hereunder
shall confer on any Optionee who is an employee of the Company or any of its
subsidiaries or affiliates any right to continue in the employ of the Company or
any of its subsidiaries or affiliates or to interfere in any way with the right
of the Company or any of its subsidiaries or affiliates to terminate the
Optionee's employment at any time.
ARTICLE XIII
TRANSFER RESTRICTIONS
Appropriate legends shall be placed on the stock certificates
evidencing shares issued upon exercise of Options to reflect any relevant
transfer restrictions.
-6-
<PAGE>
ARTICLE XIV
AMENDMENT OR DISCONTINUANCE OF PLAN
The Board may from time to time, to the extent permitted by applicable
law, amend, suspend, or discontinue the Plan; provided, however, that the Board
may not take any action which would have a material adverse effect on
outstanding Options or any unexercised rights under outstanding Options without
the consent of the Optionee whose options would be adversely affected thereby.
ARTICLE XV
CANCELLATION OF OPTIONS
The Committee, in its discretion, may, with the express written
consent of the Optionee to be affected, cancel any Option held by such
consenting Optionee hereunder.
ARTICLE XVI
MISCELLANEOUS
(a) The Company may, in its discretion, require that an Optionee pay
to the Company, at the time of exercise, such amount as the Company deems
necessary under law to satisfy its obligations to withhold Federal, state, or
local income or other taxes incurred by reason of the exercise or the transfer
of shares thereupon.
(b) Anything in the Plan or any Option Agreement entered into
pursuant to the Plan to the contrary notwithstanding, if, at any time specified
herein or therein for the making of any issue of shares of Common Stock, any
law, regulation or requirement of any governmental authority having jurisdiction
in the premises shall require either the Company or the Optionee (or the
Optionee's personal legal representative or transferee) to take any action in
connection with any such shares to be issued, the issue of such shares shall be
deferred until such action shall have been taken, provided, however, that the
Company shall not be required to take such action.
(c) The Plan shall be governed by and construed in accordance with
the laws of the State of Delaware without reference to the principles of
conflicts of law thereof.
-7-
<PAGE>
(d) No provision of the Plan shall require the Company, for the
purpose of satisfying any obligations under the Plan, to purchase assets or
place any assets in a trust or other entity to which contributions are made or
otherwise to segregate any assets, nor shall the Company maintain separate bank
accounts, books, records or other evidence of the existence of a segregated or
separately maintained or administered fund for such purposes.
(e) Except as otherwise specifically provided in the relevant plan
document, no payment under the Plan or other amount required to be reported as
income for Federal income tax purposes shall be taken into account in
determining any benefits under any pension, retirement, profit sharing, group
insurance or other benefit plan of the Company.
(f) The expenses of administering the Plan shall be borne by the
Company. The proceeds received by the Company from the exercise of any Options
pursuant to the Plan will be used for general corporate purposes.
(g) Masculine pronouns and other words of masculine gender shall
refer to both men and women.
(h) The titles and headings of the sections in the Plan are for
convenience of reference only, and in the event of any conflict, the text of the
Plan, rather than such titles or headings, shall control.
ARTICLE XVII
SPECIAL PROVISIONS FOR ISOS
(a) ISOs must be granted within ten years from the date the Plan is
adopted, or the date the Plan is approved by the shareholders of the Company,
whichever is earlier.
(b) ISOs may not be exercised after the expiration of ten years from
the date such ISOs are granted.
(c) The Exercise Price of ISOs may not be less than the fair market
value of a share of Common Stock at the time such ISOs are granted, as
determined by the Committee. In such case, fair market value shall be
determined in a manner consistent with the rules and regulations under Section
422 of the Code.
-8-
<PAGE>
(d) ISOs may not be granted to a person who owns stock possessing
more than 10% of the total combined voting power of all classes of stock of the
Company or any "subsidiary corporation" of the Company within the meaning of
Section 424(f) of the Code.
(e) To the extent the aggregate fair market value of the Common Stock
with respect to which ISOs are exercisable for the first time by any Optionee
during a calendar year (under all plans of the Company and all "subsidiary
corporations" of the Company within the meaning of Section 424(f) of the Code)
exceeds $100,000, such ISOs shall be treated as Non-Qualified Options. For
purposes of the preceding sentence, the fair market value of the Common Stock
shall be determined by the Committee at the time the ISO covering such stock is
granted.
(f) No ISOs may be granted under the Plan unless the Plan has been
approved by the shareholders of the Company within 12 months before or after the
date of the Plan's adoption by the Board.
* * * *
-9-
<PAGE>
UNITED AUTO GROUP, INC.
NON-EMPLOYEE DIRECTOR COMPENSATION PLAN
1. PURPOSE. The purpose of this Plan is to promote the
interests of United Auto Group, Inc. and its affiliates and stockholders by
helping to attract and retain highly qualified non-employee directors.
2. DEFINITIONS. Unless the context clearly indicates
otherwise, the following terms, when used in the Plan, shall have the meanings
set forth in this section:
a. "Annual Meeting" shall mean the Company's regular annual meeting
of shareholders.
b. "Board" shall mean the Board of directors of the Company.
c. "Company" shall mean United Auto Group, Inc., a Delaware
corporation, and any successor corporation.
d. "Director" shall mean a member of the Board.
e. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
f. "Non-Employee Director" shall mean a Director who is not also a
salaried employee of the Company or any of its subsidiaries.
g. "Plan" shall mean this United Auto Group, Inc. Non-Employee
Director Compensation Plan, as set forth herein and as it may be
amended from time to time.
h. "Stock" shall mean shares of the voting Common Stock of the
Company, par value $0.0001 per share.
3. ANNUAL RETAINER. Each Non-Employee Director shall be paid
for each year of service a retainer at an annualized rate of $15,000, payable in
arrears in four equal quarterly installments on each of June 1, September 1,
December 1, and March 1 (each, "Payment Date") following the Annual Meeting at
which such director was elected or re-elected to the Board, as the case may be.
A Non-Employee Director who becomes a member of the Board between Annual
Meetings shall be paid the quarterly installment on each Payment Date which
falls between the date he becomes a member of the Board and the date of the next
Annual
<PAGE>
Meeting. A Non-Employee Director who resigns from the Board between Annual
Meetings shall be paid the quarterly installment for the Payment Date next
following the date of such resignation. Such annual retainer may be increased
by the Board from time to time in its discretion.
4. MEETING FEES. Each Non-Employee Director shall be paid
$1,000 for each Board meeting and $500 for each Board meeting attended by
telephone. In addition, for serving on a committee of the Board, each Non-
Employee Director shall receive $750 for each committee meeting attended and
$500 for each committee meeting attended by telephone.
5. ELECTION TO RECEIVE FEES IN STOCK. (a) At the election of a
Non-Employee Director, but subject to approval by the Board, such Non-Employee
Director may receive shares of Stock in lieu of the annual retainer and meeting
fees described in Sections 3 and 4. Such elections shall be made once each year
by no later than April 1 of such year, and shall relate to each of the next four
Payment Dates following such April 1. Once made, such election shall be
irrevocable for such year. For the period commencing on the effective date of
this Plan and ending on the first Annual Meeting, such election shall be made
not later than 30 days following such effective date.
(b) If a Non-Employee Director's election is approved by the
Board, such Non-Employee Director shall receive a number of shares of Stock
determined as follows: As of each Payment Date to which the Non-Employee
Director's election relates, a number of shares equal to the quotient obtained
by dividing (1) 25% of the annual retainer for such year, plus the aggregate
amount of meeting fees which would have been paid to the Non-Employee Director
for meetings attended since the last Payment Date if such election had not been
made, and (2) the fair market value of the Stock on the current Payment Date
based on the closing price of the Stock on the New York Stock Exchange on such
date or, if such date is not a trading day, on the last preceding trading day.
(c) Such shares of Stock shall not be subject to any transfer or
resale restrictions other than those applicable under federal and state
securities laws.
(d) If a Non-Employee Director becomes a member of the Board
between Annual Meetings, such director may elect to receive his fees in Stock
for the Payment Dates which precede the next Annual Meeting by making such
election within 30 days after becoming a director, provided that such election
shall be subject to the approval by the Board.
(e) Board approval of Non-Employee Director elections under this
Section 5 shall be obtained prior to the first date on which a Non-Employee
Director may receive Stock in respect of such election.
-2-
<PAGE>
6. EFFECTIVE DATE. The Plan shall be effective upon the
effective date of the Company's initial public offering.
7. AMENDMENT AND TERMINATION OF THE PLAN. The Board in its
discretion may terminate the Plan or alter or amend the Plan or any part thereof
from time to time.
8. RULE 16b-3. The terms and conditions each Stock acquisition
under the Plan shall be approved in advance by the Board for purposes of the
exemption from Section 16(b) of the Exchange Act available under Rule 16b-
3(d)(1) promulgated under the Exchange Act.
-3-
<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/ Henry J. Schoeler
------------------------ 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 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>
EXHIBIT 10.2.4.2
<PAGE>
BMW OF NORTH AMERICA, INC.
DEALER STANDARD PROVISIONS
<PAGE>
BMW OF NORTH AMERICA, INC.
DEALER STANDARD PROVISIONS
APPLICABLE TO DEALER AGREEMENT
TABLE OF CONTENTS
Page
----
PARAGRAPH 1. DEFINITIONS 1
(a) BMW 1
(b) BMW NA 1
(c) BMW Dealers 1
(d) BMW Products 1
(e) BMW Vehicles 1
(f) Dealer 1
(g) Dealer Agreement 2
(h) Dealer's BMW Operations 2
(i) Dealer Forum 2
(j) Dealer's Officers 2
(k) Dealer Operating Requirements 2
(l) Dealer Operating Requirements Addendum 3
(m) Dealer Operator 3
(n) Dealer's Owners 3
(o) Dealer's Facility 3
(p) General Manager 4
(q) Improvement Addendum 4
(r) Net Purchase Price 4
(s) Original BMW Parts 5
(t) Primary Market Area 5
PARAGRAPH 2. BASIC OBLIGATIONS OF BMW NA 6
(a) Supply of BMW Products to Dealer 6
(b) Assistance to Dealer 6
(c) Allocation of Vehicles 7
<PAGE>
PARAGRAPH 3. BASIC OBLIGATIONS OF DEALER 8
(a) BMW Sales, Service and Parts Supply 8
(b) Conduct of Business 8
(c) Compliance with Dealer Operating
Requirements and Standards 8
(d) Issuance of Improvement Addendum 9
PARAGRAPH 4. GENERAL REQUIREMENTS FOR DEALER'S OPERATIONS 10
(a) Business Hours 10
(b) Signs 10
(c) Insurance 10
(d) Exclusive Ownership of BMW Trademarks 11
(e) Use of BMW Trademarks by Dealer 11
(f) Evaluation of Dealer's Facility 12
(g) Sales of Used BMW Vehicles 12
(h) Training 12
(i) Advertising 13
(j) Compliance with Laws 13
PARAGRAPH 5. DEALER'S SALES OF BMW VEHICLES 14
(a) Sales Promotion 14
(b) Sales Performance 14
(c) Demonstrators 14
(d) Retail Business Plan 15
(e) Performance Evaluation 15
(f) Down Payments and Trade Ins 16
(g) Price Disclosure 16
PARAGRAPH 6. CUSTOMER SERVICE 17
(a) Scope and Quality 17
(b) Disclosure and Use of Original BMW Parts 17
(c) Pre-Delivery Inspection 19
(d) BMW Service Booklet and BMW Drivers Handbook 19
(e) Compliance with Consumer Protection Statutes 19
PARAGRAPH 7. DEALER RECORDS & REPORTS; ACCESS TO PREMISES 21
(a) Financial Records 21
(b) Management Information Systems Requirements 21
(c) Financial Statements 21
(d) Additional Reports 22
(e) Access to Dealer's Premises and Records 22
(f) Confidentiality 23
PARAGRAPH 8. DEALER'S PURCHASE OF BMW VEHICLES 24
(a) Dealer's Purchase Price 24
(b) Payment 24
(c) Line of Wholesale Credit 24
(d) Shipment to Dealer 24
-ii-
<PAGE>
(e) Claims Processing 25
(f) Passing of Risk 26
(g) Repair and Sale of Damaged BMW Vehicles 26
(h) Option to Repurchase Damaged Vehicles 26
PARAGRAPH 9. DEALER'S INVENTORY AND PURCHASE OF BMW PARTS 28
(a) Minimum Inventory of Original BMW Parts 28
(b) Dealer's Purchase Price 28
(c) Payment 28
(d) Delivery 29
(e) Claims for Incomplete Delivery 29
(f) Return of Defective Original BMW Parts 29
(g) Right to Return Original BMW Parts 29
(h) No Return of Special Materials 30
PARAGRAPH 10. ADDITIONAL PROVISIONS GOVERNING DEALERS PURCHASE
OF BMW PRODUCTS; DEALER'S INVENTORIES 31
(a) State and Local Taxes 31
(b) BMW NA's Purchase Money Security Interest 32
(c) Return or Diversion of BMW Vehicles on
Failure to Accept 35
(d) Failure of or Delay in Delivery 35
(e) Changes in Specifications 36
(f) Changes by Dealer on BMW Products;
Compliance with Safety, Air Pollution,
Noise Control and Consumer
Warranty Requirements 36
(g) Inventories 37
PARAGRAPH 11. WARRANTY TO CUSTOMERS 38
(a) BMW Warrantees 38
(b) Incorporation of BMW Warrantees in
Dealer's Sales 38
(c) Warranty Procedures 39
PARAGRAPH 12. TERMINATION PRIOR TO EXPIRATION DATE; SUCCESSION 41
(a) Termination by Dealer 41
(b) Immediate Termination by BMW for Cause 41
(c) Termination by BMW NA on 60 Days' Notice 43
(d) No Waiver by Failure to Terminate 46
(e) Termination Upon Death or Permanent
Disability 47
(f) Successor to Dealer in Event of Death 48
(g) Successor Nominee 49
-iii-
<PAGE>
PARAGRAPH 13. CONTINUATION OF BUSINESS RELATIONS 51
(a) Continuation of Business Relations
After Expiration or Prior Termination 51
PARAGRAPH 14. RIGHTS AND LIABILITIES UPON EXPIRATION OR
PRIOR TERMINATION 52
(a) Pending Orders 52
(b) Purchase of Dealer's Inventory of BMW
Products by BMW 54
(c) BMW NA's Right to Specific Performance 58
PARAGRAPH 15. TRANSFER OF AGREEMENT 59
(a) Transfer, Sale or Assignment of Agreement
by Dealer 59
PARAGRAPH 16. INDEMNIFICATION 60
(a) Indemnification by BMW NA 60
(b) Indemnification by Dealer 62
(c) Notification 64
(d) Allegation Involving Both BMW NA
and Dealer 65
PARAGRAPH 17. MISCELLANEOUS PROVISIONS 67
(a) Approval or Consent by BMW NA 67
(b) Divisibility 67
(c) Termination of Prior Agreements 67
(d) Notices 68
(e) No Implied Waivers 68
(f) Dealer Not an Agent; Disclaimer of
Further Liability by BMW 68
(g) Accounts Payable 69
(h) BMW NA's Continuing Security Interest 69
(i) Assignment of BMW NA's Security Interest 70
(j) Headings 70
(k) Entire Agreement; Representations 70
-iv-
<PAGE>
The following Dealer Standard Provisions are made a part of and are incorporated
into the Dealer Agreement.
DEFINITIONS
PARAGRAPH 1
In addition to the definitions contained in
the Dealer Agreement, the following terms
shall have the following meanings:
BMW (a)"BMW" shall mean Bayerische Motoren Werke
AG, a company organized and existing under
and by virtue of the laws of Germany, having
its principal place of business at Munich,
Germany;
BMW NA (b)"BMW NA" shall mean BMW of North America,
Inc., a corporation organized under the laws
of the State of Delaware, the exclusive
importer and distributor of BMW Products in
the United States;
BMW DEALERS (c)"BMW Dealers" shall mean all of the
authorized BMW dealers which are signatories
to a Dealer Agreement with BMW NA;
BMW PRODUCTS (d)"BMW Products" shall mean BMW Vehicles and
Original BMW Parts;
BMW VEHICLE(S) (e)"BMW Vehicle(s)" shall mean new passenger
car(s) manufactured by BMW or one of its
manufacturing subsidiaries, sold by BMW NA
and bearing the trademarks of BMW;
DEALER (f)"Dealer" shall mean a dealer authorized to
sell BMW Products as appointed by BMW NA
pursuant to this Agreement;
-1-
<PAGE>
DEALER AGREEMENT (g)"Dealer Agreement" or "Agreement" shall
have the same meaning as set forth in Article
B of the Dealer Agreement;
DEALER'S BMW OPERATIONS (h)"Dealer's BMW Operations" or "BMW
Operations" shall mean all activities of
Dealer relating to the promotion and sale of
BMW Products, the supply of Original BMW
Parts, customer service for BMW Products,
and/or all other operations of Dealer
governed by this Agreement, such as sales of
used BMW Vehicles;
DEALER FORUM (i)"Dealer Forum" shall mean the elected
representatives of the BMW Dealers who
perform the responsibilities set forth in
Article F of the Dealer Agreement;
DEALER'S OFFICERS (j)"Dealer's Officers" shall mean all the
persons named in Article C of the Dealer
Agreement as officers of Dealer, as well as
any other person who succeeds to any such
executive and/or managerial position in
Dealer in accordance with the Agreement;
DEALER OPERATING REQUIREMENTS (k)"Dealer Operating Requirements" shall mean
the Facility, Personnel, Financial, Equipment
and Demonstrator Requirements published by
BMW NA, as amended, cancelled or superseded
from time to time by BMW NA following review
by the Dealer Forum;
-2-
<PAGE>
DEALER OPERATING REQUIREMENTS (l)"Dealer Operating Requirements
ADDENDUM Addendum" shall mean the Facility, Personnel,
Financial, Equipment and Demonstrator
Requirements applicable to Dealer, as amended
or superseded from time to time by BMW NA
following review with Dealer;
DEALER OPERATOR (m)"Dealer Operator" shall mean the person
named in Article C of the Dealer Agreement as
the person in charge of the 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 is relying to
represent BMW Products and to act on Dealer's
behalf, as well as any person who succeeds to
such position in accordance with this
Agreement;
DEALER'S OWNERS (n)"Dealer's Owners" shall mean all the
persons named in Article C of the Dealer
Agreement as the beneficial and record owners
of Dealer, as well as any other person who
acquires or succeeds to any beneficial
interest or record ownership of Dealer in
accordance with the Agreement;
DEALER'S FACILITY (o)"Dealer's Facility" shall mean the land
and building(s) which constitute the
authorized location established in accordance
with the provisions of Article D of the
Dealer Agreement for the conduct of the
Dealer's BMW Operations;
-3-
<PAGE>
GENERAL MANAGER (p)"General Manager" shall mean the person
named in Article C of the Dealer Agreement as
the person in charge of Dealer's BMW
Operations in the absence of the Dealer
Operator, as well as any person who succeeds
to such position in accordance with this
Agreement;
IMPROVEMENT ADDENDUM (q)"Improvement Addendum" shall mean the
Addendum to this Dealer Agreement which lists
the outstanding obligations of Dealer which
must be met to ensure the continuation of
this Agreement under Article G of this
Agreement;
NET PURCHASE PRICE (r)"Net Purchase Price" shall mean the actual
price at which Dealer purchased the certain
BMW Product from BMW NA, which price shall
include the addition or deduction of any and
all rebates, refunds, credit allowances,
discounts and other payments or adjustments
made by BMW NA relative to such BMW Product.
"Net Purchase Price" shall not include
payments or adjustments in connection with
Dealer Advertising Group (DAG) activities;
-4-
<PAGE>
ORIGINAL BMW PARTS BMW (s)"Original BMW Parts" shall mean (i) any
parts, accessories, and equipment for BMW
Vehicles manufactured and/or sold by BMW
and/or BMW NA and/or bearing the authorized
trademarks of BMW, which parts, accessories
and equipment usually are described as
"Original" in packaging; and (ii) any
equipment designed for use in BMW Operations
(including special BMW tools) and any non-
automotive accessories and other equipment
including lifestyle items bearing the
trademarks of BMW, which are supplied to
Dealer by BMW NA; and
PRIMARY MARKET AREA (t)"Primary Market Area" shall mean the area
designed by BMW NA in which the Dealer is
expected to focus its activities under this
Dealer Agreement. Evaluation of Dealer's
performance shall be primarily based upon
Dealer's activities in its Primary Market
Area;
-5-
<PAGE>
BASIC OBLIGATIONS OF BMW NA PARAGRAPH 2
SUPPLY OF BMW PRODUCTS TO (a)BMW NA agrees to sell and deliver BMW
DEALER Products to Dealer in accordance with this
Agreement and the ability of the Dealer to
store, display, sell and service BMW
Products, as reflected in its Dealer
Operating Requirements Addendum. BMW NA
shall have no obligations to supply and
Dealer shall not be entitled to receive BMW
Products which exceed Dealer's ability to
store, display, sell or service BMW Products
as evidenced by its Dealer Operating
Requirements Addendum.
ASSISTANCE TO DEALER (b)BMW NA will assist Dealer in Dealer's BMW
Operations through such means and upon such
terms and conditions as BMW NA considers
necessary and appropriate, including, among
other things
(1) Special training courses and meetings for
Dealer's personnel;
(2) Sales, service, and parts literature and
other printed materials relating to bmw
Products;
(3) National advertising campaigns for BMW
Vehicles;
(4) Periodic suggestions and evaluations to
assist Dealer in the conduct of its BMW
Operations; and
(5) Technical Assistance Hotline and Parts
Telephone Support.
-6-
<PAGE>
ALLOCATION OF VEHICLES (c) BMW NA agrees to sell and deliver BMW
Products to Dealer in accordance with the
provisions of this Agreement.
(1) In making such sales and deliveries, BMW
NA will consider Dealer's preferences, as
well as its compliance with the resale and
use restrictions of the Dealer Agreement, and
will endeavor to make a fair and equitable
allocation and distribution of the BMW
Products available to it among its BMW
dealers. BMW NA reserves the right to reduce
allocation of BMW Vehicles to dealers which
do not comply with the terms of the Dealer
Agreement or the dealer Operating
Requirements Addendum.
(2) Dealer recognizes the possibility that
from time to time BMW Products may not be
available in sufficient quantities. In such
event, Dealer agrees that BMW NA, in the
exercise of its business judgment, may
determine the method and manner of the
allocation of BMW Products between dealer and
BMW NA's other dealers. Upon Dealer's
written request, BMW NA agrees to provide
dealer with an explanation of the method used
to distribute such BMW Products.
-7-
<PAGE>
BASIC OBLIGATIONS OF DEALER PARAGRAPH 3
BMW SALES, SERVICE, AND PARTS (a) Dealer assumes the responsibility for the
SUPPLY promotion and sale of BMW Products, the
supply of Original BMW Parts, and customer
service for BMW Products.
CONDUCT OF BUSINESS (b) In the conduct of its business, Dealer
will:
(1) Safeguard and promote the reputation of
BMW Products and the trademarks of BMW;
(2) Refrain from negligent or willful conduct
which may be harmful to the reputation or to
the marketing of BMW Products or inconsistent
with the public interest; and
(3) Refrain from all deceptive, misleading,
or unethical practices
COMPLIANCE WITH DEALER (c) Dealer, recognizing that its
OPERATING REQUIREMENTS AND responsibilities under this Agreement demand
STANDARDS FOR BMW DEALERS the most effective use of its available
facilities, capital and personnel, agrees to
comply with its Dealer Operating Requirements
Addendum. Dealer shall review said Addendum
with BMW NA representatives at the Retail
Business Plan Review; satisfy outstanding
obligations under its Improvement Addendum,
if applicable; and further comply with all
reasonable standards established by BMW NA
from time to time relating to Dealer's BMW
Operations.
-8-
<PAGE>
ISSUANCE OF IMPROVEMENT (d) BMW NA will notify Dealer in writing if
ADDENDUM Dealer fails to comply with any obligation,
responsibility or requirement under the
Dealer Agreement or the Dealer Operating
Requirements Addendum ("Deficiency")
(1) If Dealer fails to remedy the Deficiency
following notice, BMW NA will issue to Dealer
an Improvement Addendum or amend an existing
Improvement Addendum, listing the
Deficiency(s) and providing Dealer a
reasonable date to satisfy the Deficiency(s).
(2) Should Dealer reasonably request an
extension of time in writing, a justified
request for extension will not be
unreasonably withheld; however under no
circumstances is BMW NA obligated to grant
more than 2 extensions.
(3) Dealer's failure to satisfy the
Deficiency(s) will jeopardize the Dealer's
ability to renew the Dealer Agreement and
could subject Dealer to early termination of
this Agreement.
(4) The Improvement Addendum will be
cancelled once Dealer remedies the
Deficiency(s).
(5) An Improvement Addendum may be superseded
by BMW NA at any time to reflect Dealer's
progress toward satisfaction of the
Deficiency(s).
-9-
<PAGE>
GENERAL REQUIREMENTS FOR PARAGRAPH 4
DEALER'S BMW OPERATIONS
BUSINESS HOURS (a) Throughout the term of the Agreement,
Dealer shall operate Dealer's Facility
during, and for not less than, the customary
business hours of the trade.
SIGNS (b) Dealer agrees to display conspicuously at
and around Dealer's Facility such BMW signs
as BMW NA shall reasonably require.
INSURANCE (c) Dealer shall maintain comprehensive and
excess liability insurance policies in an
amount sufficient to meet all reasonably
anticipated contingencies, including legal
judgments entered against Dealer. In no
event shall the aggregate value of the
policies be less than Three Million Dollars
($3,000,000.00). The policy must be issued
by an insurance company with a Best's
insurance rating of "B+" or better.
-10-
<PAGE>
EXCLUSIVE OWNERSHIP OF BMW (d) Dealer acknowledges BMW's exclusive
TRADEMARKS ownership, and the validity, of the BMW
trademarks (including, without limitation,
the BMW logo), both registered and common
law, and shall not contest the same during
the term of the Agreement or any time
thereafter. Dealer and BMW NA agree to
cooperate with each other in preventing any
acts of trademarks infringement or unfair
competition with respect to any BMW
trademark, but BMW (or BMW NA, as BMW's agent
with respect to trademark matters) shall
have sole control over all actions and legal
proceedings to suppress infringement of any
unfair competition with respect to any BMW
trademark.
USE OF BMW TRADEMARKS BY (e) BMW NA grants Dealer a non-exclusive
DEALER license to use the BMW trademarks subject to
the terms and conditions of the Agreement.
Dealer agrees that it will use the trademarks
in connection with the promotion and sale of
BMW Products and consumer service for BMW
Products only in such manner, at such
location, to such extent, and for such
purposes as BMW NA may specify from time to
time. No BMW trademark may be used except in
the color, size, form and style approved by
BMW NA. Moreover, without the express prior
written consent of BMW NA, Dealer will not
use any BMW trademark as part of its
corporate or business name.
-11-
<PAGE>
EVALUATION OF DEALER'S FACILITY (f) Recognizing the Dealer's facilities
affect Dealer's ability to discharge properly
its responsibilities under this Agreement and
the Dealer Operating Requirements Addendum,
Dealer will ensure that Dealer's Facility
complies with the applicable provisions of
this Agreement, including such reasonable
requirements and standards as BMW NA may
prescribe from time to time.
SALES OF USED BMW VEHICLES (g) Recognizing the importance to the success
of Dealer's business of a well-operated BMW
used car department, Dealer shall use its
best efforts to maintain in presentable
condition a properly illuminated used car
display area in which used BMW Vehicles will
be prominently displayed. Dealer shall not
use any BMW trademark in connection with the
sale of used BMW Vehicles unless Dealer
complies fully with all requirements of BMW
NA as to the standards, practices, and
facilities for used car sales under the BMW
trademarks.
TRAINING (h) Dealer agrees that its personnel will be
trained in such special training courses as
may be offered from time to time by BMW NA.
Dealer shall require its personnel to meet
with BMW NA personnel in the dealership or at
other appropriate locations for the purposes
of training and to use training materials as
may be suggested from time to time by BMW NA.
-12-
<PAGE>
ADVERTISING (i) Dealer agrees to advertise BMW Products
and customer service for BMW Products in
accordance with the standards set forth in
Paragraph 3(b) and such other reasonable
standards and guidelines as BMW NA may
establish from time to time. Such
advertising shall include, among other
things, listings in local classified
telephone directories identifying Dealer as
an authorized dealer in BMW Products.
Both BMW NA and Dealer recognize the need of
maintaining uniformly high standards of
ethical advertising of a quality and dignity
consistent with the reputation of BMW
Products in order to maintain public
confidence and respect in Dealer, BMW NA, and
BMW Products. Accordingly, Dealer agrees not
to publish or cause to be published any
advertising relating to BMW Products and
customer service for BMW Products which is
likely to deceive and mislead the public or
to impair the goodwill of BMW NA or BMW
Products. BMW NA reserves the right to
require Dealer to cease any advertising
inconsistent with this provision including
the right to prohibit Dealer from using BMW
Trademarks in advertising.
COMPLIANCE WITH LAWS (j) Dealer shall comply with all applicable
local, state and federal laws and
regulations, including, but not limited to,
laws and regulations requiring licensing
and/or registration. Dealer agrees to
disclose information as BMW NA may reasonably
request with respect to the foregoing.
-13-
<PAGE>
DEALER'S SALES OF BMW VEHICLES PARAGRAPH 5
SALES PROMOTION (a) Dealer will actively and effectively
promote the sale of the full line of BMW
Vehicles as it is authorized to promote and
sell primarily in its Primary Market Area
through regular contacts with owners and
prospective owners and users of BMW Products
consistent with the terms of this Dealer
Agreement, and through such other means as
reasonably may be required by BMW NA from
time to time.
SALES PERFORMANCE (b) Within the limitations, if any, resulting
from the quantity of BMW Vehicles made
available to Dealer by BMW NA, Dealer shall
achieve the best possible sales performance
obtainable for BMW Vehicles. Such sales
performance shall be evaluated on the basis
of such reasonable and equitable criteria as
may be determined from time to time by BMW
NA.
DEMONSTRATORS (c) For purposes of demonstration, Dealer
shall have available, at all times, such
number of the most current model BMW Vehicles
as required pursuant to the Dealer's
Operating Requirements Addendum. Dealer
shall maintain such BMW Vehicles in first-
class operating condition at all times.
-14-
<PAGE>
RETAIL BUSINESS PLAN (d) Each Dealer shall develop a Retail
Business Plan with objectives for the
following year. The annual Retail Business
Plan will be discussed with and presented to
the BMW NA representative at an annual retail
business plan review. The final Retail
Business Plan, as accepted by BMW NA, shall
represent the goals and objectives of Dealer
and contain the action plans developed by
Dealer to achieve those goals and objectives
and, in the case of an Improvement Addendum,
address the means of complying with the terms
of this Agreement.
PERFORMANCE EVALUATION (e) Dealer and BMW NA agree that their
primary purpose is to satisfy customers by
properly servicing and promoting the sale of
BMW Products within Dealer's Primary Market
Area. Dealer and BMW NA will work together
to achieve this purpose.
(1) Dealer's compliance with the Retail
Business Plan and Dealer's sales service and
customer satisfaction performance will be
reviewed and evaluated at least annually.
BMW NA will provide to Dealer, in writing,
its evaluation of Dealer's performance. Any
written comments submitted by Dealer to BMW
NA shall become part of a performance
evaluation report.
(2) BMW NA shall evaluate Dealer's
performance based on, but not limited to:
A. Dealer's sales of BMW Products in
Dealer's Primary Market Area;
-15-
<PAGE>
B. Registrations attributable to Dealer in
Dealer's Primary Market Area;
C. The sales and registrations of
competitive vehicles in Dealer's Primary
Market Area;
D. Feedback from Dealer's customers measured
by the results of the customer satisfaction
surveys provided to Dealer by BMW NA;
E. The trend of Dealer's performance over a
reasonable period of time;
F. Significant local conditions that may
have affected Dealer's performance;
G. The general vehicle purchasing trends of
the public; and
H. Dealer's compliance with its Dealer
Operating Requirements Addendum and its
Retail Business objectives.
DOWN PAYMENTS AND TRADE INS (f) Payments received from customers, whether
in money or in kind, which are to be applied
towards the subsequent purchase of a new BMW
Vehicle, shall be held for such customers in
accordance with applicable law until such
time as the transaction with respect to which
such payments were received is consummated.
PRICE DISCLOSURE (g) Dealer shall deliver to any purchaser of
a BMW Vehicle an itemized invoice and
disclose any other information or give any
notice required by law
-16-
<PAGE>
CUSTOMER SERVICE PARAGRAPH 6
SCOPE AND QUALITY (a) Dealer shall provide the best possible
customer service for all owners of BMW
Vehicles whether or not the BMW Vehicle was
sold by Dealer and shall promote its customer
service and the sale of Original BMW Parts.
Dealer shall not engage in any service
practice with respect to any BMW Products if
BMW NA has reasonably objected to the nature
or quality of such practice.
DISCLOSURE AND USE OF ORIGINAL (b) Dealer shall not use any parts other
BMW PARTS than genuine Original BMW Parts or parts
expressly approved by BMW NA in the
performance of warranty service in connection
with the BMW New Car Limited Warranty and/or
other BMW warranties.
-17-
<PAGE>
(2) Dealer recognizes that its customers
have a right to expect that any product that
they purchase from Dealer meets the high
quality standards associated with BMW
Products In order to avoid confusion and
minimize potential customer dissatisfaction,
in any case where Dealer sells for use in the
repair of any BMW Product any parts which are
not genuine Original BMW Parts or parts
approved by BMW or BMW NA, Dealer shall
disclose to the customer that such parts are
not genuine Original BMW Parts or parts
approved by BMW or BMW NA, and, consequently,
that such parts are not warranted by BMW NA.
Such disclosure shall be in writing,
conspicuous and set forth on the parts
invoice, service or repair order. Dealer
will also, by appropriate written notice,
advise the customer of the source of such
parts and extent of any warranty given by the
supplier or manufacturer of such parts.
(3) Dealer shall not represent in any
manner, sell or offer for sale as new,
genuine Original BMW Parts or parts approved
by BMW or BMW NA, any parts which are not in
fact new, genuine Original BMW Parts or parts
approved by BMW or BMW NA.
-18-
<PAGE>
PRE-DELIVERY INSPECTION (c) Before delivery to the customer, Dealer
shall inspect and condition each new BMW
Vehicle in accordance with quality
certification and other pre-delivery
inspection procedures furnished from time to
time by BMW NA to Dealer. Evidence of
completion will be determined at the
discretion of BMW NA, through customer
response to surveys or inspection documents
maintained in Dealer's vehicle history file.
BMW SERVICE BOOKLET; BMW (d) Upon delivery to a customer of a new BMW
DRIVER'S HANDBOOK Vehicle, Dealer will also deliver to the
customer the BMW Service Booklet supplied by
BMW NA for such BMW Vehicle, properly
completed and stamped with Dealer's corporate
or business name, the customer warranty
information, including notification of any
laws, rules or regulations addressed in
subparagraph (e) below when required by
applicable state law, and the appropriate BMW
Driver's Handbook.
COMPLIANCE WITH CONSUMER (e) Dealer acknowledges the existence and
PROTECTION STATUTES applicability of various "repair or replace"
laws or other consumer protection laws, rules
and regulations. Dealer agrees to comply
fully with the requirements of such laws,
rules and regulations and Dealer will take no
action which adversely affects BMW NA's
rights and duties under these laws, rules and
regulations.
-19-
<PAGE>
Moreover, Dealer agrees to use its best
efforts to notify BMW NA promptly in writing
of all situations in which "repair or
replace" laws are or may be applicable.
Dealer further agrees to take such other
actions as BMW NA may reasonably require.
-20-
<PAGE>
DEALER'S RECORDS AND REPORTS; PARAGRAPH 7
ACCESS TO DEALER'S PREMISES
FINANCIAL RECORDS (a) Dealer shall keep accurate and current
books of account in accordance with
accounting principles reasonably satisfactory
to BMW NA so as to enable BMW NA to develop
comparative data in order, among other
things, to furnish to Dealer, for Dealer's
benefit, business management assistance.
MANAGEMENT INFORMATION SYSTEMS (b) To facilitate the efficient operation of
REQUIREMENTS the BMW NA dealer network and the accurate
and prompt disclosure to BMW NA of dealership
operations and financial information, Dealer
agrees to install and maintain management
information system facilities which are
compatible with the computer system and
software used by BMW NA and comply with the
terms of the BMW Information Management
Manual.
FINANCIAL STATEMENTS (c) Dealer shall deliver or mail to BMW NA
the following:
(1) On or before the tenth (10th) day of each
calendar month, on such forms as BMW NA
reasonably may require, a financial and
operating statement reflecting Dealer's BMW
Operations for the preceding month and
Dealer's total BMW Operations from the
beginning of the calendar year to the end of
the preceding month; and
-21-
<PAGE>
(2) Within three and one-half (3-1/2) months
after the end of the calendar year, a
financial and operating statement for such
year. In the event BMW NA so requests in
writing, such statement shall be reviewed by
a certified public accountant.
ADDITIONAL REPORTS (d) Dealer will furnish to BMW NA, on such
forms and at such times as BMW NA reasonably
may require, complete and accurate reports of
dealer's sales and inventories of new BMW
Vehicles, of used BMW Vehicles, of Original
BMW Parts, and of other used automobiles.
Dealer will also furnish to BMW NA such other
reports as BMW NA reasonably may require from
time to time. Dealer shall maintain such
records for at least three years.
ACCESS TO DEALER'S (e) Until the expiration or prior
PREMISES AND RECORDS termination of the Agreement and thereafter
until consummation of all the transactions
referred to in paragraph 14 hereof, BMW NA,
through its representatives, employees, and
other designees, shall have the right, at all
reasonable times during regular business
hours, to inspect Dealer's BMW Operations,
including the Dealer's Facility, records and
accounts of Dealer relating to Dealer's BMW
Operations. Dealer shall cooperate fully
with, and take all actions necessary to
facilitate such inspections.
-22-
<PAGE>
CONFIDENTIALITY (f) BMW NA will not furnish any data
submitted to it by Dealer to any third party
unless authorized by Dealer, required by law,
regulation or judicial, arbitral or
administrative process; or pertinent to
judicial, arbitral or administrative
proceedings.
-23-
<PAGE>
DEALER'S PURCHASES OF BMW VEHICLES PARAGRAPH 8
DEALER'S PURCHASE PRICE (a) BMW NA will sell BMW Vehicles to Dealer
at such prices and upon terms as may be
established from time to time by BMW NA.
Dealer shall be responsible for payment of
any and all sales taxes, use taxes, excise
taxes and other governmental or municipal
charges imposed or levied or based upon the
sale of BMW Vehicles by BMW NA to or through
Dealer.
PAYMENT (b) Payment for each BMW Vehicle purchased by
Dealer shall be made in cash at the time of
delivery unless the invoice provides
otherwise, in which event the terms of the
invoice shall govern. Receipt of any check,
draft, or other commercial paper shall not
constitute payment until BMW NA has received
cash in full amount thereof. Dealer shall
pay all collection charges.
LINE OF WHOLESALE CREDIT (c) During the term of this Agreement, Dealer
shall maintain exclusively for BMW Vehicles,
an unrestricted line or lines of wholesale
credit with a financing institution or
institutions satisfactory to BMW NA in
amounts as specified in the Dealer Operating
Requirements Addendum.
SHIPMENT TO DEALER (d) BMW NA will endeavor, whenever
practicable, to follow Dealer's requests with
regard to route and method of shipment of BMW
Vehicles but BMW NA reserves the right to
ship BMW Vehicles purchased by Dealer
hereunder by whatever mode of transportation,
by whatever route, and from whatever point
BMW NA may select. All shipping charges for
BMW Vehicles will be borne
-24-
<PAGE>
by Dealer.
CLAIMS PROCESSING (e) In order to facilitate the processing of
claims for damage against the carrier or
carrier's insurer, Dealer hereby authorizes
BMW NA to process, and BMW NA agrees that it
will so process at its own cost and expense,
all such claims in BMW NA's name but for
Dealer's account in such manner and on such
basis as BMW NA may reasonably determine.
BMW NA shall not, however, be obliged to
retain counsel or commence legal proceedings
against carrier or carrier's insurer with
respect to any such claims. Dealer also
authorizes BMW NA to settle or compromise any
such claims for less than the full amount
thereof as BMW NA may in its sole judgment
determine without the prior approval of
Dealer.
Immediately upon delivery of any BMW Products
to Dealer, Dealer shall make a careful
inspection of such Products and shall note
any deficiency or damage in the BMW Products
so delivered on the appropriate carrier
delivery forms, which shall be signed by both
the representatives of carrier and the
representatives of Dealer. Dealer shall also
follow any other pertinent procedures that
may be established from time to time by BMW
NA and will cooperate with BMW NA in
processing any claims. Failure by Dealer to
note any deficiency or damage upon delivery
to Dealer and failure to follow any other
pertinent procedures established by BMW NA
shall constitute a waiver by Dealer of BMW
NA's obligation to process any claim and
Dealer shall be solely responsible for
asserting and processing any such claims
against the carrier.
-25-
<PAGE>
PASSING OF RISK (f) All BMW Vehicles sold to Dealer shall be
at Dealer's risk and peril from the time of
delivery at BMW NA's established place of
delivery whether to Dealer, Dealer's agent or
a common carrier and during all subsequent
transportation. It shall be the obligation
of Dealer to insure against such risks for
its benefit and at its expense.
REPAIR AND SALE OF (g) In the event that any BMW Vehicle sold by
DAMAGED BMW VEHICLES BMW NA to Dealer should become damaged prior
to its delivery by Dealer to a customer,
Dealer shall, applying BMW approved repair
practices and procedures, repair fully such
damage so that such BMW Vehicle shall be
placed in first-class salable condition prior
to delivery. Dealer shall not market any BMW
Vehicle if the quality or condition thereof
has been reasonably objected to by BMW NA.
Dealer shall comply with all state laws
applicable to such sales and shall disclose
to the customer all damage in accordance with
applicable state law. Dealer will also
disclose all damage when processing wholesale
or retail trades of BMW Vehicles.
OPTION TO REPURCHASE (h) In order to protect the integrity of BMW
DAMAGED VEHICLES Vehicles, Dealer's and BMW NA's reputation in
the marketplace, Dealer agrees to notify BMW
NA whenever any of Dealer's new and unused
BMW Vehicles are substantially damaged. For
the period of ten (10) business days from BMW
NA's receipt of such notice, BMW NA shall
have the first option to repurchase from
Dealer such damaged BMW Vehicles at a price
equal to the Net Purchase Price originally
paid by Dealer to BMW NA less any monies or
other consideration received by Dealer in
connection with or relating to such damaged
BMW Vehicles.
-26-
<PAGE>
Dealer agrees to assign its rights under any
insurance contract with respect to such BMW
Vehicles to BMW NA. In the event BMW NA
exercises its option to repurchase as granted
above, BMW NA reserves the right to make any
payment hereunder directly to any party
having a security interest in the BMW Vehicle
being repurchased. BMW NA shall not be
liable for any interest expense under this
Paragraph 8 on returned vehicles, unless
repurchased under this subparagraph (h).
-27-
<PAGE>
DEALER'S INVENTORY AND PARAGRAPH 9
PURCHASE OF ORIGINAL BMW PARTS
MINIMUM INVENTORY OF (a) Dealer shall acquire and at all times
ORIGINAL BMW PARTS maintain a minimum inventory of available
Original BMW Parts necessary to satisfy
adequately the needs of the market.
DEALER'S PURCHASE PRICE (b) BMW NA shall sell Original BMW Parts to
Dealer at such prices and upon such terms as
may be established from time to time by BMW
NA. Dealer is responsible for any and all
sales taxes, excise taxes, use taxes and
other governmental or municipal charges
imposed or levied or based upon the sale of
Original BMW Parts by BMW NA to Dealer,
except federal excise taxes which may be
included in the purchase price of BMW NA to
Dealer. In the event of any increase in the
prices established by BMW NA for Original BMW
Parts, Dealer will have the right to cancel
all orders for Original BMW Parts affected by
the increase which are pending and unfilled
at the time Dealer obtains notice of the
increase, provided that BMW NA is notified in
writing of such cancellation within ten (10)
days from the time Dealer obtains such
notice.
PAYMENT (c) Dealer's orders for Original BMW Parts
will be filled on the basis of payment terms
established from time to time by BMW NA for
Dealer's account. Such terms may provide for
open account, limited open account, C.O.D.,
or cash. Dealer will be invoiced at the time
of shipment through the electronic Dealer
Communications System. Dealer shall receive
a month-end statement by the tenth day of the
month following the date of invoice. Dealer
shall render
-28-
<PAGE>
payment for the total amount of the monthly
statement in accordance with the terms stated
therein.
DELIVERY (d) Delivery of Original BMW Parts ordered by
Dealer shall be made by common carrier or US
mail and/or, if practical, in accordance with
Dealer's specific request. If freight
charges are to be paid by BMW NA, the most
economical transportation will be selected.
CLAIMS FOR INCOMPLETE DELIVERY (e) All claims for incomplete delivery of
Original BMW Parts must be made by Dealer in
writing immediately upon Dealer's receipt of
shipment.
RETURN OF DEFECTIVE (f) Dealer shall not sell, offer for sale or
ORIGINAL BMW PARTS install any Original BMW Parts if the nature
or quality thereof has been reasonably
objected to by BMW NA. Dealer may, after
receipt of written authorization from BMW NA,
return defective Original BMW Parts to BMW NA
for credit, together with the original
invoice indicating Dealer's purchase price of
such Original BMW Parts. Such Original BMW
Parts shall be shipped, shipping charges
prepaid, to the destination specified by BMW
NA. Dealer will be reimbursed for shipping
charges prepaid by it on authorized returns
of defective Original BMW Parts based on the
lowest applicable rate of transportation by
common carrier.
RIGHT TO RETURN (g) Dealer will notify BMW NA of any Original
ORIGINAL BMW PARTS BMW Parts ordered by Dealer in error within
thirty five (35) days after receipt of
shipment. Dealer may return such Original
BMW Parts, no later than thirty five(35) days
after Dealer's receipt of specific
authorization from BMW NA, for
-29-
<PAGE>
credit, which credit shall be applied based
on the invoiced price of the returned
Original BMW Parts. Such Original BMW Parts
shall be returned, shipping charges prepaid,
to the destination specified by BMW NA.
Dealer may also return, after receipt of
written authorization from BMW NA, Original
BMW Parts shipped to Dealer due to BMW NA
shipping error. Such Original BMW Parts
shall be shipped, shipping charges prepaid,
to the destination specified by BMW NA and
Dealer shall be credited for such prepaid
shipping charges as well as for the invoiced
prices of the returned Original BMW Parts.
NO RETURN OF SPECIAL MATERIAL (h) Dealer will not be entitled to return (1)
any materials which have been acquired or
specially fabricated by BMW NA upon Dealer's
order, or (2) unlisted Original BMW Parts or
assemblies.
-30-
<PAGE>
ADDITIONAL PROVISIONS GOVERNING PARAGRAPH 10
DEALER'S PURCHASE OF BMW
PRODUCTS; DEALER'S INVENTORIES
STATE AND LOCAL TAXES (a) With regard to each purchase of BMW
Products, Dealer represents and warrants
that:
(1) Such BMW Products are being purchased
from BMW NA by Dealer for resale in the
ordinary course of Dealer's business;
(2) Dealer has complied with all of the
applicable provisions of local and state laws
prerequisite to the collection and payment by
Dealer of all sales, use, and excise taxes
and other governmental or municipal charges
applicable to all such resale transactions;
and
(3) Dealer has furnished to BMW NA all
resale certificates or similar documents
required to perfect an exemption from any
applicable sales and use tax.
Dealer shall be responsible for payment of
any and all taxes and other governmental or
municipal charges imposed or levied in
connection with the sale to Dealer by BMW NA
of BMW Products or equipment supplied to
Dealer by BMW NA.
In the event that any BMW Products are put to
a taxable use by Dealer or are in fact
purchased by Dealer for purposes other than
resale in the ordinary course of Dealer's
business, Dealer shall make timely return and
payment to the appropriate taxing
authorities, as required by Paragraph 8(a),
with respect to BMW Vehicles, and Paragraph
-31-
<PAGE>
9(b), with respect to Original BMW Parts, of
all applicable sales, use and excise taxes,
and other governmental or municipal charges
imposed or levied or based upon the sale of
such BMW Products by BMW NA to Dealer, and
Dealer shall hold BMW NA harmless from any
and all claims and demands which may be made
by such taxing authorities against BMW NA
with respect thereto.
BMW NA'S PURCHASE MONEY (b) In order to assure its prompt and
SECURITY INTEREST unconditional payment to BMW NA upon the
terms and as and when due of any and all
indebtedness, obligations or liabilities of
Dealer to BMW NA for the purchase of each BMW
Product ("Obligation's"), Dealer hereby
grants, assigns and transfers to BMW NA a
continuing first and senior lien on and
security interest in each such BMW Product
sold on credit, open account or limited open
account to Dealer by BMW NA, all accessions
and additions thereto, and all proceeds and
products of each such BMW Product, whether
now owned or hereafter acquired as welll as a
security interest in cash incentives,
holdbacks, bonuses or other BMW NA payables
(the "Collateral"). In furtherance thereof
and in recognition of BMW NA's status as a
secured party having all the rights and
remedies of a secured party under Article 9
of the Uniform Commercial Code:
(1) In the event Dealer is in default of any
Obligations or any of the events described in
Paragraph 12(b) and (c) of this Agreement
shall occur, and at any time thereafter, BMW
NA may declare Dealer in default and may
exercise the following rights and remedies,
in addition to all other rights
-32-
<PAGE>
and remedies it has a secured party under the
Uniform Commercial Code:
(i) To declare all Obligations of Dealer to
BMW NA immediately due and payable; and
(ii) To require Dealer to assemble the
Collateral and make it available to BMW NA
for possession at a place designated by BMW
NA which is reasonably convenient to both
parties.
(2) With respect to all proceeds of the
Collateral, including, without limitation,
payments received by Dealer from a customer
upon delivery of any BMW Product constituting
Collateral and cash deposits received from a
customer in anticipation of a future delivery
of a BMW Product constituting Collateral to
such customer, Dealer grants to BMW NA an
irrevocable power of attorney to endorse all
cash and non-cash proceeds of the Collateral
to effect collection thereof, it being
understood and intended by Dealer that such
power of attorney is coupled with an
interest; and Dealer shall:
(i) Upon demand by BMW NA, whether or not
Dealer is in default of any Obligations,
deposit not later than the business day
following receipt, all proceeds of the
Collateral or any portion thereof, in a
separate bank account designated for that
purpose and under the sole control of BMW NA;
(ii) Not commingle any proceeds of the
Collateral to which BMW NA is entitled with
other funds or property of Dealer until
delivery of such proceeds to BMW NA has been
-33-
<PAGE>
completed, it being agreed and understood
that the proceeds to which BMW NA is entitled
shall be that portion of the proceeds upon
sale of a BMW Product constituting Collateral
which equals the Obligations with respect to
such BMW Product; and
(iii) Hold any proceeds of the Collateral to
which BMW NA is entitled under Paragraph
10(b)(2) hereof separate and apart and upon
express trust for BMW NA until such delivery
or deposit.
(3) Dealer shall hold in trust each deposit
of cash received from a customer in
anticipation of a future delivery of a BMW
Product constituting Collateral to such
customer until such delivery is consummated.
(4) Dealer shall not sell, pledge, assign,
transfer, lease, resell or otherwise dispose
of any type of Collateral herein described or
any interest in Collateral except in the
ordinary course of Dealer's business or as
may be authorized in writing by BMW NA.
(5) Dealer shall execute and deliver
promptly to BMW NA one or more financing
statements pursuant to the Uniform Commercial
Code in form suitable for filing to perfect a
purchase money security interest in the
Collateral and otherwise satisfactory to BMW
NA. Dealer irrevocably appoints BMW NA as
its attorney in fact, to sign and file, in
Dealer's name, financing statements at any
time with respect to the Collateral and the
proceeds thereof, it being understood and
intended by Dealer that such power of
attorney is coupled with an interest.
-34-
<PAGE>
(6) The remedies provided in this Paragraph
10(b) shall be in addition to any other
rights and remedies provided in this
Agreement or under applicable law.
RETURN OR DIVERSION OF BMW (c) In the event Dealer should fail or
VEHICLES ON DEALER'S FAILURE refuse for any reason (other than an error by
TO ACCEPT BMW NA) to accept any BMW Vehicle delivered
to Dealer's Facility, Dealer will reimburse
BMW NA for all expenses incurred by BMW NA in
returning such BMW Vehicle to the original
point or in diverting it to another
destination, as the case may be; but in no
event shall Dealer be required to pay BMW NA
an amount in excess of the expense of
returning such BMW Vehicle to its original
point of delivery to Dealer. Dealer forfeits
any further rights it may have with respect
to such rejected BMW Vehicle(s).
FAILURE OF OR DELAY IN DELIVERY (d) BMW NA will not be under any liability
to Dealer for failure to deliver or for delay
in making delivery if such failure or delay
results from any event brought by causes
other than willful or grossly negligent
conduct of BMW NA, such as, for example, any
event in the nature of force majeure, acts of
God, acts of any government, foreign or civil
wars, riots, interruptions of navigation,
shipwrecks, strikes, lockouts, other labor
troubles, embargoes, blockades, fires,
explosions, sabotage, failures of BMW or of
any other supplier of BMW NA to deliver, or
delay of BMW or of any other supplier of BMW
NA in making delivery.
-35-
<PAGE>
CHANGES IN SPECIFICATIONS (e) BMW Products will be delivered by BMW NA
to Dealer in accordance with standards
applicable at the time of their manufacture.
BMW NA and Dealer recognize and agree that
BMW and/or BMW NA shall have the right,
without limitation, at any time and from time
to time, to make changes or modifications in
the design specifications of BMW Products
without notice to BMW NA or Dealer. BMW NA
shall have no obligation to Dealer to make
such change or modification with respect to
BMW Products previously delivered to or
ordered by Dealer or to make any refund or
other adjustment for any BMW Products
previously purchased by Dealer or being
imported, manufactured or sold, whether or
not the price of such BMW Products is
affected thereby. No change shall be
considered a model year change unless so
specified by BMW.
CHANGES BY DEALER ON BMW (f) Dealer agrees not to make any
PRODUCTS; COMPLIANCE WITH modifications or alterations to BMW Vehicles
SAFETY, AIR POLLUTION, which alters the original engineering and/or
NOISE CONTROL AND CONSUMER operating specifications of the vehicle. BMW
WARRANTY REQUIREMENTS NA may request Dealer to make such changes or
refrain from making such changes on BMW
Products as may be prescribed from time to
time by BMW, and Dealer agrees to comply
promptly with such requests. Dealer also
agrees to take such steps and render such
reports in connection with the National
Traffic and Motor Vehicle Safety Act of 1966,
the Consumer Product Safety Act, the
Magnuson-Moss Warranty Act, or any other
legislation or regulation pertaining to
safety, air pollution, noise control or
warranties to consumers, as may be required
of automobile dealers or
-36-
<PAGE>
manufacturers or as BMW or BMW NA may request
from time to time, and to comply with all
such legislation and regulations in
conducting Dealer's BMW Operations. BMW NA
will reimburse Dealer for the reasonable cost
of any Original BMW Parts, and labor in
accordance with current warranty rates and
procedures, which may be used by Dealer in
making changes on BMW Products requested by
BMW NA and/or BMW. Dealer agrees to
indemnify and hold harmless BMW and BMW NA
from and against any and all claims and
liabilities arising from Dealer's failure or
alleged failure to comply, in whole or in
part, with any obligation assumed by Dealer
pursuant to this paragraph. Dealer will
communicate to BMW NA all suggestions with
respect to improvements in BMW Products it
may have or develop as a result of its
experience.
INVENTORIES (g) Dealer agrees that, in addition to
maintaining the minimum inventory of Original
BMW Parts required under Paragraph 9(a),
Dealer will acquire, and at all times
maintain, such inventory of available BMW
Products as is necessary in accordance with
the current and reasonably foreseeable volume
of Dealer's business and to further Dealer's
sales activities and to assure satisfactory
customer service and supply of Original BMW
Parts.
-37-
<PAGE>
WARRANTY TO CUSTOMERS PARAGRAPH 11
BMW WARRANTEES (a) Each BMW Vehicle supplied by BMW NA will
be warranted to the customer by BMW NA in
accordance with the New Car Limited Warranty
and the Limited Warranty on Emission Control
and the Limited Warranty Against Rust
Perforation. Each Original BMW Part supplied
by BMW NA will be warranted to the customer
by BMW NA in accordance with the Limited
Warranty on Original BMW Spare Parts or the
Limited Warranty on Original BMW Spare Parts
Purchased Over the Counter, as the case may
be.
INCORPORATION OF BMW (b) Dealer agrees to make all sales of BMW
WARRANTEES IN DEALER'S SALES Vehicles and Original BMW Parts in such a way
that its customers acquire all rights in
accordance with the New Car Limited Warranty,
the Limited Warranty on Emission Controls,
the Limited Warranty against Rust
Perforation, the Limited Warranty on Original
BMW Spare Parts or the Limited Warranty on
Original BMW Spare Parts Purchased Over the
Counter, as the case may be. Dealer will
supply consumers with a copy of such
warranties in such fashion as may from time
to time be required by BMW NA or by
applicable law. TO THE EXTENT PERMITTED BY
APPLICABLE LAW, EXCEPT FOR THE NEW CAR
LIMITED WARRANTY, THE LIMITED WARRANTY ON
EMISSION CONTROLS, THE LIMITED WARRANTY
AGAINST RUST PERFORATION, THE LIMITED
WARRANTY ON ORIGINAL BMW SPARE PARTS AND THE
LIMITED WARRANTY ON ORIGINAL BMW SPARE PARTS
PURCHASED OVER THE COUNTER, BMW NA MAKES NO
OTHER WARRANTIES, EXPRESS OR IMPLIED, TO
CONSUMERS.
-38-
<PAGE>
WARRANTY PROCEDURES (c) Dealer agrees to comply with the
provisions of the current Warranty Policies
and Procedures Manual supplied by BMW NA to
Dealer and to follow the procedures
established from time to time by BMW NA for
the processing and disposition of warranty
claims and the return and disposition of
Original BMW Parts claimed to be defective.
Dealer will also comply with all requests of
BMW NA for the performance of service in
response to warranty claims and will maintain
detailed records of time and parts
consumption as prescribed by BMW NA. Upon
complying with such procedures and requests
and maintaining such records, Dealer will be
entitled to reimbursement for warranty claims
at the current rate of reimbursement
specified by BMW NA for Dealer provided that
Dealer has the necessary equipment and
qualified service personnel, as specified by
BMW NA, to effect necessary warranty repairs.
Strict adherence to the procedures
established for processing warranty claims is
necessary in order for BMW NA to process such
claims fairly and expeditiously. BMW NA will
be under no obligation with respect to
warranty claims not made strictly in
accordance with such procedures. Dealer's
obligation hereunder extends to all BMW
Vehicles and BMW Products under warranty
presented to Dealer by a customer, regardless
of whether Dealer sold the BMW Vehicle or BMW
Product to such customer.
Dealer is not authorized to assume or incur
any other or additional warranty obligations
or liabilities on behalf of either BMW or BMW
NA. Any such other or additional obligations
-39-
<PAGE>
assumed or incurred by Dealer shall be solely
the responsibility of Dealer, including the
disclosure of the identity of the supplier or
warrantor, the existence of a warranty, and
the specific terms and conditions of such
warranty to the consumer.
-40-
<PAGE>
TERMINATION PRIOR TO EXPIRATION PARAGRAPH 12
DATE; SUCCESSION
TERMINATION BY DEALER (a) Dealer shall have the right to terminate
the Agreement at any time by sending notice
of such termination to BMW NA, by certified
mail, return receipt requested, telegram, or
overnight mail service sixty (60) days in
advance of the effective date thereof.
IMMEDIATE TERMINATION BY BMW (b) Except to the extent a greater notice
NA FOR CAUSE period is required by any applicable statute,
in which case the minimum notice period shall
be deemed to be the minimum period required
by such law, BMW NA shall have the right to
terminate the Agreement for cause, with
immediate effect, by sending notice of such
termination to Dealer by certified mail
return receipt requested, telegram, or
overnight mail service, if any of the
following events should occur:
(1) Any material misrepresentation by any of
the persons listed in Article C of the Dealer
Agreement as to any fact relied upon by BMW
NA in entering into this Agreement or
approving such persons;
(2) Conviction of Dealer or of any of the
persons listed in Article C of the Dealer
Agreement, or pleading guilty or pleading
nolo contendre by any of the foregoing, of
any felony or for any material violation of
law if BMW NA has reason to believe that such
conviction or plea may adversely affect the
conduct of Dealer's BMW Operations or would
tend to be harmful to
-41-
<PAGE>
BMW, BMW NA, the reputation of BMW Products
or the marketing of BMW Products;
(3) Submission by Dealer to BMW NA of a
false or fraudulent report or statement or of
a false or fraudulent claim for
reimbursement, refund or credit, such as, for
example, a false or fraudulent warranty
claim;
(4) Grossly negligent or willful conduct on
the part of Dealer that BMW NA determines, in
the reasonable exercise of its discretion, to
be harmful to the goodwill of BMW or BMW NA,
the reputation of BMW Products or the
marketing of BMW Products;
(5) Closure or cessation of Dealer's BMW
Operations for a period of six (6)
consecutive business days, unless such
closure or cessation of operation is caused
by some event beyond the control of the
Dealer, such as strikes, civil war, riots,
fires, floods, earthquakes, or other acts of
God, and Dealer immediately resumes its
customary operations after the cause of the
closure or cessation of operations is
removed;
(6) Dissolution or liquidation of Dealer, if
a partnership or corporation;
(7) Insolvency or business failure of
Dealer, Dealer's inability to pay its debts
as such debts become due; appointment of a
receiver or custodian for all or any part of
the property of Dealer; assignment for the
benefit of creditors by Dealer; the
commencement of a case or proceeding under
any bankruptcy
-42-
<PAGE>
or insolvency laws by or against Dealer or
any person or entity owning or holding,
beneficially or otherwise, a majority or
controlling interest in Dealer; or the
subjection of all or any BMW Products to
execution or other judicial process;
(8) Termination of BMW NA's authorization as
a BMW importer;
(9) The conduct, directly or indirectly, of
any dealership operation at any location,
other than that specifically approved herein
for such operation, without the prior written
approval of BMW NA; or
(10) Any attempted or actual sale, transfer
or assignment by Dealer of this Agreement or
any of the rights granted Dealer hereunder,
or any attempted or actual transfer,
assignment or delegation by Dealer of any of
the responsibilities assumed by it under this
Agreement without the prior written approval
of BMW NA.
TERMINATION BY BMW NA ON (c) Except to the extent a greater notice
60 DAYS' NOTICE period is required by any applicable statute,
in which case the notice period shall be
deemed to be the period required by such
statute, BMW NA shall have the right to
terminate the Agreement, on sixty (60) days
notice, if any of the following situations
exist and BMW NA has previously sent a
written notice to Dealer with respect
thereto:
-43-
<PAGE>
(1) Any disagreement or personal
difficulties between or among any of the
persons listed in Article C of the Dealer
Agreement which BMW NA has a reasonable basis
to believe would have a materially adverse
effect on the conduct of Dealer's BMW
Operations or the presence in the management
of Dealer of any person who BMW NA has a
reasonable basis to believe does not have the
requisite qualifications for the position;
(2) Impairment of the reputation or
financial standing of Dealer or any of the
persons listed in Article C of the Dealer
Agreement or ascertainment by BMW NA of any
facts existing at or prior to the time of
execution of the Agreement which tend to
impair such reputation or financial standing;
(3) Any reduction in value of Dealer's BMW
Products or any act on the part of the
Dealer, including without limitation, the
existence of any liens or encumbrances upon
BMW Products, which to any degree imperils
the prospect of full performance or
satisfaction of the Obligations of Dealer to
BMW NA; or any change in the financial or
other condition of Dealer which BMW NA has
reason to believe unreasonably impairs BMW
NA's security or increases its risk
hereunder. By way of example such
impairments might include failure to pay for
BMW Products in accordance with the terms and
conditions of sales and failure to establish
and/or maintain for the duration of the
Agreement, net working capital, adequate
exclusive unrestricted wholesale lines of
credit;
-44-
<PAGE>
(4) The importation, distribution or sale of
BMW vehicles which are not originally
manufactured or designed for use in the
United States or the sale of BMW Products for
resale or use outside the 50 United States or
other violation of any BMW NA Export Policy
established by BMW NA;
(5) Refusal to permit BMW NA to examine or
audit Dealer's accounts and records as
provided herein upon receipt by Dealer from
BMW NA of written notice requesting such
permission or information;
(6) Failure of Dealer to furnish accurate
sales or financial information and related
supporting data in a timely fashion;
(7) Subject to provisions contained herein
with regard to any change in ownership
occurring by reason of the death or permanent
disability of Dealer's Owner(s), any change
in Dealer's Owner(s) holding a majority or
controlling ownership interest in Dealer, or
any change, whether voluntary or by operation
of law, in the ownership of beneficial
interests in Dealer, or any appointment of
Dealer Operator, without the prior written
consent of BMW NA;
-45-
<PAGE>
(8) Dealer's failure to take any actions
pursuant to the National Traffic and Motor
Vehicle Safety Act of 1966, the Consumer
Product Safety Act, the Magnuson-Moss
Warranty Act, or any other legislation or
regulation pertaining to safety, air
pollution, noise control, or warranties to
consumers which may be required of automobile
dealers or which BMW NA may request in
implementing any action undertaken by BMW NA
or BMW; or
(9) Any breach or violation of any material
obligation contained in the Agreement or in
connection with any transaction between BMW
NA and Dealer; or the failure of Dealer to
satisfy any deficiency(s) contained in the
Improvement Addendum, or any material failure
by Dealer to comply with a requirement
established by BMW NA and communicated to
Dealer in accordance with this Agreement.
During the period such a situation continues
to exist, BMW NA may modify its terms of
payment with respect to Dealer to such extent
as BMW NA may consider appropriate,
irrespective of Dealer's credit standing or
payment record.
NO WAIVER BY FAILURE (d) In the event BMW NA shall be entitled to
TO TERMINATE terminate the Agreement pursuant to the
provisions of Paragraph 12(b) or Paragraph
12(c) but shall fail to do so, such failure
shall not be considered a waiver of the
rights of BMW NA to so terminate the
Agreement.
-46-
<PAGE>
TERMINATION UPON DEATH (e) Death or permanent disability of any of
OR PERMANENT DISABILITY Dealer's Owners holding a majority or
controlling ownership interest in Dealer or
the permanent disability of Dealer Operator
may, at BMW NA's option, result in the
termination of this Agreement, upon written
notice by BMW NA to Dealer. BMW NA shall
provide such notice within a reasonable time
after such death or permanent disability.
Termination hereunder shall be effective
sixty (60) days from the date of such notice.
-47-
<PAGE>
SUCCESSOR TO DEALER (f) Notwithstanding the above Paragraph
IN EVENT OF DEATH 12(e), in the event of the death of any of
the Dealer's Owners, if the beneficial
interest in Dealer passes directly to the
surviving spouse and children, or to any of
them, and if:
(1) Either or both of the persons included
in Article C(iv) and (v) of the BMW Dealer
Agreement remain(s) unchanged; or
(2) Within ninety (90) days after the death
of such Owner, arrangements are completed for
the assumption of the management of Dealer by
persons acknowledged in writing by BMW NA to
be satisfactory to it, then BMW NA will not
terminate the Agreement by reason of such
death before the end of twelve (12) months
after the death of such Owner and, if the
Agreement expires sooner than twelve (12)
months after the death of such Owner, BMW NA
will offer to enter into a new Agreement with
Dealer for an extension period equal to the
difference between twelve months and the
number of days between the date of death of
such Owner and the expiration date of this
Agreement. Such new Agreement will be in
substantially the same form as the Agreement
then currently offered by BMW NA to its
Dealers. Prior to the expiration of such
extension period and after completion of BMW
NA's evaluation of the performance of
Dealer's management during such period, BMW
NA will review with Dealer the changes, if
any, in the management or equity interests of
Dealer required by BMW NA as a condition to
renewing or extending the aforementioned new
Agreement with Dealer.
-48-
<PAGE>
SUCCESSOR NOMINEE (g) Dealer may amend the Dealer Agreement to
nominate a Successor, designating proposed
Dealer Owner(s) of a Successor Dealer to be
established if this Agreement is terminated
because of death or permanent disability.
Dealer may also cancel a Successor Nominee by
providing notice to BMW NA that it intends to
amend the Dealer Agreement to delete and/or
substitute a new Successor Nominee. The
request to amend the Dealer Agreement or to
cancel a Successor Nominee must be executed
by all Dealer's Owners and be received by BMW
NA prior to such death or permanent
disability. In the case of the nomination of
a Successor, any proposed Dealer Owner(s)
must be acceptable to BMW NA. If Successor
Nominee is not acceptable to BMW NA, Dealer
and BMW NA will create a developmental plan
which, if successfully accomplished, will
qualify the Successor Nominee to eventually
become a Dealer Owner.
In the case of cancellation of a Successor
Nominee, BMW NA agrees to delete the name of
the party listed in Article C(iv) upon
receipt of that notice. If, due to changed
circumstances, BMW NA believes or has a
reasonable basis to believe the Successor
Nominee is or should be disqualified, BMW NA
will notify Dealer that the proposed owner is
no longer acceptable. A subsequent Successor
Nominee will be designated or a developmental
plan will be created by mutual agreement
between BMW NA and Dealer.
-49-
<PAGE>
If BMW NA has notified Dealer Owner's in
writing before the death or permanent
disability of such owners that BMW NA does
not plan to continue to have a dealer at
Dealer's location, BMW NA shall accept a
Successor Nominee upon the Successor's
written commitment to relocate Dealer's BMW
Operation within a reasonable time to a
mutually acceptable location.
-50-
<PAGE>
CONTINUATION OF PARAGRAPH 13
BUSINESS RELATIONS
CONTINUATION OF BUSINESS (a) The Agreement can be extended or renewed
RELATIONS AFTER EXPIRATION only through an express written instrument to
OR PRIOR TERMINATION that effect executed in accordance with
Article I of the Dealer Agreement. Any
business relations of any nature whatsoever
between BMW NA and Dealer after the
expiration of the Agreement, or after its
prior termination pursuant to Paragraph 12,
without such written instrument shall not
operate as an extension or renewal of the
Agreement. Nevertheless, all such business
relations, so long as they are continued,
shall be governed by terms identical with the
provisions of the Agreement.
-51-
<PAGE>
RIGHTS AND LIABILITIES UPON PARAGRAPH 14
EXPIRATION OR PRIOR TERMINATION
PENDING ORDERS (a) Upon the expiration or prior termination
of the Agreement, all pending orders of
Dealer for BMW Products previously accepted
by BMW NA will be considered canceled and
Dealer will immediately do the following:
BMW SIGNS (1) Remove, at its own expense, all BMW
signs displayed at Dealer's Facility and sell
and deliver the same to BMW NA at Dealer's
Facility in suitable condition and packing
for transportation. Promptly following such
delivery, BMW NA will pay to Dealer, Dealer's
purchase price for such signs reduced by
straight-line depreciation on the basis of a
seven-year useful life;
-52-
<PAGE>
DISCONTINUANCE OF USE OF BMW (2) Dealer acknowledges that the license and
TRADEMARKS right to the use of the BMW trademarks ceases
upon Dealer's voluntary resignation or
termination as a Dealer, or upon the
expiration of this Agreement, whichever
occurs first. In such event, Dealer will
immediately cease holding itself out as a BMW
dealer and refrain from the use of BMW
trademarks in any fashion whatsoever.
Moreover, Dealer agrees not to use any
similar trademarks and refrain from any other
activity which states or implies that it is
authorized to deal in or service BMW
Products. If Dealer shall refuse or neglect
to comply with the provisions of Paragraph
14(a)(1) and (2), Dealer shall reimburse BMW
NA for all costs and expenses (including
attorneys' fees) incurred by BMW NA in
connection with legal proceedings to require
Dealer's compliance;
ORDERS AND FILES (3) Transfer to BMW NA, or BMW NA's designee
or designees, all orders for sale by Dealer
of BMW Vehicles and Original BMW parts then
pending with Dealer, all deposits made
thereon, whether in cash or in kind, and all
of its warranty files and files of
prospective customers for BMW Products, or
complete copies of all such files;
CUSTOMER LISTS (4) Provide BMW NA with the names and
addresses of all customers who purchased BMW
Vehicles from or by Dealer and the service
records of all current and active service
customers; and
-53-
<PAGE>
LITERATURE (5) Deliver to BMW NA at BMW NA's place of
business, or to BMW NA's designee or
designees, free of charge, any and all
technical or service literature, advertising
and other printed material relating to BMW
Products then in Dealer's possession which
were acquired or obtained by Dealer from BMW
NA, such as, for example, sales instruction
manuals and promotional materials.
PURCHASE OF DEALER'S INVENTORY (b) Within 90 days of the expiration or
OF BMW PRODUCTS BY BMW NA prior termination of this Agreement and
provided further that all Dealer's
Obligations to BMW NA have been paid or
satisfied in full, BMW NA, upon Dealer's
compliance with the provisions hereinafter
set forth, will purchase from Dealer and
Dealer will sell and deliver to BMW NA, the
following:
NEW BMW VEHICLE INVENTORY (1) All new, unused, undamaged and
unmodified BMW Vehicles then unsold in
Dealer's inventory which are in first-class
salable condition and of the then current
model year or the immediately preceding model
year, provided that such BMW Vehicles were
purchased by Dealer from BMW NA (or in the
ordinary course of business, from other
Dealers). The price for such BMW Vehicles
shall be the Net Purchase Price at which they
were originally purchased from BMW NA;
-54-
<PAGE>
NEW ORIGINAL BMW PARTS INVENTORY (2) All new, unused and undamaged Original
BMW Parts (other than the special BMW tools
specifically covered in Paragraph 14(b)(3)
below), in original packaging not classified
as obsolete or "special" by BMW NA, and
listed in the then current BMW Parts Price
List, then unsold in Dealer's inventory which
are in first-class, salable condition;
provided such Original BMW Parts were
purchased by Dealer from BMW NA. The price
at which BMW NA will purchase such Original
BMW Parts shall be the price last established
by BMW NA under the BMW NA standard parts
order for the sale of identical Original BMW
Parts to Dealers, less a 15% handling and
restocking charge; and
SPECIAL BMW TOOLS (3) All required special BMW tools
applicable to BMW Vehicles including
electronic testing equipment (Suntester Model
2013) and computer hardware and software, if
any, provided that such tools were purchased
by Dealer from BMW NA, and provided any sets
of such tools are complete and no parts or
components are missing or otherwise unusable.
The price at which BMW NA will purchase such
special BMW tools shall be reasonably
determined by BMW NA, but in no event will
such price be less than Dealer's purchase
price for such tools reduced by straight-line
depreciation on the basis of a three-year
useful life.
-55-
<PAGE>
Any and all items to be sold by Dealer to BMW
NA pursuant to the provisions of this
Paragraph 14(b) shall be delivered by Dealer
to BMW NA at Dealer's Facilities in suitable
condition and boxed and/or packed for
transportation, which transportation shall be
at BMW NA's expense. In the event Dealer
fails to so box and pack any Original BMW
Parts or special BMW tools to be sold
hereunder, BMW NA may do so and deduct the
expenses of such boxing and packing from the
applicable price thereof.
As a condition precedent to the obligations
of BMW NA under this Paragraph 14(b) to
repurchase any BMW Vehicles, Original BMW
Parts or special BMW tools, Dealer shall
permit BMW NA and BMW NA's designee or
designees, at such time and for such periods
of time as BMW NA reasonably shall determine,
to enter Dealer's Facility for the purpose of
inspection and/or taking an inventory of all
or any part of Dealer's stock of BMW
Vehicles, Original BMW Parts and special BMW
tools. At the request of BMW NA, Dealer
shall comply in all respects with the
provisions of all applicable bulk sales acts
or similar statutes protecting a transferee
of personal properly with respect to
liabilities of the transferor.
In making payments in accordance with this
Paragraph 14(b), BMW NA reserves the right to
do the following:
-56-
<PAGE>
(i) To pay any financial institution
retaining a security interest in any of the
items to be repurchased by BMW NA such sums
as are necessary to obtain good, unencumbered
and marketable title to such items;
(ii) To pay any claimant, in accordance with
any applicable statute, such sums as may be
necessary to acquire good, unencumbered and
marketable title, free of any interest, right
or claim of such claimant, to the items being
repurchased by BMW NA; and
(iii) To set off the amount due Dealer
including, without limitation, amounts due
Dealer from BMW NA for the repurchase of BMW
Products hereunder against any amount which
may be due BMW NA from Dealer, including,
without limitation, reimbursement of expenses
incurred by BMW NA pursuant to (i) or (ii)
above.
Notwithstanding anything to the contrary
contained in this Paragraph 14(b), in no
event will BMW NA be required to purchase any
item from Dealer unless Dealer is able to
convey title to such item free and clear of
all liens, claims, encumbrances and security
interests.
-57-
<PAGE>
BMW NA's RIGHT TO SPECIFIC (c) Since Dealer's performance of its
PERFORMANCE obligations under this Paragraph 14 is of
such a nature that it is impossible to
measure, in money, the damages which will be
suffered by BMW NA in the event Dealer should
fail to perform any of these obligations,
Dealer agrees that, in the event of any such
failure or performance on its part, BMW NA
will be entitled to maintain an action or
proceeding to compel the specific performance
by Dealer of these obligations and Dealer
agrees not to urge in any such action or
proceedings the claim or defense that BMW NA
has an adequate remedy at law.
-58-
<PAGE>
TRANSFER OF AGREEMENT PARAGRAPH 15
TRANSFER, SALE OR ASSIGNMENT (a) Dealer shall not transfer, sell or
OF AGREEMENT BY DEALER assign, or attempt to transfer, sell or
assign, the Agreement or sell or transfer any
right or delegate any duty, or obligation or
responsibility of Dealer under the Agreement.
If a transfer, sale or assignment of Dealer's
BMW Operations is approved by BMW NA, then
BMW NA shall offer the transferee or assignee
of Dealer the right to enter into a new
Agreement in substantially the same form as
the Agreement then currently offered by BMW
NA to its dealers.
-59-
<PAGE>
INDEMNIFICATION PARAGRAPH 16
INDEMNIFICATION BY BMW NA (a) Subject to the provisions of this
Paragraph 16, BMW NA shall indemnify and hold
Dealer harmless against any judgment which
may be rendered against Dealer, plus
reasonable attorney fees and court costs,
resulting from lawsuits seeking monetary
damages commenced against Dealer by third
parties concerning:
(1) Bodily injury or property damage
(including damage to BMW Products) claimed to
have been caused by an alleged defect in the
design, manufacture or assembly of BMW
Products; provided, however, that any claimed
defect in manufacture or assembly was not
such as should have been detected by Dealer
in a reasonable inspection of the BMW
Products, whether in the performance of the
Dealer's pre-delivery inspection and
conditions or otherwise;
(2) Failure of BMW Products to conform,
because of changes in standard equipment or
material component parts, to any description
thereof set forth in advertisements or
product brochures made available to Dealer by
BMW NA and allegedly relied on by the first
retail purchaser thereof, unless Dealer shall
have received written notice of such changes
from BMW NA prior to the date of delivery of
the affected BMW Product to such purchaser,
or
(3) Any substantial damage to BMW Products
repaired by BMW NA prior to the time any
affected
-60-
<PAGE>
BMW Product is delivered to the Dealer,
unless Dealer shall have received written
notice of such damage and repair from BMW NA
prior to the date of delivery of the affected
BMW Product to the first retail purchaser
thereof.
In the event that any lawsuit making
allegations as set forth in (1) through (3)
above is brought naming Dealer as a
defendant, BMW NA will, following receipt of
notice as provided in subparagraph (c) of
this Paragraph 16, undertake at its sole
expense and through counsel selected or
approved by BMW NA, the defense of said
action on behalf of Dealer.
BMW NA is specifically authorized by Dealer
to settle or to continue to defend any such
lawsuit brought against Dealer, provided that
BMW NA shall be solely liable for the payment
of the amount of any settlement which it
effects or judgment that is rendered.
Should BMW NA for any reason refuse to
undertake the defense of Dealer when it is
otherwise obligated to do so under this
subparagraph, Dealer may conduct its own
defense and, in that event, BMW NA's
liability shall be limited solely to the
costs of such defense, including reasonable
attorney fees, court costs and the amount of
any judgment or final settlement paid by
Dealer (provided, however, that Dealer shall
notify BMW NA within twenty (20) days of such
judgment or settlement).
BMW NA shall have the right to decline to
accept Dealer's
-61-
<PAGE>
defense or, after accepting the defense but
prior to trial, to tender the defense back to
Dealer, and Dealer shall accept such tender
if BMW NA reasonably concludes that the
allegations or claims being pursued are no
longer those set forth in (1) through (3)
above.
INDEMNIFICATION BY DEALER (b) Subject to the provisions of this
Paragraph 16, Dealer shall indemnify and hold
BMW NA harmless against any judgment which
may be rendered against BMW NA, plus
reasonable attorney fees and court costs,
resulting from lawsuits seeking monetary
damages commenced against BMW NA by third
parties concerning:
(1) Dealer's alleged failure to perform or
negligent or willfully malfeasant performance
of (1) the service obligations assumed by it
pursuant to Paragraph 6 of the Dealer
Standard Provisions, or (2) any maintenance
or repair service on BMW Products or such
other motor vehicles or products as may be
sold or serviced by Dealer:
(2) Dealer's alleged breach of any contract
between Dealer and Dealer's customer,
provided, however, that the breach was not
caused by any act or omission on the part of
BMW NA concerning which BMW NA unreasonably
failed to notify Dealer prior to the date of
Dealer's entering into the contract with its
customer:
(3) Dealer's alleged independent warranties,
misleading statements, misrepresentations, or
unfair or deceptive acts or practices,
-62-
<PAGE>
whether through advertisements or otherwise,
affecting any individual or entity; provided,
however, that the alleged warranties,
statements, representations, deceptive acts
or practices or advertisements are-not based
on information or material produced or
supplied by BMW NA and not subsequently
superseded or withdrawn by BMW NA upon
written notification to Dealer.
In the event that any lawsuit making
allegations as set forth in (1) through (3)
above is brought naming BMW NA as a
defendant, Dealer will, following receipt of
notice as provided in subparagraph (c) of
this Paragraph 16, undertake at its sole
expense and through counsel selected by
Dealer and approved by BMW NA, the defense of
said action on behalf of BMW NA. Dealer is
specifically authorized by BMW NA to settle
or to continue to defend any such lawsuit
brought against BMW NA, provided that Dealer
shall be solely liable for the payment of the
amount of any settlement which it effects or
judgment that is rendered.
Should Dealer for any reason refuse to
undertake the defense on behalf of BMW NA
when it is otherwise obligated to do so under
this subparagraph, BMW NA may conduct its own
defense and, in that event, Dealer's
liability shall be limited solely to the
costs of such defense including reasonable
attorney fees, court costs and the amount of
any judgment or final settlement paid by BMW
NA (provided, however, that BMW NA shall
notify Dealer within twenty (20) days of such
judgment or settlement).
-63-
<PAGE>
Dealer shall have the right to decline to
accept BMW NA's defense or, after accepting
the defense but prior to trial, to tender the
defense back to BMW NA, and BMW NA shall
accept such tender, if Dealer reasonably
concludes that the allegations being pursued
are no longer those set forth in (1) through
(3) above.
NOTIFICATION (c) Whenever a lawsuit is commenced against
either BMW NA or Dealer or both of them, each
shall, within fifteen (15) days after service
of the complaint, notify the other in writing
of any request to assume its defense and to
indemnify it, and shall provide at the time
copies of any pleadings or any other court
papers which have been served upon the party
giving notice, as well as all information
then available regarding the first customer,
the plaintiff and the circumstances giving
rise to the suit.
IN THE EVENT THIS PROVISION IS FOR ANY REASON
NOT COMPLIED WITH, SUBPARAGRAPHS (a) AND (b)
OF THIS PARAGRAPH 16 SHALL NOT APPLY FOR
PURPOSES OF THAT LAWSUIT OR WITH RESPECT TO
ANY CLAIM OR LAWSUIT ARISING OUT OF
ALLEGATIONS OR TRANSACTIONS ANTEDATING THE
FIRST CLAIM OR LAWSUIT INVOLVING THE AFFECTED
BMW PRODUCT.
The request to assume the defense and to
indemnify shall be accepted or rejected, in
writing, by the party to whom it is delivered
within thirty (30) days following its
receipt. Prior to receipt of a response to
its request, each party agrees to take all
-64-
<PAGE>
reasonable steps to ensure that the defense
to the action is in no way prejudiced,
whether by action or inaction. If the
request is accepted, the party making the
request shall cooperate fully in the defense
of the suit in such manner and to such extent
as the party assuming the defense may
reasonably require; provided, however, that
subparagraphs (a) and (b) of this Paragraph
16 shall be applicable commencing with the
date on which the request is accepted and any
expenses or other obligations incurred prior
to such acceptance by the party making the
request shall be borne solely by such Party.
ALLEGATIONS INVOLVING BOTH BMW (d) If at any time in a lawsuit it is
NA AND DEALER alleged that there is liability on the part
of both BMW NA (on any or all of the bases
set forth in subparagraph (a) of this
Paragraph 16) and Dealer (on any or all of
the bases set forth in subparagraph (b) of
this Paragraph 16), each party shall be
responsible for its own defense, including
costs and attorneys fees, unless at any time
after the commencement of such suit one party
offers to undertake the total defense and the
other party agrees thereto in writing, in
which event the provisions of subparagraphs
(a) and (b) hereof shall be controlling, as
appropriate to the circumstances of such
agreement.
-65-
<PAGE>
The responsibility of BMW NA or Dealer for
its own defense pursuant to this
sub-paragraph (d), or pursuant to any other
circumstances not within the scope of this
Paragraph 16, shall in no way affect or alter
the legal rights, if any, either may have to
indemnification or contribution from the
other.
-66-
<PAGE>
MISCELLANEOUS PROVISIONS PARAGRAPH 17
APPROVAL OR CONSENT BY BMW NA (a) Any approval or consent given by BMW NA
must be in writing and signed by duly
authorized representatives of BMW NA.
DIVISIBILITY (b) If any provision of this Agreement
contravenes or is prohibited by the laws of
any state or other jurisdiction which are
held to be applicable to this Agreement, such
provision shall be limited to the extent
necessary so that it will not render this
Agreement invalid, unlawful or unenforceable,
in whole or part, under such laws, but all
other provisions of this Agreement shall
remain in full force and effect.
TERMINATION OF PRIOR AGREEMENTS (c) This Agreement terminates and supersedes
all prior written or oral agreements, if any,
between BMW NA (or any predecessor of BMW NA)
and Dealer relating to the subject matter
hereof, except with respect to any trade
indebtedness which may be owing by either BMW
NA or Dealer to the other and except that
this Agreement shall not operate to cancel
any of Dealer's unfilled orders with BMW NA
for any BMW Products placed with BMW NA
pursuant to the provisions of any agreement
terminated or superseded by this Agreement.
-67-
<PAGE>
NOTICES (d) Any notices under or pursuant to the
provisions of this Agreement shall be
directed to the respective addresses of the
parties as stated in the Dealer Agreement or,
if either of the parties shall have specified
another address by notice in writing to the
other party, to the address thus last
specified. The parties shall advise each
other promptly, in writing, of any change of
address.
NO IMPLIED WAIVERS (e) Except as otherwise provided in this
Agreement, the failure of either party at any
time to require performance by the other
party of any provision hereof shall in no way
affect the full right to require such
performance at any time thereafter, nor shall
the waiver by either party of a breach of any
provision hereof constitute a waiver of any
succeeding breach of the same or any other
provision or constitute a waiver of the
provision itself.
DEALER NOT AN AGENT; (f) Dealer will conduct its BMW Operations on
DISCLAIMER OF FURTHER its own behalf and for its own account.
LIABILITY BY BMW NA AND BMW Dealer has no power or authority to act for
or to bind BMW and/or BMW NA Except as
expressly provided in the Agreement, BMW NA
will not be liable for any expenditure made
or incurred by Dealer in connection with
Dealer's performance of its obligations
pursuant to the Agreement. Dealer is not an
agent of BMW NA, and BMW NW owes no fiduciary
duty to dealer.
-68-
<PAGE>
Dealer agrees that it has no rights, without
limitation, arising from or in connection
with any agreement between BMW NA and any
other BMW dealer and that Dealer is not a
third party beneficiary of any such
agreement. Nothing herein grants Dealer any
rights to enforce any such agreement. Dealer
also agrees that no third party shall have
any enforceable rights under this Agreement.
ACCOUNTS PAYABLE (g) All monies or accounts due Dealer shall
be net of Dealer's indebtedness to BMW NA,
its subsidiaries and affiliates. Following
thirty (30) days written notice to Dealer,
BMW NA may: (1) deduct any amounts due or to
become due from Dealer to BMW NA, its
subsidiaries and affiliates, and/or (2)
set-off any amounts due from Dealer which are
being held by BMW NA, its subsidiaries and
affiliates, relating to this Dealer Agreement
or any other agreement between dealer and any
of those parties.
BMW NA'S CONTINUING SECURITY (h) Except as specifically provided by any
INTEREST other provision of this Agreement, the
security interest granted to BMW NA hereunder
shall not be affected by any provision in any
other instrument, including, but not limited
to, invoices, purchase orders, purchase order
acknowledgments and other forms; and the
terms of this Agreement relating to such
security interest may only be modified,
amended or changed by a writing signed by
both parties and specifically referring to
this Agreement.
-69-
<PAGE>
ASSIGNMENT OF BMW NA'S (i) BMW NA may assign the security interest
SECURITY INTEREST granted to it under this Agreement or any
part thereof, including its security interest
in particular items of Collateral and, upon
notifying the Dealer, the assignee shall be
entitled to the full performance of the
covenants, rights and remedies contained in
Paragraph 10 of the Agreement in so far as
they apply to the Collateral assigned.
Dealer will not assert any claims, defenses
or offsets against the assignee that it may
have against BMW NA.
HEADINGS (j) The headings contained in this Agreement
have been inserted for convenient reference
only and shall not in any way affect the
construction, interpretation or meaning of
the text.
ENTIRE AGREEMENT; (k) This Agreement contains the entire
REPRESENTATIONS agreement between BMW NA and Dealer. Dealer
acknowledges that no representation or
statement has been made to it on behalf of
BMW, BMW NA and/or any agents,
representatives or employees of either BMW or
BMW NA that in any way tend to change or
modify any of the terms or provisions of the
Agreement or that in any manner prevents this
Agreement from becoming effective. Dealer
further acknowledges that there is no other
agreement or understanding, except those
specifically provided for in this Agreement,
either oral or written, between Dealer and
BMW and/or BMW NA affecting this Agreement or
relating to the subject matter hereof.
-70-
<PAGE>
EX 10.2.5.1
TERM DEALER SALES AND SERVICE AGREEMENT
THIS AGREEMENT, effective the 3rd day of July, 1996 is entered into
by and between AMERICAN SUZUKI MOTOR CORPORATION, Automotive Division, a
California Corporation (hereinafter referred to as "SUZUKI"), having its
principal office at 3251 East Imperial highway, Brea, California, and Fair
Hyundai Partnership, partnership duly registered under the laws of the State
of Connecticut, and trading as Danbury Suzuki, (hereinafter referred to as
"DEALER"), having its principal office at 100C Federal Road, Danbury, CT
06810.
PURPOSE OF AGREEMENT
It is acknowledged by both SUZUKI and DEALER that the purpose of
this Agreement is to establish DEALER as an authorized dealer of Suzuki
products and to provide for the sale, lease and servicing of Suzuki products
by DEALER. It is of utmost importance to SUZUKI that Suzuki products are
sold and serviced in a manner which promotes consumer satisfaction and
confidence. It is hereby understood and acknowledged that DEALER desires an
opportunity to qualify for a three-year American Suzuki Motor Corporation
Dealer Sales and Service Agreement for Suzuki Four Wheel Vehicle Products.
DEALER understands, acknowledges and accepts that DEALER must first fulfill
all of DEALER's undertakings as hereinafter set forth.
In furtherance of the purpose of this Agreement, the parties
acknowledge that SUZUKI is the exclusive distributor in the United States
(except Hawaii) of Suzuki Four Wheel Vehicles and Parts and Accessories
therefor manufactured by Suzuki Motor Co., Ltd., a corporation incorporated
under the laws of Japan.
It is of utmost important to SUZUKI that Suzuki
Products are sold and serviced in a manner which promotes consumer
satisfaction and confidence. DEALER desires to become one SUZUKI's
authorized dealers. SUZUKI, based on the representations and promises of
DEALER, and in reliance on DEALER's integrity, ability and expressed
intention to deal fairly with SUZUKI and the consumer, has accepted DEALER as
an authorized retail dealer of Suzuki Products.
DEALER acknowledges that SUZUKI has selected DEALER as an authorized
SUZUKI dealer and has granted to it a Dealership for Suzuki Products and
related rights pursuant to this Agreement solely in reliance upon the
undertaking of DEALER to fulfill its responsibilities to any third party or
parties.
This Agreement sets forth the rights and responsibilities of SUZUKI
and DEALER. The relationship between SUZUKI and DEALER shall be that of
vendor and purchaser. DEALER is not the agent or legal representative of
SUZUKI or Suzuki Motor Co., Ltd. for any purpose whatsoever. DEALER does not
have any express or implied rights of authority to assume or create any
obligations or responsibilities on behalf of, or in the name of, SUZUKI or
Suzuki Motor Co., Ltd.
<PAGE>
THEREFORE, subject to the terms and conditions of this Agreement,
based on the foregoing facts and in consideration of the mutual promises and
other valuable consideration, the receipt of which is hereby acknowledged,
the parties hereto agree as follows:
I. RIGHTS GRANTED TO DEALER
Subject to the terms of this Agreement, SUZUKI hereby appoints
DEALER as a nonexclusive authorized dealer for Suzuki Products
and grants DEALER the right to:
A. Sell, lease and service Suzuki Products to the satisfaction of SUZUKI
from the Dealership Facilities and Locations as set forth in the
Facility Standards Addendum and Section X herein.
B. Identify itself as an authorized Suzuki Dealer utilizing
Suzuki-approved signage at the Dealership Facilities; and
C. Use the name "Suzuki" and the Suzuki trademarks in the advertising,
promotion, sales, leasing and servicing of Suzuki Products in the
manner herein provided.
SUZUKI hereby reserves the unrestricted right to sell Suzuki Products
and to grant the privilege of using the Suzuki name and trademarks to
other dealers and entities, wherever they may be located.
II. RESPONSIBILITIES ACCEPTED BY DEALER
DEALER accepts its appointment as an authorized Suzuki Dealer and, in
consideration of its appointment and subject to other conditions and
provisions of the Agreement, agrees to:
A. Establish and maintain Dealership Facilities to the satisfaction of
SUZUKI as set forth herein and in the Facility Standards Addendum and
the Dealer Minimum Standards Addendum at the location(s) set forth
herein;
B. Sell, lease and promote Suzuki Products subject to, and in accordance
with, the terms and conditions of this Agreement;
C. Service, in a manner satisfactory to SUZUKI, Suzuki Products
subject to, and in accordance with, the terms and conditions of this
Agreement; and
D. Build and maintain public confidence and respect in DEALER, SUZUKI
and Suzuki Products by maintaining the highest ethical standards of
advertising, business practices and conduct.
III. TERM
This Agreement shall come into full force and effect at SUZUKI
headquarters in Brea, California when executed by SUZUKI and, subject
to its earlier termination, in accordance
- 2 -
<PAGE>
with the provisions of this Agreement, shall continue in full force and
effect for six months, expiring on 1/3/97 subject to the provisions of
Section 11.00 of the Standard Provisions only upon the condition that
DEALER complies and completes all the terms and conditions of this
Agreement.
IV. OWNERSHIP OF DEALER
DEALER represents and warrants and this Agreement is conditioned
upon, and is entered into by SUZUKI upon the representations
and warranties of DEALER that:
A. Dealer is a Connecticut Partnership (indicate whether a sole
proprietor, a partnership, a corporation or other type of
organization)
B. The following person(s) and only said person(s) own and will
continue to own, throughout the term of this Agreement, the
following interest in ownership of the Dealership:
<TABLE>
<CAPTION>
Percentage of State Whether Partner
Name Interest Officer or Director
---- ------------ ---------------------
<S> <C> <C>
Fair Hyundai Corporation 30%
DiFeo Partnerships 70%
</TABLE>
C. DEALER intends to carry on business under the name(s) of Fair
Hyundai Partnership T/A Danbury Suzuki.
DEALER warrants that the appropriate registration or fictitious
business name statement reflecting the name in Paragraph (C) above
has been filed with the proper state authorities for the conduct of
business under the name by DEALER.
V. MANAGEMENT OF DEALERSHIP
A. SUZUKI enters into this Agreement on DEALER's representation that
William Comastro and no other person, shall be General manager and
shall have full managerial authority and responsibility for the
operation and management of all phases of the business of the
Dealership with authority to make all decisions on behalf of DEALER
with respect to the operation of the Dealership and the performance
of this Agreement.
VI. CHANGE IN OWNERSHIP OR MANAGEMENT
SUZUKI has entered into this Agreement in reliance on DEALER's
representation that the persons identified as Owners and/or General
Manager in Sections IV and V herein possess the ability, experience and
other personal qualifications requisite for the performance of this
Agreement. Therefore, if there is to be a change in the person(s) named
as having full ownership and/or full managerial authority as General
Manager and responsibility for the
- 3 -
<PAGE>
operation and management of the Dealership, DEALER must give prior
written notice of the change to SUZUKI, (except a change caused by
death, in which case DEALER or the DEALER's legal representative shall
give immediate written notice to SUZUKI). No such change or notice
shall alter or modify any of the provisions in this Agreement until
embodied in an appropriate written amendment and executed by all
parties. SUZUKI will not unreasonably withhold consent to a change in
ownership or management, provided that SUZUKI receives all information
requested by it concerning the prospective owner(s) and/or General
Manager, and provided that the prospective owner(s) and/or General
Manager meet(s) all SUZUKI financial qualifications and other
qualifications in effect at the time of the proposed change.
VII. LICENSING OF DEALER
If any state, city or other jurisdiction where the Dealership operations
are to be located and conducted requires DEALER to obtain and maintain a
license for the conduct of Dealership operations as set forth herein,
this Agreement shall not be valid until and unless DEALER shall have
first provided to SUZUKI certification of the issuance of such
license(s) to DEALER. DEALER shall immediately notify SUZUKI in writing
of failure to obtain or maintain any such licenses or renewal thereof.
DEALER shall further notify SUZUKI in writing if any license that DEALER
has obtained pursuant to this Paragraph is suspended or revoked and the
date and reasons therefor.
VIII. INCORPORATION OF STANDARD PROVISIONS
The Suzuki Dealer and Service Agreement Standard Provisions
accompanying this Agreement are incorporated herein by this reference
and made a part of this Agreement with the same force and effect as if
fully set forth at this point.
IX. INCORPORATION OF DOCUMENTS AS PART OF AGREEMENT
The Dealer Application, Facility Standards Addendum, Dealer Minimum
Standards Addendum and Dealer Updates are incorporated by this
reference and made a part of this Agreement with the same force and
effect as if all the representations and warranties in the Dealer
Application, and all terms and conditions of the Facility Standards
Addendum, Dealer Minimum Standards Addendum and Dealer Updates were set
forth in full herein. The DEALER represents and warrants and SUZUKI
enters into this Agreement in reliance upon those representations and
warranties that all representations and warranties made by the DEALER
in the Dealer Application, Facility Standards Addendum and Dealer
Minimum Standards Addendum are true and correct as of the date of
execution of this Agreement.
X. CONDITIONS OF SUZUKI'S OFFER
If this Agreement is not terminated prior to its expiration date as set
forth above, SUZUKI hereby offers to enter into a three-year American
Suzuki Corporation Dealer Sales and Service Agreement with DEALER in
such form as shall be in use by SUZUKI at that time.
- 4 -
<PAGE>
This offer may be accepted by DEALER fulfilling all of the following
conditions during the term of this Agreement and at the expiration
thereof, each of which DEALER recognizes, understands and agrees as
being reasonable and necessary:
(a) Provide through acquisition or construction, and maintain the
following facilities for the Suzuki Dealership and for the state,
leasing and servicing of Suzuki Products:
Dealer shall not establish or conduct any Dealership operations
which are the subject of this Agreement, including the display,
sale, leasing or servicing of Suzuki Products, at any location
or facility other than as set forth above or in the Facility
Standards Addendum.
(b) Complete the acquisition and installation, at the Dealership
Facilities, of improvements, signs, furniture and furnishings,
tools and equipment as recommended by SUZUKI for the Dealership;
(c) Employ such personnel, in qualification and number, as
recommended by SUZUKI for the Dealership;
(d) Furnish SUZUKI, on forms or in the format designated by SUZUKI,
by the tenth (10th) day of each month, with the financial and
operating statements set forth in Section 3.04 of the Standard
Provisions;
(e) Comply with all other of SUZUKI's standards of DEALER to
operate the Dealership and qualify in all other respects for a
Suzuki three-year Dealer Sales and Service Agreement;
(f) Comply with all federal, state and local governmental statutes,
ordinances, rules, regulations and standards to conduct
business as an authorized Suzuki Dealer at the Dealership
Facilities;
(g) Other Conditions:
- Install and maintain approved Suzuki signage in accordance
with paragraph 2.02 of the Standard Provisions of the Dealer
Sales and Service Agreement.
- Maintain a minimum of two (2) Suzuki trained technicians in
Product intro and EFI to service the Suzuki product line
during the term of this agreement.
- Maintain Suzuki Information Center during the term of this
agreement.
- Maintain Suzuki SCAT System during the term of this agreement.
- Utilize Suzuki Financial Statement and submit by the 20th of
each month to National AND Regional Offices during the term
of this agreement. ---
- Maintain average monthly District, Regional, or National
total sales per dealer, whichever is highest, during the
entire term of the Dealer Sales and Service Agreement.
- 5 -
<PAGE>
- Pursuant to Section 5.02 of the Suzuki Standard Provisions,
dealer agrees to maintain adequate flooring arrangements
conforming to the requirements established and approved by
Suzuki, in no event less than $500,000.
Should DEALER fail to fulfill each and every condition set forth in
this Paragraph during the term of the Agreement and prior to the
expiration thereof, the above offer made by SUZUKI shall be
automatically revoked on the expiration date set forth in Paragraph
III without further notice to dealer.
XI. EFFECT OF LEGAL PROCEEDINGS ON SUZUKI'S OFFER TO DEALER
Should a proceeding of any nature be filed with or initiated in any
court or administrative body seeking to prevent or delay SUZUKI from
entering into a Dealer Sales and Service Agreement with DEALER
and/or seeking damages resulting from SUZUKI doing so, SUZUKI shall
be under no obligation to enter into such Agreement during the
pendency of such proceeding. Furthermore, if, as a result of such
proceeding, SUZUKI shall be ordered or prevented from entering into
such an Agreement with Dealer, the offer contained in Section X
herein shall be void and SUZUKI shall have no liability to DEALER
whatsoever for any damages which DEALER may incur as a result
thereof.
XII. BREACH OF AGREEMENT BY DEALER
Should DEALER fail to comply with and fully and completely carry out
all of the terms and conditions of this Agreement, including those
incorporated by reference, such failure shall constitute a material
breach of this Agreement, and SUZUKI shall be under no obligation
whatsoever to DEALER to extend this Agreement in whole or in part,
to enter into a regular three year Dealer Sales and Service
Agreement with DEALER or be under any other obligation or have any
liability to DEALER whatsoever.
XIII. ONLY AGREEMENT
Unless expressly referred to and incorporated herein, this Agreement
cancels and supersedes all previous contracts, agreements and
understandings between SUZUKI and DEALER with respect to Suzuki
Products, and there are no promises, representations, understandings
or agreements except as stated herein.
- 6 -
<PAGE>
IN WITNESS WHEREOF the parties hereto have executed this Agreement
this 3rd day of July, 1996.
AMERICAN SUZUKI MOTOR CORPORATION
Automotive Division
BY: /S/ M. NAQURA
-----------------------------
M. NAQURA, PRESIDENT
-----------------------------
Name and Title
Fair Hyundai Partnership T/A
DANBURY SUZUKI
-----------------------------
Dealer Entity Name
BY /S/ JAMES G. HETHERINGTON
-----------------------------
President
BY /S/ GEORGE LOWRANCE
-----------------------------
Secretary
- 7 -
<PAGE>
DEALER MINIMUM STANDARDS ADDENDUM
<TABLE>
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------
Dealer Dealer Code
James G. Hetherington 406090
- ---------------------------------------------------------------------------------------------------
Plan Name Region
Fair Hyundai Partnership New York
- ---------------------------------------------------------------------------------------------------
Trading As Sales District Service District
Danbury Suzuki CO2 CO2
- ---------------------------------------------------------------------------------------------------
Address City State Zip Code
100C Federal Road Danbury CT 06810
- ---------------------------------------------------------------------------------------------------
Mailing Address City State Zip Code
Same
- ---------------------------------------------------------------------------------------------------
Sales Phone Service Phone Fax Number
203-730-5680 203-730-5680 203-730-4782
- ---------------------------------------------------------------------------------------------------
Management Office
- ---------------------------------------------------------------------------------------------------
Business Name Phone Fax Number
Fair Hyundai Partnership 203-730-5600 203-730-5723
- ---------------------------------------------------------------------------------------------------
Address Mailing Address
102 Federal Road Same
- ---------------------------------------------------------------------------------------------------
City State Zip Code City State Zip Code
Danbury CT 06810
- ---------------------------------------------------------------------------------------------------
Floorline Source
- ---------------------------------------------------------------------------------------------------
Credit Institution Phone Credit Limit
General Motors Acceptance Corporation 201-560-2022 $600,000
- ---------------------------------------------------------------------------------------------------
Address City State Zip Code
120 Eagle Rock Avenue, Suite 310 East Hanover NJ 07936
- ---------------------------------------------------------------------------------------------------
PERSONNEL STANDARD ACTUAL REQUIREMENTS ORDERED COMPLETE
- ---------------------------------------------------------------------------------------------------
Sales Manager 1 1 Advertising Materials X
- ---------------------------------------------------------------------------------------------------
Salesmen 4 4 General Workshop Equipment X
- ---------------------------------------------------------------------------------------------------
Service Manager 1 1 Initial Parts Order X
- ---------------------------------------------------------------------------------------------------
Parts Manager 1 1 Initial Accessories Order X
- ---------------------------------------------------------------------------------------------------
Technicians 2 2 SCAT Plus System X
- ---------------------------------------------------------------------------------------------------
Special Tool Kit X
----------------------------------------------------
Temporary Signage X
- ---------------------------------------------------------------------------------------------------
COPY OF DOCUMENTS FILED WITH DEALER ENTITY Signage X
STATE
- ---------------------------------------------------------------------------------------------------
X Articles of Incorporation X Corporation Suzuki Information Center X
- ---------------------------------------------------------------------------------------------------
Partnership Agreement Partnership
- ---------------------------------------------------------------------------------------------------
Proprietorship
- ---------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
AMERICAN SUZUKI MOTOR CORPORATION
FAIR HYUNDAI PARTNERSHIP T/A DANHURY SUZUKI Automotive Division
- -----------------------------------------------------
Dealer
By: /S/ JAMES G. HETHERINGTON By: /S/ M. NAQURA
------------------------------------------------- ---------------------------------
Signature Signature
JAMES G. HETHERINGTON, EXECUTIVE VICE PRESIDENT M. NAQURA, PRESIDENT
- ----------------------------------------------------- -------------------------------------
Name and Title Name and Title
MARCH 29, 1996 JULY 3, 1996
- ----------------------------------------------------- -------------------------------------
Date Date
</TABLE>
- 8 -
<PAGE>
FACILITY STANDARDS ADDENDUM
Fair Hyundai Partnership T/A
Danbury Suzuki Danbury, CT 06810 406090
-------------- ----------------- ------ ----------
Dealer Name City, State, Zip Dealer Code Date
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
FACILITIES LOCATION FACILITY
- -------------------------------------------------------------------------------------------------------------------------------
DISTANCE
FROM SHOWROOM GENERAL DEDICATED
MAIN INCLUSIVE OFFICE & DEDICATED SUZUKI
ADDRESS LOCATION OF CLOSING CUSTOMER SUZUKI STALLS/ BODY
LOCATION LOCATION UNE (MILES) OFFICES* LOUNGE* PARTS* PARTS SERVICE* HOISTS SHOP*
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
A. Main 100C Federal Road 3,640 540 1,975 600 6,685 2/2 N/A
- -------------------------------------------------------------------------------------------------------------------------------
Location Sales/
Use Service/Parts
- -------------------------------------------------------------------------------------------------------------------------------
B.
Additional
Location
Use
- -------------------------------------------------------------------------------------------------------------------------------
C.
Additional
Location
Use
- -------------------------------------------------------------------------------------------------------------------------------
D.
Additional
Location
Use
- -------------------------------------------------------------------------------------------------------------------------------
E.
Additional
Location
Use
- -------------------------------------------------------------------------------------------------------------------------------
Total
Land
and
TOTALS Building Land Building
12,840 141,000 153,840 3,640 540 1,975 6,685 2/2 N/A
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------
LAND
- ------------------------------------------------------------------------------------
NEW NEW SERVICE USED
VEHICLE VEHICLE CUSTOMER CUSTOMER CAR
DISPLAY* STORAGE* PARKING* PARKING* DISPLAY*
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
A. Main 20,000 90,000 5,000 5,000 21,000
- ------------------------------------------------------------------------------------
Location
Use
- ------------------------------------------------------------------------------------
B.
Additional
Location
Use
- ------------------------------------------------------------------------------------
C.
Additional
Location
Use
- ------------------------------------------------------------------------------------
D.
Additional
Location
Use
- ------------------------------------------------------------------------------------
E.
Additional
Location
Use
- ------------------------------------------------------------------------------------
TOTALS 20,000 90,000 5,000 5,000 21,000
- ------------------------------------------------------------------------------------
</TABLE>
*TOTAL FACILITY
<TABLE>
<S> <C> <C>
Fair Hyundai Partnership T/A AMERICAN SUZUKI MOTOR CORPORATION
FACILITIES OWNED BY: FACILITIES ARE: Danbury Suzuki Automotive Division
----------------------------
Dealer
[ ] Dealer [ ] Permanent By: /S/ JAMES G. HETHERINGTON By: /S/ M. NAQURA
[ ] Dealership [ ] Temporary -------------------------------------- -------------------------------
[ ] Dealer Realty Signature Signature
JAMES G. HETHERINGTON, EXECUTIVE VICE PRESIDENT M. NAQURA, PRESIDENT
----------------------------------------------- -----------------------------------
Name and Title Name and Title
Corporation or
Similar Entity
[ ] If Facilities are MARCH 29, 1996 JULY 3 1996
leased, -------------------------------------- ---------------------------------
complete section on back Date Date
</TABLE>
<PAGE>
SUZUKI
AMERICAN SUZUKI MOTOR CORPORATION
SUPPLEMENTAL AGREEMENT TO
AMERICAN SUZUKI MOTOR CORPORATION
DEALER SALES AND SERVICE AGREEMENT
This Supplemental Agreement ("Supplemental Agreement") is entered into among
Fair Hyundai Partnership, trading as Danbury Suzuki, ("Dealer"), Di Feo
Partnership, Inc. and Fair Hyundai Corp. (collectively "Dealer Owner"), United
Auto Group, Inc. ("Public Company") and American Suzuki Motor Corporation
("Suzuki").
WHEREAS, Suzuki and Dealer have entered into the Term Dealer Sales and Service
Agreement, dated July 25, 1996, ("Dealer Agreement") permitting Dealer to
conduct its circumscribed business activities on behalf of Suzuki from the
approved location identified in the Dealer Agreement; and
WHEREAS, the contemplated future organization and ownership structure of Dealer
and Dealer Owner are such that the terms of the Dealer Agreement are not wholly
adequate to address the legitimate business needs and concerns of the Dealer,
Dealer Owner and Suzuki; and
WHEREAS, Dealer and Suzuki have entered into the Dealer Agreement in
consideration for and reliance upon certain understandings, assurances and
representations which the parties hereto wish to document;
NOW, THEREFORE, the parties agree as follows:
1. For purposes of the Dealer Agreement, including Sections IV, V and VI,
James G. Hetherington shall be considered the Dealer's General Manager, as
the term is used in Sections V and VI of the Dealer Agreement ("Dealer
Principal"). Suzuki has relied and will reply upon the personal
qualifications and management skills of Dealer Principal. Dealer and
Dealer Owner hereby represent that Dealer Principal has complete and
irrevocable authority to make all decisions, and to enter into any and all
necessary business commitments required in the normal course of conducting
the Dealer's business activities and may take all actions normally required
of a Dealer Principal pursuant to Section IV, V and VI of the Dealer
Agreement. Neither Dealer nor Dealer Owner will revoke, modify or amend
such authority without the prior written approval of Suzuki.
2. The removal or withdrawal of Dealer Principal without Suzuki's prior
written consent shall constitute grounds for termination of the Dealer
Agreement, subject to applicable law. However, Suzuki recognizes that
employment responsibilities of the Dealer Principal with Dealer and/or
Dealer Owner may change, making it impractical for the
<PAGE>
Dealer Principal to continue to fulfill his responsibilities as Dealer
Principal. In that case, or in the event Dealer Principal leaves the
employ of Dealer and/or Dealer Owner, Dealer shall have the opportunity to
propose a replacement Dealer Principal. Suzuki will not unreasonably
withhold approval of any such proposal, provided the proposed replacement
has the skills and qualifications to act as Dealer Principal pursuant to
the standard policies and procedures of Suzuki.
3. Dealer shall make every effort to obtain the consent of Suzuki to a
proposed replacement Dealer Principal prior to the removal or withdrawal of
the approved Dealer Principal. If that is not practical, Dealer shall
notify Suzuki in writing within 10 days following the withdrawal of the
approved Dealer Principal. Within 60 days of that withdrawal, Dealer will
submit to Suzuki a plan and appropriate applications to replace Dealer
Principal with a qualified replacement acceptable to Suzuki. The
replacement Dealer Principal must assume his responsibilities no later than
90 days following the withdrawal of the approved Dealer Principal.
4. Dealer is a partnership of Dealer Owner, which, in turn, is controlled by
Public Company. Dealer, Dealer Owner and Public Company hereby warrant
that the responsibilities and assurances of each herein are within their
respective authority to make and do not contravene any directive, policy or
procedure of Dealer, Dealer Owner or Public Company.
5. Any material change in ownership of Dealer, or any event with respect to
Public Company described in Paragraph 6 below, shall be considered a change
in ownership of Dealer under the terms of the Dealer Agreement, and all
applicable provisions of the Dealer Agreement will apply to any such
change. Suzuki has executed the Dealership Agreement in reliance upon
Dealer's ownership and management structure and any material change in such
structure (other than changes in ownership of Public Company, which are
discussed in Paragraph 5 below), shall constitute grounds for termination
of the Dealer Agreement, subject to applicable law.
6. Given the ultimate control Dealer Owner has over Dealer, the control of
Dealer Owner by Public Company, and Suzuki's strong interest in assuring
that those who own and control their Dealers have interests consistent with
those of Suzuki, Dealer, Dealer Owner and Public Company agree that if an
ownership interest is acquired (after completion of the IPO of Public
Company's Common Shares) in Public Company by a person or entity which
notifies Public Company via Schedule 13D filed with the Securities and
Exchange Commission, Dealer shall advise Suzuki in writing, and
-2-
<PAGE>
attach a copy of that Schedule. In the event Item 4 of the Schedule
discloses that the person or entity acquiring such ownership interest owns
or controls twenty percent (20%) of Public Company and intends or may
intend either: (a) an acquisition of additional securities of Public
Company or (b) an extraordinary corporate transaction such as a merger,
reorganization or liquidation, involving Public Company or any of its
subsidiaries or (c) a sale or transfer of a material amount of assets of
Public Company or any of its subsidiaries or (d) any change in the present
Board of Directors or management of Public Company or (e) any other
material change in the Public Company's business or corporate structure or
(f) any action similar to those noted above, then, if Suzuki reasonably
concludes that such person or entity does not have interests compatible
with those of Suzuki, or is otherwise not qualified to have an ownership
interest in a Suzuki dealership, Dealer and Dealer Owner agree that within
90 days of receipt of written notice from Suzuki of this fact, they will:
(i) transfer the assets associated with Dealer to a third party acceptable
to Suzuki, (ii) voluntarily terminate the Dealer Agreement in effect with
Dealer, or (iii) provide evidence to Suzuki that such person or entity no
longer has such an ownership interest in Public Company.
7. Dealer, Dealer Owner and Public Company agree that Dealer shall maintain,
at all times, sufficient working capital to meet or exceed the minimum net
working capital standards for the Dealer as determined from time to time by
Suzuki consistent with the normal practices and procedures of Suzuki.
Dealer and Dealer Owner shall provide such documentation as reasonably
requested by Suzuki to assure compliance with the requirement.
8. The parties agree that this Supplemental Agreement shall supplement the
terms of the Dealer Agreement in accordance with paragraph 13.15 of the
Dealer Agreement, Standard Provisions. Nothing in this Supplemental
Agreement or the Dealer Agreement shall be construed to confer any rights
upon any person not a party hereto or thereto, nor shall it create in any
party an interest as a third party beneficiary of this Supplemental
Agreement or the Dealer Agreement.
9. Dealer, Dealer Owner and Public Company hereby agree to indemnify and hold
Suzuki, its parent company and its affiliates, directors, officers,
employees, agents and representatives from and against all claims, actions,
damages, expenses, costs and liability arising from or in connection with
any action by a third-party in its capacity as a stockholder or Public
Company other than through a derivative stockholder suit authorized by the
Board of Directors of Public Company.
-3-
<PAGE>
10. This Supplemental Agreement is intended to supplement and modify certain
provisions of the Dealer Agreement and is intended to be incorporated as
part of the Dealer Agreement. Dealer Owner and Dealer hereby reaffirm all
provisions of the Dealer Agreement. In the event that any provisions of
this Supplemental Agreement are in conflict with other provisions of the
Dealer Agreement, the provisions contained in this Supplemental Agreement
shall govern.
IN WITNESS WHEREOF, the parties have executed this Agreement this 6th day of
September, 1996.
Fair Hyundai Partnership Di Feo Partnership, Inc.
/s/ Carl Spielvogel /s/ Carl Spielvogel
----------------------- --------------------------
----------------------- --------------------------
By: Carl Spielvogel By: Carl Spielvogel
Title: Chairman & CEO Title: Chairman & CEO
Date: 9/18/96 Date: 9/18/96
Fair Hyundai Corporation United Auto Group, Inc.
/s/ Carl Spielvogel
----------------------- --------------------------
/s/ Samuel X. DiFeo
----------------------- --------------------------
By: Samuel X. DiFeo By: Carl Spielvogel
Title: Partner Title: Chairman & CEO
Date: 9/17/96 Date: 9/18/96
American Suzuki Motor Corporation
/s/ M. Nagura
-----------------------
-----------------------
By: M. Nagura
Title: President
Date: September 6, 1996
-4-
<PAGE>
EXHIBIT
10.2.5.2
<PAGE>
SUZUKI DEALER SALES AND SERVICE AGREEMENT
STANDARD PROVISIONS
<PAGE>
TABLE OF CONTENTS
Page
----
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. PLACE OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1 Location . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Identification and Signs.. . . . . . . . . . . . . . . . . . . 3
2.3 Business Hours.. . . . . . . . . . . . . . . . . . . . . . . . 3
3. RETAIL SALES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.1 Suzuki Products and Tradenames.. . . . . . . . . . . . . . . . 4
3.2 Personnel. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.3 Inventory Responsibility.. . . . . . . . . . . . . . . . . . . 4
3.4 Standard Accounting System.. . . . . . . . . . . . . . . . . . 4
3.5 Sales Records and Reports. . . . . . . . . . . . . . . . . . . 4
3.6 Retail Delivery Report.. . . . . . . . . . . . . . . . . . . . 5
3.7 Dealer Reports.. . . . . . . . . . . . . . . . . . . . . . . . 5
3.8 Electronic Data Processing Requirements. . . . . . . . . . . . 5
3.9 Dealer Directives. . . . . . . . . . . . . . . . . . . . . . . 5
3.10 Promotions.. . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.11 Suzuki Product Orders. . . . . . . . . . . . . . . . . . . . . 5
3.12 Distribution and Delivery. . . . . . . . . . . . . . . . . . . 6
3.13 Force Majeure. . . . . . . . . . . . . . . . . . . . . . . . . 6
3.14 Suggested Retail Prices. . . . . . . . . . . . . . . . . . . . 6
3.15 Title. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.16 Security Interest. . . . . . . . . . . . . . . . . . . . . . . 7
3.17 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . 7
4. SERVICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4.1 Service Records. . . . . . . . . . . . . . . . . . . . . . . . 7
4.2 Recommended Service Procedures . . . . . . . . . . . . . . . . 7
4.3 Records and Manuals. . . . . . . . . . . . . . . . . . . . . . 7
4.4 Service Schools. . . . . . . . . . . . . . . . . . . . . . . . 7
4.5 Service Personnel. . . . . . . . . . . . . . . . . . . . . . . 7
4.6 Recall Procedures. . . . . . . . . . . . . . . . . . . . . . . 8
4.7 Dealer Distributed Literature. . . . . . . . . . . . . . . . . 8
4.8 Notice of Complaints.. . . . . . . . . . . . . . . . . . . . . 8
5. CAPITALIZATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.1 Net Working Capital. . . . . . . . . . . . . . . . . . . . . . 8
5.2 Flooring and Lines of Credit . . . . . . . . . . . . . . . . . 8
6. CREDIT, FINANCE AND PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . . 9
6.1 Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.2 Payment for Suzuki Vehicles. . . . . . . . . . . . . . . . . . 9
6.3 Open Account.. . . . . . . . . . . . . . . . . . . . . . . . . 9
6.4 Security Interest. . . . . . . . . . . . . . . . . . . . . . . 9
<PAGE>
6.5 Title. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.6 Costs of Return. . . . . . . . . . . . . . . . . . . . . . . . 9
6.7 Effect of Termination. . . . . . . . . . . . . . . . . . . . . 9
7. ADVERTISING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
7.1 Advertising Standards. . . . . . . . . . . . . . . . . . . . .10
7.2 Participation. . . . . . . . . . . . . . . . . . . . . . . . .10
7.3 Voluntary Dealer Cooperative Advertising Association.. . . . .10
8. TRANSPORTATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
8.1 Delivery.. . . . . . . . . . . . . . . . . . . . . . . . . . .10
8.2 Refusal of Delivery. . . . . . . . . . . . . . . . . . . . . .11
8.3 Force Majeure. . . . . . . . . . . . . . . . . . . . . . . . .11
8.4 Risk of Loss.. . . . . . . . . . . . . . . . . . . . . . . . .11
8.5 Product Return.. . . . . . . . . . . . . . . . . . . . . . . .11
9. PRODUCT WARRANTY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
9.1 Warranty Records.. . . . . . . . . . . . . . . . . . . . . . .11
9.2 Warranty Responsibility. . . . . . . . . . . . . . . . . . . .12
9.3 Dealer Obligation. . . . . . . . . . . . . . . . . . . . . . .12
9.4 Warranty Service and Credit. . . . . . . . . . . . . . . . . .12
9.5 No Other Warranties. . . . . . . . . . . . . . . . . . . . . .12
10. PARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
10.1 Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . .12
10.2 Genuine Suzuki Replacement Parts . . . . . . . . . . . . . . .12
10.3 Shipment Acceptance. . . . . . . . . . . . . . . . . . . . . .12
11. TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
11.1 Termination by DEALER. . . . . . . . . . . . . . . . . . . . .13
11.2 Termination by SUZUKI. . . . . . . . . . . . . . . . . . . . .13
11.3 Sixty (60) Days' Notice. . . . . . . . . . . . . . . . . . . .13
11.4 Fifteen (15) Days' Notice. . . . . . . . . . . . . . . . . . .14
11.5 Operation of the Law.. . . . . . . . . . . . . . . . . . . . .15
11.6 Termination Liability. . . . . . . . . . . . . . . . . . . . .15
11.7 SUZUKI Option to Repurchase. . . . . . . . . . . . . . . . . .16
11.8 Application of Credit. . . . . . . . . . . . . . . . . . . . .17
12. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
12.1 Indemnification by SUZUKI. . . . . . . . . . . . . . . . . . .17
12.2 Indemnification by DEALER. . . . . . . . . . . . . . . . . . .18
13. MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . .18
13.1 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . .18
13.2 Expenses.. . . . . . . . . . . . . . . . . . . . . . . . . . .19
13.3 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
13.4 Set Off. . . . . . . . . . . . . . . . . . . . . . . . . . . .19
13.5 No Assignment. . . . . . . . . . . . . . . . . . . . . . . . .19
13.6 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
<PAGE>
13.7 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
13.8 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . .19
13.9 Modification . . . . . . . . . . . . . . . . . . . . . . . . .20
13.10 Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . .20
13.11 Partial Invalidity.. . . . . . . . . . . . . . . . . . . . . .20
13.12 Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . . . .20
<PAGE>
Suzuki Dealer Sales and Service Agreement
STANDARD PROVISIONS
The following Standard Provisions have been made a part of, and are incorporated
by reference, in the American Suzuki Motor Corporation Dealer Sales and Service
Agreement and shall apply to and govern the transactions, dealings, and
relations between SUZUKI and DEALER.
1. DEFINITIONS
For the purpose of this Agreement the following terms set forth below shall
be defined as indicated:
(a) "Accessories": All accessories for Suzuki Vehicles as defined
in (o) herein below, distributed in the United States by
SUZUKI.
(b) "Agreement": This Agreement and the Dealer Application,
Facility Standards Addendum, Dealer Minimum Standards Addendum
and Dealer Updates as may be issued from time to time.
(c) "Dealership": The business of the DEALER located at the
designated Dealer Premises.
(d) "Dealer Application": The signed application of the DEALER
presented to SUZUKI which will become part of this Agreement
when approved by SUZUKI.
(e) "Dealer Minimum Standards Addendum": The written requirements
executed by DEALER and SUZUKI, as amended from time to time by
SUZUKI, setting forth the minimum qualifications required by
SUZUKI for appointment as a Suzuki Dealer and DEALER's
representations as to its fulfillment of those qualifications
relied upon SUZUKI for DEALER's appointment as an authorized
Suzuki Dealer. In conjunction with the Facility Standards
Addendum, it constitutes the criteria by which SUZUKI shall
evaluate DEALER's performance to determine whether DEALER
qualifies for renewal(s) of its Suzuki Dealership. The Dealer
Minimum Standards Addendum has been incorporated by reference
and is part of this Agreement as though set forth in full
herein.
(f) "Dealer Premises": The specific premises approved for the
Dealership by SUZUKI.
<PAGE>
(g) "Dealer Prices": The prices in effect at the time of delivery
of Suzuki Products as set forth in the Dealer Price Lists that
will be charged by SUZUKI to the DEALER exclusive of any
charges for transportation, taxes or any other charges.
(h) "Dealer Price Lists": The price lists issued by SUZUKI for
Suzuki Products as defined in (n) herein below, as amended from
time to time by SUZUKI.
(i) "Dealer Updates": Addendums to the Agreement pursuant to the
terms of this Agreement, issued from time to time by SUZUKI to
clarify and explain procedures and programs to be followed by
the DEALER in the operation of the Suzuki Dealership. The
Updates shall be incorporated as part of this Agreement as they
are issued.
(j) "Facility Standards Addendum": The written standards for
facilities, as amended from time to time by SUZUKI, setting
forth the criteria with respect to the physical facilities
which DEALER is required to establish and maintain and which
was relied upon by SUZUKI in its appointment of DEALER as an
authorized Suzuki Dealer. The Facility Standards Addendum, in
conjunction with the Dealer Minimum Standards Addendum
constitutes the criteria by which SUZUKI shall evaluate
DEALER's performance to determine whether DEALER qualifies for
renewal(s) of its Suzuki Dealership. Said Facility Standards
Addendum shall become part of this Agreement upon execution of
the Agreement by SUZUKI.
(k) "Manufacturer's Suggested Retail Price": Any suggested retail
price for any Suzuki Product as issued by SUZUKI from time to
time.
(l) "Owner(s)": The beneficial owner(s) of the Dealership, listed
in this Agreement.
(m) "Parts": All parts for the Four Wheel Vehicles, which are the
subject of this Agreement, and/or accessories therefor
distributed in the United States by SUZUKI.
(n) "Suzuki Products": Suzuki Four Wheel Vehicles manufactured for
highway use by Suzuki Motor Co., Ltd. including automobiles,
trucks, vans, and four wheel drive vehicles and their
successors and the parts and accessories therefor distributed
in the United States
-2-
<PAGE>
(except Hawaii) by SUZUKI. Whenever the term "Suzuki Products"
is used in this Agreement, it shall be construed as defined
herein.
(o) "Suzuki Vehicles": All Suzuki automobiles, trucks, vans and
four wheel drive vehicles for highway use and their successors
manufactured by Suzuki Motor Co., Ltd. and distributed in the
United States (except Hawaii) by SUZUKI. This term
specifically excludes all ATV recreational vehicles
manufactured and distributed by SUZUKI. Whenever the term
"Suzuki Vehicles" is used in this Agreement, it shall be
construed as defined herein.
(p) "Suzuki Warranty": The warranty issued from time to time by
SUZUKI with respect to Suzuki Products and any revisions or
supplements thereto.
2. PLACE OF BUSINESS
2.1 LOCATION. The DEALER shall be responsible for selling, leasing and
servicing at retail the Suzuki Products, but only at the Dealer
Premises described in this Agreement by the Facility Standards
Addendum and the Dealer Minimum Standards Addendum. If the DEALER
desires to change the location of the Dealership, or any part of its
operation, prior written approval from SUZUKI must be obtained.
Failure to obtain such prior approval shall be a material breach of
this Agreement and shall constitute grounds for its termination.
2.2 IDENTIFICATION AND SIGNS. Subject to applicable government
statutes, ordinances, rules and regulations, DEALER shall buy from
SUZUKI, or from sources designated by SUZUKI, and erect and maintain
in good working order on the Dealership Premises, entirely at
DEALER's expense, authorized sales and service signs conforming to
the requirements established and approved by SUZUKI. DEALER shall
obtain and maintain any licenses or permits necessary to erect and
maintain such signs. Failure to obtain, erect, maintain, repair,
illuminate and prominently display such signs in a manner approved
by SUZUKI shall constitute grounds for termination of this
Agreement.
2.3 BUSINESS HOURS. The DEALER shall operate the Dealership in an
efficient and businesslike manner during the retail and service
hours customary for the DEALER's trade and the area in which the
Dealership is located.
-3-
<PAGE>
3. RETAIL SALES
3.1 SUZUKI PRODUCTS AND TRADENAMES. Subject to and in accordance with
the terms and conditions of this Agreement, the DEALER shall have
the nonexclusive right to:
(a) Purchase from SUZUKI, for sale at retail only, Suzuki Products;
and
(b) Identify itself as an authorized Suzuki Dealer by displaying
the various tradenames, trademarks and service marks and any
other word or design marks that SUZUKI uses in connection with
or with respect to the Suzuki Products.
3.2 PERSONNEL. The DEALER shall at all times employ competent and
adequate personnel to sell and service the Suzuki Products in a
manner satisfactory to SUZUKI. Upon request to do so by SUZUKI, the
DEALER, at its own expense, shall send its personnel to any training
seminars organized and carried out by SUZUKI.
3.3 INVENTORY RESPONSIBILITY. The DEALER shall maintain at all times an
adequate stock of new, undamaged, and marketable Suzuki Products for
display, demonstration, sale and servicing. Further, the DEALER
shall maintain an adequate supply of tools for servicing the Suzuki
Products.
3.4 STANDARD ACCOUNTING SYSTEM. It is mutually beneficial to DEALER and
SUZUKI that DEALER keep and maintain standard accounting systems and
practices. Therefore, DEALER agrees to maintain its records based
upon commonly accepted accounting principles and to establish and
maintain a standard accounting system and practices in accordance
with the Suzuki Automotive Standard Accounting System established
and designated by SUZUKI for use by all Suzuki Dealers, as the same
may from time to time be amended, revised or supplemented. DEALER
further agrees to provide to SUZUKI by the tenth (10th) day of each
month, in the manner and form prescribed by SUZUKI, complete and
accurate financial and operating statements covering the preceding
month and showing calendar year-to-date operations of the Suzuki
Dealership.
3.5 SALES RECORDS AND REPORTS. DEALER shall keep an accurate record of
its sales of Suzuki Products, in conformity with any statutory and
regulatory requirements.
-4-
<PAGE>
3.6 RETAIL DELIVERY REPORT. DEALER shall immediately upon delivery of a
Suzuki Vehicle to a retail purchaser complete and transmit to SUZUKI
a report of the retail sale called the "Retail Delivery Report" and
furnish SUZUKI with other reports or records as may be reasonably
required by SUZUKI in its sole discretion.
3.7 DEALER REPORTS. DEALER shall furnish reports of its sales and
inventory at intervals no greater than ten (10) days each for each
calendar month on the forms provided by SUZUKI. DEALER shall also
furnish such reports concerning its financial condition as SUZUKI
may reasonably request, including monthly financial statements,
accurately reflecting Suzuki Dealership operations.
3.8 ELECTRONIC DATA PROCESSING REQUIREMENTS. In order to promote prompt
and accurate reporting of relevant Dealership operational and
financial information as SUZUKI may require hereunder, DEALER agrees
to install and maintain electronic data processing equipment which
is compatible with SUZUKI's computer network as it may from time to
time be modified, updated or supplemented.
3.9 DEALER DIRECTIVES. DEALER shall faithfully comply with SUZUKI's
existing and future directives, bulletins and manuals pertaining to
the sale and servicing of Suzuki Products.
3.10 PROMOTIONS. To further expose and popularize the name "Suzuki" and
the "Suzuki" Vehicles, SUZUKI may from time to time sell Suzuki
Products directly to non-dealers for use in promotions of unrelated
merchandise through "give away", "premium", and other forms of
promotional programs or in payment for media advertising. DEALER
shall cooperate by rendering pre-delivery inspections, delivery and
warranty services in connection with such sales, for which DEALER
will be compensated at the rates established therefor by SUZUKI.
3.11 SUZUKI PRODUCT ORDERS. All orders for Suzuki Products shall be
submitted in writing by the DEALER to SUZUKI in accordance with
Suzuki directives and on the forms that SUZUKI shall supply. All
orders are subject to acceptance by SUZUKI's home office in whole or
in part. All orders submitted by DEALER shall be binding upon
DEALER unless and until they are rejected in writing by SUZUKI;
provided, however, that in the event of a partial acceptance by
SUZUKI, it is understood that DEALER shall no longer be bound in
respect to the part of the order not accepted.
-5-
<PAGE>
SUZUKI will attempt to fill all pre-sold retail orders but cannot be
held responsible for its failure to do so, nor for any lost profits
or loss of business experienced by DEALER from SUZUKI's inability to
supply any pre-sold order.
3.12 DISTRIBUTION AND DELIVERY. SUZUKI shall endeavor, to the extent
practicable, to deliver the new Suzuki Products ordered by DEALER
and required in the fulfillment of DEALER's responsibilities under
this Agreement. DEALER acknowledges that SUZUKI also has an
obligation to endeavor to deliver Suzuki Products to other Suzuki
Dealers who are also required by SUZUKI to fulfill their
responsibilities under their Dealer Agreements with SUZUKI. Because
of numerous factors that affect the distribution of the Suzuki
Products and the relevance of such factors at any given time, SUZUKI
does hereby reserve to itself discretion in applying such factors
and in processing orders for Suzuki Products from its authorized
Dealers. The judgment and decisions of SUZUKI, therefore, shall be
final in all matters relating to the distribution and delivery of
Suzuki Products to DEALER.
3.13 FORCE MAJEURE. SUZUKI shall not be liable for failure to process or
for any delay in processing orders for any Suzuki Products where
such failure or delay is due, in whole or in part, to any of the
following: 1) labor, material, transportation or utility shortage
or curtailment; 2) Japanese or United States governmental
regulation; 3) any import or export restriction; 4) discontinuance
of sale by SUZUKI of the Suzuki Products ordered; 5) any labor
trouble in the plants of Suzuki Motor Co., Ltd., or its suppliers or
the transportation and distribution system used by SUZUKI; 6) any
curtailment of production due to economic or trade conditions; or 7)
any cause beyond the control of, or without the fault or negligence
of, SUZUKI.
3.14 SUGGESTED RETAIL PRICES. SUZUKI's Dealer Price Lists will set forth
Suggested Retail Prices for the Suzuki Products. The DEALER is
under no obligation to accept these Suggested Retail Prices and may
sell for a different retail price. If DEALER sells at prices less
than, or more than, those suggested, those sales will not affect its
business relations with SUZUKI or any other person over whom SUZUKI
has control or influence.
3.15 TITLE. Title to Suzuki Products shall pass to the DEALER from
SUZUKI only upon payment in full for the Suzuki Products shipped to
DEALER. Until payment in
-6-
<PAGE>
full for Suzuki Products is made. SUZUKI retains all right, title,
and a security interest in the Suzuki Products.
3.16 SECURITY INTEREST. DEALER grants to SUZUKI a security interest in
all Suzuki Products delivered to DEALER to secure repayment of any
indebtedness owing from DEALER to SUZUKI. SUZUKI shall have all the
rights of a secured creditor under the Uniform Commercial Code,
including the right to take possession of Suzuki Products, without
the necessity of legal process, to satisfy outstanding indebtedness.
DEALER shall execute all documents and notices as may be required to
perfect the security interest of SUZUKI under applicable laws.
3.17 TERMINATION. Upon termination of this Agreement, SUZUKI may cancel
any or all pending orders of DEALER for Suzuki Products, whether or
not previously accepted by SUZUKI.
4. SERVICE
4.1 SERVICE RECORDS. DEALER shall keep an accurate record of its
servicing, in conformity with any requirements in the Suzuki
Warranty Manual, Dealer Updates and any statutory and regulatory
requirements.
4.2 RECOMMENDED SERVICE PROCEDURES. DEALER shall faithfully comply with
SUZUKI's existing and future directives, bulletins and manuals
pertaining to the sale and servicing of Suzuki Products.
4.3 RECORDS AND MANUALS. DEALER shall maintain and keep updated all
manuals, bulletins and records received from SUZUKI. DEALER and its
service personnel will have available and be familiar with all
service and maintenance manuals provided by SUZUKI.
4.4 SERVICE SCHOOLS. DEALER will send Dealer personnel to and
participate in, service training classes, service schools, seminars
and other dealer employee training courses as provided by SUZUKI
from time to time. DEALER acknowledges the need for such school and
training to keep current on all Suzuki Products for the protection
of DEALER's customers.
4.5 SERVICE PERSONNEL. Service personnel in the Dealership will be
competent and adequate to handle all service work of the DEALER's
customers. DEALER accepts the responsibility to provide fast,
efficient and accurate service work to its customers. From time to
time, SUZUKI will make suggestions regarding
-7-
<PAGE>
the improvement and upgrading of DEALER's Service Department and
personnel; however, DEALER is solely responsible for all work
performed in its Service Department by its service personnel.
4.6 RECALL PROCEDURES. If at any time DEALER receives from SUZUKI a
notification of certain procedures that DEALER is to follow
concerning a recall of any Suzuki Product in conformance with the
requirements of the National Highway Traffic Safety Act or Consumer
Product Safety Commission or any other governmental agency, DEALER
shall comply with it. If for any reason DEALER fails or refuses to
comply with the procedures outlined in any Suzuki recall notice,
DEALER shall be in violation of this Agreement. DEALER acknowledges
the necessity of complying with recall notices to insure the
protection of the consumer and to comply with government laws, rules
and regulations.
4.7 DEALER DISTRIBUTED LITERATURE. If the state in which the DEALER is
franchised institutes programs which require distribution of
material such as Lemon Law disclosures, Consumer Rights brochures or
general notices, the DEALER shall in accordance with SUZUKI
instructions complete, execute and deliver said material.
4.8 NOTICE OF COMPLAINTS. If at any time the DEALER receives any
customer complaints which apply to any consumer protection laws,
rules or regulations, the DEALER agrees to provide prompt notice to
SUZUKI of such complaints and take steps that SUZUKI may reasonably
require. The DEALER agrees to perform in a manner that will not
adversely affect SUZUKI's rights under such laws, rules and
regulations.
5. CAPITALIZATION
5.1 NET WORKING CAPITAL. Dealer agrees to establish and maintain actual
net working capital which in SUZUKI's judgment is sufficient to
allow the DEALER to effectively perform his obligations under the
Agreement.
5.2 FLOORING AND LINES OF CREDIT. At all times during the term of this
Agreement, it is DEALER's sole responsibility, which DEALER hereby
accepts and to which he agrees, to obtain and maintain adequate
flooring arrangements and lines of credit with a reputable financial
institution acceptable to SUZUKI to ensure the availability of
sufficient funds to meet DEALER's needs for payment of Suzuki
Products ordered by DEALER from SUZUKI.
-8-
<PAGE>
6. CREDIT, FINANCE AND PAYMENTS.
6.1 SALES. All sales to DEALER will be at Dealer Prices published by
SUZUKI in the Dealer Price Lists.
6.2 PAYMENT FOR SUZUKI VEHICLES. Unless financing is arranged with
respect to a particular shipment in advance, all payments for Suzuki
vehicles shall be made in full at the time of shipment.
6.3 OPEN ACCOUNT. DEALER may order Suzuki Products, promotional and
miscellaneous items, other than Suzuki Vehicles, on open account, so
long as SUZUKI determines DEALER is credit qualified. DEALER agrees
to pay for all items billed to its open account per monthly itemized
statements. DEALER agrees to pay all late charges, interest,
attorneys' fees, court costs and expenses that may be incurred as a
result of default on DEALER's open account obligations. Upon
default, SUZUKI may suspend or terminate DEALER's open account.
SUZUKI may offset any credits due DEALER against debits for sums due
SUZUKI.
6.4 SECURITY INTEREST. DEALER grants to SUZUKI a security interest in
all Suzuki Products delivered to DEALER to secure repayment of any
indebtedness owing from DEALER to SUZUKI. SUZUKI shall have all the
rights of a secured creditor under the Uniform Commercial Code,
including the right to take possession of Suzuki Products, without
the necessity of legal process, to satisfy outstanding indebtedness.
DEALER shall execute all documents and notices as may be required to
perfect the security interest of SUZUKI under applicable laws.
6.5 TITLE. Title to Suzuki Products passes to DEALER from SUZUKI only
upon payment in full for the Suzuki Products shipped to DEALER.
6.6 COSTS OF RETURN. In the event DEALER's inventory of Suzuki Products
is repossessed or returned to SUZUKI or to a financial institution
for repurchase by SUZUKI, DEALER agrees to pay reasonable handling
costs incurred by SUZUKI according to SUZUKI policy in effect at the
time of the return.
6.7 EFFECT OF TERMINATION. Termination of this Agreement, in whatever
manner, shall not release DEALER from any obligations or
indebtedness owing to SUZUKI.
7. ADVERTISING
-9-
<PAGE>
7.1 ADVERTISING STANDARDS. SUZUKI and DEALER recognize the need to
maintain at all times the highest ethical standards in advertising
and which evoke an image consistent with the quality and reputation
that SUZUKI and Suzuki Products enjoy in order to maintain public
confidence in, and respect for, DEALER, SUZUKI and Suzuki Products.
Accordingly, DEALER shall not publish, nor cause or permit to be
published, advertising relating to Suzuki Products which is not in
compliance with all federal, state and local laws, ordinances, rules
and regulations or that is likely to mislead or deceive the public
or impair the goodwill, good name and reputation of SUZUKI, Suzuki
Motor Co., Ltd. or Suzuki Products. If SUZUKI, in its sole
judgment, determines that any of DEALER's advertising is
inappropriate or which may be injurious to SUZUKI's reputation or to
the business of SUZUKI or DEALER, it shall so advise DEALER. Upon
receipt of such notice, DEALER agrees to immediately discontinue all
such inappropriate advertising.
7.2 PARTICIPATION. DEALER shall participate in any existing or future
cooperative advertising program with SUZUKI. DEALER shall use its
best efforts to promote and sell Suzuki Products. In that regard,
DEALER shall also maintain an effective advertising program aimed at
enhancing the sale of Suzuki Products.
7.3 VOLUNTARY DEALER COOPERATIVE ADVERTISING ASSOCIATION. SUZUKI and
DEALER recognize the benefits which may be derived from a
comprehensive, joint advertising effort by Suzuki dealers.
Accordingly, DEALER may, if DEALER elects to do so on a completely
voluntary basis, participate in the formation and effective
operation of a voluntary cooperative dealer advertising association.
Each Suzuki Dealer Advertising association will finance its
advertising programs through the voluntary assessment of a fixed
charge of no less than 2% or $150.00 of the total dealer price per
vehicle, excluding freight, for each new Suzuki vehicle purchased by
Suzuki Dealers who voluntarily choose to participate as members of
an advertising association. As a service to the dealer association,
SUZUKI will collect the agreed upon charge, provided that the dealer
association maintains control over both the amount of the assessment
and manner in which such funds will be expended.
8. TRANSPORTATION
8.1 DELIVERY. SUZUKI shall select the distribution points, carriers and
methods of transportation in
-10-
<PAGE>
effecting delivery of Suzuki Products to DEALER. DEALER agrees to
reimburse SUZUKI for any delivery, freight handling and other
charges which appear on SUZUKI's invoice to DEALER.
8.2 REFUSAL OF DELIVERY. If SUZUKI is required to divert any Suzuki
Products ordered by DEALER because of DEALER's failure or refusal to
accept such product, DEALER assumes responsibility for, and will pay
charges incurred by SUZUKI as a result of such diversion. In
addition, DEALER shall pay all charges for storage and other charges
related to such diversion.
8.3 FORCE MAJEURE. Although SUZUKI will use due diligence to promptly
ship orders accepted by it, SUZUKI shall not be liable for any delay
in shipment caused by a shortage of supply, riot, war, government
regulation, willful acts of a third party, labor problems, import or
export restriction, acts of God, or any other cause beyond SUZUKI's
control. It is understood and agreed that SUZUKI will attempt to
fill all orders accepted by it, but SUZUKI takes no responsibility
for failure to fill any of DEALER's orders.
8.4 RISK OF LOSS. Notwithstanding the reservation of title in SUZUKI as
provided in Paragraphs 3.15, 6.04 and 6.05, all risks with respect
to the Suzuki Products shall pass to and be assumed by DEALER at the
time of delivery to the DEALER, or its agents, or to the carrier of
the Suzuki Products. DEALER shall insure Suzuki Products upon
delivery to DEALER against all risks and perils at DEALER's own
expense.
8.5 PRODUCT RETURN. SUZUKI will not accept the return of Suzuki
Products except in cases where SUZUKI has agreed in writing to do so
where required by State law. Upon receipt of such written
authorization from SUZUKI, DEALER may return Suzuki Products under
the following conditions:
(a) DEALER shall pay all transportation and handling charges; and
(b) DEALER shall pay to SUZUKI a restocking charge in accordance
with the terms and conditions of SUZUKI policy in effect at the
time of return.
9. PRODUCT WARRANTY
9.1 WARRANTY RECORDS. DEALER shall keep an accurate record of its
warranty servicing of Suzuki Products, in conformity with any
requirement in the Dealer
-11-
<PAGE>
Updates, Warranty Manual and any statutory and regulatory
requirements.
9.2 WARRANTY RESPONSIBILITY. DEALER shall diligently perform all
warranty and servicing obligations in accordance with the scale of
remuneration established by SUZUKI from time to time, whether or not
the DEALER sold the Suzuki Products to the customer requiring such
servicing.
9.3 DEALER OBLIGATION. DEALER acknowledges its obligation to, and shall
provide all warranty service, consistent with the Suzuki Limited
Warranty applicable to each Suzuki Product, regardless of the origin
of purchase of said Suzuki Product.
9.4 WARRANTY SERVICE AND CREDIT. DEALER will install any replacement
parts and make certifications or verifications, perform maintenance
and service, and do all other things that may be required under the
terms of the Suzuki Limited Warranty, or inspection, correctional,
or recall campaigns. SUZUKI will credit DEALER's account for
warranty service and inspection, corrections or recalls DEALER
performs at the request of SUZUKI.
9.5 NO OTHER WARRANTIES. DEALER acknowledges that the Suzuki Limited
Warranty is the only warranty made or deemed to have been made by
SUZUKI or Suzuki Motor Co., Ltd. and that neither DEALER, nor its
agents or employees, are authorized to extend or enlarge upon the
Suzuki Limited Warranty by any oral or written means. DEALER
further acknowledges that SUZUKI will not assume nor authorize any
person to assume on its behalf, any other obligation of liability in
regard to the Suzuki Products.
10. PARTS
10.1 INVENTORY. DEALER agrees to maintain an adequate inventory of
Suzuki Parts to fulfill customer service and warranty requirements.
If, in the sole judgment of SUZUKI, DEALER fails to maintain an
adequate inventory of Suzuki Parts to satisfy customer needs, such
failure will constitute a violation of this Agreement.
10.2 GENUINE SUZUKI REPLACEMENT PARTS. DEALER will not sell any part to
a customer as a Suzuki Part, unless it is a genuine Suzuki Part. If
DEALER does so, it shall be a violation of this Agreement.
10.3 SHIPMENT ACCEPTANCE. DEALER will accept all shipments of Suzuki
Parts ordered by it. In the
-12-
<PAGE>
event of an error in a shipment by SUZUKI, the DEALER must submit a
parts discrepancy report and receive prior written approval of
SUZUKI before returning the parts.
11. TERMINATION
11.1 TERMINATION BY DEALER. DEALER may terminate this Agreement by
serving thirty (30) days' written notice of termination on SUZUKI.
11.2 TERMINATION BY SUZUKI. In the event that DEALER breaches or
violates any of the duties, obligations or responsibilities set
forth herein or any of the terms, conditions or undertakings in the
Dealer Application, Dealer Updates, the Facility Standards Addendum
or the Dealer Minimum Standards Addendum, SUZUKI may terminate this
Agreement by giving the DEALER written notice as provided below.
SUZUKI need not state all grounds on which it relies for its
termination of DEALER. SUZUKI's failure to refer to additional
grounds for termination shall not constitute a waiver of its right
to rely on such grounds.
11.3 SIXTY (60) DAYS' NOTICE. SUZUKI may terminate this Agreement with
sixty (60) days' notice after the occurrence of any of the following
events:
(a) A disagreement or personal difficulty between or among the
owners, partners, shareholders, officers or managers of DEALER
that, in the opinion of SUZUKI, may adversely affect the
ownership, operation, management or business of DEALER, or the
presence in the management of DEALER of any person who, in the
opinion of SUZUKI, does not have or no longer has the requisite
qualifications for his position;
(b) Any change in the legal or beneficial ownership or control of
DEALER without the prior written consent of SUZUKI to such
changes, or any misrepresentation thereof;
(c) The death, incapacity, removal, resignation, withdrawal,
elimination or disassociation from DEALER of any owner,
partner, shareholder, officer or manager identified herein;
(d) Failure of DEALER to properly obtain, erect, maintain, repair
and illuminate signs and other displays in a manner approved by
SUZUKI as required under the provisions of this Agreement;
-13-
<PAGE>
(e) DEALER's failure to honor any commitment made to SUZUKI
including, but not limited to, those made in the Facility
Standards Addendum, Dealer Minimum Standards Addendum, Dealer
Updates or any other document incorporated by reference herein;
(f) DEALER's failure to submit any reports, financial or otherwise,
required by SUZUKI hereunder, or in any Update;
(g) DEALER's financial condition becoming such that, in the opinion
of SUZUKI, DEALER is unable to carry out his obligations
hereunder satisfactorily;
(h) The failure on the part of DEALER to pay any account, including
any monies for Suzuki Satisfaction System Contracts sold, owing
to SUZUKI when due;
(i) (Any agreement, understanding or contract entered into by
DEALER, oral or written, with any other Dealer or Dealers for
the purpose of fixing retail prices of Suzuki Products;
(j) (The imposition of a levy against DEALER under attachment,
garnishment, execution or other similar process, except those
garnishments or executions pertaining to obligations of
DEALER's employees; or
(k) Any assignment or attempted assignment of this Agreement or any
part thereof without the prior written consent of SUZUKI.
11.4 FIFTEEN (15) DAYS' NOTICE. SUZUKI may terminate this Agreement with
fifteen (15) days' written notice after the occurrence of any of the
following events:
(a) DEALER or any of its owners, partners, shareholders, officers
or managers engaging in any practice or conduct or being
convicted of any felony or the violation of any law that, in
the opinion of SUZUKI, may adversely affect the operation or
business of the DEALER or be injurious to the goodwill or
reputation of SUZUKI, Suzuki Products or other Suzuki Dealers;
(b) The closure of the Dealership for any reason for a period in
excess of ten (10) days;
-14-
<PAGE>
(c) Any change in the location of the Dealer Premises or any
portion of its operation without the prior written consent of
SUZUKI;
(d) Any submission by DEALER of a false or fraudulent application,
and/or any supporting claim or statement of SUZUKI, for payment
by SUZUKI related to warranty repairs, special or recall
adjustments performed by the DEALER, or for any other discount,
allowance, refund, or credit under any plan, provision or
program offered by SUZUKI to the DEALER whether or not the
DEALER offers or makes to SUZUKI or SUZUKI seeks or obtains
from the DEALER restitution of any payment made to the DEALER
on the basis of any false or fraudulent applications, claims or
statements;
(e) Any sale or attempted sale of Dealership by DEALER without the
prior written approval of SUZUKI;
(f) The insolvency of the DEALER, the filing of a voluntary
petition in bankruptcy by the DEALER, the filing of an
involuntary petition to have DEALER declared bankrupt, the
appointment of receiver or trustee for the DEALER, or the
execution by DEALER of any assignment for the benefit of
creditors;
(g) Any bulk sale or the attempted sale of the Dealership assets;
or
(h) The dissolution of the Dealership if the Dealership is a
corporation or a partnership.
11.5 OPERATION OF THE LAW. Notwithstanding the provisions above, the
Agreement will terminate automatically and without notice from
either party in the event of the occurrence of any of the following:
(a) The failure of DEALER to obtain any license required for the
operation of the Dealership in any jurisdiction where this
Agreement is performed; or
(b) The failure of DEALER to secure or maintain the license or
renewal thereof, or the suspension or revocation or the
license, irrespective of the cause or reason.
11.6 TERMINATION LIABILITY. Upon termination, DEALER shall cease to be
an authorized Suzuki Dealer and shall:
-15-
<PAGE>
(a) Pay forthwith to SUZUKI all sums then outstanding and owing by
DEALER to SUZUKI;
(b) Allow SUZUKI to audit DEALER's records with regard to its sales
of the Suzuki Satisfaction System contracts and pay forthwith
to SUZUKI all sums due and owing for any and all Suzuki
Satisfaction System contracts sold for which monies have not
been paid by DEALER. DEALER agrees that SUZUKI shall have the
right to debit DEALER's parts account for any such sums due and
owing on Suzuki Satisfaction System contracts sold by DEALER;
(c) Remove forthwith, at its own expense, all SUZUKI signs which
are displayed at Dealer's Premises;
(d) Refrain from all further use whatsoever of any tradename,
trademark, logo, service mark, or any word or design that
SUZUKI has used or uses in connection with or with respect to
Suzuki Products, including in its stationery and other printed
material and, if necessary, including changing its corporate or
business name;
(e) Cease representing itself as an authorized Suzuki Dealer for
Suzuki Products; and
(f) Return to SUZUKI all technical and/or service literature,
advertising and other printed material in DEALER's possession
which relate to Suzuki Products.
11.7 SUZUKI OPTION TO REPURCHASE. Upon the termination of this
Agreement, SUZUKI shall have the option to purchase from DEALER,
free and clear of all liens, charges and encumbrances, any of the
following:
(a) New, unused, unaltered, undamaged, unlicensed and marketable
current model Suzuki Vehicles, with mileage of 100 miles or
less, which were purchased by DEALER from SUZUKI, and are in
DEALER's inventory, at DEALER's vehicle price less destination
charges and any voluntary advertising associated assessments
made on behalf of a Suzuki Advertising Association. SUZUKI
shall pick up said Suzuki Vehicles and pay all transportation
charges for return of said vehicles; and
(b) The new, current model Suzuki Parts and Accessories at SUZUKI's
invoice price to DEALER, less SUZUKI's prevailing restocking
charge, but only if delivered by DEALER at DEALER's expense,
-16-
<PAGE>
to SUZUKI's Parts Warehouse located nearest DEALER provided
however, that these Suzuki Parts and Accessories must be in a
new, unused, undamaged and saleable condition and in the
original package and original package quantity; provided
further, that SUZUKI will not purchase any Suzuki Parts or
Accessories which SUZUKI deems to be obsolete.
11.8 APPLICATION OF CREDIT. If SUZUKI exercises its option to
repurchase, any indebtedness owed by DEALER to SUZUKI may be applied
against the purchase price and the balance if any, owing to DEALER
shall be paid to DEALER only after verification by SUZUKI of the
inventory of purchased Suzuki Products.
12. INDEMNIFICATION
12.1 INDEMNIFICATION BY SUZUKI. SUZUKI agrees to assume the defense of
DEALER and to indemnify and hold DEALER harmless in any lawsuit
naming DEALER as a defendant and involving any Suzuki Product when
the lawsuit involves allegation of:
(a) Breach of Suzuki warranty, or bodily injury or property damage
arising out of any occurrence allegedly caused solely by a
defect in design, manufacture or assembly of a Suzuki Product
(except for tires), provided that the defect could not
reasonably have been discovered by DEALER during the required
pre-delivery service of the Suzuki Product;
Provided:
(b) The DEALER delivers to SUZUKI, within ten (10) days of the
service of any summons or complaint, copies of such documents,
and requests in writing a defense and/or indemnification;
(c) That the complaint does not involve allegations of DEALER
misconduct, including but not limited to, improper or
unsatisfactory service or repair, misrepresentation, or any
claim of DEALER's unfair or deceptive trade practice;
(d) That the Suzuki Product which is the subject of the lawsuit was
not altered by or for DEALER;
(e) The DEALER agrees to cooperate fully in the defense of such
action as SUZUKI may reasonably required; and
-17-
<PAGE>
(f) The DEALER agrees that SUZUKI may offset any recovery on
DEALER's behalf against any indemnification that may be
required hereunder.
12.2 INDEMNIFICATION BY DEALER. DEALER agrees to assume the defense of
SUZUKI and to indemnify and hold it harmless in any lawsuit naming
SUZUKI as a defendant when the lawsuit involves allegations of:
(a) DEALER's alleged failure to comply, in whole or in part, with
any obligation assumed by DEALER pursuant to this Agreement;
(b) DEALER's alleged negligent or improper repair or servicing of a
new or used Suzuki Vehicle or equipment, or such other motor
vehicles or equipment as may be sold or serviced by DEALER;
(c) DEALER's alleged breach of any contract or warranty other than
that provided by SUZUKI;
(d) DEALER's alleged misleading statements, misrepresentations, or
deceptive or unfair trade practices; and
(e) Any modification or alteration made by or on behalf of DEALER
to Suzuki Product, except those made pursuant to the express
instruction or with the express approval of SUZUKI.
Provided:
(f) That SUZUKI delivers to DEALER, within ten (10) days of the
proper service of any summons or complaint, copies of such
documents, and requests in writing a defense and/or
indemnification;
(g) That SUZUKI agrees to cooperate fully in the defense of such
action as DEALER may reasonably require; and
(h) That the complaint does not involve allegations of liability
premised upon separate SUZUKI conduct or omissions.
13. MISCELLANEOUS PROVISIONS
13.1 INSURANCE. DEALER shall maintain at its own expense adequate
insurance against all types of risk and liability, including without
limitation, personal liability insurance. Such insurance shall be
with an accredited and reputable company. DEALER shall annually
furnish SUZUKI with certification for such
-18-
<PAGE>
insurance with evidence showing that premiums have been paid in
full.
13.2 EXPENSES. Except as set forth herein, SUZUKI shall not be under any
liability whatsoever for any expenditure made or expense incurred by
DEALER with respect to DEALER's performance of its obligations
pursuant to this Agreement.
13.3 TAXES. DEALER agrees that it shall be responsible for and shall pay
any and all sales taxes, use taxes, excise taxes, and other
governmental charges whenever imposed, levied or based upon the sale
of Suzuki Products by SUZUKI to DEALER and DEALER shall keep
accurate and current records of the foregoing for reporting
purposes.
13.4 SET OFF. In addition to any other specific rights of set off
otherwise provided in documents affecting DEALER and SUZUKI, SUZUKI
shall have the right to set off any sums or accounts due or to
become due from DEALER to SUZUKI against any sums or accounts due or
to become due from SUZUKI to DEALER.
13.5 NO ASSIGNMENT. This Agreement, based on mutual trust between DEALER
and SUZUKI, may not be assigned or transferred by DEALER without the
prior written consent of SUZUKI. Any purported assignment without
the prior written consent of SUZUKI is null and void.
13.6 WAIVER. The waiver by either party of any breach or violation or
any provision of this Agreement shall not be deemed to be a waiver
by that party of any subsequent breach or violation of any other
provision herein.
13.7 NOTICE. Whenever a notice, demand or other document is required or
permitted to be given by the terms of the Agreement, or any document
incorporated by reference, it shall be deemed sufficiently given if
delivered personally or by prepaid ordinary mail at the addresses
set forth for SUZUKI and DEALER on page one (1) of this Agreement.
The addresses set forth may be changed from time to time by notice
in writing. Any notice or other document, if sent by mail, shall be
deemed to have been given to, and received by the party to whom it
was sent as of the date of mailing.
13.8 SURVIVAL. The obligations of DEALER upon termination as set forth
in Section 11.00 of this Agreement shall survive the termination of
this Agreement. Any termination of this Agreement shall be without
prejudice to rights accruing hereunder, provided
-19-
<PAGE>
however, that DEALER agrees that SUZUKI shall not by reason of any
termination, be liable to DEALER for any compensation,
reimbursement, damages or expenses arising from such termination.
13.9 MODIFICATION. Any modification or amendment to this Agreement,
other than by amendments to the Facility Standards Addendum, the
Dealer Minimum Standards Addendum and Dealer Updates and
transactions under which credit is extended by SUZUKI to DEALER,
must be executed in the same manner as the Agreement itself.
13.10 ARBITRATION. All disputes between the parties arising out of or in
any way related to this Agreement or the business relationship
between the parties shall be subject to and resolved by binding
arbitration according to the rules and under the administration of
the American Arbitration Association. The site of the arbitration
shall be in any federal judicial district where venue would be
appropriate under federal law, without regard to the amount
allegedly in controversy.
The law of the State of California shall apply; however, the
arbitrator shall not have the power to award exemplary or punitive
damages. Nothing in this Agreement to arbitrate shall be construed
to prevent either party's use of a court forum for receivership,
injunction, repossession, replevin, sequestration, seizure,
attachment or other provisional remedies allowed in law or equity.
Any award shall be enforceable in any state or federal court having
jurisdiction thereof.
13.11 PARTIAL INVALIDITY. If any provision of this Agreement is invalid
under or in conflict with the laws of any jurisdiction where this
Agreement is to be performed, such provision shall be deemed to be
deleted and the remaining provisions of this Agreement shall remain
valid and binding.
13.12 ATTORNEYS' FEES. If SUZUKI is required to retain an attorney to
enforce its rights under the terms of this Agreement, SUZUKI shall
be entitled to reasonable attorneys' fees.
-20-
<PAGE>
Exhibit 10.2.6.1
TOYOTA DEALER AGREEMENT
This is an Agreement between Toyota Motor Distributors, Inc.
(DISTRIBUTOR), and Hudson Motors Partnership t/a Hudson Toyota (DEALER), a(n)
/ / individual, /X/ partnership, / / corporation. If a corporation, DEALER is
duly incorporated in the State of New Jersey and doing business as HUDSON
TOYOTA.
PURPOSES AND OBJECTIVES OF THIS AGREEMENT
DISTRIBUTOR sells Toyota Products which are manufactured or approved
by Toyota Motor Corporation (FACTORY) and imported and/or sold to DISTRIBUTOR by
Toyota Motor Sales, U.S.A., Inc. (IMPORTER). It is of vital importance to
DISTRIBUTOR that Toyota Products are sold and serviced in a manner which
promotes consumer confidence and satisfaction and leads to increased product
acceptance. Accordingly, DISTRIBUTOR has established a network of authorized
Toyota dealers, operating at approved locations and pursuant to certain
standards, to sell and service Toyota Products. DEALER desires to become one of
DISTRIBUTOR's authorized dealers. Based upon the representations and promises
of DEALER, set forth herein, DISTRIBUTOR agrees to appoint DEALER as an
authorized Toyota dealer and welcomes DEALER to DISTRIBUTOR's network of
authorized dealers of Toyota Products.
This Agreement sets forth the rights and responsibilities of
DISTRIBUTOR as seller and DEALER as buyer of Toyota Products. DISTRIBUTOR
enters into this Agreement in reliance upon DEALER's integrity, ability,
assurance of personal services, expressed intention to deal fairly with the
consuming public and with DISTRIBUTOR, and promise to adhere to the terms and
conditions herein. Likewise, DEALER enters into this Agreement in reliance upon
DISTRIBUTOR's promise to adhere to the terms and conditions herein. DISTRIBUTOR
and DEALER shall refrain from conduct which may be detrimental to or adversely
reflect upon the reputation of the FACTORY, IMPORTER, DISTRIBUTOR, DEALER or
Toyota Products in general. The parties acknowledge that the success of the
relationship between DISTRIBUTOR and DEALER depends upon the mutual
understanding and cooperation of both DISTRIBUTOR and DEALER.
1
<PAGE>
I. RIGHTS GRANTED TO THE DEALER
Subject to the terms of this Agreement, DISTRIBUTOR hereby grants
DEALER the nonexclusive right:
A. To buy and resell the Toyota Products identified in the Toyota
Product Addendum hereto which may be periodically revised by IMPORTER;
B. To identify itself as an authorized Toyota dealer utilizing
approved signage at the location(s) approved herein;
C. To use the name Toyota and the Toyota Marks in the advertising,
promotion, sale and servicing of Toyota Products in the manner herein provided.
DISTRIBUTOR reserves the unrestricted right to sell Toyota Products
and to grant the privilege of using the name Toyota or the Toyota Marks to other
dealers or entities, wherever they may be located.
II. RESPONSIBILITIES ACCEPTED BY THE DEALER
DEALER accepts its appointment as an authorized Toyota dealer and
agrees to:
A. Sell and promote Toyota Products subject to the terms and
conditions of this Agreement;
B. Service Toyota Products subject to the terms and conditions of
this Agreement;
C. Establish and maintain satisfactory dealership facilities at the
location(s) set forth herein; and
D. Make all payments to DISTRIBUTOR when due.
III. TERM OF AGREEMENT
This Agreement is effective this 5th day of May, 1995, and shall
continue for a period of Six (6) Years, and shall expire on May 4, 2001, unless
ended earlier by mutual agreement or terminated as provided herein. This
Agreement may not be continued beyond its expiration date except by written
consent of DISTRIBUTOR and IMPORTER.
IV. OWNERSHIP OF DEALERSHIP
This Agreement is a personal service Agreement and has been entered
into by DISTRIBUTOR in reliance upon and in consideration of DEALER's
representation that only the following named persons are the Owners of DEALER,
that such persons will serve in the capacities indicated, and that such persons
are committed to achieving the purposes, goals and commitments of this
Agreement:
2
<PAGE>
OWNER'S PERCENT OF
NAMES TITLE OWNERSHIP
DiFeo Partnership HCT, Inc. Partner 70%
---------------------------- -------------- -----------
Hudson Toyota, Inc. Partner 30%
---------------------------- -------------- -----------
---------------------------- -------------- -----------
---------------------------- -------------- -----------
---------------------------- -------------- -----------
V. MANAGEMENT OF DEALERSHIP
DISTRIBUTOR and DEALER agree that the retention of qualified
management is of critical importance to satisfy the commitments made by DEALER
in this Agreement. DISTRIBUTOR, therefore, enters into this Agreement in
reliance upon DEALER's representation that Richard King, Jr., and no other
person, will exercise the function of General Manager, be in complete charge of
DEALER's operations, and will have authority to make all decisions on behalf of
DEALER with respect to DEALER's operations. DEALER further agrees that the
General Manager shall devote his or her full efforts to DEALER's operations.
VI. CHANGE IN MANAGEMENT OR OWNERSHIP
This is a personal service contract. DISTRIBUTOR has entered into
this Agreement because DEALER has represented to DISTRIBUTOR that the Owners and
General Manager of DEALER identified herein possess the personal qualifications,
skill and commitment necessary to ensure that DEALER will promote, sell and
service Toyota Products in the most effective manner, enhance the Toyota image
and increase market acceptance of Toyota Products. Because DISTRIBUTOR has
entered into this Agreement in reliance upon these representations and DEALER's
assurances of the active involvement of such persons in DEALER operations, any
change in ownership, no matter what the share or relationship between parties,
or any changes in General Manager from the person specified herein, requires the
prior written consent of DISTRIBUTOR, which DISTRIBUTOR shall not unreasonably
withhold.
DEALER agrees that factors which would make DISTRIBUTOR's withholding
of consent reasonable would include, without limitation, the failure of a new
Owner or General Manager to meet DISTRIBUTOR'S standards with regard to
financial capability, experience and success in the automobile dealership
business.
3
<PAGE>
VII. APPROVED DEALER LOCATIONS
In order that DISTRIBUTOR may establish and maintain an effective
network of authorized Toyota dealers, DEALER agrees that it shall conduct its
Toyota operation only and exclusively in facilities and at locations herein
designated and approved by DISTRIBUTOR. DISTRIBUTOR hereby designates and
approves the following facilities as the exclusive location(s) for the sale and
servicing of Toyota Products and the display of Toyota Marks:
NEW VEHICLE SALES AND SHOWROOM USED VEHICLE DISPLAY AND SALES
585 Route 440 599 Route 440
Jersey City, NJ 07304 Jersey City, NJ 07304
SALES AND GENERAL OFFICE BODY AND PAINT
585 Route 440 N/A
Jersey City, NJ 07304
PARTS SERVICE
585 Route 440 585 Route 440
Jersey City, NJ 07304 Jersey City, NJ 07304
OTHER FACILITIES - STORAGE
585 Route 440
Jersey City, NJ 07304
DEALER may not, either directly or indirectly, display Toyota Marks or
establish or conduct any dealership operations contemplated by this Agreement,
including the display, sale and servicing of Toyota Products, at any location or
facility other than those approved herein without the prior written consent of
DISTRIBUTOR. DEALER may not modify or change the usage or function of any
location or facility approved herein or otherwise utilize such locations or
facilities for any functions other than the approved function(s) without the
prior written consent of DISTRIBUTOR.
VIII. PRIMARY MARKET AREA
DISTRIBUTOR will assign DEALER a geographic area called a Primary
Market Area ("PMA"). The PMA is used by DISTRIBUTOR to evaluate DEALER's
performance of its obligations, among other things. DEALER agrees that it has
no exclusive right to any such PMA. DISTRIBUTOR may add new dealers, relocate
dealers, or adjust DEALER's PMA as it reasonably determines is necessary.
DEALER's PMA is set forth on the PMA Addendum hereto.
Nothing contained in this Agreement, with the exception of Section
XIV(B), shall limit or be construed to limit the geographical area in which, or
the persons to whom, DEALER may sell or promote the sale of Toyota products.
4
<PAGE>
IX. STANDARD PROVISIONS
The "Toyota Dealer Agreement Standard Provisions" are incorporated
herein and made part of this Agreement as if fully set forth herein.
X. ADDITIONAL PROVISIONS
In consideration of DISTRIBUTOR's agreement to appoint DEALER as an
authorized Toyota dealer, DEALER further agrees:
These Additional Provisions to Toyota Dealer Agreement ("Additional
Provisions") are entered into as of , 1995 among DISTRIBUTOR, DEALER,
DIFEO PARTNERSHIP HCT, INC., a Delaware corporation (hereinafter "DP"), HUDSON
TOYOTA, INC., a New Jersey corporation (hereinafter "HTI"; DP and HTI are
hereinafter collectively referred to as the "Partners"), UNITED AUTO GROUP,
INC., a Delaware corporation formerly known as EMCO Motor Holdings, Inc.
(hereinafter "UNITED"), "21" INTERNATIONAL HOLDINGS, INC., a Delaware
corporation (hereinafter "TIHI"), MARSHALL S. COGAN (hereinafter "Cogan"),
SAMUEL X. DIFEO and JOSEPH C. DIFEO (hereinafter collectively the "DiFeos"), and
form a part of and are incorporated into the Dealer Agreement.
RECITALS
1. DISTRIBUTOR and DEALER have entered into a Toyota Dealer
Agreement (the "Dealer Agreement") dated as of _____________, 1995.
2. The Partners are the sole partners of DEALER; UNITED is the sole
shareholder of DP; TIHI is the Majority (defined below) shareholder of UNITED;
Cogan is the Majority shareholder of TIHI; and the DiFeos are the sole
shareholders (including ownership by related persons or entities) of HTI. For
purposes of these Additional Provisions, "Majority" means direct or indirect
ownership (including ownership by related persons or entities) of 66 2/3% or
more of the voting power and 40% or more of the fair market value of the equity
securities of the entity in question. A "related" person is an individual who
is a member of the immediate family of the person in question. A related entity
is (a) a corporation or partnership 80% or more of the interests in which are
owned by the person in question or a related person or (b) a trust benefiting
the person in question or a related person or entity. "Controlled" has the
meaning given to it in Rule 405 under the Rules and Regulations of the
Securities Act of 1993, as amended.
3. UNITED, DEALER, the Partners, TIHI, Cogan and the DiFeos are
hereinafter collectively referred to as the "UNITED Parties". DISTRIBUTOR and
the UNITED Parties are hereinafter collectively referred to as the "Parties".
5
<PAGE>
ADDITIONAL PROVISIONS (CONTINUED)
4. Provisions for the purposes of agreeing to be bound by the terms
of these Additional Provisions, which are a part of and are incorporated into
the Dealer Agreement.
NOW THEREFORE, in consideration for the mutual agreements contained
herein and in the Dealer Agreement, the Parties agree as follows:
A. GENERAL
1. The Parties acknowledge that DISTRIBUTOR has been provided with
copies of the Master Agreement dated as of March 11, 1992, as amended, between
UNITED, DP, HTI, TIHI, DEALER, the DiFeos and others, the Partnership Agreement
of DEALER dated as of October 5, 1992, the Management Agreement among DEALER,
UNITED and others dated as of October 5, 1992 (the "Management Agreement") and
certain other documentation relating to the relationships between the UNITED
Parties and others (collectively the "Underlying Documentation"). The UNITED
Parties agree that nothing contained in the Underlying Documentation will in any
way be deemed to be consented to by or binding on DISTRIBUTOR, and that the
legal rights and obligations between DISTRIBUTOR, on the one hand, and any of
the UNITED Parties, on the other hand, will be governed exclusively by the
Dealer Agreement, these Additional Provisions and any other agreements executed
by both DISTRIBUTOR and DEALER in connection therewith and herewith.
2. The UNITED Parties acknowledge and agree that if any provision of
these Additional Provisions is violated in any material respect by any of the
UNITED Parties, DISTRIBUTOR will have the right to terminate the Dealer
Agreement on written notice to DEALER.
B. PROVISIONS RELATING TO THE STRUCTURE OF DEALER
1. SINGLE PURPOSE ENTITY. DEALER will be maintained as a separate
legal entity, and will not engage in any business other than operation of a
Toyota dealership and activities related thereto.
2. SINGLE PURPOSE PARTNERS. DP and HTI will be maintained as
separate legal entities, and will not engage in any business other than acting
as partners of DEALER and activities related thereto.
3. NO MERGER, CONSOLIDATION, ETC. Neither DEALER nor either of the
Partners will be merged with or into, or be consolidated with, or acquire
substantially all of the assets of, any other entity.
6
<PAGE>
ADDITIONAL PROVISIONS (CONTINUED)
C. PROVISIONS RELATING TO MANAGEMENT
1. ROLE OF THE DIFEOS. Samuel X. DiFeo, Joseph C. DiFeo or both of
them will remain actively involved in the management of all aspects of the
operations of DEALER.
a) Both of the DiFeos will be members of the Executive
Committee, Board of Directors or other governing body of DEALER. The
DiFeos will have complete control over all management decisions of DEALER
or relating to DEALER, including day-to-day activities and extraordinary
matters, provided, that the Executive Committee, Board of Directors or
other governing body of DEALER may take part in decisions relating to
extraordinary matters, including but not limited to a change in business
location and a sale or liquidation of the business.
b) The General Manager will report directly to and be
responsible to the DiFeos.
c) Subject to Section C.2., the DiFeos will at all times be the
sole shareholders of HTI (including ownership by related persons or
entities), and HTI will at all times own at least a 25% interest in the
profits and capital of DEALER, provided, that if HTI's interest falls below
30%, any interest below 30% will be transferred to DP.
d) DISTRIBUTOR may rely on oral or written communications and
agreements from either of the DiFeos as being the binding agreements of
DEALER, without any duty of DISTRIBUTOR to confirm that such communication
or agreement has been approved by the Executive Committee or any other
person or entity.
2. SUCCESSORS TO THE DIFEOS. In the event that (a) neither of the
DiFeos wishes to continue his role in the management of DEALER as set forth in
Section C.l., (b) the DiFeos wish to cease being the sole shareholders of HTI
(including ownership of related persons or entities) or (c) HTI wishes to
decrease its ownership in DEALER to less than 25%, such action may be taken only
with the prior written consent of DISTRIBUTOR. Such consent of DISTRIBUTOR may
be conditioned on either (i) transfer of the DiFeos' management responsibilities
and/or ownership interest (direct or indirect) as applicable, in DEALER to an
individual or individuals approved by DISTRIBUTOR, taking into account such
factors as DISTRIBUTOR deems to be relevant and are consistent with applicable
laws or (ii) transfer of not less than 25% of the voting power, profits interest
and capital interest in DEALER to the then General Manager of DEALER, which
transfer may be accomplished by having such General Manager acquire such
interest in increments of not less than 5% per year over a period of not more
than 5 years.
7
<PAGE>
ADDITIONAL PROVISIONS (CONTINUED)
3. ROLE OF THE GENERAL MANAGER.
a) Richard King, Jr., or any subsequent General Manager of
DEALER approved by DISTRIBUTOR, will serve exclusively as General Manager
of DEALER on a full time basis and will not have any management
responsibilities with respect to any other dealership or other business or
appear as the General Manager on any automobile dealership franchise
agreement other than that of DEALER.
b) The General Manager will have responsibility for and
authority with respect to the day-to-day operations of DEALER in the
ordinary course of business, under the supervision of the DiFeos (subject
to Section C.2.), and either the DiFeos or the General Manager will have
the following authority, without the need for obtaining the prior approval
of any other person:
(i) the authority to hire or terminate any employee of
DEALER.
(ii) the authority to order vehicles and other products.
(iii) the authority to place advertising.
(iv) the authority to communicate with DISTRIBUTOR with
respect to all aspects of the business of DEALER.
(v) the authority to approve expenditures by DEALER in
the ordinary course of business in amounts of less than $50,000 per
item.
(vi) the authority to approve capital improvements or
modifications to the DEALER's facilities in amounts not to exceed
$100,000 with respect to any expenditure.
4. MEMBERSHIP OF EXECUTIVE COMMITTEE. There shall be no change in
the membership of the Executive Committee, Board of Directors or other governing
body of DEALER without the prior written approval of DISTRIBUTOR.
D. PROVISIONS RELATING TO CAPITALIZATION AND ACCOUNTING
1. No distributions will be made by DEALER to the Partners if such
distributions would cause DEALER to fail to meet any of DISTRIBUTOR's
capitalization guidelines, including but not limited to net working capital
requirements.
8
<PAGE>
ADDITIONAL PROVISIONS (CONTINUED)
2. The operations and financial results of DEALER will be reported
to DISTRIBUTOR separately from those of any other entity, business or activity,
including but not limited to any of the UNITED Parties and any other dealerships
directly or indirectly owned or controlled by any of the UNITED Parties.
3. DEALER will maintain complete and separate departments for new
and used vehicle sales, service, parts sales, leasing and finance and insurance,
and will provide separate identifiable areas for each department. DEALER will
maintain a separate and permanent personnel staff and separate retail operations
from other dealerships directly or indirectly owned by any of the UNITED
Parties. DEALER shall not combine its used car operation with that of any other
entity, including any other dealerships directly or indirectly owned by any of
the UNITED Parties.
4. DEALER will not transfer assets or liabilities on an intercompany
receivable or payable basis; or place vehicles on consignment to any other
dealership, except on payment terms requiring payment in full within three (3)
business days and in an outstanding amount not to exceed $150,000 at any one
time. Any loan from DEALER to any person or entity controlled by any UNITED
Party will be treated as a distribution by DEALER to the Partners for purposes
of determining compliance with Section D.l.
5. If DEALER transfers assets to any commonly controlled person or
entity for less than fair market value consideration, the excess of the fair
market value of such assets over the consideration paid, if any, will be treated
as a distribution by DEALER to the Partners for purposes of determining
compliance with Section D.1.
6. DEALER will submit to DISTRIBUTOR a consolidated, audited
financial statement of all dealerships controlled by the UNITED Parties on an
annual basis, on or before June 30 of each year for the previous year ended
December 31.
E. PROVISIONS RELATING TO OWNERSHIP
1. CHANGES IN INDIRECT OWNERSHIP. In addition to the right of
DISTRIBUTOR to approve changes in ownership of DEALER as set forth in the Dealer
Agreement, DISTRIBUTOR will also have the right, in compliance with applicable
laws, to approve transfers in ownership of DP, HTI and UNITED, and will have the
right to approve any transfer in ownership of TIHI which results in Cogan no
longer being the Majority shareholder of TIHI.
2. NO PUBLIC OFFERING. (a) The UNITED Parties acknowledge that the
Dealer Agreement is a personal service contract, and that the personal service
nature of the Dealer Agreement was a material inducement to DISTRIBUTOR in
entering
9
<PAGE>
ADDITIONAL PROVISIONS (CONTINUED)
into the Dealer Agreement. In light of the foregoing, none of DEALER, any
Partner, or any person or entity directly or indirectly owning an interest in,
or, directly or indirectly, controlling, controlled by or under common control
with (within the meaning of Rule 405 under the Rules and Regulations of the
Securities Act of 1933, as amended), DEALER or any partner of DEALER (as
applicable, the "Issuer") will offer, issue or sell securities that are required
to be registered pursuant to the Securities Act of 1933, as amended, ("Public
Securities") or permit any of their securities to become Public Securities, or
merge or consolidate with any entity the securities of which are Public
Securities without the prior written consent of DISTRIBUTOR, such consent to be
granted or denied in DISTRIBUTOR's sole discretion.
b) Nothing contained in this Section E.2 will be deemed to prohibit
(i) one or more entities which have issued Public Securities from owning equity
securities of TIHI, provided that Cogan agrees that, subject to compliance with
applicable laws, (A) neither he nor any related person or entity will transfer
any equity security in TIHI to an entity which has issued public securities and
(B) any transfer of equity securities in TIHI by Cogan will contain a specific
restriction prohibiting the transferee (or any subsequent transferee) from
reselling such equity securities to an entity which has issued Public
Securities, or (ii) TIHI from holding an interest in one or more entities which
have issued Public Securities, provided that such entities do not own an
interest in any of the UNITED Parties.
c) Notwithstanding this Section E.2, in the event that at any time
after the date hereof, DISTRIBUTOR issues a Dealer Agreement to an entity which
owns and operates a Toyota dealership in the United States which specifically
permits the issuance of Public Securities or contains specific restrictions on
the issuance of Public Securities which are different from this Section E.2 in
any material respect, DISTRIBUTOR, upon request by DEALER, agrees to offer
DEALER the option of amending this Section E.2 to contain provisions relating to
issuance of Public Securities which are substantially the same as those which
are contained in the Dealer Agreement of such other dealership.
d) (i) Any person or entity who owns or will own ten percent
(10%) of the outstanding stock or of the voting rights of DEALER, UNITED, DP or
HTI, shall file an ownership application with DISTRIBUTOR, which application
shall be subject to approval of DISTRIBUTOR.
(ii) Any corporation or other entity holding or obtaining ten
percent (10%) or more of the ownership or voting rights of any class of
stock in UNITED shall provide its most recent annual statement, financial
statement or
10
<PAGE>
ADDITIONAL PROVISIONS (CONTINUED)
equivalent to DISTRIBUTOR; in the event the corporation is submitting an
ownership application to DISTRIBUTOR, such statement shall be submitted
with the application.
(iii) UNITED shall provide a list of all current members of its
Board of Directors, and resumes for each Director, to DISTRIBUTOR, and
provide such information for each new member.
(iv) There shall be no change in the management function of
Samuel X. and Joseph C. DiFeo without the prior written approval of
DISTRIBUTOR.
(v) In approving the current ownership structure, DISTRIBUTOR
is specifically not approving any future ownership change which could
result from a public offering of the stock of UNITED or any other entity.
The UNITED Parties hereby acknowledge that certain provisions of the
documentation provided to DISTRIBUTOR in connection with the sale of
preferred stock of UNITED, including the Registration Rights Agreement, are
potentially in conflict with Section E.2 of these Additional Provisions to
Dealer Agreement, and agree that any violation of such Section E.2 will
constitute a material breach of this Dealer Agreement.
3. SUCCESSORS AND ASSIGNS. In the event that any interest in any of
the UNITED Parties is transferred in accordance with the provisions of the
Dealer Agreement and these Additional Provisions, as a condition to such
transfer the transferee must agree in writing to be bound by all of the terms
and provisions of the Dealer Agreement and these Additional Provisions, such
agreement to be in form and substance reasonably acceptable to DISTRIBUTOR.
4. COMPETITORS. In no event may any interest in any of the UNITED
Parties be transferred to an entity which is directly or indirectly engaged in
the business of manufacturing and/or distributing automobiles, or an affiliate
thereof.
F. CUSTOMER SATISFACTION
DEALER agrees to achieve, within twelve (12) months of the effective
date of this Agreement and to thereafter maintain throughout the duration of
this Agreement, a satisfactory customer satisfaction performance, as measured by
all applicable standards established by Toyota Motor Sales, U.S.A., Inc., and
which are modified from time to time.
11
<PAGE>
IN WITNESS WHEREOF, the Parties have executed these Additional
Provisions as of the date first above written.
TOYOTA MOTOR SALES, U.S.A., INC. HUDSON MOTORS PARTNERSHIP
By: /s/ Ezra P. Mager
-------------------------------
General Partner
By: /s/ Shinji Sakai
--------------------------
Title:
----------------------- By: /s/ Samuel X. DiFeo
-------------------------------
Title:
----------------------------
DIFEO PARTNERSHIP HCT, INC. HUDSON TOYOTA, INC.
By: /s/ Ezra P. Mager
- ------------------------------
Title:
----------------------- By: /s/ Samuel X. DiFeo
-------------------------------
Title:
----------------------------
UNITED AUTO GROUP, INC. "21" INTERNATIONAL HOLDINGS,
INC.
By: /s/ Ezra P. Mager By: /s/ Marshall S. Cogan
-------------------------- -------------------------------
Title: Title:
----------------------- -----------------------
/s/ Marshall S. Cogan /s/ Samuel X. DiFeo
- ------------------------------ -----------------------------------
MARSHALL S. COGAN SAMUEL X. DIFEO
/s/ Joseph C. DiFeo
- ------------------------------
JOSEPH C. DIFEO
12
<PAGE>
XI. EXECUTION OF AGREEMENT
Notwithstanding any other provision herein, the parties to this
Agreement, DISTRIBUTOR and DEALER, agree that this Agreement shall be valid and
binding only if it is signed:
A. On behalf of DEALER by a duly authorized person;
B. On behalf of DISTRIBUTOR by the President and/or an authorized
General Manager, if any, of DISTRIBUTOR; and
C. On behalf of IMPORTER, solely in connection with its limited
undertaking herein, by President of IMPORTER.
XII. CERTIFICATION
By their signatures hereto, the parties agree that they have read and
understand this Agreement, including the Standard Provisions incorporated
herein, are committed to its purposes and objectives and agree to abide by all
of its terms and conditions.
Hudson Motors Partnership t/a HUDSON TOYOTA DEALER
- ------------------------------------------------------------
(Dealer Entity Name)
Date: By: /s/ Sam C. DiFeo President - Hudson Toyota, Inc.
----- ----------------------- -------------------------------
Sam C. DiFeo Signature Title
Chief Executive Officer
Date: By: /s/ Ezra Mager DiFeo Partnership HCT, Inc.
----- ----------------------- -------------------------------
Ezra Mager Signature Title
Date: By:
----- ----------------------- -------------------------------
Signature Title
Toyota Motor Distributors, Inc. DISTRIBUTOR
- -------------------------------------------------------
(Distributor Name)
Date:3/2/95 By: /s/ Marshall Johnson General Manager
------ ------------------------ ---------------------------
Marshall Johnson Signature Title
Date: By:
----- ----------------------- -------------------------------
Signature Title
13
<PAGE>
Undertaking by IMPORTER: In the event of termination of this
Agreement by virtue of termination or expiration of DISTRIBUTOR's contract with
IMPORTER, IMPORTER, through its designee, will offer DEALER a new agreement of
no less than one year's duration and containing the terms of the Toyota Dealer
Agreement then prescribed by IMPORTER.
TOYOTA MOTOR SALES, U.S.A., INC.
Date: May 05, 1995 By: /s/ Shinji Sakai President
------------- ------------------------ ------------------
Shinji Sakai Signature Title
<PAGE>
TOYOTA DEALER AGREEMENT
STANDARD PROVISIONS
The following Standard Provisions are expressly incorporated in and
made a part of the Toyota Dealer Agreement.
XIII. ACQUISITION, DELIVERY AND INVENTORY OF TOYOTA PRODUCTS
A. ACQUISITION OF TOYOTA PRODUCTS
DEALER shall have the right to purchase Toyota Products from
DISTRIBUTOR in accordance with the provisions set forth herein and
such other requirements as may be established from time to time by
DISTRIBUTOR.
B. AVAILABILITY AND ALLOCATION OF PRODUCT
DISTRIBUTOR agrees to use its best efforts to provide Toyota Products
to DEALER in such quantities and types as may be required by DEALER to
fulfill its obligations with respect to the sale and servicing of
Toyota Products under this Agreement, subject to available supply from
IMPORTER, DISTRIBUTOR's requirements, and any change or discontinuance
with respect to any Toyota Product. DISTRIBUTOR will endeavor to
allocate Toyota Products among its dealers in a fair and equitable
manner, which it shall determine in its sole discretion. DISTRIBUTOR
agrees to provide DEALER with an explanation of the method used to
distribute such products and, upon written request, will advise DEALER
of DISTRIBUTOR's total wholesale sales of new motor vehicles, by
series, in DISTRIBUTOR's area and to DEALER individually, for a
reasonable time frame.
C. PRICES AND TERMS OF SALE
DISTRIBUTOR shall have the right to establish and revise prices and
other terms for the sale of Toyota Products to DEALER. Ownership and
title of Toyota Products sold by DISTRIBUTOR to DEALER shall pass upon
payment therefor by DEALER to DISTRIBUTOR and DEALER shall have no
ownership interest in such Products until such payment is received.
Risk of loss for Toyota Products sold by DISTRIBUTOR to DEALER shall
pass upon delivery of such Products to DEALER. Revised prices and
terms shall apply to any Toyota Products not invoiced to DEALER by
DISTRIBUTOR at the time the notice of such change is given to
-2-
<PAGE>
DEALER (in the case of Toyota Motor Vehicles), or upon issuance of a
new or modified Parts Price List or through change notices, letters,
bulletins, or revision sheets (in the case of parts, options and
accessories), or at such other times as may be designated in writing
by DISTRIBUTOR.
Payment for all Toyota Products shall be made when billed, unless
other terms are established by DISTRIBUTOR in writing.
D. MODE, PLACE AND CHARGES FOR DELIVERY OF PRODUCTS
DISTRIBUTOR shall designate the distribution points and the mode of
transportation and shall select carrier(s) for the TRANSPORTATION of
Toyota Products to DEALER. DEALER shall pay DISTRIBUTOR such charges
as DISTRIBUTOR in its sole discretion establishes for such
transportation services.
E. INVENTORY DAMAGE CLAIMS AND LIABILITY
DEALER shall promptly notify DISTRIBUTOR of any damage occurring
during transit and shall, if so directed by DISTRIBUTOR, file claims
on DISTRIBUTOR's behalf against transportation carrier for damage.
DEALER agrees to assist DISTRIBUTOR in obtaining recovery against any
transportation carrier or insurer for loss or damage to Toyota
Products shipped hereunder.
To the extent required by law, DEALER shall notify the purchaser of a
vehicle of any damage sustained by such vehicle prior to sale. DEALER
shall indemnify and hold DISTRIBUTOR harmless from any liability
resulting from DEALER's failure to so notify such purchasers.
F. DELAY OR FAILURE OF DELIVERY
DISTRIBUTOR shall not be liable for delay or failure to deliver Toyota
Products which it has previously agreed to deliver, where such delay
or failure to deliver is the result of any event beyond the control of
DISTRIBUTOR, IMPORTER or FACTORY, including but not limited to fire,
floods, storms or other acts of God, any law or regulation of any
governmental entity, foreign or civil wars, riots, interruptions of
navigation, shipwrecks, strikes, lockouts or other labor troubles,
embargoes, blockades, or delay or failure of FACTORY to deliver Toyota
Products.
-3-
<PAGE>
G. DIVERSION CHARGES
If after delivery DEALER fails or refuses to accept Toyota Products
that it has agreed to purchase, DEALER shall pay all charges incurred
by DISTRIBUTOR as a result of such refusal. Such charges shall not
exceed the charge of returning any such product to the point of
original shipment by DISTRIBUTOR plus all charges for demurrage,
storage or other charges related to such refusal.
DEALER also agrees to assume responsibility for, and shall pay any and
all reasonable charges for, demurrage, storage or other charges
accruing after arrival of shipment at the point of original shipment.
H. CHANGES OF DESIGN, OPTIONS OR SPECIFICATIONS
DISTRIBUTOR, IMPORTER or FACTORY may change the design or
specifications of any Toyota Product or the options in any Toyota
Product and shall be under no obligation to provide notice of same or
to make any similar change upon any product previously purchased by or
shipped to DEALER. No change shall be considered a model year change
unless so specified by DISTRIBUTOR.
I. DISCONTINUANCE OF MANUFACTURE OR IMPORTATION
FACTORY, IMPORTER and/or DISTRIBUTOR may discontinue the manufacture,
importation or distribution of all or part of any Toyota Product,
whether motor vehicle, parts, options, or accessories, including any
model, series, or body style of any Toyota Motor Vehicle at any time
without any obligation or liability to DEALER by reason thereof.
J. MINIMUM VEHICLE INVENTORIES
Subject to the ability of DISTRIBUTOR to supply Toyota Motor Vehicles
to DEALER, DEALER agrees that it shall, at all times, maintain at
least the minimum inventory of Toyota Motor Vehicles as may be
established by DISTRIBUTOR from time to time. DEALER also agrees that
it shall have available at all times, for purposes of display and
demonstration, the number of Toyota Motor Vehicles of the most current
models as may be established by DISTRIBUTOR from time to time, and
shall, at all times, maintain such Motor Vehicles in showroom ready
condition.
-4-
<PAGE>
K. PRODUCT MODIFICATIONS
DEALER agrees that it will not make any modifications to Toyota
Products that may impair or adversely affect a vehicle's safety,
emissions or structural integrity.
XIV. DEALER MARKETING OF TOYOTA PRODUCTS
A. DEALER'S SALES RESPONSIBILITIES
DEALER recognizes that customer satisfaction and the successful
promotion and sale of Toyota Products are significantly dependent on
DEALER's advertising and sales promotion activities. DEALER shall
actively and effectively promote, through DEALER's own advertising and
sales promotion activities, the purchase of Toyota Products by
customers. Therefore, DEALER at all times shall:
1. Actively and effectively advertise, merchandise, promote and sell
Toyota Products;
2. Maintain an adequate, stable and trained sales organization, and,
to that end, make all reasonable efforts to ensure that its sales
personnel attend all sales training courses prescribed by
DISTRIBUTOR at DEALER's expense;
3. Maintain high standards of ethics in advertising, promoting and
selling Toyota Products and avoid engaging in any
misrepresentation or unfair or deceptive practices; and
4. Accurately represent to customers the total selling price of
Toyota Products. DEALER agrees to explain to customers of Toyota
Products the items that make up the total selling price and to
give the customers itemized statements and all other information
required by law. DEALER understands and hereby acknowledges that
it may sell Toyota Products at whatever price DEALER desires.
B. EXPORT PROHIBITION
DEALER is authorized to sell Toyota Motor Vehicles only to customers
located in the continental United States. DEALER agrees that it will
not sell Toyota Motor Vehicles for resale or use outside the
continental United States. DEALER agrees to abide by any export
policy established by DISTRIBUTOR.
-5-
<PAGE>
C. USED VEHICLES
DEALER agrees to display, promote and sell used vehicles at the
Approved Location. DEALER shall maintain for resale an inventory of
used vehicles.
D. ASSISTANCE PROVIDED BY DISTRIBUTOR
1. SALES TRAINING ASSISTANCE
To assist DEALER in the fulfillment of its sales responsibilities
under this Agreement, DISTRIBUTOR agrees to offer general and
specialized sales management and sales training programs for the
benefit and use of DEALER's sales organization. When requested
by DISTRIBUTOR, DEALER's personnel shall participate in such
programs at DEALER's expense.
2. SALES PROMOTION ASSISTANCE
In order that authorized Toyota dealers may be assured of the
benefits of comprehensive advertising and promotion of Toyota
Products, DISTRIBUTOR agrees to establish and maintain general
advertising and promotion programs and will from time to time
make sales promotion and campaign materials available to DEALER
to promote the sales of such Toyota Products at a reasonable
charge where applicable.
3. FIELD SALES PERSONNEL ASSISTANCE
To assist DEALER in handling its sales responsibilities under
this Agreement, DISTRIBUTOR agrees to provide trained field sales
personnel to advise and counsel DEALER on sales-related subjects,
including merchandising, training and sales management.
XV. DEALER SERVICE OBLIGATIONS
A. CUSTOMER SERVICE STANDARDS
DEALER and DISTRIBUTOR agree that the success and future growth of
DISTRIBUTOR and DEALER are substantially dependent upon the customer's
ability to obtain high-quality vehicle servicing. Therefore, DEALER
agrees to:
1. Take all reasonable steps to provide service of the highest
quality for all Toyota Motor Vehicles, regardless of where
purchased and whether or not under warranty;
-6-
<PAGE>
2. Ensure that the customer is advised of the necessary repairs and
that his or her consent is obtained prior to the initiation of
any repairs;
3. Ensure that problems on Toyota Motor Vehicles are accurately
diagnosed and repairs are promptly and professionally performed;
and
4. Ensure that the customer is treated courteously and fairly at all
times.
B. NEW MOTOR VEHICLE PRE-DELIVERY SERVICE
DEALER agrees that prior to delivery of a new Toyota Motor Vehicle to
a customer it shall perform, as directed by DISTRIBUTOR, pre-delivery
service on each Toyota Motor Vehicle in accordance with Toyota
standards. DISTRIBUTOR shall pay DEALER for such pre-delivery service
according to such directives and the applicable provisions of the
TOYOTA WARRANTY POLICY AND PROCEDURES MANUAL.
C. WARRANTY AND POLICY SERVICE
DEALER acknowledges that the only warranties of DISTRIBUTOR or FACTORY
applicable to Toyota Products shall be the New Vehicle Limited
Warranty or such other written warranties that may be expressly
furnished or sold by DISTRIBUTOR or FACTORY. Except for its limited
liability under such written warranty or warranties, DISTRIBUTOR and
FACTORY do not assume any other warranty obligation or liability.
DEALER is not authorized to assume any additional warranty obligations
or liabilities on behalf of DISTRIBUTOR, IMPORTER or FACTORY. Any
such additional obligations assumed by DEALER shall be the sole
responsibility of DEALER. Any extended service contract sold by
IMPORTER, DISTRIBUTOR or Toyota-affiliated entity shall be governed by
its own terms.
DEALER shall perform warranty service specified by DISTRIBUTOR in
accordance with the TOYOTA WARRANTY POLICY AND PROCEDURES MANUAL.
DISTRIBUTOR agrees to compensate DEALER for all warranty work,
including labor, diagnosis and Genuine Toyota Parts and Accessories,
in accordance with procedures and at rates to be announced from time
to time by DISTRIBUTOR. Unless otherwise approved in writing in
advance by DISTRIBUTOR, DEALER shall use only Genuine Toyota Parts and
Accessories when performing Toyota warranty repairs. Warranty service
is provided for the benefit of customers and DEALER agrees that the
customer shall not be obligated to pay any charges
-7-
<PAGE>
for warranty work or any other services for which DEALER is reimbursed
or paid by DISTRIBUTOR.
D. USE OF PARTS AND ACCESSORIES IN NON-WARRANTY SERVICING
Subject to the provisions set forth below, DEALER has the right to
sell, install or use, for making non-warranty repairs, products that
are not Genuine Toyota Parts or Accessories.
DEALER acknowledges, however, that its customers expect that any parts
or accessories that DEALER sells, installs or uses in the sale, repair
or servicing of Toyota Motor Vehicles are, or meet the high quality
standards of, Genuine Toyota Parts or Accessories. DEALER agrees that
in sales, repairs or servicing where DEALER does not use Genuine
Toyota Parts or Accessories, DEALER will only utilize such other parts
or accessories that will not adversely affect the mechanical operation
of the Toyota Motor Vehicle being sold, repaired or serviced, and that
are equivalent in quality and design to Genuine Toyota Parts or
Accessories.
E. WARRANTY DISCLOSURES AS TO NON-GENUINE PARTS AND ACCESSORIES
In order to avoid confusion and to minimize potential customer
dissatisfaction, in any instance where DEALER sells, installs or uses
other than Genuine Toyota Parts or Accessories, DEALER shall disclose
such fact to the customer and shall advise the customer that these
items are not included in warranties furnished by DISTRIBUTOR. Such
disclosure shall be written, conspicuous and stated on the customer's
copy of the service or repair order or sale document. In addition,
DEALER will clearly explain to the customer the extent of any warranty
covering the parts or accessories involved and will deliver a copy of
the warranty to the customer.
F. SERVICE CAMPAIGN INSPECTIONS AND CORRECTIONS
DEALER agrees to perform service campaign inspections and/or
corrections for owners or users of all Toyota Products that qualify
for such inspections and/or corrections. DEALER further agrees to
comply with all DISTRIBUTOR's directives and with the applicable
procedures in the TOYOTA WARRANTY POLICY AND PROCEDURES MANUAL
relating to those inspections and/or corrections. DISTRIBUTOR agrees
to reimburse DEALER for all replacement parts and/or other materials
required and used in connection with such
-8-
<PAGE>
work and for labor according to such directives and the applicable
provisions of the TOYOTA WARRANTY POLICY AND PROCEDURES MANUAL.
G. COMPLIANCE WITH SAFETY AND EMISSION CONTROL REQUIREMENTS
DEALER agrees to comply and operate consistently with all applicable
provisions of the National Traffic and Motor Vehicle Safety Act of
1966 and the Federal Clean Air Act, as amended, including APPLICABLE
rules and regulations issued from time to time thereunder, and all
other applicable federal, state and local motor vehicle safety and
emission control statutes, rules and regulations.
In the event that the laws of the state in which DEALER is located
require motor vehicle dealers or distributors to install in new or
used motor vehicles, prior to their retail sale, any safety devices or
other equipment not installed or supplied as standard equipment by
FACTORY, then DEALER, prior to the sale of any Toyota Motor Vehicle on
which such installations are required, shall properly install such
devices or equipment on such Toyota Motor Vehicles. DISTRIBUTOR
agrees to reimburse DEALER for all parts and/or other materials
required and used in connection with such work and for labor according
to the applicable provisions of the TOYOTA WARRANTY POLICY AND
PROCEDURES MANUAL. DEALER shall comply with state and local laws
pertaining to the installation and reporting of such equipment.
In the interest of motor vehicle safety and emission control,
DISTRIBUTOR and DEALER agree to provide to each other such information
and assistance as may reasonably be requested by the other in
connection with the performance of obligations imposed on either party
by the National Traffic and Motor Vehicle Safety Act of 1966 and the
Federal Clean Air Act, as amended, and their rules and regulations,
and all other applicable federal, state and local motor vehicle safety
and emissions control statutes, rules and regulations.
H. COMPLIANCE WITH CONSUMER PROTECTION STATUTES, RULES AND REGULATIONS
Because certain customer complaints may impose liability upon
DISTRIBUTOR under various repair or replace laws or other consumer
protection laws and regulations, DEALER agrees to provide prompt
notice to DISTRIBUTOR of such complaints and take such other steps as
DISTRIBUTOR may reasonably require. DEALER
-9-
<PAGE>
will do nothing to affect adversely DISTRIBUTOR's rights under such
laws and regulations. Subject to any law or any regulation to the
contrary, DEALER shall be liable to DISTRIBUTOR for any refunds or
vehicle replacements provided to customer where DISTRIBUTOR reasonably
establishes that DEALER failed to carry out vehicle repairs in
accordance with DISTRIBUTOR's written published policies and
procedures or its express oral instructions subsequently confirmed in
writing. DEALER also agrees to provide applicable required customer
notifications and disclosures as prescribed by repair or replacement
laws or other consumer laws or regulations.
XVI. SERVICE AND PARTS OPERATIONS
A. ORGANIZATION AND STANDARDS
DEALER agrees to organize and maintain an adequate, stable and trained
service and parts organization of the highest quality, including a
qualified Service Manager and a qualified Parts Manager, and a number
of competent customer relations, service and parts personnel
sufficient to meet the needs of the marketplace in the reasonable
opinion of DISTRIBUTOR. DEALER's personnel will meet the educational,
management and technical training standards established by
DISTRIBUTOR.
B. SERVICE EQUIPMENT AND SPECIAL TOOLS
DEALER agrees to acquire and properly maintain adequate service
equipment and such special service tools and instruments as are
specified by DISTRIBUTOR.
C. PARTS INVENTORY
DEALER and DISTRIBUTOR recognize that the owners and users of Toyota
Motor Vehicles may reasonably expect that DEALER will have Genuine
Toyota Parts or Accessories immediately available for purchase or
installation. DEALER, therefore, agrees to carry in stock at all
times during the term of this Agreement an adequate inventory of
Genuine Toyota Parts or Accessories, as listed in DISTRIBUTOR's
current inventory guide, to enable DEALER to meet its customers' needs
and to fulfill its service responsibilities under this Agreement.
-10-
<PAGE>
D. ASSISTANCE PROVIDED BY DISTRIBUTOR
1. SERVICE TRAINING ASSISTANCE
To Assist DEALER in fulfilling its service and parts
responsibilities under this Agreement, DISTRIBUTOR agrees to
offer general and specialized service and parts training programs
for the benefit and use of DEALER's service and parts
organizations. When requested by DISTRIBUTOR, DEALER's personnel
shall participate in such programs at DEALER's expense.
2. MANUALS AND MATERIALS
DISTRIBUTOR agrees to make available to DEALER, at DEALER's
expense, copies of such dealer manuals, catalogs, bulletins,
publications and technical data as DISTRIBUTOR shall deem to be
necessary for the needs of DEALER's service and parts
organization. DEALER shall be responsible for keeping such
manuals, publications and data current and available for
consultation by its employees.
3. FIELD PERSONNEL ASSISTANCE
To assist DEALER in handling its parts and service
responsibilities under this Agreement, DISTRIBUTOR agrees to make
available qualified field parts and service personnel who will,
from time to time, advise and counsel DEALER on parts and
service-related subjects, including parts and service policies,
product quality, technical adjustments, repair and replacement of
product components, customer relations, warranty administration,
service and parts merchandising, and personnel/management
training.
XVII. CUSTOMER SATISFACTION RESPONSIBILITIES
A goal of DISTRIBUTOR and DEALER is to be recognized as marketing the
finest products and providing the best service in the automobile
industry. The Toyota name should be synonymous with the highest level
of customer satisfaction. DEALER will take all reasonable steps to
ensure that each customer is completely satisfied with his or her
Toyota Products and the services and practices of Dealer.
-11-
<PAGE>
Whenever requested by DISTRIBUTOR, DEALER shall:
A. Designate an employee responsible for customer satisfaction
commensurate with the needs of the marketplace; and
B. Provide a detailed written plan of DEALER's customer satisfaction
program to DISTRIBUTOR and implement such program on a continuous
basis. This plan shall include an ongoing system for:
1. Emphasizing customer satisfaction to all DEALER's employees;
2. Training DEALER's employees, including participation in
DISTRIBUTOR's customer satisfaction training at DEALER's
expenses; and
3. Responding immediately to, and resolving promptly, requests for
customer assistance, and conveying to customers that DEALER is
committed to the highest possible level of customer satisfaction.
XVIII. DEALERSHIP FACILITIES AND IDENTIFICATION
A. FACILITIES
1. In order for DISTRIBUTOR to establish an effective network of
authorized Toyota dealers, DEALER shall provide, and at all times
maintain, attractive dealership facilities at the Approved
Location(s) that satisfy the image, size, layout, interior
design, color, equipment, identification and other factors
established by DISTRIBUTOR. DEALER shall meet the minimum
facility standards and policies established by DISTRIBUTOR which
can be amended from time to time.
2. To assist DEALER in planning, building, or remodeling dealership
facilities, DISTRIBUTOR will provide DEALER upon request, a
TOYOTA DEALER FACILITY PLANNER and will assist in identifying
sources from which DEALER may purchase architectural materials
and furnishings that meet Toyota standards and guidelines. In
addition, representatives of DISTRIBUTOR will be available to
DEALER from time to time to counsel and advise DEALER in
connection with DEALER's planning and equipping the dealership
premises.
B. DEALER'S OPERATING HOURS
DEALER agrees to keep all of its dealership operations open for
business during all days and
-12-
<PAGE>
hours that are customary and lawful for such operations in the
community or locality in which DEALER is located and in accordance
with industry standards. The dealership shall not be considered open
unless all sales, service and parts operations are open to the public
and dealership personnel are present to assist customers.
C. SIGNS
Subject to applicable governmental ordinances, regulations, and
statutes, DEALER agrees to comply with IMPORTER's signage program and
to display only standard authorized signage which conforms to the
approved corporate identification program.
D. USE OF TOYOTA MARKS
1. USE BY DEALER
DISTRIBUTOR grants to DEALER the non-exclusive privilege of
displaying or otherwise using authorized Toyota Marks as
specified in the TOYOTA BRAND GRAPHIC STANDARDS MANUALS at the
Approved Location(s) in connection with the selling or servicing
of Toyota Products.
DEALER further agrees that it promptly shall discontinue the
display and use of any Toyota Marks, or shall change the manner
in which any Toyota Marks are displayed and used, when for any
reason it is requested to do so by DISTRIBUTOR. DEALER may use
the Toyota Marks as specified in the TOYOTA BRAND GRAPHIC
STANDARDS MANUAL only at Approved Location(s) and for such
purposes as are specified in this Agreement. DEALER agrees that
such Toyota Marks may be used as part of the name under which
DEALER's business is conducted only with the prior written
approval of DISTRIBUTOR.
DEALER shall discontinue any advertising that DISTRIBUTOR may
find to be injurious to DISTRIBUTOR's business or reputation or
the Toyota Marks.
2. DISCONTINUANCE OF USE
Upon termination, non-renewal, or expiration of this Agreement,
DEALER agrees that it shall immediately:
a. Discontinue the use of Toyota Marks, or any semblance of
same, including without limitation, the use of all
stationery,
-13-
<PAGE>
telephone directory listing, and other printed material
referring in any way to Toyota or bearing any Toyota Mark;
b. Discontinue the use of the Toyota Marks, or any semblance of
same, as part of its business or corporate name, and file a
change or discontinuance of such name with appropriate
authorities;
c. Remove all product signs bearing Toyota Marks. Product
signs owned by DEALER shall be removed and disposed of at
DEALER's sole cost and expense. Product signs leased to
DEALER by or through IMPORTER or its representative shall be
removed from DEALER's premises at IMPORTER's sole cost and
expense. DEALER hereby grants permission for DISTRIBUTOR to
enter upon DEALER's premises to remove signs leased to
DEALER by IMPORTER;
d. Cease representing itself as an authorized Toyota Dealer;
and
e. Refrain from any action, including without limitation, any
advertisement, statement or implication that it is
authorized to sell or distribute Toyota Products.
In the event DEALER fails to comply promptly with the terms and
conditions of this Section, DISTRIBUTOR shall have the right to
enter upon DEALER's premises and remove, without notice or
liability, all such product signs and identification bearing the
Toyota Marks. DEALER agrees that it shall reimburse DISTRIBUTOR
for any costs and expenses incurred in the removal of signs owned
by DEALER bearing the Toyota Marks, including reasonable attorney
fees.
XIX. EVALUATION OF DEALER'S PERFORMANCE
DEALER acknowledges the importance of its overall performance in
relation to the purposes and objectives of this Agreement.
DISTRIBUTOR will periodically evaluate DEALER's performance of its
responsibilities in the areas of sales, service and parts, facilities
and customer satisfaction, based upon such reasonable criteria as
DISTRIBUTOR may establish from time to time. DISTRIBUTOR agrees to
review all such evaluations with DEALER and will provide DEALER a copy
thereof. Where performance is below acceptable standards of
DISTRIBUTOR. DEALER agrees to take prompt action to improve its
performance and, if requested by DISTRIBUTOR, to notify DISTRIBUTOR in
-14-
<PAGE>
writing of its detailed plans and timetables for accomplishing those
improvements.
A. SALES PERFORMANCE EVALUATION
Pursuant to Section XIV herein, DISTRIBUTOR will evaluate DEALER's
sales performance under criteria established by DISTRIBUTOR, which may
include, but is not limited to, the achievement of reasonable sales
objectives as DISTRIBUTOR may establish; comparisons of DEALER's sales
and/or registrations to those of comparable Toyota dealers and other
line makes within DEALER's Primary Market Area or such area(s) which
DISTRIBUTOR believes is a reasonable basis for comparison; sales
performance trends over a reasonable period of time; and the manner in
which DEALER has conducted its sales and marketing operations.
B. SERVICE PERFORMANCE EVALUATION
Pursuant to Sections XV and XVI herein, DISTRIBUTOR will evaluate
DEALER's service performance in such areas as, without limitation,
warranty management, compliance with the TOYOTA WARRANTY POLICY AND
PROCEDURES MANUAL, service management, service operating procedures,
service staffing and training, administration, service facilities and
equipment, new vehicle pre-delivery service, customer handling and
customer retention.
C. PARTS PERFORMANCE EVALUATION
Pursuant to Section XVI herein, DISTRIBUTOR will evaluate DEALER's
parts performance in such areas as, without limitation, general parts
management, parts operating procedures, parts staffing and training,
parts facilities, parts inventory management, parts sales, accessory
sales, parts merchandising and parts availability to customers.
D. CUSTOMER SATISFACTION PERFORMANCE EVALUATION
Pursuant to Section XVII herein, DISTRIBUTOR will evaluate DEALER's
performance of its responsibilities in the area of customer
satisfaction based on the following considerations:
1. DISTRIBUTOR will provide DEALER with customer satisfaction
reports or such other equivalent data as will permit DEALER to
assess its performance and maintain the highest level of customer
satisfaction. DEALER agrees to review with its employees on a
regular basis the results of the
-15-
<PAGE>
customer satisfaction reports or other data it receives.
2. DEALER agrees to develop, implement and review with DISTRIBUTOR
specific action plans for improving results in the event that
DEALER is below the average customer satisfaction levels for
other Toyota dealers in such areas that DISTRIBUTOR believes are
a reasonable basis for comparison. DEALER shall respond on a
timely basis to requests from DISTRIBUTOR to take action on
unsatisfactory customer satisfaction matters and to commit
necessary resources to remedy deficiencies reasonably specified
by DISTRIBUTOR, and DEALER shall remedy those deficiencies.
DISTRIBUTOR reserves the right to establish reasonable, uniform
criteria to be used to evaluate DEALER.
E. DEALERSHIP FACILITIES EVALUATION
Pursuant to Section XVIII, herein, DISTRIBUTOR will evaluate DEALER's
performance of its responsibilities in the area of dealership
facilities.
XX. CAPITAL, CREDIT, RECORDS AND UNIFORM SYSTEMS
A. NET WORKING CAPITAL
The amount and structure of the net working capital required to
properly conduct the business of DEALER depends upon many factors,
including the nature, size and volume of DEALER's vehicle sales,
service and parts operations. Therefore, DEALER agrees to establish
and maintain actual net working capital in an amount not less than the
minimum net working capital specified in a separate Minimum Net
Working Capital Agreement executed by DEALER and DISTRIBUTOR
concurrently with this Agreement. If, either because of changed
conditions or because DISTRIBUTOR adopts a new net working capital
formula, DISTRIBUTOR shall have the right to revise DEALER's minimum
net working capital requirement to be used in DEALER's operation. If
so revised, DEALER agrees to enter into the revised Minimum Net
Working Capital Agreement and to meet the new standard within a
reasonable period of time as established by DISTRIBUTOR.
B. FLOORING LINE
DEALER recognizes that its ability to fulfill its obligations under
this Agreement is dependent upon its maintenance of flooring which is
sufficient to sustain its ongoing operations. DEALER agrees to
-16-
<PAGE>
obtain and maintain at all times a confirmed and adequate flooring
line with a bank or financial institution or other method of financing
acceptable to DISTRIBUTOR to enable DEALER to perform its obligations
pursuant to this Agreement. Subject to the foregoing obligations,
DEALER is free to do its financing business, wholesale, retail or
both, with whomever it chooses and to the extent it desires.
C. PAYMENT TERMS AND SETTLEMENT OF ACCOUNTS
All monies or accounts due DEALER from DISTRIBUTOR will be considered
net of DEALER's obligations to DISTRIBUTOR on DEALER's parts/open
account. DISTRIBUTOR may deduct or offset any amounts due or to become
due from DEALER to DISTRIBUTOR, or any amounts held by DISTRIBUTOR,
from or against any sums or accounts due or to become due from
DISTRIBUTOR to DEALER. Payments by DEALER to DISTRIBUTOR shall be
made by electronic bank draft or in any other manner prescribed by
DISTRIBUTOR and shall be applied against DEALER's indebtedness in
accordance with DISTRIBUTOR's policies and practices. DISTRIBUTOR
shall have the right to apply payments received from DEALER to any
amount owed to DISTRIBUTOR, in DISTRIBUTOR's sole discretion. All
obligations owed by DEALER to DISTRIBUTOR shall be due and payable
when billed, unless other terms are established by DISTRIBUTOR in
writing.
Under no circumstances will DISTRIBUTOR enter into a new Agreement
with a proposed transferee unless DEALER first makes arrangements
acceptable to DISTRIBUTOR to satisfy any outstanding obligations to
DISTRIBUTOR on DEALER's parts/open account.
D. UNIFORM ACCOUNTING SYSTEM
DEALER agrees to maintain its financial books and records in
accordance with the TOYOTA DEALER ACCOUNTING MANUAL, as amended from
time to time by DISTRIBUTOR. In addition, DEALER shall furnish to
DISTRIBUTOR, who may also furnish it to IMPORTER and FACTORY, complete
and accurate financial and operating information by the tenth (10th)
of each month in a format prescribed by DISTRIBUTOR. This information
shall include, without limitation, a complete and accurate financial
and operating statement covering the preceding month and calendar
year-to-date operations, including any adjusted year-end statements,
showing the true condition of DEALER's business. All such information
shall be furnished by DEALER to DISTRIBUTOR via DISTRIBUTOR's
-17-
<PAGE>
electronic communications network and/or in hard copy and/or in any
other manner designated by DISTRIBUTOR.
E. RECORDS MAINTENANCE
DEALER agrees to keep complete, accurate and current records regarding
its sale, lease and servicing of Toyota Products for a minimum of FIVE
(5) years, regardless of any retention period required by any
governmental entity. DEALER shall prepare, keep current and retain
records in support of requests for reimbursement for warranty and
policy work performed by DEALER in accordance with the IMPORTER's
TOYOTA WARRANTY POLICY AND PROCEDURES MANUAL.
F. EXAMINATION OF DEALERSHIP ACCOUNTS AND RECORDS
DISTRIBUTOR, in its sole discretion, without notice and for any reason
whatsoever, shall have the right during regular business hours to
inspect DEALER's facilities and to examine, audit and to reproduce all
records, accounts and supporting data relating to the operations of
DEALER, including without limitation, sales, sales reporting, service
and repair of Toyota Products by DEALER. If requested by DEALER,
DISTRIBUTOR agrees to review any report with DEALER and to provide a
copy of any report of the examination or audit of DEALER.
G. TAXES
DEALER shall be responsible for and duly pay all taxes of any kind,
including, but not limited to, sales taxes, use taxes, excise taxes
and other governmental municipal charges imposed, levied or based upon
the sale of Toyota Products by DEALER, and shall maintain accurate
records of the same.
H. CONFIDENTIALITY
Except as provided in Sections XX(D) above and XXI(A), below,
DISTRIBUTOR agrees that it shall not provide any financial
information, documents or other information submitted to it by DEALER
to any third party, other than subsidiary and parent corporations of
DISTRIBUTOR, unless authorized by DEALER, required by law, required to
effectuate the terms and conditions of this Agreement, or required to
generate composite or comparative data for analytical purposes.
DEALER agrees to keep confidential and not to disclose, directly or
indirectly, any information that DISTRIBUTOR designates as
confidential.
-18-
<PAGE>
I. INFORMATION COMMUNICATION SYSTEMS
To facilitate the accurate and prompt reporting of such relevant
dealership operational and financial information as DISTRIBUTOR may
require, DEALER agrees to install and maintain electronic
communication processing facilities which are compatible with and
which will facilitate the transmission and reception of such
information on the electronic communications network utilized by
DISTRIBUTOR.
J. SALES REPORTING
DEALER agrees to report accurately to DISTRIBUTOR, together with such
information as DISTRIBUTOR may reasonably require, the delivery of
each new motor vehicle to a purchaser by the end of the day in which
the vehicle is delivered to the purchaser thereof; and to furnish
DISTRIBUTOR with such other reports in such form as DISTRIBUTOR may
reasonably require from time to time.
XXI. RIGHT OF FIRST REFUSAL OR OPTION TO PURCHASE
A. RIGHTS GRANTED
If a proposal to sell the dealership's assets or transfer its
ownership is submitted by DEALER to DISTRIBUTOR, or in the event of
the death of the majority Owner of DEALER, DISTRIBUTOR has a right of
first refusal or option to purchase the dealership assets or stock,
including any leasehold interests or realty. DISTRIBUTOR's exercise
of its right or option under this Section supersedes any right or
attempt by DEALER to transfer its interest in, or ownership of, the
dealership. DISTRIBUTOR's right or option may be assigned by it to
any third party and DISTRIBUTOR hereby guarantees the full payment to
DEALER of the purchase price by such assignee. DISTRIBUTOR may
disclose the terms of any pending buy/sell agreement and any other
relevant dealership performance information to any potential assignee.
DISTRIBUTOR's rights under this Section will be binding on and
enforceable against any successor in interest of DEALER or purchaser
of DEALER's assets or stock.
B. EXERCISE OF DISTRIBUTOR'S RIGHTS
DISTRIBUTOR shall have thirty (30) days from the following events
within which to exercise its right of first refusal or option to
purchase: (i) DISTRIBUTOR's receipt of all data and documentation
customarily required by it to evaluate a proposed
-19-
<PAGE>
transfer of ownership; (ii) DISTRIBUTOR's receipt of written notice
from DEALER of the death of the majority Owner of DEALER; or (iii)
DISTRIBUTOR's disapproval of any application submitted by an Owner's
heirs pursuant to Section XXII. DISTRIBUTOR'S exercise of its right
of first refusal under this Section shall neither be dependent upon
nor require its prior consideration of or refusal to approve the
proposed buyer or transferee.
C. RIGHT OF FIRST REFUSAL
If DEALER has entered into a bona fide written agreement to sell its
dealership stock or assets, DISTRIBUTOR's right under this Section is
a right of first refusal, enabling DISTRIBUTOR to assume the buyer's
rights and obligations under such agreement, and to terminate this
Agreement and all rights granted DEALER. Upon DISTRIBUTOR's request,
DEALER agrees to provide other documents relating to the proposed
transfer and any other information which DISTRIBUTOR deems
appropriate, including, but not limited to, those reflecting other
agreements or understanding between the parties to the buy/sell
agreement. Refusal to provide such documentation or to state in
writing that no such documents exist shall create the presumption that
the buy/sell agreement is not a bona fide agreement.
D. OPTION TO PURCHASE
In the event of the death of the majority Owner of DEALER or if DEALER
submits a proposal which DISTRIBUTOR reasonably believes is not bona
fide, DISTRIBUTOR has the option to purchase the principal assets of
DEALER utilized in the dealership business, including real estate and
leasehold interests, and to cancel this Agreement and the rights
granted DEALER. The terms and conditions of the purchase of the
dealership assets will be determined by good faith negotiations
between the parties. If an agreement cannot be reached, those terms
will be exclusively determined by arbitration in accordance with the
commercial arbitration rules of the American Arbitration Association.
The site of the arbitration shall be the office of the American
Arbitration Association in the locality of DISTRIBUTOR's principal
place of business.
E. DEALER'S OBLIGATIONS
Upon DISTRIBUTOR's exercise of its right or option and tender of
performance hereunder, DEALER shall forthwith transfer the affected
real property by
-20-
<PAGE>
warranty deed or its equivalent, conveying marketable title free and
clear of all liens, claims, mortgages, encumbrances, interests and
occupancies. The warranty deed or its equivalent shall be in proper
form for recording, and DEALER shall deliver complete possession of
the property and deed at the time of closing. DEALER shall also
furnish to DISTRIBUTOR all copies of any easements, licenses or other
documents affecting the property or dealership operations and shall
assign any permits or licenses that are necessary or desirable for the
use of or appurtenant to the property or the conduct of such
dealership operations. DEALER shall also forthwith execute and
deliver to DISTRIBUTOR instruments satisfactory to DISTRIBUTOR
conveying title to all affected personal property and leasehold
interests involved in the transfer or sale to DISTRIBUTOR. If any
personal property is subject to any lien or charge of any kind, DEALER
agrees to procure the discharge and satisfaction thereof prior to the
closing of sale of such property to DISTRIBUTOR.
F. NO APPLICABILITY TO NOMINATED SUCCESSOR
Section XXI shall not apply to any DEALER whose proposed transfer of
assets or ownership is to a candidate who is currently approved by
DISTRIBUTOR to be DEALER's nominated successor pursuant to Section
XXII(C).
XXII. SUCCESSION RIGHTS UPON DEATH OR INCAPACITY
A. SUCCESSION TO OWNERSHIP AFTER DEATH OF OWNER
In the event that Owner dies and his or her interest in Dealership
passes directly to any person or persons ("Heirs") who wish to succeed
to Owner's interest, then Owner's legal representative must notify
DISTRIBUTOR within sixty (60) days of the death of the Owner of such
Heir's or Heirs' intent to succeed Owner. The legal representative
also must then designate a proposed General Manager for DISTRIBUTOR
approval. The effect of such notice from Owner's legal representative
will be to suspend any notice of termination provided for in Section
XXIII(B)(4) issued hereunder.
Upon delivery of such notice, Owner's legal representative shall
immediately request any person(s) identified by it as intending to
succeed Owner and the designated candidate for General Manager to
submit an application and to provide all personal and financial
information that DISTRIBUTOR may reasonably and customarily require in
connection
-21-
<PAGE>
with its review of such applications. All requested information must
be provided promptly to DISTRIBUTOR and in no case later than thirty
(30) days after receipt of such request from Owner's legal
representative. Upon the submission of all requested information,
DISTRIBUTOR agrees to review such application(s) pursuant to the then
current criteria generally applied by DISTRIBUTOR in qualifying dealer
Owners and/or General Managers. DISTRIBUTOR shall either approve or
disapprove the application(s) within ninety (90) days of full
compliance with all DISTRIBUTOR's requests for information. If
DISTRIBUTOR approves the application(s), it shall offer to enter into
a new Toyota Dealer Agreement with Owner's Heir(s) in the form then
currently in use, subject to such additional conditions and for such a
term as DISTRIBUTOR deems appropriate.
In the event that DISTRIBUTOR does not approve the designated Heir(s)
or designated candidate for General Manager, or if the Owner's legal
representative withdraws his or her notice of the Heir(s) intent to
succeed as Owner(s), or if the legal representative or any proposed
owners or General Manager fails to timely provide the required
information, DISTRIBUTOR may reinstate or issue a notice of
termination. Nothing in this Section shall constitute a waiver of
DISTRIBUTOR's right under Section XXI to exercise its right of first
refusal or option to purchase.
B. INCAPACITY OF OWNER
The parties agree that, as used herein, incapacity shall refer to any
physical or mental ailment that, in DISTRIBUTOR's opinion, adversely
affects Owner's ability to meet his or her obligations under this
Agreement. DISTRIBUTOR may terminate this Agreement when an
incapacitated Owner also is the General Manager identified herein.
Prior to the effective date of any notice of termination, an
incapacitated Owner who is also the General Manager, or his or her
legal representative, may propose a new candidate for the position of
General Manager. Such proposal shall be in writing and shall suspend
any pending notice of termination until DISTRIBUTOR advises DEALER of
its approval or disapproval of the new candidate. Upon receipt of
such notice, DISTRIBUTOR and DEALER shall follow the qualification
procedures set forth in subsection (A) above.
-22-
<PAGE>
C. NOMINATION OF SUCCESSOR PRIOR TO DEATH OR INCAPACITY OF OWNER
An Owner owning a majority of DEALER's stock may nominate a candidate
to assume ownership and/or the position of General Manager of the
dealership upon his or her death or incapacity.
As soon as practicable after such nomination, DISTRIBUTOR will request
such personal and financial information from the nominated Owner
and/or General Manager candidate as it reasonably and customarily may
require in evaluating such candidates. DISTRIBUTOR shall apply
criteria then currently used by DISTRIBUTOR in qualifying Owners
and/or General Managers of authorized dealers. Upon receipt of all
requested information, DISTRIBUTOR shall either approve or disapprove
such candidate. Approval by DISTRIBUTOR will not be unreasonably
withheld. In the event of the death or incapacity of the nominating
Owner, DISTRIBUTOR will enter into a new Toyota Dealer Agreement with
the approved nominee of a length to be determined by DISTRIBUTOR.
DISTRIBUTOR agrees that DEALER may renominate the candidate after the
expiration of this Agreement, and DISTRIBUTOR will approve such
nomination provided: (1) DISTRIBUTOR and DEALER have entered into a
new Toyota Dealer Agreement; and (2) the proposed candidate continues
to comply with the then current criteria used by DISTRIBUTOR in
qualifying such candidates. If DISTRIBUTOR does not initially qualify
the candidate, DISTRIBUTOR agrees to review the reason(s) for its
decision with Owner. Owner is free at any time to renew its
nomination. However, in such instances, the candidate must again
qualify pursuant to the then current criteria. Owner may, by written
notice, withdraw a nomination at any time, even if DISTRIBUTOR has
previously qualified said candidate.
XXIII. TERMINATION
A. VOLUNTARY TERMINATION BY DEALER
DEALER may voluntarily terminate this Agreement at any time by written
notice to DISTRIBUTOR. Termination shall be effective thirty (30)
days after receipt of the notice by DISTRIBUTOR, unless otherwise
mutually agreed in writing.
-23-
<PAGE>
B. TERMINATION FOR CAUSE
1. IMMEDIATE TERMINATION
DEALER and DISTRIBUTOR agree that the following conduct is within
DEALER's control and is so contrary to the goals, purposes and
objectives of this Agreement as to warrant its immediate
termination. Accordingly, DEALER agrees that if it engages in
any of the following types of conduct, DISTRIBUTOR shall have the
right to terminate this Agreement immediately:
a. If DEALER fails to conduct any customary dealership
operations for seven consecutive business days during
DEALER's customary business hours, except in the event such
closure or cessation of operation is caused by some physical
event beyond the control of DEALER, such as fires, floods,
earthquakes, or other acts of God;
b. If DEALER becomes insolvent, or files any petition under
bankruptcy law, or executes an assignment for the benefit of
creditors, or appoints a receiver or trustee or another
officer having similar powers is appointed for DEALER and is
not removed within thirty (30) days from his appointment
thereto or there is any levy under attachment or execution
or similar process which is not vacated or removed by
payment or bonding within ten (10) days;
c. If DEALER, or any Owner or officer or parent company of
DEALER, is convicted of any felony;
d. If DEALER or any Owner, officer or General Manager of DEALER
makes any material misrepresentation to DISTRIBUTOR,
including, but not limited to, any misrepresentations made
by DEALER to DISTRIBUTOR in applying for this Agreement or
for approval as Owner or General Manager of DEALER;
e. If DEALER fails to obtain or maintain any license, permit or
authorization necessary for the conduct by DEALER of his or
her business pursuant to this Agreement, or such license,
permit or authorization is suspended or revoked; or
f. If DEALER makes any attempted or actual sale, transfer or
assignment by DEALER of this
-24-
<PAGE>
Agreement or any of the rights granted DEALER hereunder, or
upon any attempted or actual transfer, assignment or
delegation by DEALER of any of the responsibilities assumed
by it under this Agreement without the prior written
approval of DISTRIBUTOR.
2. TERMINATION UPON SIXTY DAYS NOTICE
The following conduct violates the terms and conditions of this
Agreement and, if DEALER engages in such conduct, DISTRIBUTOR
shall have the right to terminate this Agreement upon sixty (60)
days notice:
a. Appointment of a new General Manager without the prior
written approval of DISTRIBUTOR;
b. Conducting, directly or indirectly, any Toyota dealership
operation at any location other than at the Approved
Location(s);
c. Failure of DEALER to make any payments to DISTRIBUTOR when
due;
d. Failure of DEALER to establish or maintain during the
existence of this Agreement the required net working capital
or adequate flooring line;
e. Any dispute, disagreement or controversy among Owners,
partners, managers, officers or stockholders of DEALER that,
in the reasonable opinion of DISTRIBUTOR, adversely affects
the ownership, operation, management, business, reputation
or interests of DEALER or DISTRIBUTOR;
f. Impairment of the reputation or financial standing of
DEALER, Owner, officer or parent company subsequent to the
execution of this Agreement;
g. Refusal to permit DISTRIBUTOR to examine or audit DEALER's
accounting records as provided herein upon receipt by DEALER
from DISTRIBUTOR of written notice requesting such
permission or information;
h. Failure of DEALER to furnish all required sales or financial
information and related supporting information in a timely
manner;
-25-
<PAGE>
i. Any civil, criminal or administrative liability found
against DEALER or any Owner, officer or parent company of
DEALER for any automotive-related matter which adversely
affects the ownership, operation, management, reputation,
business or interests of DEALER, or impairs the goodwill
associated with the Toyota Marks; or
j. Breach or violation by DEALER of any other term or provision
of this Agreement.
3. TERMINATION FOR FAILURE OF PERFORMANCE
If, upon evaluation of DEALER's performance pursuant to Section
XIX, herein, DISTRIBUTOR concludes that DEALER has failed to
perform adequately its sales, service, parts or customer
satisfaction responsibilities or to provide adequate dealership
facilities, DISTRIBUTOR shall notify DEALER in writing of such
failure(s) and will endeavor to review promptly with DEALER the
nature and extent of such failure(s), and will grant DEALER 180
days or such other period as may be required by law to correct
such failure(s). If DEALER fails or refuses to correct such
failure(s) or has not made substantial progress towards remedying
such failure(s) at the expiration of such period, DISTRIBUTOR may
terminate this Agreement upon sixty (60) days notice or such
other notice as may be required by law. Section XXIII(B)(3)
shall not be applicable where DEALER has relocated without
DISTRIBUTOR's approval.
4. TERMINATION UPON DEATH OR INCAPACITY
DISTRIBUTOR may terminate this Agreement in the event of the
death of an Owner or upon the incapacity of any Owner who is also
the General Manager identified herein, upon written notice to
DEALER and/or such Owner's legal representative. Termination
upon either of these events shall be effective ninety (90) days
from the date of such notice.
C. NOTICE OF TERMINATION
Any notice of termination under this Agreement shall be in writing and
shall be mailed to DEALER or its General Manager at DEALER's Approved
Location by certified mail, return receipt requested, or shall be
delivered in person to the dealership. Such notice shall be effective
upon the date of receipt. DISTRIBUTOR need not state all grounds on
which it
-26-
<PAGE>
relies in its termination of DEALER, and shall have the right to amend
such notice as appropriate. DISTRIBUTOR's failure to refer to any
additional grounds for termination shall not constitute a waiver of
its right later to rely upon such grounds.
D. CONTINUANCE OF BUSINESS RELATIONS
Upon receipt of any notice of termination or non-renewal, DEALER
agrees to conduct itself and its operation until the effective date of
termination or non-renewal in a manner that will not injure the
reputation or goodwill of the Toyota Marks or DISTRIBUTOR.
E. REPURCHASE PROVISIONS
1. DISTRIBUTOR'S OBLIGATIONS
Upon the expiration or termination of this Agreement (other than
pursuant to an approved agreement to sell the dealership business
or assets or to otherwise transfer the ownership of DEALER),
DISTRIBUTOR shall repurchase from DEALER the following:
a. New, unused, never titled, unmodified, undamaged, current
model year Toyota Motor Vehicles with less than 100 miles,
then unsold in DEALER's inventory. The prices of such Motor
Vehicles shall be the same as those at which they were
originally purchased by DEALER, less all prior refunds or
other allowances made by DISTRIBUTOR to DEALER with respect
thereto.
b. New, unused and undamaged Toyota parts and accessories,
contained in the original packaging, then unsold in DEALER's
inventory that are in good and saleable condition. The
prices for such parts and accessories shall be the prices
last established by DISTRIBUTOR for the sale of identical
parts or accessories to dealers in the area in which DEALER
is located.
c. Special service tools recommended by DISTRIBUTOR and then
owned by DEALER and that are especially designed for
servicing Toyota Motor Vehicles. The prices for such
special service tools will be the price paid by DEALER less
appropriate depreciation, or such other price as the parties
may negotiate.
-27-
<PAGE>
d. Signs that DISTRIBUTOR has recommended for identification of
DEALER and are owned by DEALER. The price of such signs
shall be the price paid by DEALER less appropriate
depreciation or such other price as the parties may
negotiate.
2. RESPONSIBILITIES OF DEALER
DISTRIBUTOR's obligations to repurchase the items set forth in
this Section are contingent upon DEALER fulfilling the following
obligations:
a. Within thirty (30) days after the date of expiration or the
effective date of termination of this Agreement, DEALER
shall deliver or mail to DISTRIBUTOR a detailed inventory of
all items referred to in this Section which it requests
DISTRIBUTOR to repurchase and shall certify that such list
is true and accurate.
b. DEALER shall be entitled to request repurchase of only those
items which it purchased from DISTRIBUTOR, unless
DISTRIBUTOR agrees otherwise.
c. Products and special service tools to be repurchased by
DISTRIBUTOR from DEALER shall be delivered by DEALER to
DISTRIBUTOR's place of business at DEALER's expense.
d. DEALER will execute and deliver to DISTRIBUTOR instruments
satisfactory to DISTRIBUTOR conveying good and marketable
title to the aforesaid items to DISTRIBUTOR. If such items
are subject to any lien or charge of any kind, DEALER will
procure the discharge in satisfaction thereof prior to their
repurchase by DISTRIBUTOR.
e. DEALER will remove, at its own expense, all signage bearing
Toyota marks which it owns from DEALER's Approved
Location(s) before it is eligible for payment for any
repurchased items pursuant to Section XXIII(E).
3. PAYMENT BY DISTRIBUTOR
DISTRIBUTOR will pay DEALER for such items as DEALER may request
be repurchased and that qualify hereunder as soon as practicable
upon DEALER's compliance with the obligations set forth herein
and upon computation of any outstanding
-28-
<PAGE>
indebtedness of DEALER to DISTRIBUTOR. DISTRIBUTOR shall have
the right to offset from any amounts due to DEALER hereunder the
total sum of DEALER's outstanding indebtedness to DISTRIBUTOR.
If DEALER disagrees with DISTRIBUTOR's valuation of any item
herein, and DEALER and DISTRIBUTOR have not resolved their
disagreement within sixty (60) days of the effective date of
termination or expiration of this Agreement, DISTRIBUTOR shall
pay to DEALER the amount to which it reasonably believes DEALER
is entitled. DEALER's exclusive remedy to recover any additional
sums that it believes is due under this Section shall be by
resort to any existing Alternative Dispute Resolution program
established by DISTRIBUTOR that is binding on DISTRIBUTOR. If no
Alternative Dispute Resolution program is then existing, DEALER's
exclusive remedy shall be by resort to arbitration in accordance
with the commercial arbitration rules of the American Arbitration
Association (AAA). The site of the arbitration shall be the
office of the AAA in the locality of DISTRIBUTOR's principal
place of business.
XXIV. MANAGEMENT OF DISPUTES
A. ALTERNATIVE DISPUTE RESOLUTION PROGRAMS
DISTRIBUTOR and DEALER acknowledge that disputes involving the
performance of this Agreement may from time to time arise that cannot
be resolved at the DISTRIBUTOR level. In order to minimize the
effects of such disputes on their business relationship, the parties
agree to participate in such Alternative Dispute Resolution programs,
including mediation, as may be established by DISTRIBUTOR in its sole
discretion.
It is expressly understood that, unless otherwise specified in this
Agreement, the results of any Alternative Dispute Resolution program
will not be binding upon DEALER, but shall be binding upon
DISTRIBUTOR. The parties' commitment to support and participate in
Alternative Dispute Resolution programs specifically is not a waiver
of DEALER's right to later resort to litigation before any judicial or
administrative forum.
-29-
<PAGE>
B. APPLICABLE LAW
This Agreement shall be governed by and construed according to
the laws of the state in which DEALER is located.
C. MUTUAL RELEASE
Each party hereby releases the other from any and all claims and
causes of action that it may have against the other for money
damages arising from any event occurring prior to the date of
execution of this Agreement, except for any accounts payable by
one party to the other as a result of the purchase of any Toyota
Products, audit adjustments or reimbursement for any services.
This release does not extend to claims which either party does
not know or reasonably suspect to exist in its favor at the time
of the execution of this Agreement.
XXV. DEFENSE AND INDEMNIFICATION
A. DEFENSE AND INDEMNIFICATION BY DISTRIBUTOR
DISTRIBUTOR agrees to assume the defense of DEALER and to
indemnify and hold harmless DEALER, expressly conditioned and
subject to all provisions of Section XXV(C), against loss in any
lawsuit or claim naming DEALER for bodily injury, property damage
or breach of warranty caused solely by an alleged defect in
design, manufacture or assembly of a Toyota Product (except for
tires not manufactured by FACTORY) sold by DISTRIBUTOR to DEALER
for resale that has not been altered, converted or modified by or
for DEALER, provided that the alleged defect could not reasonably
have been discovered by DEALER during pre-delivery inspection or
service or installation of Toyota Products, less any offset.
DISTRIBUTOR agrees to defend, to indemnify and hold harmless
DEALER for alleged misrepresentations, misleading statements,
unfair or deceptive trade practices of DISTRIBUTOR, IMPORTER or
FACTORY or any substantial damage to a Toyota Product purchased
by DEALER from DISTRIBUTOR which was improperly repaired by
DISTRIBUTOR unless DEALER has been notified of such damage in
writing prior to retail delivery of the affected Toyota Product.
Notwithstanding any provision of this Agreement, DISTRIBUTOR
shall not be required to defend, to indemnify or hold harmless
DEALER against loss resulting from any claim, complaint, or
action alleging DEALER misconduct, including but not limited to,
improper or unsatisfactory service or repair, or
misrepresentations, or any claim of DEALER's unfair
-30-
<PAGE>
or deceptive trade practices or any claim of improper
environmental or work place practices or conditions.
B. DEFENSE AND INDEMNIFICATION BY DEALER
DEALER agrees to assume the defense of DISTRIBUTOR, IMPORTER or
FACTORY and to indemnify and hold them harmless, expressly
conditioned and subject to all provisions of Section XXV(C),
against loss in any lawsuit or claim naming DISTRIBUTOR, IMPORTER
or FACTORY, or their subsidiaries or affiliates, when the claim
or lawsuit directly or indirectly involves any allegations of:
(1) DEALER's alleged failure to comply, in whole or in part, with
any obligation assumed by DEALER pursuant to this Agreement; or
(2) DEALER's alleged negligent or improper repairing or servicing
or installation of a new or used Toyota Motor Vehicle or Toyota
Product, or any loss related to other motor vehicles or
equipment, other than Toyota Motor Vehicles or Products, as may
be sold, serviced, repaired or installed by DEALER; or (3)
DEALER's alleged breach of any contract or warranty other than
that provided by DISTRIBUTOR, IMPORTER or FACTORY; or (4)
DEALER's alleged misleading statements, misrepresentations, or
deceptive or unfair trade practices; or (5) any modification,
conversion or alteration made by or for DEALER to a Toyota
Product, except those made pursuant to the express written
approval and instruction of DISTRIBUTOR, IMPORTER or FACTORY; or
(6) any and all claims arising out of or in any way connected to
the hiring, retention or termination of any person by DEALER,
including but not limited to, claims of employment
discrimination, age, race or sex discrimination or harassment,
wrongful discharge or termination, breach of the covenant of good
faith and fair dealing, breach of contract, interference with
contractual relations, intentional and/or negligent infliction of
emotional distress, defamation, negligent hiring, violations of
or non-compliance with: the Occupational Safety and Health Act,
the Fair Labor Standards Act, or the Employment Retirement Income
and Security Act ("ERISA") or any similar state or local laws.
C. CONDITIONAL DEFENSE AND/OR INDEMNIFICATION
The obligations of the DEALER, DISTRIBUTOR, IMPORTER or FACTORY
to defend, to indemnify and hold harmless are expressly
conditioned and subject to all of the following terms:
1. The party initially requesting defense and/or
indemnification shall make such request in writing
-31-
<PAGE>
and deliver to the other party within twenty (20) days of
service of any legal process or within twenty (20) days of
discovery of facts giving rise to indemnification, whichever
is sooner.
2. The party requesting defense and/or indemnification
covenants, represents and warrants that it, its agents or
employees have not permitted a default judgment to be
entered and have not made any direct or indirect admissions
of liability, and are not aware of any credible evidence to
support any independent claim of liability or lack of unity
of interest. Said party further agrees to cooperate fully
in the defense of such action as may be reasonably required.
3. The party requested to defend and/or indemnify shall have
sixty (60) days from receipt of a request in writing to
conduct an investigation or otherwise determine whether or
not, or under what conditions, it will agree to defend
and/or indemnify.
4. During the tendency of a request for defense and/or
indemnification, and thereafter, the requesting party shall
have a continuing duty to avoid undue prejudice to the other
party and to mitigate damages. The party requesting
indemnification shall protect its own interests until a
decision has been made to assume the defense and/or provide
indemnification.
5. The party accepting the request for defense and/or
indemnification shall have the right to engage and direct
counsel of its own choosing and shall have the obligation to
reimburse the requesting party for all reasonable costs and
expenses, including reasonable attorneys' fees, incurred
prior to such assumption except where the request is made
under the circumstances described in XXV(C)(6), and subject
to the provisions of XXV(C)(9).
6. If subsequent developments in a case, supported by credible
evidence, cause a party to reasonably conclude that the
allegations which initially preclude a request or acceptance
of a request for defense and/or indemnification are
meritless or no longer at issue, then the request may be
retendered.
7. No party shall be required to agree to such a subsequent
request or retender of defense and/or indemnification where
that party would be unduly
-32-
<PAGE>
prejudiced by such delay. Initial acceptance by any party
of defense and/or indemnification is not a waiver of the
right to retender timely.
8. A party agreeing to defend and/or indemnify may make its
written agreement conditioned upon the continued existence
of the state of facts as then known as well as such other
reasonable conditions as may be dictated by the particular
allegations or claims.
9. Any party withdrawing from its agreement to defend and/or
indemnify, shall give timely written notice which shall be
effective upon receipt. The withdrawing party shall be
responsible for all costs and expenses of defense prior to
receipt of notice of withdrawal, except for those reasonable
costs and expenses, including reasonable attorneys' fees,
incurred solely for the benefit of the other party.
10. The defense, indemnification and hold harmless obligations
of this Agreement shall survive the termination of this
Agreement.
XXVI. GENERAL PROVISIONS
A. NOTICES
Except as otherwise specifically provided herein, any notice
required to be given by either party to the other shall be in
writing and delivered personally to the dealership or by
certified mail, return receipt requested, and shall be effective
on the date of receipt. Notices to DEALER shall be directed to
DEALER or its General Manager at DEALER's Approved Location.
Notices to DISTRIBUTOR shall be directed to the General Manager
of DISTRIBUTOR.
B. NO IMPLIED WAIVERS
The failure of either party at any time to require performance by
the other party of any provision herein shall in no way affect
the right of such party to require such performance at any time
thereafter, nor shall any waiver by any party of a breach of any
provision herein constitute a waiver of any succeeding breach of
the same or any other provision, nor constitute a waiver of the
provision itself.
Any continuation of business relations between the parties
following expiration of this Agreement shall not be deemed a
waiver of the expiration nor shall it imply that either party has
committed to continue to
-33-
<PAGE>
do business with the other at any time in the future. Should
this Agreement be renewed or any other form of agreement be
offered to DEALER, DISTRIBUTOR reserves the right to offer an
agreement of a length and upon such additional terms and
conditions as it deems reasonable.
C. SOLE AGREEMENT OF THE PARTIES
There are no prior agreements or understandings, either oral or
written, between the parties affecting this Agreement or relating
to the sale or service of Toyota Products, except as otherwise
specifically provided for or referred to in this Agreement.
DEALER acknowledges that no representations or statements other
than those expressly set forth herein were made by DISTRIBUTOR or
any officer, employee, agent or representative thereof, or were
relied upon by DEALER in entering into this Agreement. This
Agreement cancels and supersedes all previous agreements between
the parties relating to the subject matters covered herein. No
change or addition to, or deletion of, any portion of this
Agreement (except as provided in Section III) shall be valid or
binding upon the parties hereto unless the same is approved in
writing by an officer of each of the parties hereto.
D. DEALER NOT AN AGENT OR REPRESENTATIVE
DEALER is an independent business. This Agreement is not a
property right and does not constitute DEALER, Owners or
employees of DEALER as the agent or legal representatives of
DISTRIBUTOR for any purpose whatsoever. DEALER, Owners and
employees of DEALER or any other persons acting on behalf of
DEALER are not granted any express or implied right or authority
to assume or create any obligation on behalf of or in the name of
DISTRIBUTOR or to bind DISTRIBUTOR in any manner whatsoever.
E. ASSIGNMENT OF RIGHTS OR DELEGATION OF DUTIES
This a personal service agreement and may not be assigned or sold
in whole or in part, directly or indirectly, voluntarily or by
operation of law, without the prior written approval of
DISTRIBUTOR. Any attempted transfer, assignment or sale without
DISTRIBUTOR's prior written approval will be void and not binding
upon DISTRIBUTOR.
-34-
<PAGE>
F. NO FRANCHISE FEE
DEALER warrants that it has paid no fee, nor has it provided any
goods or services in lieu of same, to DISTRIBUTOR or any other
party in consideration of entering into this Agreement. The sole
consideration for DISTRIBUTOR's entering into this Agreement is
DEALER's ability, integrity, assurance or personal services and
expressed intention to deal fairly and equitably with DISTRIBUTOR
and the public.
G. SEVERABILITY
If any provision of this Agreement should be held invalid or
unenforceable for any reason whatsoever, or conflicts with any
applicable law, this Agreement will be considered divisible as to
such provisions, and such provisions will be deemed amended to
comply with such law, or if it cannot be so amended without
materially affecting the tenor of the Agreement, then it will be
deemed deleted from this Agreement in such jurisdiction, and in
either case, the remainder of the Agreement will be valid and
binding.
H. NEW AND SUPERSEDING DEALER AGREEMENTS
In the event any new and superseding form of dealer Agreement is
offered by DISTRIBUTOR to authorized Toyota dealers generally at
any time prior to the expiration of the term of this Agreement,
DISTRIBUTOR may, by written notice to DEALER, replace this
Agreement with a new agreement in a new and superseding form for
a term not less than the then unexpired term of this Agreement.
I. BENEFIT
This Agreement is entered into by and between DISTRIBUTOR and
DEALER for their sole and mutual benefit. Neither this Agreement
nor any specific provision contained in it is intended or shall
be construed to be for the benefit of any third party.
J. NO FIDUCIARY RELATIONSHIP
This Agreement shall not be construed to create a fiduciary
relationship between DEALER and DISTRIBUTOR.
K. NO JOINT EMPLOYMENT
DEALER acknowledges that it has assumed obligations under this
Agreement to use its best efforts to sell and service Toyota
Products, to increase the future
-35-
<PAGE>
growth in Toyota Product sales through increased customer
satisfaction and other obligations related to the operation of
the dealership and recognizes the necessity to employ and train
qualified personnel to satisfy these commitments. To this end,
DEALER agrees to employ only qualified persons who will fulfill
the commitments made by DEALER to DISTRIBUTOR in this Agreement.
Notwithstanding the foregoing, DEALER retains the sole and
exclusive right to determine whom to hire and their
qualifications, to direct, control and supervise DEALER's
employees, and to establish all terms and conditions of
employment of DEALER's employees. All supervision, control and
direction of DEALER's employees shall be the sole and exclusive
responsibility of DEALER. DEALER shall at all times remain the
sole employer of persons employed by DEALER and, to this end,
DEALER and DISTRIBUTOR agree that no act or omission of DEALER or
DISTRIBUTOR shall be construed to make or render them joint
employer, co-employer or alter ego of each other.
L. CONSENT OF DISTRIBUTOR
Any time that this Agreement provides that DEALER must obtain
DISTRIBUTOR's consent to any proposed conduct or change, DEALER
must provide all information requested by DISTRIBUTOR concerning
the proposal, and DISTRIBUTOR shall have a reasonable amount of
time in which to evaluate the proposal.
M. DISTRIBUTOR'S POLICIES
This Agreement, from time to time, refers to certain policies and
standards. DEALER acknowledges that these policies and standards
are prepared by DISTRIBUTOR in its sole discretion based upon
DISTRIBUTOR's evaluation of the marketplace. DISTRIBUTOR may
reasonably amend its policies and standards as the marketplace
changes from time to time.
XXVII. DEFINITIONS
As used in this Agreement, the parties agree that the following terms
shall be denied as exclusively set forth below.
-36-
<PAGE>
A. OWNER: The persons identified in Section IV hereof.
B. GENERAL MANAGER: The person identified in Section V hereof.
C. DEALER FACILITIES: The buildings, improvements, fixtures, and
equipment situated at the Approved Location(s).
D. APPROVED LOCATION(S): The location(s) and any facilities
thereon, designated in Section VII that DISTRIBUTOR has approved
for the dealership operation(s) specified therein.
E. TOYOTA MARKS: The various Toyota trademarks, service marks,
names, logos and designs that DEALER is authorized by DISTRIBUTOR
to use in the sale and servicing of Toyota Products as specified
in the current TOYOTA BRAND GRAPHIC STANDARDS MANUAL.
F. TOYOTA PRODUCTS: All Toyota Motor Vehicles, parts, accessories
and equipment which IMPORTER, in its sole discretion, sells to
DISTRIBUTOR for resale to authorized Toyota dealers.
G. TOYOTA MOTOR VEHICLES: All motor vehicles identified in the
current Toyota Product Addendum that DISTRIBUTOR sells to DEALER
for resale.
H. GENUINE TOYOTA PARTS AND ACCESSORIES: All Toyota brand Parts and
Accessories manufactured by or on behalf of DISTRIBUTOR or
FACTORY, or other parts and accessories specifically approved by
FACTORY for use in servicing Toyota Motor Vehicles and sold by
DISTRIBUTOR to DEALER for resale.
-37-
<PAGE>
Chrysler Corporation
TERM SALES AND SERVICE AGREEMENT
Fair Chrysler Plymouth Partnership t/a Danbury Fair Dodge located at 100B
Federal Road, Danbury, Connecticut a(n) Partnership hereinafter called DEALER,
and Chrysler Corporation, a Delaware corporation, hereinafter sometimes referred
to as "CC", agree as follows:
INTRODUCTION
The purpose of the relationship established by this Term Sales and Service
Agreement ("Term Agreement") is to provide a means for the sale and service of
specified CC vehicles and the sale of CC vehicle parts and accessories in a
manner that will maximize customer satisfaction and be of benefit to DEALER and
CC.
While the following provisions, each of which is material, set forth the
undertakings of this relationship, the success of those undertakings rests on a
recognition of the mutuality of interests of DEALER and CC, and a spirit of
understanding and cooperation by both parties in the day to day performance of
their respective functions. As result of such considerations, CC has entered
into this Term Agreement in reliance upon and has placed its trust in the
personal abilities, expertise, knowledge and integrity of DEALER's principal
owners and management personnel, which CC, anticipates will enable DEALER to
perform the personal services contemplated by this Term Agreement.
It is the mutual goal of this relationship to promote the sale and service of
specified CC products by maintaining and advancing their excellence and
reputation by earning, holding and furthering the public regard for CC and all
CC dealers.
DEALER acknowledges that CC is relying upon DEALER to provide representation
which conforms to the standards set forth herein and in the Additional Terms and
Provisions of the Chrysler Corporation Sales and Service Agreement (Terms and
Provisions), which are incorporated herein by reference in Paragraph 5 of this
Term Agreement.
DEALER wishes an opportunity to qualify for the standard Chrysler Corporation
Sales and Service Agreement for specified CC vehicle and understands that, for
this purpose, DEALER must first fulfill all of DEALER's undertakings hereinafter
described.
1. PRODUCTS COVERED
DEALER has the right to order and purchase from CC and to sell at retail only
those specific models of CC vehicles, sometimes referred to as "specified CC
vehicles," listed on the Motor
<PAGE>
Vehicle Addendum, attached hereto and incorporated herein by reference. CC may
change the models of CC vehicles listed on the Motor Vehicle Addendum by
furnishing DEALER a superseding Motor Vehicle Addendum. Such a superseding
Motor Vehicle Addendum will not be deemed or construed to be an amendment to
this Term Agreement.
2. DEALERS'S MANAGEMENT
CC has entered into this Term Agreement relying on the active, substantial and
continuing personal participation in the management of DEALER's organization by:
NAME POSITION
Thomas Campbell General Manager/Dealer Principal
DEALER represents and warrants that at least one of the above named individuals
will be physically present at DEALER's facility (sometimes referred to as
"Dealership Facilities") during most of its operating hours and will manage all
of DEALER's business relating to the sale and service of CC products. DEALER
will not change the personnel holding the above described position(s) or the
nature and extent of his/her/their management participation without the prior
written approval of CC.
3. DEALER'S CAPITAL STOCK OR PARTNERSHIP INTEREST
If DEALER is a corporation or partnership, DEALER warrants that the persons
named below own beneficially the capital stock or partnership interest of DEALER
in the percentages indicated below. DEALER warrants that there will be no
change affecting more than 50% of the ownership interest of DEALER, nor will
there be any other change in the ownership interest of DEALER, which may affect
the managerial control of DEALER without CC's prior written approval.
Name Voting Non-Voting Partnership Active
Stock Stock Interest Yes/No
DiFeo Partnership, Inc. 70% No
JS2, Inc. 30% No
Total 100%
-2-
<PAGE>
4. SALES LOCALITY
DEALER shall have the non-exclusive right, subject to the provisions of this
Term Agreement, to purchase from CC those new specified CC vehicles, vehicle
parts, accessories and other CC products for resale at the DEALER's facilities
and location described in the Dealership Facilities and Location Addendum,
attached hereto and incorporated herein by reference. DEALER will actively and
effectively sell and promote the retail sale of specified CC vehicles, vehicle
parts and accessories in DEALER's Sales Locality. As used herein, "Sales
Locality" shall mean the area designated in writing to DEALER by CC from time to
time as the territory of DEALER's responsibility for the sale of specified CC
vehicles, vehicle parts and accessories, although DEALER is free to sell said
products to customers wherever they may be located. Said Sales Locality may be
shared with other CC dealers of the same line-make as CC determines to be
appropriate.
5. ADDITIONAL TERMS AND PROVISIONS
The additional terms and provisions set forth in the document entitled "Chrysler
Corporation Sales and Service Agreement Additional Terms and Provisions" marked
"Form 91 (C-P-D)," as may hereafter be amended from time to time, insofar as
they are not inconsistent with the terms, provisions and conditions of this Term
Agreement, constitute a part of this Term Agreement with the same force and
effect as if set forth at length herein, and the term "this Term Agreement"
includes said Additional Terms and Provisions.
6. FORMER AGREEMENTS, REPRESENTATIONS, WAIVERS, STATEMENTS, MODIFICATIONS OR
AMENDMENT
This Chrysler Corporation Term Agreement and other documents, (or their
successors as specifically provided for herein) which are specifically
incorporated herein by reference is the entire agreement between the parties
relating to the purchase by DEALER of those new specified CC vehicles, parts and
accessories from CC for resale; and it cancels and supersedes all earlier
agreements, written or oral, between CC and DEALER relating to the purchase by
DEALER of specified CC vehicles, parts and accessories, except for (a) amounts
owing by CC to DEALER, such as payments for warranty service performed and
incentive programs, or (b) amounts owing by DEALER to CC due to DEALER's
purchase from CC of vehicles, parts, accessories and other goods or services, or
(c) amounts DEALER owes to CC as a result of other extensions of credit by CC to
DEALER.
No representations or statements, other than those expressly set forth herein or
those set forth in the applications for this Term Agreement submitted to CC by
DEALER or DEALER's representatives, are made or relied upon by any party hereto
in entering into this Term Agreement.
-3-
<PAGE>
No waiver, modification or change of any of the terms of this Term Agreement or
change or erasure of any printed part of this Term Agreement or addition to it
(except the filling in of blank spaces and lines) will be valid or binding on CC
unless approved in writing by the President or a Vice President or the National
Dealer Placement Manager of Chrysler Corporation.
DEALER and CC recognize that the passage of time, changes in the industry, ways
of doing business and other unforeseen circumstances may cause CC to determine
that it should amend all Chrysler Corporation Sales and Service Agreements
pertaining to specified CC vehicles. Therefore, CC will have the right to amend
this Term Agreement to the extent that CC deems advisable, provided that CC
makes the same amendment in Chrysler Corporation Sales and Service Agreements
pertaining to specified CC vehicles generally. Each such amendment will be
issued in a notice sent by certified mail or delivered in person to DEALER and
signed by the President or a Vice President or the National Dealer Placement
Manager of Chrysler Corporation. Thirty-five (35) days after mailing or
delivery of such notice to DEALER, this Term Agreement will be deemed amended in
the manner and to the extent set forth in the notice.
7. ARBITRATION
Any and all disputes arising out of or in connection with the interpretation,
performance or non-performance of this Term Agreement or any and all disputes
arising out of or in connection with transaction in any way related to this Term
Agreement (including, but not limited to, the validity, scope and enforceability
of this arbitration provisions, or disputes under rights granted pursuant to the
statutes of the state in which DEALER is licensed) shall be finally and
completed resolved by arbitration pursuant to the arbitration laws of the United
States of America as codified in Title 9 of the United States Code, Sections 1-
14, under the Rules of Commercial Arbitration of the American Arbitration
Association (hereinafter referred to as the "Rules") by a majority vote of a
panel of three arbitrators. One arbitrator will be selected by DEALER (DEALER's
arbitrator). One arbitrator will be selected by CC (CC's arbitrator). These
arbitrators must be selected by the respective parties within ten (10) business
days after receipt by either DEALER or CC of a written notification from the
other party of a decision to arbitrate a dispute pursuant to this Term
Agreement. Should either CC or DEALER fail to select an arbitrator within said
ten-day period, the party who so fails to select an arbitrator will have its
arbitrator selected by the American Arbitrator Association upon the application
of the other party. The third arbitrator must be an individual who is familiar
with business transactions and be a licensed attorney admitted to the practice
of law within the United States of America, or a judge. The third arbitrator
will be selected by DEALER's and CC's arbitrators. If said arbitrators cannot
agree on a third arbitrator within thirty (30) days from the date of the
-4-
<PAGE>
appointment of the last selected arbitrator, then either DEALER's or CC's
arbitrator may apply to the American Arbitration Association to appoint said
third arbitrator pursuant to the criteria set forth above. The arbitration
panel shall conduct the proceedings pursuant to the then existing Rules.
Notwithstanding the foregoing, to the extent any provision of the Rules conflict
with any provision of this Paragraph 7, the provisions of this Paragraph 7 will
be controlling.
CC and DEALER agree to facilitate the arbitration by: (a) each party paying to
the American Arbitration Association one-half (1/2) of the required deposit
before the proceeding commence; (b) making available to one another and to the
arbitration panel, for inspection and photocopying all documents, books and
records, if determined by the arbitrator to be relevant to the dispute; (c)
making available to one another and to the arbitration panel personnel directly
or indirectly under their control, for testimony during hearings and prehearing
proceedings if determined by the arbitration panel to be relevant to the
dispute; (d) conducting arbitration hearings to the greatest extent possible on
consecutive business days; and (e) strictly observing the time periods
established by the Rules or by the arbitration panel for the submission of
evidence and of briefs.
Unless otherwise agreed to by CC and DEALER, a stenographic record of the
arbitration shall be made and a transcript thereof shall be ordered for each
party, with each party paying one-half (1/2) of the total cost of such recording
and transcription. The stenographer shall be state-certified, if certification
is made by the state, and the party to whom it is most convenient shall be
responsible for securing and notifying such stenographer of the time and place
of the arbitration hearing(s).
If the arbitration provisions is invoked when the dispute between the parties is
either the legality of terminating this Term Agreement or of adding a new CC
dealer of the same line-make or relocating an existing CC dealer of the same
line-make, CC will stay the implementing of the decision to terminate this Term
Agreement or add such new CC dealer or approve the relocation of an existing CC
dealer of the same line-make until the decision of the arbitrator has been
announced, providing DEALER does not in any way attempt to avoid the obligations
of this Paragraph 7, in which the case the decision at issue will be immediately
implemented.
Except as limited hereby, the arbitration panel shall have all powers of law and
equity, which it can lawfully assume, necessary to resolve the issues in dispute
including, without limiting the generality of the foregoing, making awards of
compensatory damages, issuing both prohibitory and mandatory orders in the
nature of injunctions, and compelling the production of documents and witnesses
for pre-arbitration discovery and/or presentation at the arbitration hearing on
the merits of the case. The
-5-
<PAGE>
arbitration panel shall not have legal or equitable authority to issue a
mandatory or prohibitory order which: (a) extends or has effect beyond the
subject matter of this Term Agreement, or (b) will govern the activities of
either party for a period of more than two years; nor shall the arbitration
panel have authority to award punitive, consequential or damages whatsoever
beyond or in addition to the compensatory damages allowed to be awarded under
this Term Agreement.
The decision of the arbitration panel shall be in written form and shall include
findings of fact and conclusions of law.
It is the intent and desire of DEALER and CC to hereby and forever renounce and
reject any and all recourse to litigation before any judicial or administrative
forum and to accept the award of the arbitration panel as final and binding,
subject to no judicial or administrative review, except on those grounds set
forth in 9 USC Section 10 and Section 11. Judgment on the award and/or orders
may be entered in any court having jurisdiction over the parties or their
assets. In the final award and/or order, the arbitration panel shall divide all
costs (other than attorney fees, which shall be borne by the party incurring
such fees and other costs specifically provided for herein) incurred in
conducting the arbitration in accordance with what the arbitration panel deems
just and equitable under the circumstances. The fees of DEALER's arbitrator
shall be paid by DEALER. The fees of CC's arbitrator shall be paid by CC.
8. EFFECTIVE DATE, NECESSARY CONDITIONS, TERMINATION
This Term Agreement will become effective on the date of execution hereof and,
if not previously terminated as provided herein or in Paragraph 28 of said Terms
and Provisions, will continue in effect until ______________________, at which
time this Term Agreement will terminate automatically without notice to or by
either party.
If the Term Agreement is not terminated as provided herein or in Paragraph 28 of
said Terms and Provisions, and thus continues in effect for the period set forth
in the immediately foregoing Paragraph, CC, at the expiration of such period,
will enter into the standard Chrysler Corporation Sales and Service Agreement
current at the date of said expiration, for such specified CC vehicles with
DEALER, provided that DEALER has fulfilled each and every condition set forth in
subparagraphs 8(A) through 8(F) set forth below, which Dealer understands and
agrees to be reasonable and necessary and DEALER has otherwise complied with all
of the provisions of this Term Agreement. Furthermore, DEALER fully understands
and agrees that DEALER's failure to meet any of the conditions set forth in
subparagraphs 8(A) through 8(F) including, without limiting the generality of
the foregoing, failure to meet those conditions within the time period, if any,
specifically set forth in each condition, is grounds for termination of this
Term Agreement upon sixty (60) days' written
-6-
<PAGE>
notification to DEALER by CC as if failure to meet said conditions were
specifically set forth under Paragraph 28 of said Terms and Provisions.
8(A) DEALER shall provide CC regularly, on forms satisfactory to CC, a monthly
financial statement of DEALER's vehicle business by the tenth (10th) day of the
month following the month covered by each statement.
SEE ATTACHMENT TO SALES AGREEMENT INCORPORATED
HEREIN BY REFERENCE.
8(F) DEALER is otherwise qualified for such (a) standard CC Sales and Service
Agreement(s).
9. NO OBLIGATION OR TERMINATION
If DEALER fails to carry out fully the terms, provisions, obligations, and
conditions of this Term Agreement, then CC, whether or not it has pursued other
remedies, shall have not obligation to DEALER to extend this Term Agreement in
whole or in part or to enter into any standard Chrysler corporation Sales and
Service Agreement with DEALER or any other obligation of any kind.
The termination or expiration of this Term Agreement in any manner shall not
impose upon CC any liability or obligations under Paragraph 30 ("Disposition of
Dealer's Premises"), Paragraph 32 ("Successors to Dealer") and Paragraph 33
("Surviving Spouse's Financial Interest") of said Terms and Provisions or any
liability or obligation of any kind.
DEALER acknowledges that DEALER has read each and every term, provision and
condition of this Term Agreement and that DEALER understands and accepts all
such terms, provisions and conditions.
10. SIGNATURE
This Term Agreement becomes valid only when signed by the President or a Vice
President or the National Dealer Placement Manager of Chrysler Corporation and
by a duly authorized officer or executive of DEALER if a corporation; or by one
of the general
-7-
<PAGE>
partners of DEALER if a partnership; or by DEALER if an individual.
IN WITNESS WHEREOF, the parties hereto have signed this Term Agreement which is
finally executed at Detroit, Michigan, in triplicate, on August 16,1995.
Fair Chyrsler Plymouth Partnership
b/a Danbury Fair Dodge
- --------------------------------------------
(DEALER Firm Name and D/B/A, if applicable)
By /s/ Carl Spielvogel
------------------------------------------
(Individual Duly Authorized to Sign)
- --------------------------------------------
(Title)
CHRYSLER CORPORATION
By /s/ Illegible
------------------------------------------
National Dealer Placement Manager
- --------------------------------------------
(Title)
-8-
<PAGE>
ATTACHMENT TO TERM AGREEMENT
FAIR CHRYSLER PLYMOUTH PARTNERSHIP
T/A DANBURY FAIR DODGE
PARAGRAPH 8
(B) DEALER shall (a) within twenty-four (24) months after this
Agreement becomes effective, achieve a three (3) month Customer
Satisfaction Index ("CSI") score which is equal to or greater
than the average rating for the National Sales level group in
which each dealership is included within its dealership's sales
zone, and (b) after DEALER has achieved the above rating at any
of its dealerships within the time period allowed, DEALER will
maintain or exceed that rating at its dealership for the
following consecutive twelve (12) months.
(C) DEALER shall make a good faith effort to ensure that by December
31, 1995, all service personnel have completed forty (40) hours
of technical training program(s) offered to Chrysler dealers.
For service personnel hired late in 1995, DEALER shall make a
goof faith effort to begin and complete as much of the technical
training as possible by December 31, 1995. Subsequent to 1995,
DEALER shall act in good faith to train all of its service
personnel in accordance with the standard objectives set by
Chrysler Corporation for the training of all dealer service
personnel. A good faith effort as used in this paragraph is to
be determined by the Chrysler Zone Manager.
(D) DEALER shall make a good faith effort to ensure the ninety (90)
percent of the sales attend sales training and complete sales
certification by July 31, 1995. Subsequent to July 31, 1995,
DEALER shall act in good faith to ensure that ninety (90) percent
of its sales personnel maintain and/or update their sales
certification on a continuous basis. A good faith effort as used
in this paragraph is to be determined by the Chrysler Zone
Manager.
(E) DEALER shall continue with the Ryan CSI program throughout 1995,
and continue with the program thereafter throughout the duration
of the Term Agreement whenever it is unable to maintain Customer
Satisfaction Index ("CSI") scores, and Sales Satisfaction Index
("SSI") scores as defined by Chrysler Corporation programs.
________________________
Signature
<PAGE>
December 15, 1993
Mr. James G. Hetherington
Fair Chrysler Plymouth Partnership
t/a Fair Dodge
100 Federal Road
Danbury, Connecticut 06810
Dear Mr. Hetherington:
As you know, Chrysler Corporation ("CC") entered into a Dodge Dealer Agreement
with your company on June 9, 1993.
Paragraph 3 of this Agreement shows the beneficial ownership of all of the
capital stock or partnership interest in your company as follows:
NAME OWNERSHIP INTEREST
- ---- ------------------
JS2, Inc. 30%
DiFeo Partnership, Inc. 70%
In this regard, you have requested that CC make an exception to its policy that
the controlling ownership interest in a dealer corporation or partnership with
which it enters into Dealer Agreements must be vested in natural persons, and
not corporations or partnerships.
This is to advise you that CC hereby approved the above described ownership of
FAIR CHRYSLER PLYMOUTH PARTNERSHIP T/A FAIR DODGE
subject to, and in reliance upon
Fair Chrysler Plymouth Partnership t/a Fair Dodge
JS2, Inc.
DiFeo Partnership, Inc.
EMCO Motor Holdings, Inc.
'21' International Holdings, Inc.
agreeing that the provisions of Paragraph 28 of the Dodge Agreement executed
between Fair Chrysler Plymouth Partnership t/a Fair Dodge and CC, concurrent
with the signing of this letter by CC and to the extent that it refers to
changes in controlling ownership interests, shall be deemed to refer to the
ownership of
'21' International Holdings, Inc. and
EMCO Motor Holdings, Inc. and
DiFeo Partnership, Inc. and
JS2, Inc. as well as the ownership of
Fair Chrysler Plymouth Partnership t/a Fair Dodge.
<PAGE>
The beneficial ownership of all the capital stock or partnership interest in
JS2, Inc. is as follows:
NAME % OF OWNERSHIP
- ---- --------------
Samuel X. DiFeo 37.5%
Joseph C. DiFeo 37.5%
James G. Hetherington 25.0%
The beneficial ownership of all the capital stock or partnership interest of
DiFeo Partnership, Inc. is as follows:
NAME % OF OWNERSHIP
- ---- --------------
EMCO Motor Holdings, Inc. 100.0%
The beneficial ownership of all the capital stock or partnership interest of
EMCO Motor Holdings, Inc. is as follows:
NAME % OF OWNERSHIP
- ---- --------------
'21' International 34.36%
Ezra P. Mager 1.56%
Harvard 27.48%
Lion Advisors 17.49%
BNP 1.20%
Jeremy Grantham 1.00%
Jules Kroll 1.00%
Andrea Farace .50%
Carl Spielvogel .25%
Jerome Markowitz .05%
Philip Halperin .05%
Derek Lemke-von Ammon .025%
Frank Dunlevy .025%
Thomas Sullivan .01%
Options 15.00%
-------
100.000%
The beneficial ownership of all the capital stock or partnership interest of
'21' International Holdings, Inc. is as follows:
NAME % OF OWNERSHIP % OF VOTING CONTROL
- ---- -------------- -------------------
51 Individuals, trusts
and corporations 54.7580% 23.4851%
Marshall S. Cogan 45.2420% 76.5149%
If all the above is agreeable to you, please indicate your understanding and
acceptance thereof by signing the copies of this letter in the space provided
below:
-2-
<PAGE>
ACCEPTED:
JS2, INC.
By: /s/ [Illegible]
-------------------------------------
DiFEO PARTNERSHIP, INC.
By: /s/ E.P. Mager
-------------------------------------
EZRA P. MAGER, President
EMCO MOTOR HOLDINGS, INC.
By: /s/ E.P. Mager
-------------------------------------
EZRA P. MAGER, President
'21' INTERNATIONAL HOLDINGS, INC.
By: /s/ M.S. Cogan
-------------------------------------
MARSHALL S. COGAN
Chairman of the Board
FAIR CHRYSLER PLYMOUTH PARTNERSHIP t/a FAIR DODGE
By: /s/ E.P. Mager
-------------------------------------
EZRA P. MAGER, Chief Executive Officer
CHRYSLER CORPORATION
By: /s/ [Illegible]
-------------------------------------
Title: National Dealer Placement Manager
----------------------------------
Date:
-----------------------------------
<PAGE>
EXHIBIT
10.2.15.1
<PAGE>
HYUNDAI MOTOR AMERICA
DEALER SALES AND SERVICE AGREEMENT
This is an Agreement between HYUNDAI MOTOR AMERICA (HMA), a California
corporation, and FAIR HYUNDAI PARTNERSHIP (DEALER), a(n)_____ individual, X
partnership, _____ corporation, duly incorporated in the state of CONNECTICUT,
and doing business as FAIR HYUNDAI.
INTRODUCTION
HMA sells Hyundai Products which are manufactured or approved by Hyundai
Motor Company (FACTORY). HMA has established a network of authorized Hyundai
Dealers, operating at approved locations and according to Hyundai standards, to
sell and service Hyundai Products. HMA has selected its Dealers based on their
experience and commitment that they will sell and service Hyundai Products in a
manner which promotes and maintains Customer confidence and satisfaction, and
increases product acceptance and awareness.
DEALER represents that its Owner(s) and General Manager identified herein
have the skill, experience, capital and facilities to ensure that DEALER
operates a first-class dealership. HMA enters into this Agreement upon DEALER's
assurances of the continued personal services of said Owner(s) and General
Manager. The purpose of this Agreement is to memorialize such assurances, to
appoint DEALER as an authorized Hyundai Dealer, to provide for the effective
representation of Hyundai Products and to set forth the rights and obligations
of HMA and DEALER hereunder.
Accordingly, the parties agree as follows:
1. APPOINTMENT OF DEALER
Subject to the terms of this Agreement, HMA hereby grants DEALER the non-
exclusive right:
To buy the Hyundai Products identified in the Hyundai Product Addendum
attached hereto which HMA, in its sole discretion, may revise from
time to time; and
To identify itself as an authorized Hyundai Dealer using Hyundai Marks
in the promotion, sale and servicing of Hyundai Products and at the
location(s) approved herein.
DEALER accepts its appointment as an authorized Hyundai Dealer and agrees
to:
-1-
<PAGE>
Conduct its business in a manner which will engender Customer
confidence and satisfaction and reflect positively upon HMA;
Effectively promote and sell Hyundai Products;
Professionally service Hyundai Products; and
Establish and maintain satisfactory dealership facilities at the
location(s) approved by HMA.
2. TERM OF THIS AGREEMENT
This Agreement will become effective on the date it is executed by HMA and
will continue in effect for a period of THREE (3) YEARS, unless terminated as
provided herein. This Agreement may not be extended or renewed except in
writing signed by the President and Executive Vice President of HMA.
3. DEALER OWNERSHIP
HMA enters into this Agreement in reliance upon the personal qualifications
and representations of the persons identified below and upon DEALER's assurances
that the following persons, and only the following persons, will be the Owner(s)
of DEALER.
NAME ADDRESS TITLE OWNERSHIP
INTEREST
Fair Hyundai Corp. 30%
- ----------------------- -------------- ---------------- -------------
DiFeo Partnership, Inc. 70%
- ----------------------- -------------- ---------------- -------------
- ----------------------- -------------- ---------------- -------------
- ----------------------- -------------- ---------------- -------------
4. DEALER MANAGEMENT
DEALER recognizes that the effective performance of its obligations
hereunder requires that experienced DEALER management be actively involved at
all times. HMA enters into this Agreement in reliance upon the qualifications
of JAMES HETHERINGTON to manage DEALER's operations and upon DEALER's assurance
that such person, and no other person, will at all times function as General
Manager and be considered as Dealer Operator with complete authority to make all
decisions on behalf of DEALER with respect to DEALER's operations. DEALER
further agrees that the General Manager shall devote full time (100%) to the
management of DEALER's operations.
-2-
<PAGE>
5. CHANGE IN DEALER OWNERSHIP OR MANAGEMENT
This is a personal services agreement. HMA has entered into this Agreement
in reliance upon DEALER's assurances of the active involvement of the Owners and
General Manager identified herein in DEALER's operations. Accordingly, any
change in ownership, regardless of the share or relationship between parties, or
any change in General Manager, from the person(s) identified herein, requires
the prior written consent of HMA, which HMA shall not unreasonably withhold.
6. DEALER LOCATION
DEALER is free to sell Hyundai Products to Customers wherever they may be
located. However, in order for HMA to establish and maintain an effective
network of authorized Hyundai Dealers for the sale and servicing of Hyundai
Products and to maximize Customer convenience, HMA has approved the following
facilities as the exclusive location(s) for the sale and servicing of Hyundai
Products and for the display of Hyundai Marks:
HYUNDAI NEW VEHICLE SALES AND SHOWROOM PARTS AND SERVICE
102D Federal Road Same
- ------------------------------------------- ------------------------------
Danbury, CT 06813
- ------------------------------------------- ------------------------------
SALES AND GENERAL OFFICES USED VEHICLE DISPLAY AND SALES
Same Same
- ------------------------------------------- ------------------------------
- ------------------------------------------- ------------------------------
BODY AND PAINT
Same
- ------------------------------------------- ------------------------------
DEALER agrees not to display Hyundai Marks or to conduct any dealership
operations, including the display, sale and/or service of Hyundai Products, at
any location other than at the location(s) approved herein, without the prior
written consent of HMA.
Moreover, each location is approved only for the activity indicated.
DEALER may not alter the activity of any location approved herein or otherwise
use such location for any activities
-3-
<PAGE>
other than the approved activity, without the prior written consent of HMA.
7. STANDARD PROVISIONS
The HMA Dealer Sales and Service Agreement Standard Provisions are
incorporated herein and made a part of this Agreement as if fully set forth
herein.
8. ADDITIONAL PROVISIONS
In consideration of HMA's agreement to appoint DEALER as an authorized
Hyundai Dealer, DEALER further agrees:
Pursuant to Paragraph 12A of this Agreement, DEALER agrees to establish and
maintain a dealership facility in accordance with HMA's minimum facility
standards, as amended from time to time, and that such facility will at all
times reflect a distinctive first-class appearance in common with all other
authorized Hyundai dealers.
DEALER further agrees to operate the Showroom facility, located at 102D
Federal Road, in Danbury, Connecticut, exclusively for the display and sale of
Hyundai products.
DEALER acknowledges that HMA's approval of DEALER's current facility, does
not, in any way, constitute a promise by HMA that it will sell DEALER any
particular number of vehicles or an assurance by HMA that DEALER will achieve
any particular level of sales, operate at a profit or realize any return on his
investment. The actual profits to be realized will depend to a great extent on
the management of the dealership, as well as on business and economic
conditions. DEALER acknowledges that, as in any investment in competitive
industry, there are no guarantees.
DEALER is a General Partnership owned by two corporate entities known as
Fair Hyundai Corp ("FAIR") (30%) and DiFeo Partnership, Inc. ("DIFEO") (70%)
(collectively "Corporate Partners").
DEALER has represented to HMA that no individual owner of FAIR holds a
majority interest, i.e., more than 50% in FAIR, including, but not limited to, a
majority of voting stock. By the signatures of its owners hereto, FAIR agrees
that Samuel X. DiFeo has complete authority to make all decisions and enter into
all commitments on behalf of all owners of FAIR and that HMA may rely completely
on the authority of such person to do so.
DEALER has further represented to HMA that DIFEO is 100% owned by a
corporate entity known as EMCO Motor Holdings, Inc. ("EMCO"). A majority of all
voting shares of EMCO are held by a corporate entity known as 21 International
Holdings, Inc. ("TIHI"), and TIHI, in turn, is controlled by Marshall Cogan
-4-
<PAGE>
("COGAN"), who owns a majority of all voting shares of TIHI. By his signature
hereto, COGAN, on behalf of DIFEO, EMCO and TIHI, agrees that there will be no
change in majority ownership of Corporate Partner, DIFEO, without the prior
written consent of HMA.
COGAN further acknowledges that TIHI is approved as an owner for investment
purposes only and will not be active in the day-to-day management of DEALER's
operations.
Pursuant to Article 3, Paragraph 3.1 of the Partnership Agreement between
DIFEO and FAIR, dated __________, 1992, the Executive Committee of DEALER shall
have full and complete authority to make all day-to-day management decisions and
enter into all commitments on behalf of DEALER. The following individuals are
currently members of the Executive Committee of DEALER: Marshall Cogan, Erza P.
Mager, Joseph C. Herman, Joseph C. DiFeo and Samuel X. DiFeo. HMA has entered
into this Agreement with DEALER in reliance upon the personal qualifications and
representation of, and assurances of the active involvement of, Samuel X. DiFeo
in DEALER's management. The foregoing persons agree, individually and on behalf
of the Executive Committee, to appoint Samuel X. DiFeo as Dealer Principal of
DEALER with complete authority to make all decisions and enter into all
commitments on behalf of all Corporate Partners and that HMA may rely completely
on the authority of such person to do so. The foregoing persons also agree that
there will be no change in Dealer Principal without the prior written consent of
HMA. DEALER recognizes that failure to obtain such consent shall be grounds for
termination under Paragraph 16 of this Dealer Agreement. Finally, DEALER
acknowledges that the following persons are approved for investment purposes
only and will not be active in the day-to-day management of DEALER's operations.
DEALER acknowledges that in order to be approved as an operator, the
following persons would have to apply separately to HMA for approval: Marshall
Cogan and Erza Mager.
DEALER recognizes that the obligations incurred herein are material terms
of this Agreement. Failure to comply with any or all of the provisions shall be
grounds for termination of this Agreement.
HMA has established a minimum Net Working Capital requirement in order to
ensure that there is sufficient capital available for the operation and growth
of the dealership. DEALER's Net Working Capital needs may vary, however, DEALER
must maintain the established minimum as set forth by HMA at all times.
DEALER and HMA mutually agree that, as currently determined, it is
necessary for the proper operation of DEALER's business that DEALER maintain a
minimum of $212,519 in Net Working
-5-
<PAGE>
Capital. As of the date this Agreement is executed, DEALER is substantially
deficient in Net Working Capital.
9. EXECUTION OF AGREEMENT
This Agreement shall be valid and binding only if it is signed:
On behalf of DEALER by a duly authorized person; and
On behalf of HMA by the President, the Executive Vice President and
the General and/or Regional Manager, if any, of HMA.
By their signatures hereto, the parties agree to abide by the terms and
conditions of this Agreement, including the Standard Provisions incorporated
herein, in good faith and for their mutual benefit.
FAIR HYUNDAI PARTNERSHIP dba FAIR HYUNDAI
(Dealer Entity Name)
DATE: 9/24/92 By: /s/ illegible Exec. Comm.
------------- ---------------------------- ---------------
Signature Title
DATE: 9/21/92 By: /s/ illegible LEO
------------- ---------------------------- ---------------
Signature Title
DATE: 9/21/92 By: /s/ illegible C.O.O.
------------- ---------------------------- ---------------
Signature Title
DATE: 9/23/92 By: /s/ illegible Exec. V.P.
------------- ---------------------------- ---------------
Signature Title
DATE: 9/21/92 By: /s/ illegible Exec. V.P.
------------- ---------------------------- ---------------
Signature Title
DATE: 9/21/92 By: /s/ illegible Exec. V.P.
------------- ---------------------------- ---------------
Signature Title
HYUNDAI MOTOR AMERICA
General Manager
DATE: 10/12/92 By: /s/ illegible Eastern Region
------------- ---------------------------- ---------------
Signature Title
DATE: 10/12/92 By: /s/ illegible
------------- ---------------------------- ---------------
Signature Title
DATE: 10/12/92 By: /s/ illegible
------------- ---------------------------- ---------------
Signature Title
-6-
<PAGE>
PRODUCT ADDENDUM
TO
HYUNDAI MOTOR AMERICA
DEALER SALES AND SERVICE AGREEMENT
10/12/92
----------------
Date
Pursuant to Paragraph 1 of the Hyundai Motor America (HMA) Dealer Sales and
Service Agreement, HMA grants DEALER the non-exclusive right to buy the Hyundai
Products identified below:
Elantra, Excel, Scoupe, Sonata
and all parts, accessories and equipment for such vehicle(s).
This Hyundai Product Addendum shall remain in effect unless and until
superseded by a new Hyundai Product Addendum furnished by HMA.
<PAGE>
AMENDMENT TO
HYUNDAI DEALER SALES AND SERVICE AGREEMENT
THIS AMENDMENT (the "Amendment") to the Hyundai Dealer Sales and Service
Agreement, executed on 10/12/95 (the "Agreement"), is hereby made and entered
into by and between Hyundai Motor America ("HMA") and FAIR HYUNDAI PARTNERSHIP
("Dealer").
The parties desire to extend and modify the Agreement under the terms and
conditions of this Amendment. In consideration of the mutual covenants herein
contained, the parties agree to amend the Agreement, effective as of the date of
execution of this Amendment, as follows:
Paragraph 2 of the Agreement which provides:
This Agreement will become effective on the date it is executed by HMA and
will continue in effect for a period of 3 YEARS, unless terminated as
provided therein. This Agreement may not be extended or renewed except in
writing signed by the President and Executive Vice President of HMA.
it is hereby amended to state:
This Agreement will become effective on the date it is executed by HMA and
will continue in effect for a period of 4 YEARS, unless terminated as
provided herein. This Agreement may not be extended or renewed except in
writing, signed by HMA.
The terms and conditions of the Agreement, to the extent not modified
herein, shall remain in full force and effect and shall continue to bind the
parties hereto.
HMA hereby covenants and agrees that the signature of the HMA
representative below is an authorized representative of HMA as defined by the
Agreement, paragraph 19(b).
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date stated below.
FAIR HYUNDAI PARTNERSHIP dba FAIR HYUNDAI
DATED: 9/25/95 By: /s/ illegible Chairman
------------ -------------------- ---------------
Name Title
HYUNDAI MOTOR AMERICA
DATED: 9/29/95 By: /s/illegible
----------- --------------------
General Manager
Region Eastern
-----------------
<PAGE>
AMENDMENT TO
HYUNDAI DEALER SALES AND SERVICE AGREEMENT
Hyundai Motor America ("HMA") and FAIR HYUNDAI PARTNERSHIP ("Dealer")
hereby agree to amend Paragraph 6 of the Hyundai Dealer Sales and Service
Agreement between HMA and Dealer which was executed by the President of HMA on
OCTOBER 12, 1992 ("Current Agreement") as follows:
Paragraph 6 of the Current Agreement which provides in pertinent part that
HMA has approved the following facilities as the exclusive location(s) for
the sale and servicing of Hyundai Products and for the display of Hyundai
Marks:
HYUNDAI NEW VEHICLE SALES PARTS AND SERVICE
AND SHOWROOM
102 D Federal Road Same
- ------------------------------------------ ------------------------------
Danbury, CT 06813
- ------------------------------------------ ------------------------------
SALES AND GENERAL OFFICES USED VEHICLE DISPLAY AND SALES
Same Same
- ------------------------------------------ ------------------------------
- ------------------------------------------ ------------------------------
BODY AND PAINT
Same
- ------------------------------------------ ------------------------------
is hereby amended to state
HMA has approved the following facilities as the exclusive location(s) for
the sale and servicing of Hyundai Products and for the display of Hyundai
Marks:
HYUNDAI NEW VEHICLE SALES PARTS AND SERVICE
AND SHOWROOM
100 C Federal Road Same
- ------------------------------------------ ------------------------------
Danbury, CT 06813
- ------------------------------------------ ------------------------------
<PAGE>
SALES AND GENERAL OFFICES USED VEHICLE DISPLAY AND SALES
Same Same
- ------------------------------------------ ------------------------------
- ------------------------------------------ ------------------------------
BODY AND PAINT
Same
- ------------------------------------------
- ------------------------------------------
<PAGE>
AMENDMENT TO
HYUNDAI DEALER SALES AND SERVICE AGREEMENT
Hyundai Motor America ("HMA") and FAIR HYUNDAI PARTNERSHIP ("DEALER")
hereby agree to amend Paragraph 8 (Additional Provisions) of the Hyundai Dealer
Sales and Service Agreement between HMA and DEALER which was executed by the
President of HMA on OCTOBER 12, 1992 ("Current Agreement").
The provisions of Paragraph 8 of the Current Agreement are hereby deleted
in their entirety and are replaced by the following:
HMA has entered into this Agreement based upon DEALER's promise to provide
representation in the Hyundai/Isuzu facility, located at 100 C Federal
Road, in Danbury, Connecticut.
In recognition of his responsibilities hereunder, DEALER agrees to divide
the showroom of the proposed facility, by means of a permanent barrier, and
hereby agrees to provide exclusive representation for the display and sale
of Hyundai products.
In addition, DEALER agrees to relocate and install within 90 days of the
execution of this Agreement the existing HP-100 Hyundai freestanding sign
and one set each of 15" dealer name (DN-15) letters and 24" Hyundai (HL-24)
letters.
DEALER acknowledges that HMA's approval of DEALER's current facility, does
not, in any way, constitute a promise by HMA that it will sell DEALER any
particular number of vehicles or an assurance by HMA that DEALER will
achieve any particular level of sales, operate at a profit or realize any
return on his investment. The actual profits to be realized will depend to
a great extent on the management of the dealership, as well as on business
and economic conditions. DEALER acknowledges that, as in any investment in
competitive industry, there are no guarantees.
DEALER is a General Partnership owned by two corporate entities known as
Fair Hyundai Corp. ("FAIR") (30%) and DiFeo Partnership, Inc. ("DIFEO")
(70%) (collectively "Corporate Partners").
DEALER has represented to HMA that no individual Owner of FAIR owns a
majority interest, i.e., more than 50% in FAIR, including, but not limited
to, a majority of voting stock. By the signatures of its Owners hereto,
FAIR agrees that Samuel X. DiFeo has complete authority to make all
decisions and enter into all commitments on behalf of all Owners of FAIR
and that HMA may rely completely on the authority of such person to do so.
<PAGE>
DEALER has further represented to HMA that DIFEO is 100% owned by a
corporate entity known as United Auto Group, Inc. ("UNITED"). A majority
of all voting shares of UNITED are held by a corporate entity known as 21
International Holdings, Inc. ("TIHI) and TIHI, in turn is controlled by
Marshall Cogan ("COGAN"), who owns a majority of all voting shares of TIHI.
By his signature hereto, COGAN, on behalf of DIFEO, UNITED and TIHI, agrees
that there will be no change in majority ownership of Corporate Partner,
DIFEO, without the prior written consent of HMA.
COGAN further acknowledges that TIHI is approved as an owner for investment
purposes only and will not be active in the day-to-day management of
DEALER's operations.
Pursuant to Article 3, Paragraph 3.1 of the Partnership Agreement between
DIFEO and FAIR, dated October 11, 1992, the Executive Committee of DEALER
shall have full and complete authority to make all day-to-day management
decisions and enter into all commitments on behalf of DEALER. The
following individuals are currently members of the Executive Committee of
DEALER: Marshall Cogan, Ezra P. Mager, Carl Spielvogel, Joseph C. DiFeo
and Samuel X. DiFeo. HMA has entered into this Agreement with DEALER in
reliance upon the personal qualifications and representation of, and
assurances of the active involvement of, Samuel X. DiFeo in DEALER's
management. HMA requires FAIR and DEALER to appoint a single individual to
act as dealer principal with full and complete authority to make all
management decisions. The foregoing persons agree, individually and on
behalf of the Executive Committee, to appoint Samuel X. DiFeo as Dealer
Principal of DEALER with complete authority to make all decisions and enter
into all commitments on behalf of all Corporate Partners and that HMA may
rely completely on the authority of such person to do so. The foregoing
persons also agree that there will be no change in Dealer Principal without
the prior written consent of HMA. DEALER recognizes that failure to obtain
such consent shall be grounds for termination under Paragraph 16 of the
Dealer Agreement.
DEALER recognizes that the obligations incurred herein are material terms
of this Agreement.
<PAGE>
The foregoing amendment shall be effective on the date executed by an
authorized officer of HMA.
FAIR HYUNDAI PARTNERSHIP dba FAIR HYUNDAI
(Dealer Entity Name)
DATE: By: /s/ Carl Spielvogel
--------- ------------------------------ -------------------
Signature Title
DATE: By: /s/ Marshall S. Cogan
--------- ------------------------------ -------------------
Signature Title
DATE: By: /s/ Jospeh D. DiFeo
--------- ------------------------------ -------------------
Signature Title
DATE: By: /s/ Samuel X. DiFeo
--------- ------------------------------ -------------------
Signature Title
APPROVED:
HYUNDAI MOTOR AMERICA
General Manager
DATE: 3/1/96 By: /s/ Illegible Eastern Region
------------ ---------------------------- ------------------
Signature Title
DATE: 3/10/96 By: /s/ Illegible E.V.P./C.O.O.
------------ ---------------------------- ------------------
Signature Title
DATE: 3/14 By: /s/ Illegible
------------ ---------------------------- ------------------
Signature Title
<PAGE>
AMENDMENT TO
HYUNDAI DEALER SALES AND SERVICE AGREEMENT
Hyundai Motor America ("HMA") and Fair Hyundai Partnership ("DEALER")
hereby agree to amend Paragraph 8 of the Hyundai Dealer Sales and Service
Agreement between HMA and DEALER which was executed on October 12, 1992 and
amended from time to time prior to the date hereof (the "Current Agreement").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, as of the date hereof, a majority of the partnership interests
of DEALER are indirectly owned by United Auto Group, Inc. ("UNITED");
WHEREAS, UNITED is contemplating an offering of shares of its capital
stock to be registered pursuant to the Securities Act of 1933 (the "Public
Offering");
WHEREAS, in connection with the Public Offering, it is contemplated that
UNITED will acquire indirect ownership of all the remaining partnership
interests of DEALER; and
WHEREAS, the parties hereto desire to amend the Current Agreement to
permit the foregoing;
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereby agree as follows:
Effective upon consummation of the Public Offering, the final six
paragraphs of Section 8 of the Current Agreement shall be deleted and
replaced with the following:
DEALER is a general partnership owned by two corporate entities know as
DiFeo Partnership, Inc. ("DPI") (70%) and UAG Northeast, Inc. ("UNI")
(30%) (collectively, "Coorporate Parteners").
DEALER has represented to HMA that each of the Corporate Partners is 100%
owned by a corporate entity known as United Auto Group, Inc. ("UNITED").
UNITED is a publicly traded company in which no single entity or
individual owns the majority of voting shares. UNITED furthur warrants
that control of UNITED will be vested in a Board of Directors.
Pursuant to this Agreement, UNITED shall appoint Samuel X. DiFeo as
Dealer Operator of DEALER with complete authority to make all decisions
and enter into all commitments on behalf of DEALER with respect to DEALER's
operations, and HMA will rely completely on the authority of such person.
<PAGE>
UNITED and the Corporate Partners further agree that there will be no
change in majority direct ownership of DEALER without prior written
consent of HMA. DEALER recognizes that the failure to obtain such consent
shall be grounds for termination under paragraph 16 of this Agreement.
The foregoing amendment is agreed upon on the date executed by an
authorized officer of HMA.
FAIR HYUNDAI PARTNERSHIP
Date: By:
--------------- ------------------------------
Carl Spielvogel
Member, Executive Committee
Date: By:
--------------- ------------------------------
Samuel X. DiFeo
Member, Executive Committee
DIFEO PARTNERSHIP, INC.
Date: By:
--------------- ------------------------------
Carl Spielvogel
Chairman of the Board and
Chief Executive Officer
UAG NORTHEAST, INC.
Date: By:
--------------- ------------------------------
Carl Spielvogel
Chairman of the Board and
Chief Executive Officer
UNITED AUTO GROUP, INC.
Date: By:
--------------- ------------------------------
Carl Spielvogel
Chairman of the Board and
Chief Executive Officer
-2-
<PAGE>
APPROVED:
HYUNDAI MOTOR AMERICA
Date: By:
--------------- ------------------------------
Name:
Title:
Date: By:
--------------- ------------------------------
Name:
Title:
Date: By:
--------------- ------------------------------
Name:
Title:
-3-
<PAGE>
AMENDMENT TO
HYUNDAI DEALER SALES AND SERVICE AGREEMENT
Hyundai Motor America ("HMA") and DIFEO HYUNDAI PARTNERSHIP
("Dealer") hereby agree to amend Paragraph 3 of the Hyundai Dealer Sales and
Service Agreement between HMA and Dealer which was executed by the President of
HMA on NOVEMBER 22, 1993 ("Current Agreement").
Paragraph 3 of the Current Agreement which provides in pertinent
part that
only the following persons, will be the Owner(s) of DEALER.
OWNERSHIP
NAME ADDRESS TITLE INTEREST
DiFeo Hyundai, Inc. 30%
- ------------------------- ---------------- ---------------- ---------------
DiFeo Partnership, Inc. 70%
- ------------------------- ---------------- ---------------- ---------------
- ------------------------- ---------------- ---------------- ---------------
- ------------------------- ---------------- ---------------- ---------------
is hereby amended to state that only the following persons, will be the Owner(s)
of DEALER.
OWNERSHIP
NAME ADDRESS TITLE INTEREST
DiFeo Partnership, Inc. 70%
- ------------------------- ---------------- ---------------- ---------------
UAG Northeast, Inc. 30%
- ------------------------- ---------------- ---------------- ---------------
- ------------------------- ---------------- ---------------- ---------------
- ------------------------- ---------------- ---------------- ---------------
<PAGE>
AMENDMENT TO
HYUNDAI DEALER SALES AND SERVICE AGREEMENT
Hyundai Motor America ("HMA") and DIFEO HYUNDAI PARTNERSHIP ("DEALER")
hereby agree to amend Paragraph 8 (Additional Provisions) of the Hyundai Dealer
Sales and Service Agreement between HMA and DEALER which was executed by the
President of HMA on NOVEMBER 22, 1993 ("Current Agreement").
The provisions of Paragraph 8 of the Current Agreement are hereby deleted in
their entirety and are replaced by the following:
HMA has entered into this Agreement based upon DEALER's promise to
provide representation in the current Hyundai/Chrysler-Plymouth/Jeep-
Eagle facility, located at Route 440 at Hudson Mall in Jersey City,
New Jersey. DEALER acknowledges that its decision to combine its
Hyundai, Chrysler-Plymouth and Jeep-Eagle dealership operations,
including the Showroom facility, substantially reduces the space
available for representation of the Hyundai franchise.
DEALER acknowledges that Jersey City, New Jersey is part of the larger
Newark, New Jersey metro market area. DEALER further acknowledges
that it is HMA's policy to require exclusive sales representation in
metro market areas.
In recognition of his responsibilities hereunder, DEALER has divided
the existing Hyundai/Chrysler-Plymouth/Jeep-Eagle facility, in a
manner acceptable to HMA, and hereby agrees to provide exclusive
representation for the display and sale of Hyundai products, including
a minimum of four (4) Hyundai vehicles, in the resulting 1,600 sq. ft.
Showroom. DEALER acknowledges, however, that the divided Showroom
does not meet HMA's minimum facility requirements.
DEALER acknowledges that HMA's approval of DEALER's current facility,
does not, in any way, constitute a promise by HMA that it will sell
DEALER any particular number of vehicles or an assurance by HMA that
DEALER will achieve any particular level of sales, operate at a profit
or realize any return on his investment. The actual profits to be
realized will depend to a great extent on the management of the
dealership, as well as on business and economic conditions. DEALER
<PAGE>
acknowledges that, as in any investment in competitive industry, there
are no guarantees.
DEALER is a general partnership collectively owned 100% by two
corporate entities known as DiFeo Partnership, Inc. ("DPI") and UAG
Northeast, Inc. ("UNI) (collectively "Corporate Partners").
DEALER has represented to HMA that each of the Corporate Partners is
100% owned by a corporate entity known as United Auto Group, Inc.
("UNITED"). UNITED is a publicly traded company in which no single
entity or individual owns the majority of voting shares. UNITED
further warrants that control of UNITED will be vested in a Board of
Directors.
Pursuant to this Agreement, UNITED, through its Board of Directors,
shall appoint Joseph C. DiFeo as dealer principal of DEALER with
complete authority to make all decisions and enter into all
commitments on behalf of DEALER, and HMA will rely completely on the
authority of such person. UNITED agrees that the foregoing person
shall not be changed as dealer principal without the prior written
consent of HMA. UNITED and the Corporate Partners further agree that
there will be no change in majority direct ownership of DEALER without
prior written consent of HMA. DEALER recognizes that the failure to
obtain such consent shall be grounds for termination under Paragraph
16 of this Dealer Agreement.
DEALER recognizes that the obligations incurred herein are material
terms of this Agreement.
<PAGE>
The foregoing amendment shall be effective on the date executed by an
authorized officer of HMA.
DiFeo Hyundai Partnership dba DiFeo Hyundai
(Dealer Entity Name)
DATE: By: /s/ Illegible
---------------------- ----------------------- -------------------
SIGNATURE TITLE
DATE: By:
---------------------- ----------------------- -------------------
SIGNATURE TITLE
DATE: By:
---------------------- ----------------------- -------------------
SIGNATURE TITLE
DATE: By:
---------------------- ----------------------- -------------------
SIGNATURE TITLE
APPROVED:
HYUNDAI MOTOR AMERICA
General Manager
DATE: By: /s/ Illegible Eastern Region
---------------------- ----------------------- -------------------
SIGNATURE TITLE
DATE: By:
---------------------- ----------------------- -------------------
SIGNATURE TITLE
DATE: By:
---------------------- ----------------------- -------------------
SIGNATURE TITLE
<PAGE>
EXHIBIT 10.2.15.2
<PAGE>
HYUNDAI MOTOR AMERICA
DEALER
SALES AND SERVICE
AGREEMENT
<PAGE>
TABLE OF CONTENTS
Page
INTRODUCTION
1. APPOINTMENT OF DEALER. . . . . . . . . . . . . . . . . . . . . . . . .
2. TERM OF THIS AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . .
3. DEALER OWNERSHIP
4. DEALER MANAGEMENT
5. CHANGE IN DEALER OWNERSHIP OR MANAGEMENT . . . . . . . . . . . . . . .
6. DEALER LOCATION
7. STANDARD PROVISIONS
8. ADDITIONAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . .
9. EXECUTION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . .
10. SALE OF HYUNDAI PRODUCTS . . . . . . . . . . . . . . . . . . . . . . 1
A. DEALER'S AGREEMENT TO PURCHASE HYUNDAI PRODUCTS . . . . . . . . 1
1. Quantities . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Prices and Other Terms of Sale . . . . . . . . . . . . . . 1
3. Payment For Hyundai Products . . . . . . . . . . . . . . . 2
4. Delivery of Hyundai Products . . . . . . . . . . . . . . . 2
a. Mode and Place of Delivery . . . . . . . . . . . . . . 2
b. Title and Risk of Loss . . . . . . . . . . . . . . . . 2
c. Diversion of Deliveries. . . . . . . . . . . . . . . . 2
d. Failure or Delay of Delivery . . . . . . . . . . . . . 2
e. Damage Claims. . . . . . . . . . . . . . . . . . . . . 3
f. Option to Repurchase Damaged Motor
Vehicles. . . . . . . . . . . . . . . . . . . . . . . 3
5. Warranties on Hyundai Products . . . . . . . . . . . . . . 3
6. Effect of Change of Design, Specifications
or Options . . . . . . . . . . . . . . . . . . . . . . . 3
7. Effect of Discontinuance of Manufacture. . . . . . . . . . 4
B. DEALER'S AGREEMENT TO PROMOTE AND SELL HYNDAI
PRODUCTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1. Best Efforts . . . . . . . . . . . . . . . . . . . . . . . 4
2. Adequate Vehicle Inventory . . . . . . . . . . . . . . . . 4
3. Hyundai Dealer Advertising Association . . . . . . . . . . 4
4. Primary Market Area. . . . . . . . . . . . . . . . . . . . 5
5. Appointment of New Dealers . . . . . . . . . . . . . . . . 5
C. DEALER'S SALES OPERATIONS . . . . . . . . . . . . . . . . . . . 5
1. Sales Organization . . . . . . . . . . . . . . . . . . . . 5
2. Fair Dealing . . . . . . . . . . . . . . . . . . . . . . . 5
3. Disclosure as to Prices of Hyundai Products. . . . . . . . 5
4. Disclosure as to Parts or Accessories. . . . . . . . . . . 6
D. ASSISTANCE PROVIDED BY HMA. . . . . . . . . . . . . . . . . . . 6
1. Sales Training Assistance. . . . . . . . . . . . . . . . . 6
2. Sales Promotion Assistance . . . . . . . . . . . . . . . . 6
3. Field Sales Personnel Assistance . . . . . . . . . . . . . 7
E. EVALUATION OF DEALER'S SALES PERFORMANCE. . . . . . . . . . . . 7
11. SERVICE AND PARTS. . . . . . . . . . . . . . . . . . . . . . . . . . 7
A. DEALER RESPONSIBILITIES . . . . . . . . . . . . . . . . . . . . 7
1. New Motor Vehicle Predelivery Service. . . . . . . . . . . 8
2. Warranty and Policy Service. . . . . . . . . . . . . . . . 8
3. Campaign Inspections . . . . . . . . . . . . . . . . . . . 8
i
<PAGE>
4. Reimbursement Rates. . . . . . . . . . . . . . . . . . . . 8
5. Independent Warranty or Service Contract . . . . . . . . . 9
6. Installation and Use of Non-Genuine
Parts or Accessories . . . . . . . . . . . . . . . . . . 9
7. Safety and Emission Control Laws . . . . . . . . . . . . .10
B. SERVICE AND PARTS OPERATIONS. . . . . . . . . . . . . . . . . .11
1. Service and Parts Personnel. . . . . . . . . . . . . . . .11
2. Handling of Service Complaints . . . . . . . . . . . . . .11
3. Service Equipment and Special Tools. . . . . . . . . . . .11
4. Parts Inventory. . . . . . . . . . . . . . . . . . . . . .11
C. ASSISTANCE PROVIDED BY HMA. . . . . . . . . . . . . . . . . . .12
1. Service Training Assistance. . . . . . . . . . . . . . . .12
2. Service Manuals and Materials. . . . . . . . . . . . . . .12
3. Field Service Personnel Assistance . . . . . . . . . . . .12
D. EVALUATION OF DEALER'S SERVICE AND PARTS
PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . . . .12
12. DEALER LOCATION . . . . . . . . . . . . . . . . . . . . . . . . . .13
A. RESPONSIBILITIES OF DEALER. . . . . . . . . . . . . . . . . . .13
B. OPERATING HOURS . . . . . . . . . . . . . . . . . . . . . . . .13
C. SIGNS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
D. DATA PROCESSING SYSTEMS . . . . . . . . . . . . . . . . . . . .14
E. FACILITY PLANNING ASSISTANCE. . . . . . . . . . . . . . . . . .14
F. EVALUATION OF DEALERSHIP FACILITIES . . . . . . . . . . . . . .14
13. CAPITAL STANDARDS. . . . . . . . . . . . . . . . . . . . . . . . . .14
A. NET WORKING CAPITAL . . . . . . . . . . . . . . . . . . . . . .14
B. WHOLESALE CREDIT. . . . . . . . . . . . . . . . . . . . . . . .15
14. ACCOUNTS, RECORDS AND REPORTS. . . . . . . . . . . . . . . . . . . .15
A. UNIFORM ACCOUNTING SYSTEM . . . . . . . . . . . . . . . . . . .15
B. SALES REPORTING . . . . . . . . . . . . . . . . . . . . . . . .15
C. SALES AND SERVICE RECORDS . . . . . . . . . . . . . . . . . . .16
D. AUDIT OF DEALER RECORDS . . . . . . . . . . . . . . . . . . . .16
E. CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . . .16
15. TRADEMARKS, SERVICE MARKS AND TRADE NAMES. . . . . . . . . . . . . .16
A. USE BY DEALER 16
B. DISCONTINUANCE OF USE . . . . . . . . . . . . . . . . . . . . .17
16. TERMINATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . .17
A. TERMINATION BY DEALER . . . . . . . . . . . . . . . . . . . . .17
B. TERMINATION FOR CAUSE . . . . . . . . . . . . . . . . . . . . .17
1. Immediate Termination. . . . . . . . . . . . . . . . . . .17
2. Termination Upon Sixty Days Notice . . . . . . . . . . . .18
3. Termination For Failure of Performance . . . . . . . . . .20
4. Termination of HMA . . . . . . . . . . . . . . . . . . . .20
5. Termination Upon Death or Incapacity . . . . . . . . . . .21
a. Succession to Majority Ownership by
Designated Successor. . . . . . . . . . . . . . . .21
b. Succession to Ownership After Death
of Owner. . . . . . . . . . . . . . . . . . . . . .22
c. Succession Upon Incapacity of Owner . . . . . . . . .22
d. HMA's Investigation and Determination . . . . . . . .23
C. EFFECTIVE DATE OF TERMINATION . . . . . . . . . . . . . . . . .23
D. EFFECT OF TERMINATION . . . . . . . . . . . . . . . . . . . . .24
1. DEALER's Conduct . . . . . . . . . . . . . . . . . . . . .24
2. The Right to Purchase. . . . . . . . . . . . . . . . . . .24
3. Repurchase of Hyundai Products . . . . . . . . . . . . . .24
ii
<PAGE>
a. HMA's Obligations . . . . . . . . . . . . . . . . . .24
b. DEALER's Responsibilities . . . . . . . . . . . . . .25
c. Payment by HMA. . . . . . . . . . . . . . . . . . . .25
d. Disagreement Regarding Valuation. . . . . . . . . . .26
17. RIGHT OF FIRST REFUSAL OR OPTION TO PURCHASE . . . . . . . . . . . .26
A. HMA'S RIGHTS 26
B. PURCHASE PRICE 27
C. TRANSFER CONDITIONS . . . . . . . . . . . . . . . . . . . . . .27
18. DEFENSE AND INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . .27
A. DEFENSE AND INDEMNIFICATION BY HMA. . . . . . . . . . . . . . .27
B. DEFENSE AND INDEMNIFICATION BY DEALER . . . . . . . . . . . . .28
C. EXTENT OF RESPONSIBILITY. . . . . . . . . . . . . . . . . . . .29
D. CONDITIONAL DEFENSE AND/OR INDEMNIFICATION. . . . . . . . . . .29
E. THE EFFECT OF SUBSEQUENT DEVELOPMENTS . . . . . . . . . . . . .30
F. TIME TO RESPOND AND RESPONSIBILITIES OF THE
PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . .30
G. SURVIVAL OF OBLIGATION. . . . . . . . . . . . . . . . . . . . .30
19. MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . .31
A. ENTIRE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . .31
B. AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . . .31
C. RELEASE OF CLAIMS . . . . . . . . . . . . . . . . . . . . . . .31
D. ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . . .31
E. SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . .31
F. CAPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . .32
G. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . .32
H. WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
I. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
J. NEW AND SUPERSEDING DEALER AGREEMENTS . . . . . . . . . . . . .32
K. INDEPENDENT ENTITY. . . . . . . . . . . . . . . . . . . . . . .32
L. FORCE MAJEURE . . . . . . . . . . . . . . . . . . . . . . . . .33
M. NO FRANCHISE FEE. . . . . . . . . . . . . . . . . . . . . . . .33
N. WAIVER OF TRIAL BY JURY . . . . . . . . . . . . . . . . . . . .33
O. TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
20. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
iii
<PAGE>
HYUNDAI MOTOR AMERICA
DEALER SALES AND SERVICE AGREEMENT
STANDARD PROVISIONS
The Standard Provisions set forth below are expressly incorporated in
and made a part of the HMA Dealer Sales and Services Agreement.
10. SALE OF HYUNDAI PRODUCTS
A. DEALER'S AGREEMENT TO PURCHASE HYUNDAI PRODUCTS
1. QUANTITIES
DEALER agrees to purchase Hyundai Products in such quantities and
varieties as may be necessary to fulfill its obligations under this Agreement.
HMA will distribute such products pursuant to such procedures as HMA may deem
appropriate from time to time. HMA's agreement to sell may only be established
by written confirmation by HMA that the product will be shipped. HMA will use
its best efforts to provide Hyundai Products to DEALER subject to available
supply from FACTORY, HMA's marketing requirements, and any change or
discontinuance with respect to any Hyundai Product.
HMA and DEALER recognize that certain Hyundai Products may be in short
supply from time to time because of factors which are beyond the control of HMA
or FACTORY. Where such a shortage is determined by HMA to exist, HMA will
endeavor to allocate the affected Hyundai Product(s) among its dealers in a fair
and equitable manner, as it may determine in its sole discretion.
HMA agrees to provide DEALER with an explanation of the method used to
distribute such products and, upon written request, will advise DEALER of total
sales by model to all Dealers collectively in the Region and to DEALER
individually.
DEALER acknowledges that certain products manufactured by or for
FACTORY may be distributed in the United States by distributors other than HMA.
Entering into this Agreement, therefore, confers no rights or benefits upon
DEALER with respect to the sale or servicing of such products.
2. PRICES AND OTHER TERMS OF SALE
HMA reserves the right, without prior notice to DEALER, to establish
and revise prices and other terms of sale for all Hyundai Products sold to
DEALER under this Agreement. HMA, however, will provide notice to DEALER of any
revision in prices and other terms of sale before shipping any Hyundai Product
subject to such revision.
<PAGE>
3. PAYMENT FOR HYUNDAI PRODUCTS
DEALER agrees to pay for Hyundai Products pursuant to such procedures
as HMA may designate from time to time. Such procedures may include electronic
funds transfer and other automatic collection systems. Automatic collections
will be against DEALER's then applicable wholesale credit line. HMA will advise
DEALER in writing of the implementation of such systems. DEALER in writing of
the implementation of such systems. DEALER will make arrangements with its
designated financial institution to accommodate the use of such systems.
4. DELIVERY OF HYUNDAI PRODUCTS
a. MODE AND PLACE OF DELIVERY
HMA will select the distribution points, carriers and the mode of
transportation and will be responsible for all charges in effecting delivery of
Hyundai Products to DEALER. DEALER agrees to reimburse HMA for all delivery,
freight and other related charges as they appear on HMA's invoice to DEALER.
b. TITLE AND RISK OF LOSS
Subject to the terms of sale which HMA may establish from time to
time, title and risk of loss of Hyundai Products will pass to DEALER upon tender
of the Hyundai Products to DEALER or its authorized agent. HMA will retain, and
DEALER hereby grants to HMA, a security interest in, and the right to retain or
repossess, all Hyundai Products sold to DEALER by HMA until HMA is paid in full
therefor.
c. DIVERSION OF DELIVERIES
If DEALER should fail or refuse or for any reason be unable to take
delivery of any Hyundai Products, or if DEALER should request diversion of a
shipment from HMA, DEALER will be responsible, and will pay HMA promptly upon
demand, for all costs and expenses incurred by HMA as a result of such
diversion. HMA may direct that the returned Hyundai Products be delivered to
another destination. The amount charged DEALER, however, will not exceed the
charge of returning the products to the original point of shipment plus any
demurrage, storage or related charges.
d. FAILURE OR DELAY OF DELIVERY
DEALER will not be liable for any delay or failure to accept delivery
and HMA will not be liable for delay or failure to deliver Hyundai Products,
where such delay or failure to deliver is due, in whole or in part, to any event
of Force Majeure, or any delay or failure of FACTORY or other supplier of HMA or
any carrier to deliver Hyundai Products.
-2-
<PAGE>
e. DAMAGE CLAIMS
As between HMA and DEALER, HMA assumes responsibility for damage to
Hyundai Products occurring prior to delivery to DEALER or its authorized agent.
DEALER agrees, however, to submit such claims in the manner required in the
Hyundai Warranty Policies and Procedures Manual.
f. OPTION TO REPURCHASE DAMAGED MOTOR VEHICLES
DEALER agrees to notify HMA promptly if any new motor vehicle(s) in
DEALER's inventory, other than those used as demonstrators, should for any
reason be substantially damaged. To preserve the quality and value of new
Hyundai Motor Vehicles offered to the public, HMA will have the option to
repurchase any or all such vehicles at a price equal to the net purchase price
paid by DEALER to HMA. HMA will make appropriate payment for repurchased
vehicles directly to any lienholder. DEALER agrees to assign its rights under
any insurance contract relating to the repurchase vehicle(s) to HMA.
5. WARRANTIES ON HYUNDAI PRODUCTS
DEALER understands and agrees that the only warranties that will be
applicable to each new Hyundai Product sold to DEALER by HMA will be the written
limited warranty or warranties expressly furnished by FACTORY or HMA or as
stated in the Hyundai Warranty Policies and Procedures Manual, as it may be
revised from time to time. With respect to DEALER, such limited warranties are
in lieu of all other warranties, express or implied, including any implied
warranty of merchantability or fitness for a particular purpose or any liability
for commercial losses based on negligence or strict liability. Except for its
limited liability under such written warranty or warranties, neither FACTORY nor
HMA assumes any other warranty obligation or liability. DEALER is not
authorized to assume any additional warranty obligations or liabilities on
behalf of HMA or FACTORY. Any such additional obligations or liabilities
assumed by DEALER will be solely the responsibility of DEALER.
6. EFFECT TO CHANGE OF DESIGN, SPECIFICATIONS OR OPTIONS
HMA reserves the right at any time in its sole discretion and without
notice to change the design or specifications of any Hyundai Product or the
availability of options in any Hyundai Product. HMA is under no obligation to
make any similar change upon any product previously purchased by or shipped to
DEALER. No change will be considered a model year change unless so specified by
HMA.
-3-
<PAGE>
7. EFFECT OF DISCONTINUANCE OF MANUFACTURE
The manufacture and production of all or part of any Hyundai Product,
whether motor vehicle, parts, options, or accessories, including any model,
series, or body style of any Hyundai Motor Vehicle, may be discontinued at any
time without any obligation or liability to DEALER on the part of FACTORY or HMA
by reason thereof.
B. DEALER'S AGREEMENT TO PROMOTE AND SELL HYUNDAI PRODUCTS
1. BEST EFFORTS
DEALER is an integral part of a network of authorized Hyundai Dealers
dedicated to the vigorous and effective promotion and sale of Hyundai Products.
Accordingly, DEALER agrees to use its best efforts to effectively promote and
sell Hyundai Products to Customers in DEALER's primary market area.
2. ADEQUATE VEHICLE INVENTORY
As a duly authorized Hyundai Dealer, DEALER recognizes that its
Customers will expect DEALER to stock a reasonable quantity and variety of
current model Hyundai Motor Vehicles. Accordingly, DEALER agrees to stock and
sell, subject to available supply, all models and types of Hyundai Motor
Vehicles in the Hyundai Product Addendum and that it will, at all times,
maintain at least the minimum inventory of Hyundai Motor Vehicles requested by
HMA. DEALER will maintain all Hyundai Motor Vehicles for display and
demonstration purposes in showroom ready condition.
3. HYUNDAI DEALER ADVERTISING ASSOCIATION
HMA and DEALER recognize the benefits which may be derived from a
comprehensive joint advertising effort by Hyundai Dealers. Accordingly, HMA
agrees to assist Hyundai Dealers, including DEALER, in the establishment of a
cooperative advertising association. DEALER agrees to cooperate with HMA in the
formation of such association and, once it is established, to participate
actively and to contribute to it in accordance with the by-laws of the
association.
The Hyundai Dealer Advertising Association will finance its
advertising programs through the assessment of a fixed amount for each new
Hyundai Motor Vehicle purchased by Hyundai Dealers. As a service to the Dealer
Association, HMA will collect the agreed amount, provided that the Association
maintains control over the amount of the assessment and the manner in which the
funds are expended and so long as such funds are expended for the promotion of
Hyundai Products which may also include Parts and Service advertising campaigns
from time to time.
-4-
<PAGE>
4. PRIMARY MARKET AREA
While DEALER is required to vigorously develop its primary market
area, nothing contained in this Agreement will limit or be construed to limit
the geographical area in which DEALER may promote, or the persons to whom DEALER
may sell, Hyundai Products.
The primary market area is a geographic area which HMA will designate
from time to time for the sole purpose of evaluating DEALER's performance of its
sales and service obligations hereunder. DEALER recognizes that the designation
of a primary market area is not intended to be permanent and that HMA may, in
its sole discretion, change DEALER's primary market area from time to time.
5. APPOINTMENT OF NEW DEALERS
DEALER agrees that HMA will have the right, from time to time, to
appoint or to relocate new or additional authorized Hyundai Dealers in or near
the primary market area served by DEALER based upon such reasonable criteria as
HMA may establish in its sole discretion.
C. DEALER'S SALES OPERATIONS
1. SALES ORGANIZATION
To enable DEALER to fulfill its responsibilities satisfactorily under
this Agreement DEALER agrees to organize and maintain an adequate and trained
sales organization.
2. FAIR DEALING
HMA has selected DEALER because of the reputation of its Owner(s) and
the General Manager, identified herein, for integrity and their commitment to
fair dealing. DEALER will at all times maintain a high standard of ethics in
advertising, promoting and selling Hyundai Products and will not engage in any
misrepresentation or unfair or deceptive trade practices. DEALER will not
advertise Hyundai Products in a manner likely to mislead or deceive the public
or to impair the good will of HMA or DEALER or the reputation of Hyundai
Products. Furthermore, DEALER will deal with its Customers in a courteous, fair
and forthright manner and will not engage in any deceptive or fraudulent
practices, including without limitation, bait and switch and improper retention
of deposits.
3. DISCLOSURE AS TO PRICES OF HYUNDAI PRODUCTS
DEALER agrees to explain to purchasers of Hyundai Products the items
which make up the purchase price and to give such purchasers itemized invoices
and any other information required by law. DEALER further agrees that it will
not make any
-5-
<PAGE>
misleading statements as to the items which make up the total selling price of
any Hyundai Motor Vehicle, or as to the prices related to such items including
destination or other charges paid to HMA. DEALER also agrees not to charge
Customers for any services for which DEALER is reimbursed by HMA, including
predelivery inspection and adjustment services, without disclosing the fact of
such reimbursement to the Customer.
4. DISCLOSURE AS TO PARTS OR ACCESSORIES
DEALER recognizes that its Customers have a right to expect that any
product that they purchase from DEALER meets the high quality standards
associated with HMA, FACTORY, the Hyundai Marks and Hyundai Products in general.
Accordingly, DEALER agrees that, if it sells or installs any part or accessory
that is not a Hyundai Genuine Part or Accessory, it will disclose such fact to
the Customer and will advise the Customer that the time is not included in
warranties furnished by HMA or Factory. In all cases, the purchaser's contract
of purchase and sale will include written notice of such disclosure. In
addition, DEALER will clearly explain to the Customer the extent of any warranty
covering the equipment, part or accessory involved and will deliver a copy of
such warranty to the Customer at the time of sale.
DEALER agrees that it will not represent or offer to sell as new
Hyundai Genuine Parts or Accessories, any parts or accessories used by it in the
repair or servicing of Hyundai Motor Vehicles which are not in fact Hyundai
Genuine Parts or Accessories.
D. ASSISTANCE PROVIDED BY HMA
1. SALES TRAINING ASSISTANCE
To assist DEALER in the fulfillment of its sales responsibilities
under this Agreement, HMA will offer general and specialized sales management
and sales training programs for the benefit and use of DEALER's sales
organization. DEALER recognizes the importance of having a well trained sales
staff to meet its obligations hereunder and agrees to require its sales
personnel to participate in such programs as HMA may offer from time to time for
their benefit.
2. SALES PROMOTION ASSISTANCE
In order that authorized Hyundai Dealers may be assured of the
benefits of comprehensive advertising and promotion of Hyundai Products, HMA
agrees to establish and maintain general advertising and promotion programs and
will from time to time make sales promotion and campaign materials available to
DEALER to promote the sale of such Hyundai Products at a reasonable charge where
applicable. DEALER agrees to cooperate in HMA's
-6-
<PAGE>
advertising programs and to fully utilize the materials offered DEALER by HMA.
3. FIELD SALES PERSONNEL ASSISTANCE
To assist DEALER in handling its sales responsibilities under this
Agreement, HMA agrees to provide trained field sales personnel to advise and
counsel DEALER on sales-related subjects, including but not limited to
merchandising, training and sales management.
E. EVALUATION OF DEALER'S SALES PERFORMANCE
HMA will evaluate DEALER's sales performance at least annually and
agrees it review such evaluations with DEALER so that DEALER may take prompt
action if necessary to improve its sales performance to such satisfactory levels
as HMA may reasonably require. HMA will provide DEALER with a copy of such
evaluation upon request. HMA may, at its discretion, evaluate DEALER's sales
performance based on one or more of the following criteria:
1. Achievement of fair and reasonable sales objectives as HMA may
establish at its discretion;
2. A comparison of sales and/or registrations of Hyundai Motor
Vehicles to sales and/or registrations of other line makes: (i) in DEALER's
primary market area; (ii) in HMA's Region or any area thereof as HMA may
reasonably establish; or (iii) nationally;
3. The trend of DEALER's sales performance over a reasonable period
of time;
4. The manner in which DEALER has conducted its sales operations,
including advertising, sales promotions and Customer relations;
5. The availability of new motor vehicles to DEALER from HMA; or
6. Significant local conditions that may have affected DEALER's
performance.
11. SERVICE AND PARTS
A. DEALER RESPONSIBILITIES
DEALER recognizes that its Customers are entitled to prompt, courteous
and professional service and that Customer satisfaction is vital to the mutual
success of DEALER and HMA. DEALER agrees, therefore: to take all reasonable
steps to provide service and parts for all Hyundai Motor Vehicles, regardless of
where purchased, and whether or not under warranty; to ensure
-7-
<PAGE>
that necessary repairs on Customer vehicles are accurately diagnosed and
performed in accordance with the highest professional standards; to advise the
Customer and obtain his or her consent prior to the initiation of any repairs;
and, to treat the Customer courteously and fairly at all times.
1. NEW MOTOR VEHICLE PREDELIVERY SERVICE
DEALER will perform predelivery service on each new Hyundai Motor
Vehicle prior to delivery to the retail Customer according to HMA's
instructions. Any required campaign or policy service will also be completed at
the time of predelivery service.
2. WARRANTY AND POLICY SERVICE
DEALER will perform warranty service on each Hyundai Motor Vehicle at
the time of predelivery service and when requested by the owner according to the
requirements of the Hyundai Warranty Policies and Procedures Manual. DEALER
will perform policy service as HMA may require from time to time. DEALER will
provide each owner for whom warranty or policy service is performed with a copy
of the repair order stating all services performed.
3. CAMPAIGN INSPECTIONS
HMA may, from time to time, require DEALER to inspect and correct
conditions in Hyundai Motor Vehicles. DEALER agrees to perform such campaign
inspections regardless of where or from whom the subject Hyundai Motor Vehicles
were purchased. Because of the importance of campaign inspections to the
overall reputation of Hyundai Motor Vehicles for their high quality standards,
HMA may ship parts and other materials to DEALER without DEALER's authorization.
DEALER will accept such shipments and upon completion of the campaign, HMA will
credit DEALER for any extra parts and materials so shipped provided DEALER
returns or otherwise disposes of such parts and materials according to HMA's
instructions.
4. REIMBURSEMENT RATES
HMA agrees to compensate DEALER for all warranty, policy, and campaign
inspection work, including labor and diagnosis, in accordance with procedures
and at rates to be announced from time to time by HMA and in accordance with
applicable law. DEALER agrees that such rates will constitute full and complete
payment to DEALER for such work. Both parties agree that warranty and policy
service is provided for the benefit of Customers and DEALER agrees that the
Customer will not be obligated to pay any charges for warranty or policy work,
except as required by law.
-8-
<PAGE>
HMA will reimburse DEALER for predelivery service at an authorized
labor and/or diagnosis rate and according to the predelivery service time
allowances as established by HMA as is required by law.
If DEALER wishes to adjust the established reimbursement rate for
labor and diagnosis in connection with warranty, policy or predelivery service
performed on Customer's vehicles, DEALER agrees to make the appropriate written
application to HMA and to comply with such applicable procedures or policies as
may be set forth in the Hyundai Warranty Policies and Procedures Manual.
5. INDEPENDENT WARRANTY OR SERVICE CONTRACT
DEALER recognizes that HMA's limited warranties are provided to
Customer at no additional expense. HMA recognizes that DEALER is free to sell
warranty or service contract protection for Hyundai Motor Vehicles which is
different from and independent of HMA's warranties. In order to avoid any
misconception among its Customers, however, DEALER agrees that if it elects to
sell such independent warranties or service contracts to Customers:
a. DEALER will conspicuously disclose in writing upon the Customer's
purchase order the extent to which the independent warranty or service contract
protection purchased by the Customer overlaps that provided by HMA or Factory;
and
b. Whenever a Customer purchases such independent warranty or
service contract protection and seeks service on a Hyundai Product during the
period of time that such Product is also covered by the limited warranty
provided by HMA or FACTORY, DEALER will not apply for, and agrees that it will
not be entitled to, reimbursement under such limited warranty unless DEALER has
advised the Customer in writing, on all copies of the repair order, that the
service was provided pursuant to HMA's limited warranty and not the independent
warranty or service contract protection that the Customer purchased.
6. INSTALLATION AND USE OF NON-GENUINE PARTS OR ACCESSORIES
DEALER understands that it has the right to sell, install or use
products which are not Hyundai Genuine Parts or Accessories.
DEALER agrees, however, that its Customers may reasonably expect that
any part or accessory which DEALER sells, installs or uses in the repair or
servicing of Hyundai Motor Vehicles meets the high quality standards of Hyundai
Genuine Parts or Accessories. Therefore, in cases where DEALER does not sell,
install or use a Hyundai Genuine Part or Accessory, DEALER will only utilize
such other parts or accessories as:
-9-
<PAGE>
Will not adversely affect the mechanical operation of the Hyundai
Motor Vehicle being serviced or repaired; or
Are equivalent in quality and design to Hyundai Genuine Parts or
Accessories.
In the event any disagreement arises between HMA and DEALER regarding
the use by DEALER of parts other than Hyundai Genuine Parts or Accessories or
parts expressly approved by HMA, DEALER agrees that it will have the burden of
proving either:
That the parts replaced will not adversely affect the mechanical
operation of the Hyundai Motor Vehicle being serviced or repaired; or
That parts used by it are equivalent in quality and design to Hyundai
Genuine Parts or Accessories or parts expressly approved by HMA.
If DEALER uses parts or accessories which are not Hyundai Genuine
Parts or Accessories or are not approved in writing by HMA for use in Hyundai
Motor Vehicles, DEALER does so at its own risk and neither HMA nor FACTORY will
be responsible to DEALER or to any third party for any products liability,
warranty or other claim which may arise as a consequence of the installation
and/or use of such parts.
7. SAFETY AND EMISSION CONTROL LAWS
DEALER agrees to comply and operate consistently with all applicable
provisions of federal, state and local motor vehicle safety and emission control
laws, rules and regulations.
In addition, HMA and DEALER will each provide the other with such
information and assistance as may reasonably be requested by the other in
connection with the performance of obligations imposed on either party by any
applicable federal, state and local motor vehicle safety and emission control
requirements.
In the event that the laws of the state in which DEALER is located
require motor vehicle dealers or distributors to install in new or used motor
vehicles, prior to the retail sale thereof, any safety devices or other
equipment not installed or supplied as standard equipment by FACTORY or HMA,
then DEALER, prior to its sale of any Hyundai Motor Vehicles on which such
installations are so required, will properly install such devices or equipment
on such Hyundai Motor Vehicles. DEALER will comply with state and local laws
pertaining to installation of such equipment, including without limitation, the
reporting thereof.
-10-
<PAGE>
B. SERVICE AND PARTS OPERATIONS
1. SERVICE AND PARTS PERSONNEL
DEALER agrees to establish and maintain a complete service and parts
organization, including a service manager, a parts manager and a sufficient
number of Customer relations, service and parts personnel who meet such
educational, management, technical training and competency standards as HMA may
establish or approve.
2. HANDLING OF SERVICE COMPLAINTS
DEALER understands that the development and maintenance of Customer
confidence and satisfaction in Hyundai Products requires DEALER's full support.
DEALER, therefore, agrees to investigate and handle all complaints from
Customers according to procedures prescribed by HMA and in a manner calculated
to secure and maintain the Customers' good will towards DEALER, HMA and Hyundai
Products. Moreover, DEALER agrees to cooperate with HMA and to provide such
information as HMA may in its judgment require to comply with any federal or
state consumer protection law, rule or regulation, including without limitation,
warranty and repair or replace laws or to avoid any liability thereunder.
Furthermore, DEALER agrees to participate in and cooperate with such Customer
complaint resolution procedures as HMA may designate from time to time.
3. SERVICE EQUIPMENT AND SPECIAL TOOLS
DEALER agrees to procure such service equipment and special tools as
HMA may require from time to time, and to maintain the same in good repair and
in proper calibration to enable DEALER to fulfill its service responsibilities
under this Agreement.
4. PARTS INVENTORY
DEALER will stock a sufficient quantity and variety of parts and
accessories to meet Customer demand and to perform warranty repairs and special
policy work. DEALER recognizes, however, that its Customers may reasonably
expect that DEALER will have Hyundai Genuine Parts or Accessories immediately
available for purchase or installation. DEALER, therefore, agrees to carry in
stock at all times during the term of this Agreement a complete inventory of
Hyundai Genuine Parts or Accessories, as listed in HMA's current inventory
guide, to enable DEALER to meet its Customers' needs and to fulfill its service
responsibilities under this Agreement. HMA reserves the right to audit DEALER's
inventory from time to time and may require DEALER to supplement its inventory
to meet its obligations hereunder.
-11-
<PAGE>
DEALER will install and maintain a parts inventory control system
approved by HMA to track availability and sales of parts.
C. ASSISTANCE PROVIDED BY HMA
1. SERVICE TRAINING ASSISTANCE
DEALER recognizes the importance of providing consistent, dependable
and high quality service to its Customers. DEALER agrees that frequent training
and refresher courses are a necessary prerequisite to providing such service.
To assist DEALER in fulfilling its service and parts responsibilities
hereunder, HMA from time to time will offer general and specialized service and
technical training programs and materials. DEALER will require its service
and/or parts personnel to participate in such programs.
2. SERVICE MANUALS AND MATERIALS
HMA agrees to provide DEALER with copies of such DEALER service
manuals and bulletins, publications and technical data as HMA deems necessary
for the effective operation of DEALER's service and parts organization. DEALER
will have responsibility for keeping such manuals, publications and data current
and available for consultation by its parts and service employees.
3. FIELD SERVICE PERSONNEL ASSISTANCE
To assist DEALER in handling its parts and service responsibilities
under this Agreement, HMA agrees to make available field service personnel who
will, from time to time, advise and counsel DEALER on parts and service related
subjects, including product quality, technical adjustment, repair and
replacement of product components, parts inventory, parts sales, Customer
relations, warranty administration, and service and parts merchandising,
training and management.
D. EVALUATION OF DEALER'S SERVICE AND PARTS PERFORMANCE
DEALER's service and parts performance is extremely important to the
effective representation of Hyundai Products. Therefore, under this Agreement,
HMA will periodically evaluate DEALER's performance of its service and parts
responsibilities, including without limitation: warranty service; Customer
relations; service and parts merchandising, management and operations; new
vehicle predelivery service; parts inventory; tools and equipment; competency of
service and parts personnel; participation of DEALER's personnel in various
training programs; and the adequacy of service and parts facilities. HMA agrees
to review such evaluations with DEALER so that DEALER may take prompt action if
necessary to improve its service and parts performance to satisfactory levels as
HMA may reasonably require.
-12-
<PAGE>
HMA will provide DEALER with a copy of the evaluation upon request.
12. DEALER LOCATION
A. RESPONSIBILITIES OF DEALER
HMA has entered into this Agreement in reliance upon DEALER's
representation that it will establish and maintain dealership facilities and
operations only at the location(s) identified in paragraph 6. DEALER agrees,
therefore, that it will not, under any circumstances, conduct Dealer operations
at any other location, whether as a satellite operation, subdealership, through
an associate Dealer or otherwise, without the prior written consent of HMA.
Moreover, it is the mutual desire of DEALER and HMA that DEALER's
facilities reflect a distinctive first-class appearance in common with all other
duly authorized Hyundai Dealers. Accordingly, DEALER agrees to procure from
approved sources and install all items necessary to insure that DEALER's retail
environment complies in all respects with such distinctive first-class
appearance. In addition, DEALER agrees that all of its facilities will be
satisfactory as to space, appearance, amenities, layout, equipment, and signage
and will at all times be in accordance with HMA's minimum facilities standards,
as amended from time to time.
B. OPERATING HOURS
DEALER agrees that the transportation, service and maintenance needs
of its Customers can be met properly only if DEALER keeps its dealership
premises open for business during hours which are reasonable and convenient for
such Customers. Accordingly, DEALER will maintain its respective dealership
operations open for business during days and hours which are customary and
lawful for such operations in the community or locality in which DEALER is
located and in accordance with industry standards.
C. SIGNS
Subject to applicable law, DEALER agrees to purchase from sources
designated by HMA and to erect and maintain at the dealership location(s),
entirely at DEALER's expense, standard product and service signs of types
authorized by HMA, as well as such other authorized signs as are necessary to
identify the dealership operations effectively and as recommended by HMA.
DEALER shall in no way alter or modify such authorized signs without obtaining
prior written approval from HMA.
-13-
<PAGE>
D. DATA PROCESSING SYSTEMS
To facilitate the accurate and prompt reporting of relevant DEALER
operational and financial data including, without limitation, sales reports,
warranty claims and parts purchasing and to ensure rapid communication with
authorized Hyundai Dealers, HMA requires DEALER, and DEALER agrees, to acquire,
install, maintain and upgrade at DEALER's sole expense, electronic data
processing systems, compatible with HMA's data systems, from a source designated
by HMA. The computer terminals for such system will be installed and maintained
at the DEALER location(s) identified herein. Furthermore, DEALER agrees to
utilize said system in accordance with HMA's instructions.
E. FACILITY PLANNING ASSISTANCE
To assist DEALER in planning, building and maintaining the dealership
facilities, HMA will make available to DEALER, upon request, sample copies of
building layout plans, facility planning recommendations, and an applicable
identification program covering the placement, installation and maintenance of
authorized signs. In addition, representatives of HMA will be available to
DEALER from time to time to counsel and advise DEALER regarding the proper
organization and maintenance of the dealership's exterior and interior
facilities and any expansion or alteration thereof.
F. EVALUATION OF DEALERSHIP FACILITIES
HMA will periodically evaluate the adequacy of DEALER's facilities
pursuant to its responsibilities under this Agreement. In making such
evaluations, HMA will consider: the actual building and land space provided by
DEALER for the performance of its responsibilities under this Agreement;
compliance with HMA's then current requirements for dealership operations; the
appearance, condition, layout and signage of the dealership facilities; and such
other factors, if any, which in HMA's judgment may directly relate to DEALER's
performance of its responsibilities under this Agreement. HMA will discuss such
evaluations with DEALER, so that DEALER may take prompt action, if necessary, to
comply with HMA's minimum facility standards. HMA will provide DEALER with a
copy of the evaluation upon request.
13. CAPITAL STANDARDS
A. NET WORKING CAPITAL
The net working capital required to conduct the business of DEALER
properly depends upon many factors, including the nature, size and volume of
DEALER's vehicle sales, service and parts operations. Therefore, DEALER agrees
to establish and maintain actual net working capital in an amount not less than
the minimum net working capital specified in a separate Minimum
-14-
<PAGE>
Net Working Capital Agreement made between DEALER and HMA and executed by DEALER
and HMA concurrently with this Agreement. If HMA determines, in its sole
discretion, that changed circumstances require it to adjust the net working
capital requirement hereunder, DEALER agrees to revise its minimum net working
capital to be used in the dealership's operation accordingly and within a
reasonable period of time.
B. WHOLESALE CREDIT
DEALER recognizes that in order to operate its dealership successfully
and to fulfill its responsibilities hereunder, it must maintain flooring and
lines of credit adequate to meet its ongoing obligations. Accordingly, DEALER
agrees to obtain, maintain and increase as HMA may require, adequate flooring
and lines of credit from any reputable financial institution or other credit
source. Subject to the foregoing obligations, DEALER is free to do its
financing business, wholesale or retail or both, with whomever it chooses and to
the extent it desires.
14. ACCOUNTS, RECORDS AND REPORTS
A. UNIFORM ACCOUNTING SYSTEM
HMA uses the operating information provided by its Dealers to develop
composite operating statistics which are useful to Dealers and to HMA in
business management. In order for such information to be useful, however,
Hyundai Dealers must submit data which is accurate and based on uniform
accounting procedures. Accordingly, DEALER agrees to maintain a uniform
accounting system designated by HMA, and in accordance with the Hyundai
Accounting Manual, as amended from time to time. In addition, DEALER will
furnish to HMA, by the tenth (10th) of each month, in a format prescribed by
HMA, a complete and accurate financial and operating statement covering the
preceding month and calendar year-to-date operations. DEALER will also promptly
furnish to HMA a copy of any adjusted financial or operating statement prepared
by or for DEALER.
B. SALES REPORTING
HMA requires timely sales information to evaluate correctly current
market trends and to maintain a fair and equitable vehicle distribution system.
In addition, such data is necessary for HMA to evaluate DEALER's sales
performance and to provide meaningful advice and recommendations to DEALER.
Accordingly, DEALER agrees to:
1. Accurately report to HMA, with such relevant information as HMA
may reasonably require, the delivery of each new motor vehicle to a purchaser by
the end of the day in which the vehicle is delivered to the purchaser thereof;
and
-15-
<PAGE>
2. Furnish HMA with such other reports as HMA may reasonably require
from time to time.
C. SALES AND SERVICE RECORDS
DEALER agrees to keep complete and up-to-date records regarding the
sale and servicing of Hyundai Products for a minimum of five (5) years,
exclusive of any retention period required by any governmental entity. In order
that the policies and procedures relating to the application for reimbursement
for warranty, policy work and predelivery service may be applied uniformly to
all Dealers, DEALER agrees to prepare, keep current and retain records in
support of requests for reimbursement for warranty and policy work performed by
DEALER in accordance with the policies and procedures prescribed in the Hyundai
Warranty Policies and Procedures Manual and standards established by HMA
consistent with said manual.
D. AUDIT OF DEALER RECORDS
DEALER agrees that HMA will have the right, at all reasonable times
and during DEALER's regular business hours, to examine, audit and reproduce all
records, accounts and all other data relating to the sale and service of Hyundai
Products by DEALER. HMA will provide a copy of the report of the examination or
audit to DEALER upon request.
E. CONFIDENTIALITY
HMA agrees that it will not provide any data or documents submitted to
it by DEALER to any third party, except FACTORY, unless authorized by DEALER,
required by law, or otherwise pertinent to legal proceedings. DEALER agrees,
however, that HMA may use such data or documents to generate composite data
which HMA believes will be useful to assist its Dealers in improving dealership
operations. Such composite data will not specifically identify any Dealer.
15. TRADEMARKS, SERVICE MARKS AND TRADE NAMES
A. USE BY DEALER
HMA is the exclusive owner of, or is authorized to use and to permit
DEALER and others to use, the Hyundai Marks. HMA grants to DEALER the
nonexclusive privilege of displaying or otherwise using the Hyundai Marks in
connection with the promotion and sale of Hyundai Products and the conduct of
DEALER operations at the location(s) approved herein.
DEALER agrees, however, that it will promptly discontinue the display
and use of any such Hyundai Marks, and will change the manner in which any
Hyundai Marks are displayed and used, when for any reason, it is requested to do
so by HMA. DEALER further agrees that it will do nothing to impair the value
-16-
<PAGE>
of or contest the right of HMA to the exclusive use of any trademark, design
mark, service mark or trade name at any time acquired, claimed or adopted by
HMA. In addition, no company owned by or affiliated with DEALER or any of its
Owners may use any Hyundai Mark or product name without the prior written
consent of HMA.
B. DISCONTINUANCE OF USE
Upon termination, non-renewal or expiration of this Agreement, DEALER
agrees that it will immediately discontinue all use of the word Hyundai and the
Hyundai Marks, or any semblance thereof and cease representing itself as an
authorized Hyundai Dealer. Thereafter, DEALER will not use, either directly or
indirectly, any Hyundai Marks or any other similar marks in a manner likely to
cause confusion or mistake or to deceive the public. In addition, DEALER will
promptly remove all product signs bearing the word Hyundai or the Hyundai Marks
from its facilities at DEALER's sole cost and expense.
In the event DEALER fails to comply with its obligations herein within
thirty (30) days of termination, non-renewal or expiration, HMA will have the
right to enter upon DEALER's premises and remove, without liability, all signs
bearing the word Hyundai or any Hyundai Marks. DEALER will reimburse HMA for
any costs and expenses incurred in connection with the enforcement of this
paragraph, including reasonable attorney's fees.
16. TERMINATION OF AGREEMENT
A. TERMINATION BY DEALER
DEALER may voluntarily terminate this Agreement at any time by written
notice to HMA. Termination will be effective thirty (30) days after HMA
receives such notice unless otherwise mutually agreed in writing.
B. TERMINATION FOR CAUSE
1. IMMEDIATE TERMINATION
HMA will have the right to terminate this Agreement immediately in any
of the following situations:
a. Any misrepresentation to HMA by DEALER or any Owner or General
Manager in applying for this Agreement or for approval as Owner or General
Manager of DEALER;
b. If DEALER, or any Owner, officer, or General Manager of DEALER,
is convicted of any felony or for any violation or law which in HMA's sole
opinion tends to adversely affect the operation, management, reputation,
business or interests of DEALER or HMA, or to impair the
-17-
<PAGE>
good will associated with the Hyundai Marks. Such violations of law may
include, without limitation, any finding or adjudication by any court of
competent jurisdiction or government agency that DEALER has engaged in any
misrepresentation or unfair or deceptive trade practice;
c. Submission by DEALER to HMA of: (i) false claims for
reimbursement, sales incentives, refunds, rebates or credits; (ii) false
financial information, sales reports or other data required by HMA; or
(iii) false statements relating to predelivery preparation, testing,
warranties, servicing, repairing, or maintenance required by HMA;
d. If the dealership is closed for a period of seven (7) consecutive
days, except when due to an event of Force Majeure;
e. Failure of DEALER to obtain or maintain any license, or the
suspension or revocation of any license, necessary for the conduct by
DEALER of its business pursuant to this Agreement; or
f. If DEALER becomes insolvent, or files any voluntary petition
under any bankruptcy law, or executes an assignment for the benefit of
creditors, or any petition is filed by any third party to have DEALER
declared bankrupt or to appoint a receiver or trustee, or another officer
having similar power, and such filing or appointment is not vacated within
thirty (30) days or there is any levy under attachment or execution or
similar process which is not vacated or removed by payment or bonding
within ten (10) days.
2. TERMINATION UPON SIXTY DAYS NOTICE
If HMA learns that any of the following events have occurred and
determines, in its sole discretion, that the matter may require termination of
this Agreement, HMA will so advise DEALER in writing. If DEALER does not
correct the condition or explain the matter to HMA's satisfaction within thirty
(30) days of such notice, then HMA will have the right to terminate this
Agreement upon sixty (60) days notice. Events which may result in such
termination include:
a. Any sale or transfer of ownership interest by DEALER without
the prior written consent of HMA;
b. Any removal, withdrawal or change, whether voluntary or
involuntary, of a General Manager having an ownership interest in
DEALER without the prior written consent of HMA;
c. Any attempted or actual sale, transfer or assignment by
DEALER of this Agreement or any of the
-18-
<PAGE>
rights granted DEALER hereunder, or any attempted or actual transfer,
assignment or delegation by DEALER of any of the responsibilities
assumed by it under this Agreement, without the prior written consent
of HMA;
d. The conduct, directly or indirectly, of any dealership
operation at any location other than those specifically approved
herein, without the prior written consent of HMA;
e. Any sale or transfer, by operation of law or otherwise, or
any relinquishment or discontinuance of use by DEALER, of any of the
locations approved herein or of other principal assets required in the
conduct of dealership operations, without the prior written consent of
HMA;
f. Any dispute, disagreement or controversy between or among
partners, managers, officers or stockholders of DEALER which, in the
sole opinion of HMA, adversely affects DEALER's operations or the
interests of DEALER or HMA;
g. Retention by DEALER of any General Manager, who in HMA's
reasonable opinion is not competent, whether or not such person was
previously approved by HMA as General Manager of DEALER;
h. Any conduct which in HMA's opinion impairs the reputation of
DEALER or HMA;
i. Any refusal to permit HMA to examine or audit DEALER's
accounts and records as provided herein upon receipt by DEALER of
written notice from HMA requesting such permission or information;
j. Repeated failure of DEALER to furnish timely sales or
financial information and related data;
k. Failure of DEALER to establish or maintain required net
working capital or adequate wholesale credit;
l. Failure of DEALER to pay HMA for any Hyundai Products in
accordance with the terms and conditions of sale;
m. Failure of DEALER to comply with the provisions of any laws
or regulations relating to the sale or service of Hyundai Products;
n. Repeated failure of DEALER's sales, service or parts
personnel, including but not limited to
-19-
<PAGE>
management, to fully participate in any training program offered by
HMA to DEALER;
o. Failure of DEALER to properly obtain, erect, maintain,
repair and illuminate signs and other displays in a manner approved by
HMA;
p. Failure to maintain an adequate supply of general and
special tools and equipment designated by HMA;
q. Failure by DEALER to maintain good relations with its
Customers including but not limited to failure to notify HMA of
complaints by Customers, as HMA may require, and repeated failure to
properly resolve Customer complaints;
r. Failure to maintain the required minimum inventory of
Hyundai Motor Vehicles, whether for showroom display, demonstration or
immediate sale;
s. Failure to maintain an adequate parts inventory;
t. Repeated failure to use proper parts and accessories in the
repair and servicing of Hyundai Motor Vehicles; or
u. Breach or violation by DEALER of any other term or provision
of this Agreement.
3. TERMINATION FOR FAILURE OF PERFORMANCE
If, upon evaluation of Dealer's performance pursuant to paragraphs
10(E), 11(D) and/or 12(F) herein, HMA determines that DEALER has failed to
perform adequately its sales, service or parts responsibilities or to provide
adequate dealership facilities, HMA will endeavor to review promptly with DEALER
the nature and extent of such failure(s). As soon as practicable thereafter,
HMA will notify DEALER in writing of DEALER's failure of performance and will
grant DEALER 180 days from the date of such notice to correct such failure(s).
If DEALER fails or refuses to correct such failure(s) or has not made
substantial progress towards remedying such failure(s) at the expiration of such
period, HMA may terminate this Agreement upon sixty (60) days notice or such
other notice as may be required by law.
4. TERMINATION OF HMA
This Agreement will terminate upon the effective date of the
termination or expiration of HMA's right to distribute Hyundai Products.
-20-
<PAGE>
5. TERMINATION UPON DEATH OR INCAPACITY
HMA has entered into this Agreement in reliance upon the personal
services of Owner(s) and General Manager and is concerned that DEALER continues
to be owned and operated by persons who meet HMA's requirements. In order to
ensure that it is represented by qualified persons, and to protect its
interests, and subject to paragraphs 16(B)(5)(a)-(c), HMA will have the right to
terminate this Agreement in the event of the death of an Owner or upon the
incapacity of any Owner who is also the General Manager identified herein, upon
written notice to DEALER. HMA will provide such notice within a reasonable time
after Owner's death or incapacity. Termination hereunder will be effective
ninety (90) days from the date of such notice.
a. SUCCESSION TO MAJORITY OWNERSHIP BY DESIGNATED SUCCESSOR
Notwithstanding its right to terminate upon the death of any Owner,
HMA agrees to permit succession to majority ownership by any person approved as
a Successor Owner as provided herein. Accordingly, at any time during the term
of this Agreement, any Majority Owner may nominate a candidate to assume his or
her ownership interest in the dealership upon the death or incapacity of the
requesting Owner. Such nomination must be made on a form provided by HMA. In
the event that the Majority Owner is also the General Manager, such Owner may
also nominate the candidate to succeed as General Manager.
As soon as practicable after such nomination, HMA will request such
personal and financial information from the Majority Owner and/or the candidate
as it reasonably and customarily may require in evaluating candidates for
ownership and/or management. Owner agrees that HMA may apply criteria then
currently used by HMA in qualifying Owners and/or General Managers of authorized
dealers. Upon receipt of all requested information, HMA will either approve or
disapprove such candidate. If HMA initially approves the candidate, said
approval will remain in effect for the term of this Agreement. HMA agrees that
the Majority Owner may renominate a candidate after the expiration of this
Agreement and HMA will review such nomination: (i) so long as HMA and DEALER
have entered into a new Hyundai Dealer Sales and Service Agreement; and (ii) the
proposed candidate continues to comply with the then current criteria used by
HMA in qualifying such candidates.
If HMA does not initially qualify the candidate, HMA agrees to review
its decision with the Majority Owner. The Majority Owner is free at any time to
renew his or her nomination. However, in such instance, the candidate must
again qualify pursuant to HMA's then current criteria. The Majority Owner may,
by written notice, withdraw a nomination at any time, even if HMA previously has
qualified said candidate.
-21-
<PAGE>
In the event that the Majority Owner has obtained approval of his or
her candidate as Successor Owner, and upon the death of the Majority Owner, HMA
agrees to enter into a new Hyundai Dealer Sales and Service Agreement promptly
with the Successor Owner and any remaining Owner(s). The term of the new
agreement shall be for one year. The Majority Owner recognizes, however, that
before HMA shall be obligated to appoint the approved Successor Owner as the new
Majority Owner, HMA shall have the right to request assurances from the legal
representative of the Majority Owner's estate that there is no conflict between
the appointment of the Successor Owner hereunder and any valid will executed by
the Majority Owner. In any case where a Successor Owner has been designated
pursuant to this paragraph but the beneficial interest of the deceased Majority
Owner in DEALER has passed by will or by the laws of interstate succession to
another person, then HMA will proceed as though the Majority Owner had withdrawn
his or her nomination of the Successor Owner pursuant to this paragraph.
b. SUCCESSION TO OWNERSHIP AFTER DEATH OF OWNER
Except for those cases in which a Successor Owner is appointed
pursuant to the foregoing paragraph 16(B)(5)(a), if any Owner's interest in
DEALER passes by will (or in the absence of a will, if such interest would pass
by the laws of interstate succession) to any person (heir), HMA agrees to review
the qualifications of such heir to succeed as Owner of DEALER. Such right to be
considered will not arise until the legal representative of the Owner's estate
notifies HMA within ninety (90) days of the date of notice of termination
hereunder of the heir's interest in succeeding Owner and provided that:
(i) there has been no change in the General Manager of DEALER;
or
(ii) the notice from the legal representative proposes a new
DEALER General Manager candidate for HMA's approval.
The effect of notice from the legal representative will be to suspend
the notice of termination issued hereunder.
Upon receipt of such notice, HMA will investigate and make a
determination as to the proposed new Owner's qualifications as provided in
paragraph 16(B)(5)(d) herein. HMA expressly retains the right to terminate this
Agreement if the proposed new Owner fails to meet HMA's then current ownership
and/or General Manager qualification requirements.
c. SUCCESSION UPON INCAPACITY OF OWNER
The parties agree that, as used herein, incapacity will refer to any
physical or mental ailment which, in HMA's opinion, adversely affects Owner's
ability to meet his or her obligations
-22-
<PAGE>
under this Agreement. Termination for incapacity will apply only where the
incapacitated Owner is also the General Manager identified herein.
Prior to the effective date of any notice of termination hereunder, an
incapacitated Owner, or his or her legal representative, may propose a new
candidate for the position of General Manager to HMA. Such proposal must be in
writing and will suspend the pending notice of termination until HMA advises
DEALER of its approval of disapproval of the new candidate. Upon receipt of the
notice, HMA will investigate and make a determination as to the qualifications
of the proposed General Manager as provided in paragraph (16)(B)(5)(d) herein.
d. HMA'S INVESTIGATION AND DETERMINATION
Any heir wishing to succeed to ownership pursuant to paragraph
16(B)(5)(b) or any person seeking to be a General Manager pursuant to either
paragraph 16(B)(5)(b) or (c) must complete such application and submit such
personal and financial information in such form as HMA may reasonably and
customarily require in connection with its review. All requested information
must be provided promptly and in no case later than thirty (30) days after
receipt of such request. Upon the submission of all requested information, HMA
agrees to review the qualifications of the applicant pursuant to the then
current criteria generally applied by HMA in qualifying Dealer Owners and/or
General Managers. HMA will either approve or disapprove the application within
ninety (90) days of full compliance with all of HMA's requests for information.
If HMA approves the application, it will offer to enter into a new Hyundai
Dealer Sales and Service Agreement with DEALER or its successor in interest in
the form then currently in use, except that the newly approved applicants will
be identified as new Owner and/or General Manager as appropriate. Except in
cases involving the death of a Minority Owner, discussed in the next sentence,
the new agreement will be for a term of one (1) year. In cases involving the
death of a Minority Owner, which does not result in a change in General Manager,
if HMA approves the heir as new Minority Owner, then HMA and DEALER will simply
amend the current Agreement to reflect the new minority ownership.
In the event that HMA disapproves the applicant or the applicant
withdraws his or her application to be approved as Owner or General Manager or
fails to provide the required information in a timely fashion, HMA may reinstate
the notice of termination by written notice to DEALER and to the proposed new
Owner, candidate for General Manager and/or incapacitated Owner.
C. EFFECTIVE DATE OF TERMINATION
If any period of notice of termination required under this paragraph
16 is less than that required by applicable law,
-23-
<PAGE>
the period of notice required hereunder will be deemed to be the minimum period
required by such law.
D. EFFECT OF TERMINATION
1. DEALER'S CONDUCT
Upon receipt of any notice of termination, expiration or non-renewal,
Dealer agrees to conduct itself and its operations until the effective date of
termination, expiration or non-renewal in a manner which will not injure the
reputation or good will of the Hyundai Marks or HMA and is consistent with its
obligations hereunder.
2. THE RIGHT TO PURCHASE
Upon sending any notice of termination, expiration or non-renewal
hereunder, HMA will have no further obligation whatsoever to sell and DEALER
will have no right to purchase any Hyundai Products. Any decision to permit
DEALER to purchase Hyundai Products thereafter will be in HMA's sole discretion
and will not be construed as a waiver of the termination or renewal, extension
or continuation of this Agreement.
Upon the expiration or prior termination of this Agreement, HMA will
have the right to cancel any and all pending requests by DEALER to purchase
Hyundai Products and any shipments of same scheduled for delivery to DEALER.
3. REPURCHASE OF HYUNDAI PRODUCTS
a. HMA'S OBLIGATIONS
Upon expiration, non-renewal or termination of this Agreement, HMA
will repurchase from DEALER the following products which DEALER initially
purchased from HMA or from a source designated by HMA:
(i) New, unused, unmodified and undamaged current Hyundai Motor
Vehicles then in DEALER's inventory. The prices of such Motor Vehicles will be
the price at which they were originally purchased by DEALER, less all prior
refunds or other allowances made by HMA to DEALER with respect thereto.
(ii) New, unused and undamaged Hyundai Genuine Parts or
Accessories then unsold in DEALER's inventory which are in good and saleable
condition, provided that they are listed in the then current Hyundai Dealer
Parts Price List. The prices for such parts and accessories will be the prices
last established by HMA for the sale of identical parts or accessories to
Dealers in the area in which DEALER is located.
(iii) Tools and equipment required or recommended by HMA and then
owned by DEALER which are especially designed for
-24-
<PAGE>
servicing Hyundai Motor Vehicles. The prices for such tools and equipment will
be the price paid by DEALER less appropriate depreciation or such other price as
the parties may negotiate.
(iv) Signs which HMA has required or recommended for
identification of DEALER. The price of such signs will be the price paid by
DEALER less appropriate depreciation or such other price as the parties may
negotiate.
HMA shall have no obligation to repurchase products as provided herein
in the event it agrees to enter into a new Hyundai Dealer Sales and Service
Agreement with DEALER.
b. DEALER'S RESPONSIBILITIES
DEALER's right to reimbursement hereunder is contingent upon the
following:
(i) Within thirty (30) days after the date of expiration or the
effective date of termination of this Agreement, DEALER will request HMA in
writing to purchase its qualifying inventory and will provide HMA with a
detailed and accurate list of such inventory. After receiving such list, HMA
may, in its discretion, enter upon DEALER's premises to verify such inventory as
qualifying under Paragraph 16(D)(3)(a) herein. If DEALER does not provide HMA
with a list of inventory, then HMA may enter upon DEALER's premises, without
liability, to take inventory and DEALER will reimburse HMA for any costs and
expenses incurred in connection therewith.
(ii) Upon HMA's instructions, DEALER will deliver such products
as HMA will agree to repurchase hereunder to HMA's place of business at DEALER's
expense. If DEALER fails to do so, HMA may transport such products and deduct
the cost therefor from the repurchase price.
(iii) DEALER agrees to execute and deliver to HMA instruments
satisfactory to HMA conveying good and marketable title to such property as HMA
may require. If such property is subject to any lien or charge of any kind,
DEALER agrees to secure the discharge and satisfaction thereof prior to the
repurchase of such property by HMA. DEALER further agrees to comply with the
requirements of any federal or state laws which relate to the repurchase
including bulk sales or transfer laws.
(iv) DEALER agrees that it must remove, at its own expense, all
signage bearing the Hyundai Marks before it is eligible for payment hereunder.
c. PAYMENT BY HMA
HMA will pay DEALER for such items as DEALER may request repurchase
and which qualify hereunder as soon as practicable upon DEALER's compliance with
the obligations set
-25-
<PAGE>
forth herein and upon computation of any outstanding indebtedness of DEALER to
HMA, which indebtedness HMA may offset from any amounts due to DEALER hereunder.
d. DISAGREEMENT REGARDING VALUATION
If DEALER disagrees with HMA's valuation of any item herein, and
DEALER and HMA have not resolved their disagreement within sixty (60) days of
the effective date of termination or expiration of this Agreement, HMA will pay
to DEALER the amount to which it reasonably believes DEALER is entitled.
DEALER's exclusive remedy to recover any additional sums which it believes is
due under this paragraph will be by arbitration in accordance with the
commercial arbitration rules of the American Arbitration Association. The site
of the arbitration will be the office of the American Arbitration Association in
the locality of HMA's principal place of business or Regional Office.
17. RIGHT OF FIRST REFUSAL OR OPTION TO PURCHASE
HMA has entered into this Agreement to secure market representation at
the location(s) identified herein. The vitality of HMA's authorized Dealer
network and the effective sale and servicing of Hyundai Products nationwide is
dependent upon the continued representation of HMA by its authorized Dealers at
their approved location(s). Accordingly, DEALER agrees that in the event that
HMA refuses to approve a transfer or sale of any ownership interest in the
dealership, pursuant to paragraph 5, HMA will have the right of first refusal or
an option to purchase the dealership assets, including any leasehold interest or
realty, as provided herein.
A. HMA'S RIGHTS
HMA must advise DEALER in writing of its decision to exercise its
right of first refusal or option to purchase the dealership within thirty (30)
days of its refusal to approve any sale or transfer pursuant to paragraph 5.
DEALER agrees that HMA will have the right to assign its rights hereunder to any
third party it may select. HMA hereby guarantees the full payment of the
purchase price by such assignee. DEALER may render HMA's exercise of its rights
hereunder null and void if it withdraws its buy/sell proposal within thirty (30)
days following receipt of HMA's notice exercising such rights.
If DEALER has entered into a bona fide arm's length written buy/sell
agreement regarding ownership of DEALER or its rights under this Agreement,
HMA's right under this paragraph will be a right of first refusal, permitting
HMA to assume the buyer's rights and obligations under such written agreement.
If DEALER has not entered into a bona fide arm's length written
buy/sell agreement governing such transfer or sale, then HMA's rights hereunder
will be the option to purchase the
-26-
<PAGE>
principal assets of DEALER utilized in the dealership operations, including real
estate and/or leasehold interest, and to terminate this Agreement.
B. PURCHASE PRICE
If DEALER has entered into a bona fide arm's length buy/sell agreement
as provided herein, the purchase price and other terms of sale will be those set
forth in such agreement and any related documents. HMA may request and DEALER
agrees to provide any and all supporting documents relating to the transfer
which HMA may require to assess the bona fides of the agreement. Refusal to
provide such documentation or to state that no such documents exist will create
the presumption that the buy/sell agreement is not a bona fide agreement. In
the absence of a bona fide arm's length buy/sell agreement, the purchase price
will be the fair market value as negotiated by the parties. If the parties are
unable to reach a negotiated sale in a reasonable time, the price and other
terms of sale will be established exclusively by arbitration in accordance with
the commercial arbitration rules of the American Arbitration Association. The
site of the arbitration will be the office of the American Arbitration
Association in the locality of HMA's principal place of business or Regional
Office.
C. TRANSFER CONDITIONS
Upon HMA's exercise of its rights and tender of the purchase price
hereunder, DEALER will 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 will be in proper
form for recording and DEALER will deliver complete possession of the property
and the deed at time of closing, DEALER will also furnish to HMA copies of any
easements, licenses or other documents affecting the property or dealership
operations and will assign any permits or licenses which are necessary for the
use of the property or the conduct of such DEALER operations.
DEALER also agrees to execute and deliver to HMA instruments
satisfactory to HMA conveying title to all personal property, including
leasehold interests, involved in the transfer or sale to HMA. If any personal
property is subject to any lien or charge of any kind, DEALER agrees to secure
the discharge and satisfaction thereof prior to the transfer or sale of such
property to HMA.
18. DEFENSE AND INDEMNIFICATION
A. DEFENSE AND INDEMNIFICATION BY HMA
HMA will assume the defense of DEALER and agrees to indemnify and hold
DEALER harmless in any legal proceeding naming
-27-
<PAGE>
DEALER as a defendant and involving any Hyundai Product when the proceeding also
involves allegations of:
(1) Breach of any Hyundai warranty related to the Hyundai Product,
bodily injury or property damage allegedly caused solely by a
defect in design, manufacture or assembly of a Hyundai Product
(except for tires not manufactured by FACTORY), provided that the
defect could not reasonably have been discovered by DEALER by
reasonable inspection or during the predelivery service on the
Hyundai Product required hereunder;
(2) Any misrepresentation or misleading statement or unfair or
deceptive trade practice of HMA; or
(3) Any substantial damage to a Hyundai Product purchased by DEALER
from HMA which was repaired by HMA and where DEALER had not been
notified of such damage in writing prior to the delivery of the
subject vehicle, part or accessory to a retail Customer; and
Provided:
(4) That DEALER promptly delivers to HMA, in a manner to be
designated by HMA, copies of any summons and complaint and
requests in writing a defense and/or indemnification as provided
herein;
(5) That the complaint does not involve allegations of DEALER
misconduct, including but not limited to, improper or
unsatisfactory service or repair, misrepresentation, or any claim
of DEALER's unfair or deceptive trade practice;
(6) That the Hyundai Product which is the subject of the lawsuit was
not altered by or for DEALER;
(7) That DEALER agrees to cooperate fully in the defense of such
action as HMA may reasonably require; and
(8) That DEALER agrees that HMA may offset any recovery on DEALER's
behalf against any indemnification that may be required
hereunder.
B. DEFENSE AND INDEMNIFICATION BY DEALER
DEALER will assume the defense of HMA and FACTORY and indemnify and
hold them harmless in any legal proceeding naming HMA or FACTORY as a defendant
when the legal proceeding involves allegations of:
-28-
<PAGE>
(1) DEALER's alleged failure to comply, in whole or in part, with any
obligation assumed by DEALER pursuant to this Agreement;
(2) DEALER's alleged negligent or improper repairing or servicing of
a new or used Hyundai Motor Vehicle or equipment, or such other
motor vehicles or equipment as may be sold or serviced by DEALER;
(3) DEALER's alleged breach of any contract or warranty other than
that provided by HMA or FACTORY;
(4) DEALER's alleged misleading statements, misrepresentations, or
deceptive or unfair trade practices; or
(5) Any modification or alteration made by or on behalf of DEALER to
a Hyundai Product, except those made pursuant to the express
instruction of HMA; and
Provided:
(6) That HMA or FACTORY promptly delivers to DEALER, copies of any
summons and complaint and request in writing a defense and/or
indemnification as provided herein;
(7) That HMA or FACTORY agree to cooperate fully in the defense of
such action as DEALER may reasonably require; and
(8) That the complaint does not involve allegations of liability
premised upon separate HMA or FACTORY conduct or omissions.
C. EXTENT OF RESPONSIBILITY
The assumption of the defense of a party includes the obligation of
selecting counsel and paying all attorney's fees, court costs and expenses
(including expert's fees). The assumption of the obligation to indemnify and
hold harmless will include payment of any judgment amount awarded on any claim
subject to the indemnity and hold harmless provision and any settlement amount
as the indemnifying party may agree to pay to resolve such claim.
D. CONDITIONAL DEFENSE AND/OR INDEMNIFICATION
In agreeing to defend and/or indemnify each other, DEALER and HMA each
may make their agreement conditional on the continued existence of the state of
facts as then known to such party and may provide for the withdrawal of such
defense and/or
-29-
<PAGE>
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 HMA to refuse such request.
The party withdrawing from its agreement to defend and/or indemnify
will give timely notice of its intent to withdraw. Such notice will be in
writing and will be effective upon receipt. Moreover, the withdrawing party
will be responsible for all costs and expenses of defense up to the date of
receipt of the notice of withdrawal.
E. THE EFFECT OF SUBSEQUENT DEVELOPMENTS
In any case where a request for a defense and/or indemnification is
rejected, or is not made at the outset of any legal proceeding, and subsequent
developments in the case make clear that the allegations which initially
precluded a request or an acceptance of a request for a defense and/or
indemnification are not longer at issue therein or are without foundation, then
any party having a right to a defense and/or indemnification hereunder may still
tender such request for a defense and/or indemnification to the other party.
Neither DEALER nor HMA, however, will be required to agree to such subsequent
request for a defense and/or indemnification where that party would be unduly
prejudiced by such a delay.
F. TIME TO RESPOND AND RESPONSIBILITIES OF THE PARTIES
DEALER and HMA will have thirty (30) days from the receipt of a
request for a defense and/or indemnification to conduct an investigation to
determine whether or not, or under what conditions, it may agree to defend
and/or indemnify pursuant to this paragraph 18. If local rules require a
response to the complaint in the lawsuit prior to the time provided hereunder
for a response to such request, the requesting party will take all steps
necessary, including obtaining counsel, to protect its own interest in the
lawsuit until DEALER or HMA assumes the requested defense and/or
indemnification. In the event that HMA or DEALER agrees to assume defense
and/or indemnification obligations hereunder, such party will have the right to
engage and direct counsel of its own choosing and, except in cases where the
request is made pursuant to paragraph 18(E) herein, will have the obligation to
reimburse the requesting party for all reasonable costs and expenses, including
attorney fees, incurred prior to such assumption.
G. SURVIVAL OF OBLIGATION
The obligations of the parties set forth in this Paragraph 18 shall
survive the termination of this Agreement.
-30-
<PAGE>
19. MISCELLANEOUS PROVISIONS
A. ENTIRE AGREEMENT
Except as otherwise specifically provided for herein, this Agreement
constitutes the entire agreement of the parties and contains all covenants,
warranties or representations made by the parties to each other and supersedes
any and all previous agreements, either oral or in writing, between the parties
and relating to the subject matters covered herein.
B. AMENDMENT
No amendment of any portion of this Agreement will be valid or binding
upon the parties hereto unless the same is approved in writing by an authorized
representative of each of the parties.
C. RELEASE OF CLAIMS
Upon execution of this Agreement by DEALER, and in consideration of
HMA entering into this Agreement, DEALER hereby releases HMA from any and all
claims, demands, contracts and liabilities (including, but not limited to,
statutory liabilities) known or unknown, of any kind whatsoever, arising out of
or in connection with any prior agreements, business transactions, course of
dealing, discussions or negotiations between the parties prior to the effective
date hereof and regardless of whether DEALER knows or suspects the claim to
exist in its favor at the time of executing the release and whether or not if
known to it, it would have materially affected its release hereunder.
Notwithstanding any other provision herein, however, this release does not
extend to any accounts payable by one party to the other as a result of the
purchase of any Hyundai Products, audit adjustments or reimbursement for any
services.
D. ASSIGNMENT
Except as provided in this Agreement, neither this Agreement nor the
rights or obligations of either party hereunder may be sold, assigned, delegated
or otherwise transferred without the prior written consent of the other party.
E. SEVERABILITY
If any term or provision of this Agreement, or the application thereof
to any person or circumstance, will be contrary to any law or will be adjudged
by any court or government agency to be invalid, void or unenforceable, such
term or provision will be deemed deleted from this Agreement and the remaining
provisions and any application thereof will continue in full force and effect
without being impaired or invalidated in any way.
-31-
<PAGE>
F. CAPTIONS
The various captions used in the Agreement are for organizational
purposes only and may not be used to interpret the provisions hereof. In any
case where the caption and the related text conflict, the text will govern.
G. GOVERNING LAW
This Agreement will be governed and construed to the laws of the state
in which DEALER is located.
H. WAIVERS
Any failure of either party at any time to require performance by the
other party of any provision herein will not be deemed to be a waiver by such
party of any subsequent breach or violation of the same or any other provision.
I. NOTICES
Unless otherwise specifically provided herein, any notice required to
be given by either party to the other under or in connection with this Agreement
will be in writing and delivered personally or by certified mail, return receipt
requested and will be effective from the date of receipt. Notices to DEALER
will be directed to DEALER or its representative at DEALER's place of business
identified herein. Notices to HMA will be directed to the President of HMA at
its national headquarters. In the event that any party refuses to accept
delivery of notices hereunder, such notice will be effective on the date
delivery is refused.
J. NEW AND SUPERSEDING DEALER AGREEMENTS
In the event any new and superseding form of Dealer agreement is
offered by HMA to authorized Hyundai Dealers in general at any time prior to the
expiration of the term of this Agreement, HMA may, by written notice to DEALER,
terminate this Agreement and replace it with a new agreement in the new and
superseding form for a term not less than the then unexpired term of this
Agreement. Unless otherwise agreed in writing, the rights and obligations of
DEALER that may otherwise become applicable upon any termination or expiration
of the term of this Agreement will not be applicable in the event of the
execution by HMA and DEALER of any new or superseding Dealer agreement and the
matured rights and obligations of either party hereunder will continue under the
new agreement.
K. INDEPENDENT ENTITY
DEALER is an independently owned entity. This Agreement does not make
DEALER the agent or legal representative of HMA or FACTORY for any purpose
whatsoever. DEALER is not
-32-
<PAGE>
granted any express or implied right or authority to assume or to create any
obligation or responsibility on behalf of or in the name of HMA or FACTORY or to
bind it (or them) in any manner whatsoever.
L. FORCE MAJEURE
Neither party will be liable for any breach of this Agreement to the
extent caused by or resulting from prohibition or restriction by law or
regulation of any government, fire, flood, storm, war, strike, lockout or other
labor troubles, accident, riot, act of God or other events beyond that party's
control.
M. NO FRANCHISE FEE
DEALER warrants and agrees that it has paid no fee, nor has it
provided any goods or services in lieu of same, to HMA in consideration of
entering into this Agreement and that the sole consideration for HMA's entering
into this Agreement was DEALER's ability, integrity, assurance of personal
services and expressed intention to deal fairly and equitably with HMA and the
public and any other promises recited herein.
N. WAIVER OF TRIAL BY JURY
HMA and DEALER hereby waive, to the extent permitted by law, the right
to trial by jury for all disputes, controversies or claims which may arise
between DEALER and HMA out of or in connection with this Agreement, or its
construction, interpretation, effect, performance or non-performance,
termination or the consequences thereof, or in connection with any transaction
contemplated between the parties.
O. TAXES
DEALER will pay all local, state, federal or other applicable taxes,
including without limitation, sales taxes, use taxes, excise taxes, levied or
based upon the sale of Hyundai Products by HMA to DEALER and will maintain
accurate records of same for reporting purposes.
20. DEFINITIONS
The following terms, as used in this Agreement, will be defined
exclusively as set forth below:
A. AGREEMENT: This Agreement consists of the HMA Dealer Sales and Service
Agreement entered into by DEALER and HMA and includes the Standard Provisions.
B. AUTHORIZED HYUNDAI DEALER: Dealers who are authorized by HMA to sell
and service Hyundai Products, and to use the Hyundai Marks in connection
therewith, pursuant to a duly executed Hyundai Dealer Sales and Service
Agreement.
-33-
<PAGE>
C. DEALER FACILITIES: The buildings, improvements, fixtures and equipment
situated at the approved DEALER location(s).
D. DEALER LOCATION: The location or locations, and any facilities located
thereon, identified in paragraph 6, which HMA has approved for dealership
operations.
E. DEALERSHIP OPERATIONS: All Dealer operations contemplated by this
Agreement, including, without limitation, sale and servicing of Hyundai
Products, use and display of Hyundai Marks, advertising and promotion of Hyundai
Products, rental and leasing of Hyundai Motor Vehicles, sale of used cars, body
shop work, and financing or insurance services, whether conducted directly or
indirectly by DEALER.
F. GENERAL MANAGER: The person identified in paragraph 4 of the Agreement
considered to be a "Dealer Operator" with full operational responsibility and
authority for dealership operations.
G. HYUNDAI GENUINE PARTS OR ACCESSORIES: All new or remanufactured
Hyundai parts, accessories and equipment marketed by HMA and listed in HMA's
parts catalog, or the functional equivalent thereof, as amended from time to
time.
H. HYUNDAI MARKS: The various Hyundai trademarks, service marks, names,
logos and designs used by HMA in connection with Hyundai Products and which HMA
authorizes DEALER to use in the sale and servicing of Hyundai Products.
I. HYUNDAI MOTOR VEHICLES: All automobiles, trucks, vans, cab/chassis or
other motor vehicles which FACTORY, in its sole discretion, sells to HMA for
resale to authorized Hyundai Dealers.
J. HYUNDAI PRODUCTS: All Hyundai Motor Vehicles, parts, accessories and
equipment which FACTORY, in its sole discretion, and/or authorized suppliers
sell to HMA for resale to authorized Hyundai Dealers.
K. HYUNDAI WARRANTY POLICIES AND PROCEDURES MANUAL: The current
publication issued by HMA known as the Hyundai Warranty Policies and Procedures
Manual, or its functional equivalent, as it may be revised or supplemented from
time to time.
L. OWNER: The person(s) identified in paragraph 3 of this Agreement.
M. STANDARD PROVISIONS: The Standard Provisions are a part of all Hyundai
Sales and Service Agreements and are fully incorporated therein by the express
provision of paragraph 7 of the Agreement. The Standard Provisions commence
with paragraph 10 to reflect continuity with the first nine paragraphs of the
Agreement.
-34-
<PAGE>
ISUZU DEALER SALES
AND
SERVICE AGREEMENT
AGREEMENT effective the 16th day of September, 1996,
by and between
AMERICAN ISUZU MOTORS INC.,
a California corporation (hereinafter called "Distributor")
and
Fair Cadillac-Oldsmobile-Isuzu Partnership
[an individual][partnership formed in the State of Connecticut ]
[corporation incorporated in the State of ______________________]
[doing business as Fair Isuzu ]
whose business location is 100 Federal Road, Danbury, CT 06813
(hereinafter called "Dealer").
PURPOSE
The purpose of this Agreement is to set forth the basic rights, duties and
procedures that apply to the relationship and business transactions between
Distributor and Dealer, and to provide for the sale and servicing of Isuzu
Products in a manner that will best serve the interests of Distributor, Dealer,
and owners and purchasers of Isuzu Products. This Agreement sets forth the
rights which Dealer will enjoy as an Authorized Isuzu Dealer; the
responsibilities which Dealer assumes in consideration of these rights; and the
respective rights and obligations of Distributor and Dealer to each other. The
parties recognize that the success of Distributor and Dealer depends upon mutual
understanding and cooperation between Distributor and Dealer and how well they
each fulfill their respective responsibilities.
Distributor's basic responsibility is to promote and market Isuzu Products in
the United States and to endeavor to establish a sales network of dealers that
can provide effective sales and service efforts at the retail level. Dealer's
basic responsibility is to actively and effectively promote the retail sale of
Isuzu Products and to provide courteous and efficient
<PAGE>
service of Isuzu Products. Distributor and Dealer will endeavor to fulfill
their respective responsibilities through aggressive, sound, ethical selling
practices and through conscientious regard for customer service.
Distributor and Dealer shall refrain from engaging in conduct or activities
which might be detrimental to or reflect adversely upon the reputation of
Distributor, Manufacturer, Dealer or Isuzu Products and shall engage in no
discourteous, deceptive, misleading or unethical practices or activities.
NOW THEREFORE, in consideration of the foregoing and the promises and agreements
herein contained, it is hereby mutually agreed between the parties hereto as
follows:
SECTION 1. APPOINTMENT OF DEALER
Subject to the conditions and provisions set forth in this Agreement,
Distributor hereby:
(1) appoints Dealer as an Authorized Isuzu Dealer;
(2) grants Dealer the non-exclusive right to buy Isuzu Cars, Isuzu Trucks and
Isuzu Parts and Accessories from Distributor for resale at or from Dealer's
Dealership Location; and
(3) grants Dealer a non-exclusive right, subject to and in accordance with the
provisions of this Agreement, to identify itself as an Isuzu Dealer and to
use and to display, in the conduct of its dealership operations, the
various trademarks, tradenames, service marks and other word and design
marks that Distributor uses or will use in connection with the promotion or
sale of or are or will be applied to Isuzu Products.
SECTION 2. ACCEPTANCE BY DEALER
Dealer hereby accepts and grants and acknowledges that:
(1) Except as otherwise provided by applicable laws, Distributor shall have the
absolute right to appoint other persons to conduct dealership operations in
connection with Isuzu Products and to contract with such persons in
connection therewith;
(2) Except as expressly provided in this Agreement or with the prior written
consent of Distributor (which consent shall not be unreasonably withheld),
neither said appointment, said grants nor this Agreement may be
transferred, assigned or sold to any third party, whether separately or in
-2-
<PAGE>
connection with any sale of the assets of or ownership interests in Dealer,
by Dealer or its management or owners;
(3) No fee or other monetary consideration has been paid by Dealer to
Distributor for said appointment or grants or as consideration for
Distributor's entering into this Agreement and no property right or
interest, direct or indirect, is sold, conveyed or transferred to Dealer by
this Agreement.
SECTION 3. ASSUMPTION OF RESPONSIBILITY BY DEALER
In consideration of said appointment and grants and subject to the conditions
and provisions of this Agreement, Dealer agrees to:
(1) establish and maintain at Dealer's Dealership Location the Dealership
Facilities described in this Agreement in the manner set forth in this
Agreement;
(2) actively and effectively promote the sale at retail (and, if Dealer elects,
the leasing and rental) of Isuzu Products at and from Dealer's Dealership
Location in accordance with the provisions of this Agreement;
(3) conduct quality service for Isuzu Vehicles in accordance with the
provisions of this Agreement;
(4) perform all additional responsibilities specified in this Agreement;
(5) secure and maintain all licenses required for the conduct of an Isuzu
dealership at and from Dealer's Dealership Location and to furnish
Distributor with written notice of securing such licenses. This Agreement
will not be valid until and unless Dealer shall have furnished Distributor
with written notice specifying the date and the identifying number, if any,
of each such license secured by Dealer. Dealer shall notify Distributor
immediately in writing if Dealer shall fail to secure any such license or
if any such license shall expire and Dealer shall fail to obtain a renewal
thereof or if any such license is suspended or revoked, specifying the
effective date of any such expiration, suspension or revocation.
SECTION 4. OWNERSHIP AND MANAGEMENT
(a) This Agreement has been entered into by Distributor in reliance upon:
-3-
<PAGE>
(i) DEALER'S REPRESENTATION AND AGREEMENT THAT THE FOLLOWING NAMED PERSONS
ARE ALL OF THE PERSONS WHO HAVE AN OWNERSHIP INTEREST IN DEALER:
Percentage Interest.
1. (Name) Fair Cadillac-Oldsmobile Corp.
30(%)
(Residence Address) 100 Federal Road,
Danbury, CT 06813
2. (Name) DiFeo Partnership, Inc.
70%
(Residence Address) 153 East 53 Street,
New York, NY
3. (Name)
%
(Residence Address)
4. (Name)
%
(Residence Address)
5. (Name)
%
(Residence Address)
6. (Name)
%
(Residence Address)
(ii) DEALER'S REPRESENTATION AND AGREEMENT THAT THE FOLLOWING NAMED PERSON,
AND ONLY THE FOLLOWING NAMED PERSON SHALL BE DEALER'S EXECUTIVE MANAGER AND
SHALL HAVE FULL AUTHORITY AND RESPONSIBILITY FOR THE OPERATING MANAGEMENT OF
DEALER IN PERFORMANCE PURSUANT TO THIS AGREEMENT:
(Name) James D. Evans Title: Executive Manager
(Residence Address) 10 Pilgrim's Way, Gaylordville, CT 06755
(b) This Agreement has been entered into by Distributor in reliance upon, and
in consideration of, the personal qualifications and representations with
respect thereto of the above-named persons. In view of the personal
nature of this Agreement and its objectives and purposes, this Agreement
and the rights and privileges conferred on Dealer hereunder are not
assignable, transferable or saleable by Dealer. Dealer agrees that any
change in the ownership or
-4-
<PAGE>
operating management of Dealer specified herein requires the prior written
consent of Distributor. Dealer shall give Distributor prior notice of any
proposed change in said ownership or management and immediate notice of the
death or incapacity of any Owner or Executive Manager. No such change, and
no assignment of this Agreement or of any right or interest herein, shall
be effective against Distributor unless and until embodied in an
appropriate amendment to or assignment of this Agreement, as the case may
be, duly executed and delivered by Distributor and by Dealer. Distributor
shall not unreasonably withhold its consent to any such change.
SECTION 5. PROVISIONS
The "ISUZU DEALER SALES AND SERVICE AGREEMENT ADDITIONAL PROVISIONS" are hereby
incorporated herein and made a part of this Agreement with the same force and
effect as if set forth at length herein and the term "this Agreement" as used
herein, includes said "ISUZU DEALER SALES AND SERVICE AGREEMENT ADDITIONAL
PROVISIONS". Dealer agrees to be bound by and comply with the provisions of the
Service Policies and Procedures Manual, the Parts Policies and Procedures Manual
and all other manuals heretofore or hereafter issued by Distributor to Dealer
and all amendments, revisions and supplements thereto, and all bulletins and
instructions heretofore or hereafter issued by Distributor to Dealer.
SECTION 6. ENTIRE AGREEMENT
Unless expressly referred to and incorporated herein, this Agreement cancels,
supersedes and annuls all prior agreements, contracts and understandings between
Distributor and Dealer, and there are no representations, promises, agreements
or understandings except as described herein, all negotiations, representations
and understandings being merged herein.
SECTION 7. WAIVER OR MODIFICATION OF THIS AGREEMENT
(a) The failure of either party at any time to require performance by the other
party of any provisions hereof shall in no way affect the full right to
require such performance at any time thereafter. Nor shall the waiver by
either party of a breach of any provision hereof constitute a waiver of any
succeeding breach of the same or any other such provisions nor constitute a
waiver of the provision itself.
(b) 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
-5-
<PAGE>
spaces and lines) will be valid or binding on Distributor unless approved
in writing by the President or the Senior Vice President and General
Manager of Distributor.
SECTION 8. TERM
This Agreement shall have a term commencing on the effective date hereof and
shall continue in effect until terminated in accordance with the provisions of
this Agreement.
SECTION 9. APPLICABLE LAW
This Agreement shall be deemed to have been made in and shall be governed by and
construed in accordance with the laws of the State of California; provided,
however,
(a) Unless Dealer's Dealership Location is situated in California, Dealer shall
have none of the rights or duties provided for in the California Statutes
regulating the relationship between motor vehicle manufacturers,
distributors and dealers, but shall have the rights and duties provided in
the like laws, if any, of the state in which Dealer's Dealership Location
is situated; and
(b) If performance by either Distributor or Dealer of any provision of this
Agreement contravenes a law of any state or jurisdiction where such
performance is to take place, the performance of such provision shall be in
accordance with the requirements of such law to the extent, and only to the
extent, that such performance contravenes such law and only to the extent
and while such law is deemed or held to be valid and applicable to such
performance.
SECTION 10. EXECUTION OF AGREEMENT
This Agreement, and any addendum or amendment, or notice with respect thereto,
shall be valid and binding on Distributor only when it bears the signature of
either the President or the Senior Vice President and General Manager of
Distributor. This Agreement shall bind Dealer only when signed by a duly
authorized officer of Dealer if a corporation; by one or more of the general
partners of Dealer if a partnership; or by Dealer if an individual.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement in triplicate as of
the day and year first above written at Whittier, California.
DEALER DISTRIBUTOR
FAIR CADILLAC-OLDSMOBILE-ISUZU AMERICAN ISUZU MOTORS INC
PARTNERHSIP
By /s/ Carl Spielvogel By /s/ J.T. Maloney
--------------------------- --------------------------
Title Chairman & CEO Title Sr. V.P. and Gen Mgr.,
------------------------- Light Vehicles
----------------------
-7-
<PAGE>
DEALERSHIP STANDARDS ADDENDUM
FOR
FAIR CADILLAC-OLDSMOBILE-ISUZU PARTNERSHIP
DBA: FAIR ISUZU
EFFECTIVE FROM AND AFTER SEPTEMBER 16, 1996 UNTIL AMENDED
In accordance with Section 5 of our Isuzu Dealer Sales and Service Agreement
with you dated September 16, 1996, and Article III of the Isuzu Dealer Sales and
Service Agreement Additional Provisions thereto, you agree to:
1. Furnish to us, on or before the tenth day of each month, on such forms
or by such means as we may designate, complete and accurate financial
and operating statements reflecting your true financial condition of
the fiscal year then ended.
2. Maintain a satisfactory flooring arrangement with an approved bank or
financial institution providing a minimum flooring line of $600,000
exclusively for the purchase of Isuzu vehicles.
3. Maintain a separate and exclusive Isuzu new vehicle showroom located
at 100 Federal Road, Danbury, CT 06813, solely for the display and
sale of Isuzu vehicles. Said showroom to be a minimum of 1,500 square
feet, and sufficient in design to display at least three (3) Isuzu
vehicles.
4. Install and maintain standard signs as required by us for an Isuzu
dealership, including brand, fascia, exterior service and parts, and
interior parts signs, where allowable under the current local sign
ordinance. In the event the installation of the Isuzu pillar brand
sign is not allowable by local sign ordinance after all reasonable
efforts have been exhausted to obtain a variance, it is agreed the
existing Hyundai brand sign will be refaced equally dividing the area
of the sign for Isuzu and Hyundai.
5. Have your service management and technicians attend specified Isuzu
sponsored service training programs.
6. Have your sales and management personnel attend Isuzu sponsored
product training sessions.
7. Maintain a designated area in the service department located at 100
Federal Road, Danbury, CT 06813 for servicing Isuzu vehicles. this
shall be coordinated
<PAGE>
with our designated representative and subject to our approval.
8. Maintain a specified area in the parts department located at 100
Federal Road, Danbury, CT 06813 for storage of Isuzu parts. This
shall be coordinated with our designated representative and subject to
our approval.
9. Maintain net working capital of $94,850 in excess of the combined
current net working capital requirement of other manufacturers you may
also represent or, alternatively, having and maintaining net working
capital in the amount required by Isuzu as determined by any revised
standard working capital formula which we may employ.
10. Maintain and utilize the Isuzu Dealer Communication System for
submission of required monthly financial statements, parts orders,
warranty claims, retail sales reports, and all other functions which
from to time American Isuzu Motors Inc. may deem necessary.
American Isuzu Motors Inc. reserves the right to amend the foregoing Dealership
Standards at any time upon written notice to you.
Fair Cadillac-Oldsmobile-Isuzu Partnership
DBA: Fair Isuzu
100 Federal Road
Danbury, CT 06813
By /s/ Carl Spielvogel
-----------------------------
Its Chairman & CEO
----------------------------
AMERICAN ISUZU MOTORS INC.
By /s/ J.T. Maloney
-----------------------------
J.T. Maloney
Its Sr. Vice President and General Manager,
Light Vehicles
-2-
<PAGE>
SUPPLEMENTAL AGREEMENT TO
DEALER SALES AND SERVICE AGREEMENT
(PUBLICLY TRADED COMPANY)
FAIR CADILLAC-OLDSMOBILE-ISUZU PARTNERSHIP
THIS SUPPLEMENTAL AGREEMENT (this "Supplemental Agreement"),
dated as of September 16, 1996, is entered into among Fair Cadillac-Oldsmobile-
Isuzu Partnership ("Dealer"), DiFeo Partnership and Fair Cadillac-Oldsmobile
Corp. ("Owners"), United Auto Group, Inc. ("Public Company") and American Isuzu
Motors Inc. ("Distributor").
WHEREAS, contemporaneously herewith, Distributor and Dealer are
entering into a Dealer Sales and Service Agreement (the "Dealer Agreement")
which authorizes Dealer to conduct dealership operations from the Dealership
Locations identified in the Dealer Agreement;
WHEREAS, the organization and ownership of Dealer is such that
the terms of the Dealer Agreement are not wholly adequate to address the
legitimate business needs and concerns of Distributor and Dealer; and
WHEREAS, Distributor and Dealer have entered into the Dealer
Agreement in consideration for and in reliance upon certain understandings,
assurances and representations which the parties wish to document;
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein, the parties hereby agree as follows:
1. LIMITATIONS UPON CHANGE OF EXECUTIVE MANAGER
A. DESIGNATION OF EXECUTIVE MANAGER. As set forth in
Section 4 of the Dealer Agreement, James D. Evans shall be Executive Manager of
Dealer. Dealer and Owners agree that Executive Manager shall have complete and
irrevocable authority to make all decisions, and enter into any and all
necessary business commitments, required in the normal course of conducting
dealership operations on behalf of Dealer. Neither Dealer nor Owners will
revoke, modify or otherwise impose limitations upon such authority without the
prior written consent of Distributor.
B. CHANGE OF EXECUTIVE MANAGER. Without limiting the
restrictions set forth in the Dealer Agreement, the removal or withdrawal of
Executive Manager without Distributor's prior written consent shall constitute
grounds for termination of the Dealer Agreement, subject to applicable law.
2. LIMITATIONS UPON CHANGES IN OWNERSHIP
A. CHANGE IN OWNERSHIP OF DEALER OR OWNERS. Dealer,
Owners and Public Company hereby represent and warrant
<PAGE>
that all of the partnership interests of Dealer are owned by Owners, and that
Fair Cadillac-Oldsmobile Corp. is a wholly-owned subsidiary of Public Company.
Any change in ownership of Dealer or of Owners, or any event with respect to
Public Company described in subparagraph B below, shall be considered a change
in ownership of Dealer under the terms of the Dealer Agreement, and all
applicable provisions of the Dealer Agreement will apply to any such change.
B. CHANGE IN OWNERSHIP OF PUBLIC COMPANY. Given the
ultimate control Owners have over Dealer, the control of Fair Cadillac-
Oldsmobile Corp. by Public Company, and Distributor's strong interest in
assuring that those who own and control Distributor's dealerships have interests
consistent with those of Distributor, Dealer, Owners and Public Company agree
that if any person or entity hereinafter acquires or controls more than 20% of
the issued and outstanding common stock of Public Company at any time and
Distributor reasonably concludes that such person or entity does not have
interests compatible with those of Distributor or is otherwise not qualified to
have an ownership interest in the dealerships at the Dealership Locations, then
within 90 days of receipt of written notice from Distributor, Dealers and Owners
will: (i) transfer the assets associated with Dealer to a third party
acceptable to the Distributor, (ii) voluntarily terminate the Dealer Agreement,
or (iii) provide evidence to Distributor that such person or entity no longer
has such an ownership interest in Public Company. In the event that Dealer
enters into an agreement to transfer its assets to a third party as set forth in
(i) above, Distributor shall have a right of first refusal to purchase such
assets in accordance with the terms and procedures set forth in subparagraph C
below. Dealer, Owners and Public Company agree that if an ownership interest is
acquired in Public Company by a person or entity which notifies Public Company
via Schedule 13D filed with the Securities and Exchange Commission, Dealer shall
advise Distributor in writing, and attach a copy of that Schedule.
C. EXERCISE OF RIGHT OF FIRST REFUSAL. Prior to
exercising its right of first refusal pursuant to subparagraph B above,
Distributor shall have a reasonable opportunity to inspect the assets, including
real estate, before making its decision. If Dealer has entered into a bona fide
written buy/sell agreement, the purchase price and other terms of sale will be
those set forth in such agreement and any related documents, unless Dealer and
Distributor agree to other terms. Upon Distributor's request, Dealer agrees to
provide all documents relating to the proposed transfer. If Dealer refuses to
provide such documentation or states that such documents do not exist, it will
be presumed that the agreement is not bona fide. In the absence of a bona fide
written buy/sell agreement, the purchase price of the dealership assets will be
determined by good faith negotiations by Dealer and Distributor. If agreement
cannot be reached within a reasonable time, the price and other terms of sale
will be established by arbitration according to the rules of
-2-
<PAGE>
the American Arbitration Association. Dealer agrees to transfer the assets by
Warranty Deed where possible, conveying marketable title free and clear of liens
and encumbrances. The Deed will be in proper form for recording and Dealer will
deliver complete possession of the assets when the Deed is delivered. Dealer
will also furnish copies of any easements, licenses or other documents affecting
the property and assign any permits or licenses necessary for the conduct of
Dealer's operations. Distributor's rights under this section may be assigned to
any third party and in connection with any such assignment, Distributor will
guarantee full payment of the purchase price by the assignee.
3. LIMITATIONS UPON NUMBER AND LOCATIONS OF DEALERSHIPS
Dealer, Owners and Public Company agree to be bound by the
provisions of Distributor's standard policies in effect from time to time which
limit the number and locations of Distributor's dealerships which may be owned
by Dealer and/or its parent companies, subsidiary companies and companies under
common control with it. Dealer and Owners shall provide such documentation as
is reasonably requested by Distributor regarding the ownership interests of all
such persons and entities in Distributor's dealerships. In the event that
Dealer, Owners or Public Company shall acquire ownership or control of more than
one of Distributor's dealerships, then Dealer, Owners and/or Public Company
shall obtain separate motor vehicle licenses, and shall maintain separate
financial statements, for each dealership.
4. WORKING CAPITAL REQUIREMENTS
Dealer and Owners agree that Dealer shall maintain, at all times,
sufficient working capital to meet or exceed the minimum net working capital
standards for Dealer as determined from time to time by Distributor consistent
with its standard policies. Dealer and Owners shall provide such documentation
as is reasonably requested by Distributor to assure compliance with this
requirement. Owners agree to submit an annual consolidated balance sheet for
the combined dealership operations of Owners. Public Company agrees, upon
Distributor's request, to provide Distributor with copies of the materials filed
by Public Company with the Securities and Exchange Commission.
5. INDEMNITY
Public Company agrees to indemnify and hold Distributor harmless
from and against any and all claims, liabilities, losses, damages, costs and
expenses arising out of or in connection with the sale of stock in Public
Company. Public Company further agrees to indemnify and hold Distributor
harmless from and against any and all claims of the shareholders of Public
Company, and all liabilities, losses, damages, costs and expenses incurred in
connection therewith, unless a final determination is
-3-
<PAGE>
made that Distributor was in fact liable for such claims, liabilities, losses,
damages, costs or expenses.
6. MISCELLANEOUS
A. EFFECT OF SUPPLEMENTAL AGREEMENT. The parties agree
that this Supplemental Agreement is intended to supplement the terms of the
Dealer Agreement and not to limit the rights and obligations of the parties
contained therein. This Supplemental Agreement is hereby incorporated into the
Dealer Agreement and made a part thereof. In the event that any of the
provisions of this Supplemental Agreement are in actual conflict with other
provisions of the Dealer Agreement, the provisions contained in this
Supplemental Agreement shall govern. In the event that the policies of
Distributor with regard to the issues addressed herein are hereinafter modified,
the parties agree to review such modifications to determine whether
modifications of this Supplemental Agreement are appropriate.
B. CONSTRUCTION. This Supplemental Agreement shall be
governed by and construed in accordance with the laws of the State of
California. The failure of either party to enforce any of the provisions of
this Supplemental Agreement or the failure to exercise any election provided for
herein shall in no way be considered to be a waiver of such provisions or
elections. All capitalized terms used herein and not defined herein shall have
the meanings set forth in the Dealer Agreement.
C. ALTERNATIVE DISPUTE RESOLUTION. In the event of any
dispute between the parties regarding the Dealer Agreement or this Supplemental
Agreement, Dealer, Owners and Public Company agree to participate in any
alternative dispute resolution procedures specified in the standard policies of
Distributor. Upon final determination through such dispute resolution, each
party shall have recourse to a review de novo by the appropriate state court or
administrative agency consistent with the provisions of state law. The parties
agree that should a party making such appeal lose the issues presented on
appeal, then that party shall pay the reasonable expenses, including reasonable
attorneys' fees, of the other party for the defense of such de novo review.
D. NO THIRD PARTY BENEFICIARIES. Nothing in this
Supplemental Agreement or the Dealer Agreement shall be construed to confer any
rights upon any person not a party hereto or thereto, nor shall it create in any
party an interest as a third party beneficiary of this Supplemental Agreement or
the Dealer Agreement. Dealer and Owners hereby agree to indemnify and hold
harmless Distributor, its affiliates, subsidiaries, directors, officers,
employees, agents and representatives from and against all claims, actions,
liabilities, damages, costs and expenses (including reasonable attorneys' fees)
arising from or in connection with any action by a third party in its capacity
as a stockholder of Public Company other than through a derivative
-4-
<PAGE>
stockholder suit authorized by the Board of Directors of Public Company.
E. CONDITION PRECEDENT. Notwithstanding anything to the
contrary contained herein, the parties acknowledge that the provisions of this
Supplemental Agreement shall not be applicable until such time as Public Company
completes a public offering of its stock.
IN WITNESS WHEREOF, the parties have executed this Supplemental
Agreement effective as of the date set forth in the introductory paragraph
hereof.
FAIR CADILLAC-OLDSMOBILE-ISUZU DIFEO PARTNERSHIP
PARTNERSHIP
By: /s/ Carl Spielvogel By: /s/ Carl Spielvogel
-------------------------- ----------------------------
Name: Carl Spielvogel Name: Carl Spielvogel
-------------------------- ----------------------------
Title: Chairman & CEO Title: Chairman & CEO
-------------------------- ----------------------------
FAIR CADILLAC-OLDSMOBILE CORP. UNITED AUTO GROUP, INC.
By:___/s/ Samuel X. DiFeo By: /s/ Carl Spielvogel
-------------------------- ----------------------------
Name: Samuel X. DiFeo Name: Carl Spielvogel
-------------------------- ----------------------------
Title: CEO Title: Chairman & CEO
-------------------------- ----------------------------
AMERICAN ISUZU MOTORS INC.
By: /s/ J.T. Maloney
- -----------------------------
Name: J.T. Maloney
- -----------------------------
Title: Sr. Vice President,
General Manager - LV
- -----------------------------
-5-
<PAGE>
ISUZU DEALER SALES
AND
SERVICE AGREEMENT
ADDITIONAL PROVISIONS
The following Additional Provisions have by reference been
incorporated in and made a part of the ISUZU DEALER SALES AND SERVICE AGREEMENT
which they accompany and which has been executed on behalf of Distribution and
Dealer.
ARTICLE I. DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
A. "Authorized Isuzu Dealers" shall mean dealers located in the
United States that are authorized by Distributor to conduct dealership
operations in connection with the sale of Isuzu Products.
B. "Isuzu Cars" shall mean such new passenger cars manufactured
by or on behalf of Manufacturer as are from time to time offered for sale by
Distribution to Dealer for resale.
C. "Isuzu Trucks" shall mean such new light duty trucks and
chassis manufactured by or on behalf of Manufacturer as are from time to time
offered for sale by Distributor to Dealer for resale.
D. "Isuzu Vehicles" shall mean Isuzu Cars and Isuzu Trucks.
E. "Isuzu Parts and Accessories" shall mean such parts and
accessories manufactured by or on behalf of
<PAGE>
Manufacturer or Distributor as are from time to time offered for sale by
Distributor to Dealer.
F. "Isuzu Products" shall mean Isuzu Vehicles and Isuzu Parts and
Accessories.
G. "Competitive Cars" shall mean those new cars which are
designated by Distributor as directly competitive with Isuzu Cars.
H. "Import Industry Cars" shall mean all new cars manufactured
other than within the United States which are imported into the United States
for sale to the extent data relating to registration thereof are reasonably
available.
I. "Industry Cars" shall mean all new cars of manufacturers which
are sold and distributed within the United States, to the extent data
relating to registration thereof are reasonably available.
J. "Competitive Trucks" shall mean those new light duty trucks
which are designated by Distributor as directly competitive with Isuzu Trucks.
K. "Import Industry Trucks" shall mean all new light duty trucks
manufactured other than within the United States which are imported into the
United States for sale, to the extent data relating to registration thereof
are reasonably available.
L. "Industry Trucks" shall mean light duty trucks of all
manufacturers which are sold and distributed within the United States, to the
extent data relating to registration thereof are reasonably available.
-2-
<PAGE>
M. "Dealership Location" shall mean the business location of
Dealer described in the initial paragraph of this Agreement.
N. "Dealership Facilities" shall mean the land areas at the
Dealership Location and the buildings and improvements erected thereon.
O. "Dealer's Market" shall mean the geographical area within
which potential purchasers and owners of Isuzu Products which Dealer can most
readily serve are located. Such area, or portions thereof, may at any time
be a part of the Market of other Authorized Isuzu Dealers as well as Dealer.
P. "Owner(s)" shall mean the person(s) named as Owner(s) in
Section 4 of this Agreement.
Q. "Executive Manager" shall mean the person named as Executive
Manager in Section 4 of this Agreement.
R. "Successor Addendum" shall mean the Successor Addendum, if
any, executed by Distributor and Dealer pursuant to the provisions of Article
VII of this Agreement.
S. "Dealership Standards" shall mean such reasonable standards as
may be established by Distributor for Authorized Isuzu Dealers from time to
time under its standard procedures with respect to such matters as dealership
facilities, tools, equipment, capitalization, inventories and personnel.
T. "Service Policies and Procedures Manual" shall mean the
publication or publications of Distributor, as the same may from time to time
be amended, revised or supplemented, which
-3-
<PAGE>
set forth Distributor's policies and procedures concerning and administration
of Distributor's warranties and related matters.
U. "Manufacturer" shall mean ISUZU MOTORS LIMITED.
ARTICLE II. SALES TO DEALER
A. DEALER'S ORDERS
At such times as Distributor may from time to time designate, Dealer
shall submit to Distributor orders for Isuzu Products in such quantities and
varieties as may be reasonably necessary for Dealer to fulfill its
obligations under this Agreement. All orders shall be on forms supplied by
Distributor, shall be subject to acceptance by Distributor, and may be
accepted in whole or in part. Orders may be accepted by written notice to
Dealer or by actual delivery of the products ordered to Dealer or to a
carrier for transportation to Dealer. Except as otherwise provided in this
Agreement, orders shall not be cancellable by Dealer after acceptance by
Distributor. Distributor will process and fill Dealer's orders in accordance
with procedures relating thereto established by Distributor. Because of the
number of factors that affect the distribution of products and the relevancy
thereof at any given time. Distributor necessarily reserves to itself
discretion in applying such factors and in processing orders for Isuzu
Products it receives from Dealer. The judgment and decisions of Distributor
shall be final in all matters relating to the distribution and delivery of
Isuzu Products to Dealer.
-4-
<PAGE>
B. SHIPMENT AND RISK OF LOSS
Distributor will ship Isuzu Products by whatever mode of
transportation, by whatever route, and from whatever point Distributor may
select. Distributor will, if requested by Dealer in such manner and within such
time as Distributor shall from time to time specify, prosecute claims for loss
of or damage to Isuzu Products during transportation from said point of shipment
against the responsible carrier for and on behalf of Dealer.
C. PASSAGE OF TITLE
Title to Isuzu Products shall pass from Distributor to Dealer, or, if
applicable, 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. Distributor shall retain a security interest in, and the right to
repossess, any such product until paid in full therefor.
D. FREIGHT
In addition to the prices and charges otherwise provided for herein,
Dealer will pay Distributor in connection with Isuzu Vehicles delivered to
Dealer the applicable destination charges that are in effect at the time of
shipment. Dealer shall pay such transportation charges for Isuzu Parts and
Accessories as may be in effect at the time of shipment.
E. DIVERSIONS
Dealer shall pay all charges accruing after delivery of Isuzu Products
to Dealer or to carrier for transportation to Dealer, including, but not limited
to, charges for demurrage and storage. If diversions of shipments are made upon
Dealer's
-5-
<PAGE>
request or because of Dealer's failure or refusal to accept delivery thereof,
Dealer shall be responsible for and pay any additional costs or expenses thereby
incurred.
ARTICLE III. DEALERSHIP OPERATIONS
A. DEALERSHIP LOCATION AND FACILITIES
1. DEALERSHIP FACILITIES
Dealer shall provide, at the Dealership Location, Dealership
Facilities that will enable Dealer to effectively perform its responsibilities
under this Agreement. The Dealership Facilities shall be satisfactory as to
appearance and layout, properly equipped and substantially in accordance with
the applicable Dealership Standards.
2. CHANGE IN DEALERSHIP LOCATION OR FACILITIES
Dealer shall not move, relocate, modify or change the Dealership
Location or any of the Dealership Facilities, nor shall Dealer or any Owner or
Manager directly or indirectly establish or operate any other locations or
facilities for the sale or servicing of Isuzu Products or for the conduct of any
other of the dealership operations contemplated by this Agreement without the
prior written consent of Distributor.
3. HOURS OF BUSINESS
In order to serve the needs of potential purchasers and the service
requirements of owners and users of Isuzu Products, Dealer shall keep its
Dealership Facilities open and operating for business during such days and hours
as automobile dealers' sales, parts and service facilities are customarily open
in the community wherein the Dealership Location is situated.
-6-
<PAGE>
4. IDENTIFICATION OF DEALERSHIP FACILITIES
Insofar as permitted by local laws and regulations, Dealer shall
display at its Dealership Location, in such number and at such locations as
Distributor may reasonably require, signs which are compatible with the design
standards established by Distributor from time to time. Dealer shall maintain
all such signs in good condition at all times.
5. EVALUATION OF DEALER'S PERFORMANCE WITH
RESPECT TO DEALERSHIP FACILITIES
Distributor shall periodically evaluate Dealer's performance of its
responsibilities with respect to Dealership Facilities and shall discuss its
evaluation with Dealer. Dealer shall promptly take such action as may be
required to correct any deficiencies in its performance of these
responsibilities.
B. VEHICLE SALES OPERATIONS
1. RESPONSIBILITY OF DEALER
Dealer shall actively and effectively promote the sale at retail (and,
if Dealer elects, the leasing and rental) of Isuzu Vehicles to potential
customers located in Dealer's Market. However, nothing contained in this
Agreement shall limit or be construed to limit the geographical area within
which or the persons to whom Dealer may sell or promote the sale of Isuzu
Vehicles.
2. SALES PERSONNEL
Dealer shall at all times employ the number of trained and competent
new vehicle managerial and sales personnel reasonably required to fulfill its
responsibilities with respect to the sales of Isuzu Vehicles.
-7-
<PAGE>
Dealer shall, without expense to Distributor, have its said employees
attend such vehicle sales training sessions as Distributor may from time to time
conduct.
3. INVENTORY
Subject to the ability of the Distributor to supply the same, Dealer
shall maintain at all times stocks of Isuzu Vehicles of an assortment and in
quantities adequate to meet its responsibilities with respect to sales of Isuzu
Vehicles. Dealer shall also have available at all times an adequate number and
variety of Isuzu Vehicles for purposes of display and demonstration and shall,
at all times, maintain the same in first class condition.
4. MODIFICATION OF ISUZU VEHICLES
If the laws of the state in which the Dealership Location is situated
or of the states in which customers of Dealer are located require the
installation on vehicles of equipment not installed or supplied as standard
equipment by Distributor, Dealer shall, prior to its sale of the Isuzu Vehicles
on which such installation is required, install at its own expense such
additional equipment. Dealer shall indemnify and hold Distributor harmless from
and against any and all liabilities arising from Dealer's failure to install
such additional equipment on said vehicles.
5. EVALUATION OF DEALER'S SALES PERFORMANCE
Distributor shall periodically evaluate Dealer's performance of its
responsibilities with respect to sales of Isuzu Cars and shall discuss its
evaluation with Dealer. Dealer
-8-
<PAGE>
shall promptly take such action as may be required to correct any deficiencies
in its performance of these responsibilities. Dealer's performance of these
responsibilities shall be evaluated by Distributor on the basis of such
reasonable factors as Distributor shall establish and furnish Dealer from time
to time. Such factors shall include:
(a) Reasonable sales objectives for Isuzu Cars which may be
established from time to time by Distributor for Dealer;
(b) Dealer's sales of Isuzu Cars as compared to:
(i) registrations of Isuzu Cars in Dealer's Market;
(ii) registrations of Competitive Cars in Dealer's
Market;
(iii) registrations of Import Industry Cars in Dealer's
Market;
(iv) registrations of Industry Cars in Dealer's Market;
and
(v) the average sale of Isuzu Cars by comparable
groupings of Authorized Isuzu Dealers.
6. EVALUATION OF SALES OF ISUZU TRUCKS
Distributor shall periodically evaluate Dealer's performance of its
responsibilities with respect to sales of Isuzu Trucks and shall discuss its
evaluation with Dealer. Dealer shall promptly take such action as may be
required to
-9-
<PAGE>
correct any deficiencies in its performance of these responsibilities. Dealer's
performance of these responsibilities shall be evaluated by Distributor on the
basis of such reasonable factors as Distributor shall establish and furnish
Dealer from time to time. Such factors shall include:
(a) Reasonable sales objectives for Isuzu Trucks which
may be established from time to time by Distributor for Dealer;
(b) Dealer's sales of Isuzu Trucks as compared to:
(i) registrations of Isuzu Trucks in
Dealer's Market;
(ii) registrations of Competitive Trucks in
Dealer's Market;
(iii) registrations of Import Industry Trucks in
Dealer's Market;
(iv) registrations of Industry Trucks in Dealer's
Market; and
(v) the average sales of Isuzu Trucks by
comparable groupings of Authorized Isuzu
Dealers.
C. USED VEHICLE SALES OPERATIONS
To enhance Dealer's opportunities to operate successfully, Dealer will
engage in such used vehicle operations as Dealer may deem appropriate. Dealer
shall be entitled to identify such used vehicle operations as a part of its
dealership operations and to apply the trademarks, tradenames and service
-10-
<PAGE>
marks of Distributor relating to used vehicle operations, but only as and to the
extent Dealer subscribes to and fulfills all requirements of programs relating
thereto offered Dealer by Distributor.
D. RENTAL AND LEASING OPERATIONS
Since the rental and leasing of Isuzu Vehicles will offer Dealer
additional opportunities to improve its effectiveness in fulfilling its
responsibilities with respect to sales of Isuzu Vehicles, Dealer will explore
such opportunities and will establish rental and leasing operations if such
additional opportunities are apparent. Dealer shall be entitled to identify
such rental and leasing operations as a part of its dealership operations and to
apply the trademarks, tradenames and service marks of Distributor relating to
rental and leasing operations, but only as and to the extent Dealer subscribes
to and fulfills all requirements of programs relating thereto offered Dealer by
Distributor.
E. PARTS AND ACCESSORIES SALES OPERATIONS
1. RESPONSIBILITY OF DEALER
Dealer shall actively and effectively promote the sale of Isuzu Parts
and Accessories to service, wholesale and other customers located in Dealer's
Market. However, nothing contained in this Agreement shall limit or be
construed to limit the geographical area within which or the person to whom
Dealer may sell Isuzu Parts and Accessories.
-11-
<PAGE>
2. SALES PERSONNEL
Dealer shall at all times employ the number of trained and competent
parts and accessories managerial and sales personnel reasonably required to
fulfill its responsibilities with respect to the sales of Isuzu Parts and
Accessories. Dealer shall, without expense to Distributor, have its said
employees attend such parts and accessories sales training sessions as
Distributor may from time to time conduct.
3. INVENTORY
Dealer shall maintain at all times stocks of parts and accessories
adequate to meet its responsibilities with respect to service of Isuzu
Products. Dealer shall also amintain, subject to the ability of Distributor
to supply the same, stocks of Isuzu Parts and Accessories of an assortment
and in quantities adequate to meet customer demands and for warranty repairs,
special policy service and campaign corrections. Dealer shall maintain a
proper and adequate system of parts and accessories inventory control.
4. REPRESENTATIONS CONCERNING PARTS AND ACCESSORIES
In connection with its ale or offering for sale or use in the repair
or service of Isuzu Products, Dealer shall not represent as an Isuzu Part or
Accessory any part or accessory that in fact is not an Isuzu Part or Accessory.
5. EVALUATION OF DEALER'S PARTS AND ACCESSORIES SALES
PERFORMANCE
Distributor shall periodically evaluate Dealer's performance of its
responsibilities with respect to the sale of Isuzu Parts and Accessories and
shall discuss its evaluation with
-12-
<PAGE>
Dealer. Dealer shall promptly take such action as may be required to correct
any deficiencies in its performance of these responsibilities.
F. SERVICE OPERATIONS
1. GENERAL SERVICE RESPONSIBILITIES OF DEALER
Dealers shall provide prompt efficient and courteous service to owners
and users of Isuzu Products regardless of the origin of purchase thereof,
including, without limitation, the specific obligations described below. All
service performed by Dealer pursuant to this Agreement shall be performed in a
good and workmanlike manner and in accordance with the requirements,
specifications and instructions relating thereto set forth in the Service
Policies and Procedures Manual and bulletins and instructions furnished Dealer
by Distributor from time to time.
2. SPECIFIC SERVICE OBLIGATIONS OF DEALER
(a) NEW VEHICLE PRE-DELIVERY INSPECTIONS AND ADJUSTMENTS.
Dealer shall perform pre-delivery inspections and adjustments on each
Isuzu Vehicle prior to sale and delivery thereof by Dealer. Such inspections
and adjustments shall be performed by Dealer without charge to the purchaser and
in accordance with the provisions relating thereto set forth in the Service
Policies and Procedures Manual and bulletins and instructions furnished Dealer
by Distributor from time to time.
The completion of such inspections and adjustments on each such
Vehicle shall be verified by Dealer on forms supplied or approved by Distributor
for this purpose, a copy of which
-13-
<PAGE>
shall be retained in Dealer's files and a copy of which shall be furnished to
the purchaser.
(b) COMPLIMENTARY MAINTENANCE SERVICE
Dealer shall perform or be responsible for the performance of such
complimentary maintenance or other services following delivery of Isuzu Vehicles
(including labor for lubrication) as may be prescribed for such vehicle in
Distributor's applicable service bulletins, in accordance with the provisions
relating thereto set forth in the Service Policies and Procedures Manual or in
bulletins or instructions issued by Distributor to Dealer from time to time.
Dealer will perform such services as and when required and requested by the
owner or user of the vehicle, without regard to its origin of purchase.
(c) WARRANTY REPAIRS
Dealer shall perform (i) warranty repairs on each Isuzu Product which
qualifies for such repairs under the provisions of any warranty furnished
therewith by Distributor or by the manufacturer thereof and (ii) such other
inspections, repairs or adjustments as may be approved or authorized by
Distributor.
Dealer shall perform such repairs and adjustments on each such Isuzu
Product as and when required thereon and requested by the owner, without regard
to its origin of purchase, and in accordance with the provisions relating
thereto set forth in the Service Policies and Procedures Manual and in bulletins
and instructions furnished by Distributor to Dealer from time to time.
-14-
<PAGE>
Dealer shall provide each owner or user for whom Dealer performs such
repairs or adjustments with a copy of the repair order covering the same.
(d) CAMPAIGN INSPECTIONS AND CORRECTIONS
Dealer shall perform campaign inspections and/or corrections,
including those described in owner notifications and recall campaigns conducted
by Distributor in furtherance of Federal or state laws or regulations, on Isuzu
Products that qualify for such inspections and/or corrections and those on which
such campaign inspections and corrections are requested by Distributor,
regardless of their origin of purchase.
Dealer shall perform such campaign inspections and/or corrections and
shall advise Distributor as and when the same are performed, all in accordance
with the bulletins and instructions relating thereto furnished Dealer by
Distributor and as set forth in the Service Policies and Procedures Manual.
To enable Dealer to perform required corrections as promptly as
practical, and for the convenience of Dealer, parts and/or other materials
required for each such campaign may be pre-shipped to Dealer. Dealer will
accept and retain such parts and/or materials for use in such campaign. Upon
completion of the campaign, Dealer may return or dispose of any such parts
and/or materials that are in excess of Dealer's requirements for the campaign in
accordance with disposition instructions relating thereto furnished by
Distributor and Dealer shall receive credit therefor.
-15-
<PAGE>
(e) DISPOSITION OF REPLACED PARTS
Dealer shall comply with the instructions set forth in the Service
Policies and Procedures Manual with respect to retention and disposition of
parts replaced by Dealer in the performance of repairs, adjustments and services
pursuant to Article III F 2 (a), (b), (c) and (d) of this Agreement.
(f) MAINTENANCE AND REPAIR SERVICE
Dealer shall provide, at its Dealership Facilities, prompt maintenance
and repair service to owners and users of Isuzu Products. Such service shall
include only those services specifically requested by the owner or user that are
discussed in advance by the Dealer with the owner or user as being required.
Dealer shall provide all owners and users for whom Dealer provides
maintenance and repair service itemized invoices covering the details thereof.
(g) PAYMENTS BY DISTRIBUTOR TO DEALER
For Dealer's performance of pre-delivery inspections and adjustments,
complimentary maintenance service, warranty repairs, special policy adjustments,
and campaign inspections and corrections under and pursuant to the above
provisions, Distributor shall pay Dealer for the Parts and Accessories and/or
other materials or shall provide Dealer with the Parts and Accessories and/or
other materials required in connection therewith and shall pay for labor in
accordance with the provisions relating thereto set forth in the Service
Policies and Procedures Manual.
-16-
<PAGE>
3. OTHER SERVICE RESPONSIBILITIES OF DEALER
(a) COMPLIANCE WITH LAWS REGULATING VEHICLES
AND OTHER PRODUCTS
Dealer will comply with all applicable provisions of Federal, state
and local laws and governmental orders, rules and regulations, including but not
limited to laws, orders, rules and regulations relating to safety, emission,
noise control, damageability and customer service.
In furtherance of facilitating compliance with such laws, orders,
rules and regulations by Distributor and Dealer, Distributor will provide to
Dealer, and Dealer will provide to Distributor, as the case may be, such
information and assistance as may reasonably be requested by the other in
connection with the performance of their respective obligations under such laws,
orders, rules and regulations.
(b) SERVICE PERSONNEL
Dealer shall at all times employ the number of trained and competent
service managerial and technical personnel reasonably required to fulfill its
responsibilities with respect to the service of Isuzu Products. Dealer shall,
without expense to Distributor, have its said employees attend such service
training sessions as Distributor may from time to time conduct.
(c) SERVICE EQUIPMENT AND SPECIAL AND
ESSENTIAL TOOLS
Dealer shall provide adequate service equipment and such special and
essential tools as are required to fulfill its responsibilities for service of
Isuzu Products.
-17-
<PAGE>
4. EVALUATIONS OF DEALER'S SERVICE PERFORMANCE
Distributor shall periodically evaluate Dealer's performance of its
responsibilities with respect to the servicing of Isuzu Products and shall
discuss its evaluation with Dealer. Dealer shall promptly take such action as
may be required to correct any deficiencies in its performance of these
responsibilities.
G. ADVERTISING, PROMOTIONAL AND PUBLIC RELATIONS OPERATIONS
1. ADVERTISING STANDARDS
In order to secure and maintain the confidence and respect of the
public in Dealer, Distributor, Manufacturer and Isuzu Products, Dealer will at
all times maintain the highest standards of ethical advertising and will not
publish or cause or permit to be published any advertising relating to any of
its dealership operations or to any Isuzu Product which is not in compliance
with all applicable federal, state and local laws, rules, regulations and orders
or that is likely to mislead or deceive the public or impair the goodwill of
Dealer, Distributor or Manufacturer or the good reputation of Isuzu Products.
2. DEALER'S ADVERTISING PROGRAMS
Dealer shall develop and utilize advertising and promotion programs,
including, but not limited to effective displays of Isuzu Products and use of
demonstration Isuzu Vehicles.
-18-
<PAGE>
3. PARTICIPATION IN DISTRIBUTOR'S ADVERTISING PROGRAMS
Dealer shall participate in advertising and promotion programs
developed from time to time by Distributor, as and when requested by
Distributor.
4. CUSTOMER RELATIONS
(a) INFORMING CUSTOMERS AS TO DETAILS OF CHARGES
In effecting sales or service of Isuzu Products, Dealer will inform
the customers of details covering the items which make up the purchase price or
charges, will give them itemized invoices covering the details thereof and will
provide them with such other information and documents relating thereto as may
be required under any applicable laws, rules, regulations or orders.
Dealer will not make any false, misleading or deceptive
representations as to the items making up the purchase price or charges, nor
will Dealer make any statements intended to lead any purchaser to believe that a
greater portion of the selling price of a Vehicle represents destination,
factory delivery and handling, or other charges than the amounts thereof
actually charged to and paid for by Dealer.
(b) RIGHT OF RETAIL PURCHASER TO BUY VEHICLE WITHOUT
PURCHASING OPTIONAL EQUIPMENT OR ACCESSORIES
Dealer shall not include, in any retail order for an Isuzu Vehicle
taken by Dealer nor in any order covering an Isuzu Vehicle submitted by Dealer
to Distributor, any item of optional equipment or accessories, unless the retail
purchaser thereof has requested such item and has knowledge that such item will
be
-19-
<PAGE>
included in such order or unless such item is required on such vehicle under
applicable laws, rules, regulations or orders.
(c) INFORMING RETAIL PURCHASERS AS TO OPTIONAL EQUIPMENT OR
ACCESSORIES INSTALLED BY DEALER
In order to avoid disparagement of any trademark that is applied by
Distributor to items of optional equipment and accessories manufactured by or
for Distributor and in order to avoid misleading any retail purchasers who may
assume that all items of optional equipment and accessories included in Isuzu
Vehicles have been manufactured by or for Distributor, Dealer shall, if it
installs on any Isuzu Vehicle any item of optional equipment or accessory that
has not been manufactured by or for Distributor, disclose to the retail
purchaser thereof that such item of optional equipment or accessory has not been
manufactured by or for Distributor and that it is not included in any warranty
furnished by Distributor. Such disclosure by Dealer shall be included in
writing by Dealer on the retail purchaser's order for any such Isuzu Vehicle, if
one is signed by the retail purchaser thereof, but in any event in the itemized
invoice covering the details of such purchase furnished the retail purchaser by
Dealer.
H. CAPITAL
Dealer shall at all times maintain and employ in the operations of its
dealership at least that amount and allocation of net working capital needed for
Dealer to effectively fulfill its responsibilities under this Agreement, as
agreed upon in writing by Distributor and Dealer from time to time.
-20-
<PAGE>
I. ACCOUNTING SYSTEM
Dealer will install and maintain an accounting system of a type
designated by Distributor. Dealer will maintain said system in accordance with
instructions to be issued by Distributor from time to time.
J. RECORDS AND REPORTS
1. FINANCIAL STATEMENTS
Dealer shall furnish to Distributor, on or before the tenth day of
each month, on such forms as Distributor may designate, complete and accurate
financial and operating statements reflecting Dealer's true and financial
condition as of the end of the preceding month and the results of Dealer's
operations during the preceding month and for that portion of Dealer's fiscal
year then ended, with supporting data, and shall, within two (2) months after
the closing date of Dealer's fiscal year, furnish to Distributor complete and
accurate financial and operating statements for said fiscal year. Distributor
shall not furnish to any third party any financial statements or data submitted
to it hereunder, except as an unidentified part of a composite or coded report,
unless authorized by Dealer or required to do so by law or unless they are
pertinent to judicial or governmental administrative proceedings.
2. OWNERSHIP AND MANAGEMENT RECORDS
Dealer shall keep and maintain complete and up-to-date records
covering (a) the names of all persons who are Owner(s) of Dealer and the dates
and manner in which any such ownership interests of such persons are transferred
or changed in any
-21-
<PAGE>
manner whatsoever; (b) the election, appointment or selection of each person
having a management position with Dealer, including the duly elected officers
and directors of Dealer if Dealer is a corporation; and (c) the persons or
parties who have either directly or indirectly supplied funds, on either a
secured or unsecured basis, to those having any ownership interests in Dealer in
connection with their acquisition of such ownership interests.
3. SALES AND SERVICE RECORDS AND REPORTS
Dealer shall prepare and maintain complete and up-to-date records
covering its sales of and service performed by it on Isuzu Products. Promptly
upon the sale of each Isuzu Vehicle, Dealer shall accurately and fully complete
and send to Distributor the vehicle retail delivery report supplied by
Distributor with respect to said vehicle. Dealer will furnish Distributor with
such other and further reports covering sales and service of Isuzu Products by
Dealer in such form or forms and within such times as is specified in notices or
bulletins relating thereto furnished Dealer by Distributor.
4. RECORDS CONCERNING APPLICATIONS AND CLAIMS FOR PAYMENTS
Dealer shall prepare and retain, for a minimum period of two (2)
years, in accordance with the procedures set forth in the Service Policies and
Procedures Manual, records in support of applications for payment for pre-
delivery inspections and adjustment, warranty repairs and policy adjustments and
campaign inspections and corrections performed by Dealer, claims for parts
-22-
<PAGE>
compensation and applications for discounts, allowances, refunds or credits.
K. INSPECTION OF ACCOUNTS AND RECORDS
Distributor shall have the right at any reasonable time during
Dealer's regular business hours to inspect the Dealership Facilities and to
examine, audit and make copies of all accounts and records relating to the sale
and service of Isuzu Products.
L. TRADEMARKS AND SERVICE MARKS
Distributor grants Dealer the non-exclusive privilege to identify
itself as an Authorized Isuzu Dealer and to display and otherwise use in
connection with the sale and service of Isuzu Products, the various trademarks,
tradenames, service marks and other word and design marks which Manufacturer or
Distributor may use in connection with or apply to Isuzu Products during the
term of this Agreement. Except as provided herein, Dealer shall make no use of
any such trademark, tradename, service mark, or other word and design mark.
Dealer shall not use any mark, word or name which is similar to any of the
various trademarks, tradenames, service marks and other word and design marks
which Manufacturer or Distributor may use in connection with or apply to Isuzu
Products. Dealer shall neither have nor claim to have any rights in or to any
such trademark, tradename, service mark or other word and design mark. Upon
Distributor's request and, in any case, upon termination of this Agreement,
Dealer shall promptly discontinue, or cause to be discontinued, the display and
use of all such trademarks, tradenames, service marks and other word and design
marks. Dealer shall promptly change the
-23-
<PAGE>
manner in which such trademarks, tradenames, service marks and other word and
design marks are displayed and used when requested to do so by Distributor. No
such trademark, tradename, service mark or other word and design mark may be
used as part of the name under which Dealer's business is conducted, except with
Distributor's prior written consent.
ARTICLE IV. INDEMNIFICATION
A. INDEMNIFICATION OF DISTRIBUTOR
Dealer shall:
1. Upon Distributor's written request defend Distributor against
claims that during the term of this Agreement may arise, commence or be asserted
against Distributor in an action concerning:
(a) Dealer's failure or alleged failure to comply, in whole or in
part, with any obligation of Dealer under this Agreement;
(b) Any actual or alleged negligence, error, omission or act or
Dealer in connection with the preparation, repair or service (including warranty
service) by Dealer of Isuzu Products;
(c) Any modification made by or on behalf of Dealer to Isuzu
Products, except those made pursuant to the express instruction or with the
express approval of Distributor;
(d) Dealer's breach or alleged breach of any agreement between Dealer
and Dealer's customer or other third party; or
(e) Misleading statements, misrepresentations or deceptive or unfair
practices or allegations of misleading statements, misrepresentations or
deceptive or unfair practices
-24-
<PAGE>
by Dealer, directly or indirectly, to Distributor, a customer or other third
party.
2. Indemnify and hold Distributor harmless from any and all
settlements made and final judgments rendered with respect to any of the claims
described in Section A.1 of this Article IV.
B. INDEMNIFICATION OF DEALER
Distributor shall, upon Dealer's written request:
1. Defend Dealer against claims that during the term of this
Agreement may arise, commence or be asserted against Dealer in an action
concerning bodily injury or property damage arising out of an occurrence caused
solely by a defect or alleged defect existing or claimed to have existed in an
Isuzu Product at the time title to said product passed to Dealer, provided:
(i) that the defect could not have reasonably been discovered by
Dealer during the pre-delivery inspection of the product
required by this Agreement; and
(ii) Distributor did not notify Dealer in writing of such defect
prior to delivery of the product to the first retail
customer.
2. Indemnify and hold Dealer harmless from any and all settlements
made which are approved by Distributor and final judgments rendered with respect
to any of the claims described in Section B.1 of this Article IV; provided,
however, Dealer promptly notifies Distributor in writing of the assertion of
such claim and the commencement of such action against Dealer and
-25-
<PAGE>
cooperates fully in the defense of such action in such manner and to such extent
as Distributor may require.
C. EXCEPTION TO INDEMNIFICATION
If the allegations asserted in any action or if any facts established
during or with respect to any action would require Dealer to defend and
indemnify Distributor under Section A, above, and Distributor to defend and
indemnify Dealer under Section B, above, Distributor 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 Distributor and Dealer, except
to the extent that such an obligation or responsibility may be imposed by
applicable law.
ARTICLE V. TERMINATION
A. TERMINATION AGREEMENT
1. VOLUNTARY TERMINATION BY DEALER
Dealer may terminate this Agreement at any time upon 30 days' written
notice to Distributor.
2. TERMINATION DUE TO ACTS OR EVENTS CONTROLLED
BY DEALER, ITS OWNER(S) OR MANAGERS
Each of the following represents an act or event that is within the
control of or originates from action taken by Dealer or its Owner(s) or
Manager(s) and over which Distributor has no control, but which, when contrary
to the spirit, nature, purpose or objectives of this Agreement, warrant its
termination:
(a) Any misrepresentation to Distributor by Dealer or by its Owner(s)
or Executive Manager in applying for this Agreement or any misrepresentation to
Distributor by Dealer or
-26-
<PAGE>
any such person as to the persons who are or will be Owner(s) or Manager(s) of
Dealer.
(b) Any attempted sale, transfer or assignment by Dealer of this
Agreement or any of the rights or privileges granted Dealer by this Agreement;
or any attempted transfer, assignment or delegation by Dealer under this
Agreement, without in either case the prior written consent of Distributor,
which consent shall not be unreasonably withheld.
(c) Any sale, transfer, relinquishment, voluntary or involuntary, by
operation of law or otherwise, of any ownership interest in Dealer without the
prior written consent of Distributor, which consents shall not be unreasonably
withheld.
(d) Any change of the Dealer's Executive Manager without the prior
written consent of Distributor, which consent shall not be unreasonably
withheld.
(e) Any attempt by Dealer to conduct either directly or indirectly,
any of the dealership operations contemplated by this Agreement at any
facilities other than the Dealership Facilities.
(f) Any sale or other transfer, by operation of law or otherwise, to
any third party or parties, or any relinquishment or discontinuance of use by
Dealer, of any of the Dealership Facilities or other principal assets that are
employed and required by Dealer in the conduct of the dealership operations
without the prior written consent of Distributor, which consent shall not be
unreasonably withheld.
-27-
<PAGE>
(g) Any dispute, disagreement, or controversy between or among the
Owner(s) or Executive Manager (or, if Dealer is a corporation, its directors or
officers) of Dealer relating to the ownership or management of Dealer or to its
dealership operations which, in the opinion of Distributor, may adversely affect
the dealership operations or the interest of Dealer or Distributor.
(h) Insolvency of Dealer; filing of a voluntary petition in
bankruptcy by Dealer; filing of a petition to have Dealer declared bankrupt,
provided that it is not vacated within one (1) month after filing; appointment
of a receiver or trustee for Dealer, provided such appointment is not vacated
within one (1) month after such appointment; or execution by Dealer of an
assignment for the benefit of creditors.
(i) Failure of Dealer to maintain the Dealership Facilities open for
business as required under the provisions of this Agreement, for seven (7)
consecutive business days.
(j) Conviction of Dealer or any Owner(s) Executive Manager or, if
Dealer is a corporation, any of its directors or officers, of any crime which,
in the opinion of Distributor, may adversely affect the reputation of interests
of Dealer or Distributor.
(k) Any submission by Dealer to Distributor of a false or fraudulent
application, or any claim or statement in support thereof, for payment related
to predelivery inspection or adjustment, or warranty repairs, special policy or
campaign adjustments performed by Dealer, or for parts compensation or for any
other discount, allowance, refund or credit whether or not
-28-
<PAGE>
Dealer offers or makes to Distributor or Distributor seeks or obtains from
Dealer restitution of any payments made to Dealer on the basis of any such false
or fraudulent applications, claims or statements.
(l) Failure to Dealer to furnish Distributor with the financial and
operating statements or reports required to be furnished under this Agreement or
refusal by Dealer to permit Distributor to make any inspection or audit of
Dealer's facilities, accounts and records as provided in this Agreement, if such
failure or refusal shall continue for a period of one (1) month after receipt by
Dealer from Distributor of a written request for such statements or reports or
permission to make any such inspection or audit.
(m) Willful failure of Dealer to comply with the provisions of any
laws, rules, regulations or orders of a government body relating to Isuzu
Products or the advertising, promoting, sale or service thereof.
When Distributor has established to its satisfaction that any such act
or event has occurred, Distributor may terminate this Agreement by giving Dealer
written notice of termination, such termination to be effective upon receipt by
Dealer of such notice.
3. TERMINATION BY DISTRIBUTOR FOR FAILURE OF
PERFORMANCE BY DEALER
If, based on the evaluations thereof made by Distributor, Distributor
determines that Dealer has failed to fulfill any one or more of the
responsibilities assumed by Dealer under Article III of this Agreement by
failing to fulfill the
-29-
<PAGE>
responsibilities and obligations of Dealer relating thereto set forth in said
Article, Distributor will endeavor to review with Dealer the nature and extent
of such failure(s) and the reasons which, in Distributor's opinion, account for
such failure(s). Thereafter, based upon such plan or plans of action as may be
proposed by Dealer to remedy such failure or failures and upon such other
factors as Distributor deems relevant in the circumstances. Distributor will
determine whether it can be reasonably expected that Dealer can and will remedy
such failure or failures and the period of time that Dealer may reasonably
require to effect such remedy or remedies.
As soon as practicable thereafter, Distributor will notify Dealer in
writing of the nature and extent of Dealer's failure or failures of performance
and of the period of time, if any, during which Dealer will be expected to
remedy such failure or failures of performance.
If, at the expiration of the period, if any, specified in such notice,
such failure or failures of performance have not been substantially remedied by
Dealer, Distributor may terminate this Agreement by giving Dealer written notice
of termination, with such termination to be effective three (3) months after
receipt by Dealer of such notice.
In the interest of providing continuing service to owners of Vehicles,
Distributor may, if it elects, process during such three (3) month period
applications for an Isuzu Dealer Sales and Service Agreement to replace Dealer;
provided, however, that such Isuzu Dealer Sales and Service Agreement shall not
-30-
<PAGE>
become effective until after the effective date of termination of this
Agreement.
During such three (3) month period, Distributor and Dealer will
commence such actions such actions as may be necessary or desirable so that the
termination obligations of Distributor and Dealer set forth in this Agreement
may be fulfilled as promptly as practicable.
4. TERMINATION BECAUSE OF DEATH OR INCAPACITY OF OWNER AND/OR
EXECUTIVE MANAGER
Since this Agreement is in the nature of a personal service agreement
and its continuation is conditioned upon Dealer being owned and managed as
provided in Section 4 hereof, Distributor (subject to the provisions of Article
VII of this Agreement) may terminate this Agreement by written notice to Dealer
in the event of the death of an Owner or the Executive Manager or in the event
Distributor determines that the Executive Manager is physically or mentally
incapacitated so as to be unable to actively exercise full managerial authority
for the operating management of Dealer. The effective date of any such
termination shall be the date set forth in such written notice, which shall be
not less than three (3) months after receipt by Dealer of such notice.
In the interest of providing continuing service to owners of Vehicles,
Distributor may, if it elects, process, during the period from the receipt by
Dealer of such notice to the effective date of such termination applications for
an Isuzu Dealer Sales and Service Agreement to replace Dealer; provided,
however, that such Isuzu Dealer Sales and Service Agreement shall
-31-
<PAGE>
not become effective until after the effective date of termination of this
Agreement.
During the period from Dealer's receipt of such notice to the
effective date of such termination, Distributor and Dealer will commence such
actions as may be necessary or desirable so that the termination obligations of
Distributor and Dealer set forth in this Agreement may be fulfilled as promptly
as practicable.
5. TERMINATION FOR FAILURE OF DEALER OR DISTRIBUTOR TO BE
LICENSED
If Distributor or Dealer requires a license for the performance of any
obligation under or in connection with this Agreement in any state or
jurisdiction where this Agreement is to be performed and if either of the
parties shall fail to secure or maintain such license or a renewal thereof or if
such license shall be suspended or revoked, irrespective of the cause or reason
therefor, either party may immediately terminate this Agreement by giving to the
other party written notice of such termination.
6. TERMINATION BY MUTUAL AGREEMENT
This Agreement may be terminated at any time by written mutual
agreement between Distributor and Dealer in the event (1) any person named as an
Owner or Executive Manager wishes to retire, (2) Distributor and Dealer desire
to effect either a discontinuance or a relocation of Dealer's Dealership
facilities or (3) Distributor and Dealer deem it desirable for any other cause
or reason.
-32-
<PAGE>
The Provisions of Section B of this Article V shall be deemed
applicable to a termination under this Section A.6. only to the extent and in
the manner set forth in such written mutual agreement of termination.
7. RIGHT TO RELY ON ANY APPLICABLE TERMINATION PROVISION
Because the notice periods may be different with respect to, and the
rights and obligations of the parties may vary depending upon, the particular
provisions under which this Agreement is terminated, the terminating party shall
have the right to select the provision of this Section A under which it elects
to terminate this Agreement without reference in its notice of termination to
any other provision of this Section A that may also be applicable in the
circumstances. The exercise of such right shall not preclude the terminating
party from at any time asserting or establishing that the termination of this
Agreement is also supportable under another provision of this Section A.
B. TRANSACTIONS AFTER TERMINATION
1. EFFECT OF TERMINATION ON ORDERS
In the event that this Agreement is terminated in accordance with any
provision of Section A of this Article V (other than Section A.6.), Distributor
may cancel all unshipped orders received from Dealer for Isuzu Products.
Termination of this Agreement shall not release Dealer, however, from
the obligation to pay any sum which may then be owing Distributor.
-33-
<PAGE>
2. EFFECT OF TRANSACTIONS AFTER TERMINATION
Neither the processing by Distributor or orders from Dealer nor the
continuation of sales of Isuzu Products or any other products to Dealer nor any
other act of Distributor after termination of this Agreement shall be construed
as a waiver of the termination, or as a renewal, extension or continuation of
this Agreement.
3. PURCHASES OF ELIGIBLE ITEMS
Distributor shall purchase, subject to and upon compliance with the
provisions hereinafter set forth in subsections 4 and 5 of this Section B, all
or any of the following Eligible Items from Dealer:
(i) Vehicles
All new, unused, unlicensed, undamaged Isuzu Vehicles of the then
current model year purchased by Dealer from Distributor then unsold which are
the unencumbered property and in the possession of Dealer or of Dealer's
financing institution at Dealer's net cost or the price last established by
Distributor for the sale of identical vehicles by Distributor to Authorized
Isuzu Dealers, whichever is lower, plus destination charges paid by Dealer
thereon, less all refunds or allowances paid thereon by Distributor, any amount
paid by Distributor for pre-delivery inspection and service thereon and any
costs required to place said vehicles in new condition.
(ii) Parts
All new, unused, undamaged, resalable Isuzu Parts (except Publications
and parts listed in Distributor's Parts List
-34-
<PAGE>
as "non-returnable"), which are still in the original and undamaged package, are
for the then current and three (3) immediately preceding vehicle model years and
are the unencumbered property of and in the possession of Dealer at the dealer
prices set forth in Distributor's then-current price list.
(iii) Accessories
All new, unused, undamaged, resalable Isuzu Accessories which are
still in the original and undamaged package, are for the then current vehicle
model year and are the unencumbered property of and in the possession of Dealer
at the dealer prices set forth in Distributor's then current price list.
(iv) Signs
Any signs owned by Dealer of a type recommended in writing by
Distributor at a price established in accordance with Distributor's pricing
formula then in effect.
(v) Special Tools
Any special tools of a type recommended by Distributor and designed
specifically for service of any Isuzu Vehicles that were offered for sale by
Distributor to Isuzu Dealers during the three (3) year period immediately
preceding termination and were purchased by Dealer from Distributor, at prices
therefor established in accordance with the pricing formula set forth in the
then current Service Policies and Procedures Manual.
4. RESPONSIBILITIES OF DEALER
Immediately following the effective date of a termination of this
Agreement, Dealer shall furnish Distributor with a list of the identification
numbers of and such other
-35-
<PAGE>
information as Distributor may require concerning eligible vehicles to be
purchased by Distributor in accordance with subsection 3 of this Section B.
Dealer will deliver all such vehicles in accordance with Distributor's
instructions. Within one (1) month following the effective date of a
termination of this Agreement, Dealer shall mail or deliver to Distributor a
list of eligible special tools and eligible signs. Within two (2) months
following effective date of a termination of this Agreement, Dealer shall mail
or deliver to Distributor a complete list of eligible parts and accessories.
Dealer shall retain possession of all such eligible items until receipt of
written shipping instructions from Distributor. Within one (1) month after
receipt of such instructions, Dealer shall tag, pack and ship such eligible
items, transportation charges prepaid, to the destinations) specified in such
instructions. Dealer shall take such action and shall execute and deliver such
instruments as may be necessary (a) to convey to Distributor good marketable
title to all eligible items to be purchased hereunder, (b) to comply with the
requirements of any applicable state law relating to bulk sales or transfers and
(c) to satisfy and discharge any liens or encumbrances on such eligible items
prior to delivery thereof to Distributor.
5. PAYMENT BY DISTRIBUTOR
Subject to its right to offset any amounts owing Distributor from
Dealer, Distributor shall pay Dealer for the eligible items purchased by it
under the provisions of this Section B as soon as practicable following delivery
thereof to
-36-
<PAGE>
Distributor; provided, however, that any payment for such eligible items may be
made by Distributor, at its option, directly to any financing institution or
other person or concern which shall have a security or ownership interest
therein.
ARTICLE VI. SUCCEEDING AND NEW AND SUPERSEDING
SALES AND SERVICE AGREEMENTS
A. SUCCEEDING AGREEMENTS
So that the dealer sales and service agreements offered to Authorized
Isuzu Dealers will reflect changes in conditions applicable to the sales and
service of Isuzu Products as well as changes in applicable laws or regulations,
or in the interpretations thereof, Distributor will review the provisions of its
current forms of Isuzu Dealer Sales and Service Agreement on a periodic basis
and will prepare new forms of Isuzu Dealer Sales and Service Agreements that
will be offered to those Authorized Isuzu Dealers who receive an offer from
Distributor of a succeeding Isuzu Dealer Sales and Service Agreement. Dealer
acknowledges, therefore, that any new form of Isuzu Dealer Sales and Service
Agreement that may be offered Dealer may reflect therein any changes and
modifications that are deemed necessary or desirable by Distributor.
B. NEW AND SUPERSEDING DEALER AGREEMENTS
In the event a new and superseding form of Isuzu Dealer Sales and
Service Agreement is offered by Distributor to Authorized Isuzu Dealers
generally at any time, Distributor may terminate this Agreement upon prior
written notice to Dealer, provided that, at the same time, Distributor offers
Dealer such
-37-
<PAGE>
new and superseding form of Isuzu Dealer Sales and Service Agreement.
C. EFFECT OF NEW OR SUPERSEDING AGREEMENT ON RESPONSIBILITIES AND
OBLIGATIONS UNDER THIS AGREEMENT
Although the execution by Distributor and Dealer of any new or
superseding Dealer Sales and Service Agreement, whether it is executed in
accordance with the provisions of Section A and B of this Article VI or for any
other reason, will, by the terms thereof, cancel and supersede this Agreement,
such succeeding or new and superseding Isuzu Dealer Sales and Service Agreement
generally contemplates continuation of the business relations contemplated by
this Agreement. Accordingly, unless otherwise expressly agreed in writing by
Distributor and Dealer, the rights and obligations of Dealer that may otherwise
become applicable upon any termination of this Agreement shall not be applicable
in the event of the execution by Distributor and Dealer of any such new or
superseding Isuzu Dealer Sales and Service Agreement. Any evaluation of the
effectiveness of Dealer's performance of any of its responsibilities under this
Agreement may be reflected and considered together with any evaluation made of
the effectiveness of Dealer's performance of similar responsibilities under any
such succeeding or new and superseding form of Isuzu Dealer Sales and Service
Agreement. Except insofar as they may be inconsistent with the provisions of
such succeeding or new and superseding form of Isuzu Dealer Sales and Service
Agreement, any outstanding rights and obligations of Distributor and Dealer that
arose under this Agreement, or under any separate agreements
-38-
<PAGE>
executed by Distributor and Dealer under this Agreement, shall be deemed
continued under such succeeding or new and superseding form of Isuzu Dealer
Sales and Service Agreement.
ARTICLE VII. ESTABLISHMENT OF SUCCESSOR DEALER
A. BECAUSE OF DEATH OF OWNER
In the event of termination of this Agreement by Distributor pursuant
to Section A.4 of Article V because of the death of an Owner, the following
provisions shall apply:
1. Subject to the other provisions of this Article, Distributor
shall offer a provisional Sales and Service Agreement the term of which shall
not exceed two (2) years to a successor dealer ("Successor Dealer") comprised of
the person nominated by such deceased Owner as his or her successor, together
with the surviving Owner(s), provided that:
(a) the nomination was submitted to Distributor on a
Successor Addendum, was consented to by the remaining Owner(s) and was approved
by Distributor prior to the death of the deceased Owner;
(b) Either (i) there has been no change in the Executive
Manager of Dealer or (ii) the provisions of Section B, below, have been complied
with; and
(c) The successor Dealer has capital and facilities
substantially in accordance with Distributor's Standards therefor at the time
the provisional Sales and Service Agreement is offered.
2. If the deceased Owner has not nominated a successor in
accordance with the provisions of Section A.1.(a),
-39-
<PAGE>
above, but all of the beneficial interest of the deceased owner has passed by
will or the laws of interstate succession directly to the deceased Owner's
spouse and/or children or to one or more surviving Owners who each held not less
than a twenty-five percent (25) beneficial ownership interest in the dealership
prior to the death of the deceased Owner (collectively "Proposed New Owners"),
subject to the other provisions of this Article, Distributor shall offer a
provisional Sales and Service Agreement the term of which shall not exceed two
(2) years to Successor Dealer ("Successor Dealer") composed of the Proposed New
Owners, together with the surviving Owners provided that:
(a) Either (i) there has been no change in the Executive
Manager of Dealer or (ii) the provisions of Section B, below, have been complied
with; and
(b) The Successor Dealer has capital and facilities
substantially in accordance with Distributor's Standards therefor at the time
the provisional Sales and Service Agreement is offered.
B. BECAUSE OF DEATH OR INCAPACITY OF EXECUTIVE MANAGER
In the event of the termination of this Agreement by Distributor
pursuant to Section A.4. of Article V because of the death, physical or mental
incapacity ("Disability Event") of the Executive Manager ("Disabled Executive
Manager"), subject to the other provisions of this Article, Distributor shall
offer a provisional Sales and Service Agreement the term of which shall not
exceed two (20 years to a Successor Dealer composed of the Owner(s), provided
that:
-40-
<PAGE>
1. Either (i) the Owner(s) had nominated, in a Successor Addendum,
which was approved by Distributor prior to such Disability Event, a person to
succeed the Disabled Executive manager or (ii) not later than two (2) months
after the occurrence of such Disability Event a new Executive Manager is
proposed to Distributor Event a new Executive Manager is proposed to Distributor
by all of the Owner(s) and such a person is approved by Distributor;
2. The new Executive Manager owns in the aggregate beneficial
interests in the Successor Dealer of not less than twenty-five percent (25%) or
is given the right to acquire and does acquire and does acquire within twelve
(12) months beneficial interests in the Successor Dealer of not less than
twenty-five percent (25%); and
3. The Successor Dealer has capital and facilities substantially in
accordance with Distributor's Standards therefor at the time the provisional
Sales and Service Agreement is offered.
C. EVALUATION OF SUCCESSOR DEALER
During the term of the provisional Sales and Service Agreement,
Distributor will evaluate the performance of the Successor Dealer and
periodically review with the Successor Dealer this evaluation. If the Successor
Dealer's performance is deemed to be satisfactory to Distributor continuously
during the last three (3) months of the provisional Sales and Service Agreement,
Distributor will give first consideration to such
-41-
<PAGE>
Successor Dealer with respect to a new Sales and Service Agreement.
D. TERMINATION OF MARKET REPRESENTATION
Notwithstanding anything stated or implied to the contrary in this
Article, Distributor shall not be obligated to offer a provisional or new Sales
and Service Agreement to any Successor Dealer if Distributor notified Dealer in
writing prior to the event causing the termination of this Agreement that
Distributor's market representation plans do not provide for continuation of
representation in Dealer's Market.
E. TERMINATION OF OFFER
If the person or persons comprising a proposed Successor Dealer to
which any offer of a provisional or new Sales and Service Agreement shall have
been made pursuant to this Article shall not accept same within thirty (30) days
after notification to them of such offer, such offer shall automatically expire.
ARTICLE VIII. GENERAL PROVISIONS
A. DEALER NOT MADE AGENT OR LEGAL REPRESENTATIVE
An Agreement does not constitute Dealer the Agent or legal
representative of Distributor or Manufacturer for any purpose whatsoever.
Dealer is not granted any express or implied right or authority to assume or to
create any obligation in behalf of or in the name of Distributor or Manufacturer
or to bind Distributor or Manufacturer in any manner or thing whatsoever.
-42-
<PAGE>
B. DEALER'S RESPONSIBILITY FOR ITS OPERATIONS, EXPENDITURES,
LIABILITIES AND OBLIGATIONS
Dealer acknowledges that, as an independently owned and operated
enterprise, its success will be determined substantially by how effectively its
management manages and conducts its operations and affairs. This Agreement,
therefore, contemplates that all investments made by or in Dealer shall be made,
and Dealer shall fulfill its responsibilities and obligations under this
Agreement, in conformity with the provisions hereof, but otherwise at the
discretion of Dealer, its management and Owner(s). Nothing herein contained
shall impose any liability on Distributor or Manufacturer in connection with the
establishment or conduct of Dealer's facilities or operations, and Dealer shall
be solely responsible for any and all expenditures, liabilities and obligations
made, incurred or assumed by Dealer in preparation for performance or in the
performance of Dealer's responsibilities and obligations under this Agreement.
C. NOTICES
All notices required or permitted to be given by either party to the
other under or in connection with this Agreement shall be in writing and
delivered personally or by mail to Dealer at its Dealership Location and to
Distributor at its national headquarters, or to such other address as the party
to receive the notice may have previously designated by written notice to the
other party. Notices shall be effective upon receipt. If mailed, such notices
shall be postage prepaid and sent by registered or certified mail, return
receipt requested.
-43-
<PAGE>
D. OFFSETS AND SET OFFS
In addition to any other specific rights of offset or set off provided
for otherwise in any documents affecting Dealer and Distributor, Distributor
shall have the right to offset or set off any sums or accounts due or to become
due from Dealer to Distributor against any sums or accounts due or to become due
from Distributor to Dealer.
E. CHANGES REQUIRED BY LAW
Should Distributor at any time determine that Federal or state laws,
or regulations adopted thereunder, or any new interpretation thereof, as any
thereof may be validly applied, require changes in any of the provisions of this
Agreement, Distributor may offer Dealer a new and superseding Isuzu Dealer Sales
and Service Agreement that has been appropriately modified to reflect changes
that are required by such new laws, regulations or interpretations, or, in lieu
thereof. Distributor may offer Dealer an amendatory agreement to this Agreement
reflecting such changes.
If Dealer shall fail to execute such new and superseding Isuzu Dealer
Sales and Service Agreement or such amendatory agreement and return it to
Distributor within thirty (30) days after it is offered Dealer, this Agreement
may be terminated by Distributor upon written notice thereof to Dealer, with
such termination to be effective upon receipt by Dealer of such notice.
-44-
<PAGE>
DEALER
SALES AND SERVICE
AGREEMENT
<PAGE>
ISUZU DEALER SALES
AND
SERVICE AGREEMENT
ADDITIONAL PROVISIONS
TABLE OF CONTENTS
ARTICLE I. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . .1
ARTICLE II. SALES TO DEALER . . . . . . . . . . . . . . . . . . . . . . . . .4
A. Dealer's Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
B. Shipment and Risk of Loss . . . . . . . . . . . . . . . . . . . . . . .5
C. Passage of Title. . . . . . . . . . . . . . . . . . . . . . . . . . . .5
D. Freight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
E. Diversions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
ARTICLE III. DEALERSHIP OPERATIONS. . . . . . . . . . . . . . . . . . . . . .6
A. Dealership Location and Facilities. . . . . . . . . . . . . . . . . . .6
1. Dealership Facilities. . . . . . . . . . . . . . . . . . . . . . .6
2. Change in Dealership Location or Facilities. . . . . . . . . . . .6
3. Hours of Business. . . . . . . . . . . . . . . . . . . . . . . . .6
4. Identification of Dealership Facilities. . . . . . . . . . . . . .7
5. Evaluation of Dealer's Performance with Respect to
Dealership Facilities. . . . . . . . . . . . . . . . . . . . . . .7
B. Vehicle Sales Operations. . . . . . . . . . . . . . . . . . . . . . . .7
1. Responsibility of Dealer . . . . . . . . . . . . . . . . . . . . .7
2. Sales Personnel. . . . . . . . . . . . . . . . . . . . . . . . . .8
3. Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
4. Modification of Isuzu Vehicles . . . . . . . . . . . . . . . . . .8
(i)
<PAGE>
5. Evaluation of Dealer's Sales Performance . . . . . . . . . . . . .9
6. Evaluation of Sales of Isuzu Trucks. . . . . . . . . . . . . . . 10
C. Used Vehicle Sales Operations . . . . . . . . . . . . . . . . . . . . 11
D. Rental and Leasing Operations . . . . . . . . . . . . . . . . . . . . 11
E. Parts and Accessories Sales Operations. . . . . . . . . . . . . . . . 12
1. Responsibility of Dealer . . . . . . . . . . . . . . . . . . . . 12
2. Sales Personnel. . . . . . . . . . . . . . . . . . . . . . . . . 12
3. Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4. Representations Concerning Parts and Accessories . . . . . . . . 12
5. Evaluation of Dealer's Parts and Accessories Sales Performance . 13
F. Service Operations. . . . . . . . . . . . . . . . . . . . . . . . . . 13
1. General Service Responsibilities of Dealer . . . . . . . . . . . 13
2. Specific Service Obligations of Dealer . . . . . . . . . . . . . 14
(a) New Vehicle Pre-Delivery Inspections and Adjustments . . . 14
(b) Complimentary Maintenance Service. . . . . . . . . . . . . 14
(c) Warranty Repairs . . . . . . . . . . . . . . . . . . . . . 15
(d) Campaign Inspections and Corrections . . . . . . . . . . . 15
(e) Disposition of Replaced Parts. . . . . . . . . . . . . . . 16
(f) Maintenance and Repair Service . . . . . . . . . . . . . . 16
(g) Payments by Distributor to Dealer. . . . . . . . . . . . . 17
3. Other Service Responsibilities of Dealer . . . . . . . . . . . . 17
(ii)
<PAGE>
(a) Compliance with Laws Regulating
Vehicles and Other Products. . . . . . . . . . . . . . . . 17
(b) Service Personnel. . . . . . . . . . . . . . . . . . . . . 18
(c) Service Equipment and Special and Essential Tools. . . . . 18
4. Evaluations of Dealer's Service Performance. . . . . . . . . . . 18
G. Advertising, Promotional and Public Relations Operations. . . . . . . 19
1. Advertising Standards. . . . . . . . . . . . . . . . . . . . . . 19
2. Dealer's Advertising Programs. . . . . . . . . . . . . . . . . . 19
3. Participation in Distributor's Advertising Programs. . . . . . . 19
4. Customer Relations . . . . . . . . . . . . . . . . . . . . . . . 20
(a) Informing Customers as to Details of Charges . . . . . . . 20
(b) Right of Retail Purchaser to Buy Vehicle Without
Purchasing Optional Equipment or Accessories . . . . . . . 20
(c) Informing Retail Purchasers as to Optional Equipment or
Accessories Installed by Dealer. . . . . . . . . . . . . . 21
H. Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
I. Accounting System . . . . . . . . . . . . . . . . . . . . . . . . . . 22
J. Records and Reports . . . . . . . . . . . . . . . . . . . . . . . . . 22
1. Financial Statements . . . . . . . . . . . . . . . . . . . . . . 22
2. Ownership and Management Records . . . . . . . . . . . . . . . . 22
3. Sales and Service Records and Reports. . . . . . . . . . . . . . 23
4. Records Concerning Applications and Claims for Payments. . . . . 23
K. Inspection of Accounts and Records. . . . . . . . . . . . . . . . . . 24
(iii)
<PAGE>
L. Trademarks and Service Marks. . . . . . . . . . . . . . . . . . . . . 24
ARTICLE IV. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . 25
A. Indemnification of Distributor. . . . . . . . . . . . . . . . . . . . 25
B. Indemnification of Dealer . . . . . . . . . . . . . . . . . . . . . . 26
C. Exception to Indemnification. . . . . . . . . . . . . . . . . . . . . 27
ARTICLE V. TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 27
A. Termination Agreement . . . . . . . . . . . . . . . . . . . . . . . . 27
1. Voluntary Termination by Dealer. . . . . . . . . . . . . . . . . 27
2. Termination Due to Acts or Events Controlled by Dealer, its
Owner(s) or Managers . . . . . . . . . . . . . . . . . . . . . . 27
3. Termination by Distributor for Failure of Performance by Dealer. 31
4. Termination Because of Death or Incapacity of Owner and/or
Executive Manager. . . . . . . . . . . . . . . . . . . . . . . . 32
5. Termination for Failure of Dealer or Distributor to be Licensed. 33
6. Termination by Mutual Agreement. . . . . . . . . . . . . . . . . 34
7. Right to Rely on Any Applicable Termination Provision. . . . . . 34
B. Transactions After Termination. . . . . . . . . . . . . . . . . . . . 35
1. Effect of Termination on Orders. . . . . . . . . . . . . . . . . 35
2. Effect of Transactions After Termination . . . . . . . . . . . . 35
3. Purchases of Eligible Items. . . . . . . . . . . . . . . . . . . 35
4. Responsibilities of Dealer . . . . . . . . . . . . . . . . . . . 37
5. Payment by Distributor . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE VI. SUCCEEDING AND NEW AND SUPERSEDING SALES AND
SERVICE AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
A. Succeeding Agreements . . . . . . . . . . . . . . . . . . . . . . . . 38
(iv)
<PAGE>
B. New and Superseding Dealer Agreements . . . . . . . . . . . . . . . . 39
C. Effect of New or Superseding Agreement on Responsibilities and
Obligations under this Agreement. . . . . . . . . . . . . . . . . . . 39
ARTICLE VII. ESTABLISHMENT OF SUCCESSOR DEALER. . . . . . . . . . . . . . . 40
A. Because of Death of Owner . . . . . . . . . . . . . . . . . . . . . . 40
B. Because of Death or Incapacity of Executive Manager . . . . . . . . . 42
C. Evaluation of Successor Dealer. . . . . . . . . . . . . . . . . . . . 43
D. Termination of Market Representation. . . . . . . . . . . . . . . . . 43
E. Termination of Offer. . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE VIII. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . 44
A. Dealer Not Made Agent or Legal Representative . . . . . . . . . . . . 44
B. Dealer's Responsibility for Its Operations, Expenditures,
Liabilities and Obligations . . . . . . . . . . . . . . . . . . . . . 44
C. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
D. Offsets and Set Offs. . . . . . . . . . . . . . . . . . . . . . . . . 45
E. Changes Required by Law . . . . . . . . . . . . . . . . . . . . . . . 45
(v)
<PAGE>
Exhibit 10.3.6
EXECUTION COPY
SUPPORT AGREEMENT
THIS SUPPORT AGREEMENT ("Agreement") is executed as of this 18th day
of June, 1996 by United Auto Group, Inc., a Delaware corporation ("UAG") in
favor of Atlantic Auto Second Funding Corporation, a Delaware corporation
("AFC") (AFC and its respective successors and assigns are referred to herein as
the "AFC Parties").
PRELIMINARY STATEMENTS
1. AFC and Atlantic Auto Finance Corporation, a Delaware corporation
("Atlantic") have executed that certain Purchase Agreement of even date herewith
(the "AAFC Purchase Agreement") pursuant to which AFC may, from time to time,
purchase Receivables from Atlantic;
2. Atlantic is a subsidiary of UAG; and
3. It is a condition precedent to the initial Purchase by AFC under
the AAFC Purchase Agreement that UAG execute this Agreement and deliver it to
AFC.
4. It is intended by the parties hereto that this Agreement not
create any recourse against Atlantic or UAG for the payment of any uncollectible
Receivable.
In consideration of the execution of the AAFC Purchase Agreement by
AFC, and for other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged by UAG, UAG agrees as follows:
ARTICLE I.
DEFINITIONS
Section 1.1. DEFINITIONS. Unless otherwise defined in this
Agreement, all defined terms used in this Agreement, including the Preliminary
statements hereof, shall have the meaning ascribed to such terms in the AAFC
Purchase Agreement.
ARTICLE II
PERFORMANCE SUPPORT OBLIGATION
Section 2.1 PERFORMANCE SUPPORT OBLIGATION. UAG hereby
unconditionally and irrevocably guarantees for the benefit of each of the AFC
Parties, the due and punctual performance, observance and payment by Atlantic
and its respective successors and assigns of all of the terms, covenants,
conditions,
<PAGE>
agreements, undertakings and obligations on the part of Atlantic (whether
individually or as Servicer or otherwise) to be paid, performed or observed
under Sections 2.3, 2.4., 2.6, 2.7, 2.9 and 3.2 and Articles V (other than
Sections 5.1(e)) and VI of the AAFC Purchase Agreement and Sections 2.2, 2.5,
2.8 (other than Section 2.8(b)), 2.10, 2.11, 5.3 (other than Section 5.3(i)) and
5.4 and Article VI of the Transfer and Administration Agreement (all such terms,
covenants, conditions, agreements, undertakings and obligations on the part of
Atlantic to be paid, performed or observed being collectively called the
"Atlantic Obligations"); PROVIDED, HOWEVER, for purposes of this Agreement, the
"Atlantic Obligations" shall not include (a) any obligation of Atlantic under
Sections 3.2 and 2.6(b) of the AAFC Purchase Agreement to repurchase any
Receivable if the request to make such repurchase occurs more than 12 months
after the breach of a representation and warranty as described in Section 3.2 or
after the failure to deliver the Custodian Confirmation as described in Section
2.6(b), as the case may be, except there shall be no such time limit applicable
with respect to any breach of the representation and warranty contained in
Section 3.2(c) and (d) of the AAFC Purchase Agreement, (b) Atlantic's
obligations to repurchase any Receivable under Section 2.7(ii) of the AAFC
Purchase Agreement, (c) any obligation of Atlantic under Section 6.1(f) of the
AAFC Purchase Agreement to provide indemnification for its failure to perform in
accordance with any provision of the AAFC Purchase Agreement or any agreement
contemplated by the AAFC Purchase Agreement other than the provisions contained
in those Sections of the AAFC Purchase Agreement and the Transfer and
Administration Agreement enumerated above in this sentence and (d) any
obligation of Atlantic under Section 6.2 or 6.3 of the AAFC Purchase Agreement
to provide indemnification to any entity other than the Buyer, Morgan Guaranty
Trust Company of New York, any Affiliate of Morgan Guaranty Trust Company of New
York and the officers, directors and agents of any of the foregoing. In the
event that Atlantic shall fail in any manner whatsoever to perform, observe, or
pay any of the Atlantic Obligations when the same shall be required to be
performed, observed or paid, then UAG will itself duly and punctually perform,
observe and pay, or cause to be duly and punctually performed, observed or paid
the Atlantic Obligations, and it shall not be a condition to the accrual of the
obligation of UAG hereunder to perform, observe or pay any Atlantic Obligation
(or to cause the same to be performed, observed or paid) that any AFC Party
shall have first made any request of or demand upon or given any notice to UAG
or to Atlantic or its respective successors and assigns or have initiated any
action or proceeding against UAG or Atlantic or any of their respective
successors and assigns in respect thereof. Any AFC Party may proceed to enforce
the obligations of UAG under this Section 2.1 without first pursuing or
exhausting any right or remedy which any AFC Party may have against Atlantic,
any other Person, the Purchased Receivables or any other property. Each AFC
Party hereby acknowledges that the Atlantic Obligations do not (i) include any
obligations of Atlantic to repurchase the Receivables acquired by AFC under the
AAFC Purchase Agreement,
-2-
<PAGE>
except as described in Sections 2.6, 2.7 or 3.2 of the AAFC Purchase Agreement
or (ii) create recourse against Atlantic or UAG for the payment of any
uncollectible Receivable.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
Section 3.1 REPRESENTATIONS AND WARRANTIES. UAG hereby represents
and warrants as follows:
(i) UAG is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and is duly qualified to
do business, and in good standing, in every jurisdiction where the nature of its
business requires it to be so qualified.
(ii) The execution, delivery and performance by UAG of this
Agreement and the other instruments and documents to be delivered hereunder, and
the transactions contemplated hereby, are within UAG's corporate powers, have
been duly authorized by all necessary corporate action, do not contravene (A)
UAG's character or by-laws, (B) any law, rule or regulation applicable to UAG,
(C) any contractual restriction contained in any indenture, loan or credit
agreement, lease, mortgage, security agreement, bond, note or other agreement or
instrument binding on UAG or its property or (D) any order, writ, judgment,
award, injunction or decree binding on UAG or its property, and do not result in
or require the creation of any Lien upon or with respect to any of its
properties.
(iii) This Agreement has been duly executed and delivered on behalf
of UAG and is the legal, valid and binding agreement of UAG enforceable against
UAG in accordance with its terms, subject as to enforcement to bankruptcy,
insolvency, reorganization and other similar laws of general applicability
relating to or affecting creditor's rights and general principles of equity.
(iv) UAG is the registered and beneficial owner of each class of the
issued and outstanding capital stock of Atlantic.
ARTICLE IV.
COVENANTS
Section 4.1. REPORTING COVENANTS. UAG covenants and agrees that,
until this Agreement is terminated pursuant to Section 5.07, UAG will deliver to
AFC:
(a) as soon as available and in any event within 45 days after the
end of each of the first three quarters of each fiscal year of UAG, a
consolidated balance sheet of UAG and its
-3-
<PAGE>
consolidated Subsidiaries as at the end of such quarter and the related
consolidated statements of income and retained earnings of UAG and its
consolidated Subsidiaries for such quarter and the then elapsed portion of the
fiscal year, certified by the chief financial officer or the chief accounting
officer of UAG; and
(b) as soon as available and in any event within 90 days after the
end of each fiscal year of UAG, a copy of the consolidated balance sheets of UAG
and its consolidated Subsidiaries as of the end of such year and the related
consolidated statements of income and retained earnings of UAG and its
consolidated Subsidiaries for such year each reported on by nationally
recognized public accountants.
Section 4.2. STOCK OWNERSHIP AND MERGER RESTRICTIONS. UAG covenants
and agrees that, until this Agreement is terminated pursuant to Section 5.07,
UAG will continue to be the direct or indirect beneficial owner of each class of
the issued and outstanding capital stock of Atlantic (except for such capital
stock owned by management of Atlantic). UAG shall not merge or consolidate with
any Person unless (i) UAG shall be the surviving entity of any such merger or
consolidation or (ii) such surviving entity expressly assumes the obligations of
UAG hereunder.
Section 4.3. DISTRIBUTIONS. UAG covenants and agrees that, until
this Agreement is terminated pursuant to Section 5.07, UAG will not pay any
dividend or make any distribution, directly or indirectly, on account of any
shares of any class of its capital stock now or hereafter outstanding (any of
the foregoing being a "Restricted Payment"), except UAG may make Restricted
Payments on a pro rata basis to all of its shareholders which, in the aggregate,
do not exceed fifty percent (50%) of UAG's cumulative net income during the
period commencing with the fiscal year beginning on January 1, 1996 through the
date of the most recent consolidated statements of income and retained earnings
delivered pursuant to Section 4.1(b) above.
ARTICLE V.
MISCELLANEOUS
Section 5.1. VALIDITY OF OBLIGATIONS. UAG agrees that its
obligations under this Agreement shall be unconditional, irrespective of (i) the
validity, enforceability, avoidance, subordination, discharge, or disaffirmance
by any Person (including a trustee in bankruptcy) of the Atlantic Obligations,
any Receivable or the AAFC Purchase Agreement, (ii) the absence of any attempt
to collect any Receivables from the Obligor related thereto or any guarantor, or
to collect the Atlantic Obligations from Atlantic or any other Person, (iii) the
waiver, consent, extension, forbearance or granting of any indulgence by any of
the AFC Parties with respect to any provision of any instrument evidencing the
Atlantic Obligations or any Receivable, (iv) any change of the time, manner or
place of performance of,
-4-
<PAGE>
or in any other term of any of the Atlantic Obligations or any Receivable,
including without limitation, any amendment to or modification of the AAFC
Purchase Agreement, (v) any law, regulation or order of any jurisdiction
affecting any term of any of the Atlantic Obligations, any Receivable, or rights
of any of the AFC Parties with respect thereto, (vi) the failure by any of the
AFC Parties to take any steps to perfect and maintain perfected its respective
interest in any Receivable or other property acquired by any of the AFC Parties
from Atlantic or in any security or collateral related to the Atlantic
Obligations, (vii) any exchange or release of any Receivable or other property
acquired by the AFC Parties from Atlantic, (viii) any failure to obtain any
authorization or approval from or other action by or to notify or file with, any
governmental authority or regulatory body required in connection with the
performance of the obligations hereunder by UAG or (ix) any impossibility or
impracticability of performance, illegality, force majeure, any act of
government, or other circumstances which might constitute a default available
to, or a discharge of Atlantic or UAG, or any other circumstance, event or
happening whatsoever whether foreseen or unforeseen and whether similar to or
dissimilar to anything referred to above. UAG further agrees that its
obligations under this Agreement shall not be limited by any valuation,
estimation or disallowance made in connection with any proceedings involving
Atlantic filed under the Bankruptcy Code, whether pursuant to Section 502 of the
Bankruptcy Code or any other Section thereof. UAG further agrees that none of
the AFC Parties shall be under any obligation to marshall any assets in favor of
or against or in payment of any or all of the Atlantic Obligations. UAG further
agrees that, to the extent that Atlantic makes a payment or payments to any of
the AFC Parties, which payment or payments (or any part thereof) are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to Atlantic, its estate, trustee or receiver or any
other party, including, without limitation, UAG, under any bankruptcy law, state
or federal law, common law or equitable cause, then to the extent of such
payment or repayment, the Atlantic Obligations or part thereof which had been
paid, reduced or satisfied by such amount shall be reinstated and continued in
full force and effect as of the date such initial payment, reduction or
satisfaction occurred. UAG waives all set-offs and counterclaims and all
presentments, demands for performance, notices of nonperformance, protests,
notices of protest, notices of dishonor and notices of acceptance of this
Agreement. UAG's obligations under this Agreement shall not be limited if the
AFC Parties are precluded for any reason (including without limitation, the
application of the automatic stay under Section 362 of the Bankruptcy Code) from
enforcing or exercising any right or remedy with respect to the Atlantic
Obligations, and UAG shall pay to the AFC Parties, upon demand, the amount of
the Atlantic Obligations that would otherwise have been due and payable had such
rights and remedies been permitted to be exercised.
-5-
<PAGE>
Section 5.2. IRREVOCABILITY. UAG agrees that its obligations under
this Agreement shall be irrevocable. In the event that under applicable law
(notwithstanding UAG's agreement regarding the irrevocable nature of its
obligations hereunder), UAG shall have the right to revoke this Agreement, this
Agreement shall continue in full force and effect until a written revocation
hereof specifically referring hereto, signed by UAG is actually received by AFC
at AFC's address set forth on the signature page hereof. Any such revocation
shall not affect the right of any of the AFC Parties to enforce their respective
rights under this Agreement with respect to (i) any Atlantic Obligation
(including any Atlantic Obligation that is, contingent or unmatured) which arose
on or prior to the date the aforementioned revocation was received by AFC or
(ii) any Receivable which was a Receivable on the date the aforementioned
revocation was received by AFC. If any of the AFC Parties acquire Receivables
or take other action in reliance on this Agreement after any such revocation by
UAG but prior to the receipt by AFC of said written notice, the rights of the
AFC Parties with respect thereto shall be the same as if such revocation had not
occurred.
Section 5.3. WAIVER. UAG hereby waives promptness, diligence,
notice of acceptance, notice of default by Atlantic, notice of the incurrence of
any Atlantic Obligation and any other notice with respect to any of the Atlantic
Obligations and this Agreement, the AAFC Purchase Agreement, and any other
document related thereto and any requirement that the AFC Parties exhaust any
right or take any action against Atlantic, any other Person or any property.
UAG warrants to the AFC Parties that it has adequate means to obtain from
Atlantic on a continuing basis, all information concerning the financial
condition of Atlantic and the collectibility of the Receivables, and that it is
not relying on the AFC Parties to provide such information either now or in the
future.
Section 5.4. SUBROGATION. UAG, will not exercise or assert any
rights which it may acquire by way of subrogation under this Agreement unless
and until all of the Atlantic Obligations shall have been paid and performed in
full and the Termination Date shall have occurred under the AAFC Purchase
Agreement. If any payment shall be made to UAG on account of any subrogation
rights at any time prior to the occurrence of the events described in the
preceding sentence, each and every amount so paid will be held in trust for the
benefit of the AFC Parties and forthwith be paid to AFC to be credited and
applied to the Atlantic Obligations to the extent then unsatisfied, in
accordance with the terms of the AAFC Purchase Agreement or any document
delivered in connection therewith.
Section 5.5. COSTS AND EXPENSES. UAG shall pay all reasonable costs
and expenses including, without limitation, all court costs and reasonable
attorneys' fees and expenses paid or incurred by any of the AFC Parties in
connection with (a) the
-6-
<PAGE>
collection of all or any part of the obligations of UAG hereunder, (b) the
enforcement of any term or provision of this Agreement or (c) the prosecution or
defense of any action by or against any of the AFC Parties in connection with
this Agreement or the AAFC Purchase Agreement, whether involving Atlantic, UAG
or any other Person including a trustee in bankruptcy.
Section 5.6. BINDING EFFECT; ASSIGNABILITY. This Agreement shall be
binding upon UAG and upon the successors and assigns of UAG and shall inure to
the benefit of the successors and assigns of the AFC parties; all references
herein to UAG and to Atlantic shall be deemed to include their respective
successors and assigns. The successors and assigns of Atlantic shall include,
without limitation, a receiver, trustee or debtor-in-possession of or for
Atlantic. UAG may not assign any of its rights and obligations hereunder or any
interest herein without the prior written consent of AFC, such consent not to be
unreasonably withheld. AFC may assign at any time its rights and obligations
hereunder and interests herein to any other Person without the consent of UAG or
Atlantic. UAG agrees that any assignee of AFC (to the extent of its interest so
assigned) shall have the right to enforce this Agreement and to exercise
directly all of AFC's rights and remedies under this Agreement, and UAG agrees
to cooperate fully with any such assignee in the exercise of such rights and
remedies. All references to the singular shall be deemed to include the plural
where the context so requires.
Section 5.7. TERMINATION. This Agreement shall terminate upon the
earlier to occur of (a) the latest to occur of (i) the date on which all the
Atlantic Obligations are paid and/or performed in full, (ii) the Termination
Date under the AAFC Purchase Agreement, and (iii) the date on which UAG has
satisfied in full its obligations hereunder and (b) the termination of that
certain Support Agreement dated as of June 28, 1995 by and among UAG and
Atlantic Auto Funding Corporation.
Section 5.8. INTEGRATION; CONDITIONS. This Agreement contains a
final and complete integration of all prior expressions of the parties hereto
with respect to the subject matter hereof, superseding all prior oral or written
understandings. No course of dealing, course of performance or trade usage and
no parol evidence shall be used to supplement or modify any term hereof. This
Agreement is fully effective as of the date set forth above.
Section 5.9. GOVERNING LAW; WAIVER OF JURY TRIAL. THIS AGREEMENT
SHALL BE INTERPRETED AND THE RIGHTS AND REMEDIES OF THE PARTIES HERETO
DETERMINED IN ACCORDANCE WITH THE INTERNAL LAWS AND DECISIONS (AS OPPOSED TO
CONFLICTS OF LAW PROVISIONS) OF THE STATE OF NEW YORK. UAG HEREBY AGREES TO THE
JURISDICTION OF ANY FEDERAL COURT LOCATED WITHIN THE STATE OF NEW YORK, AND
WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL
SUCH SERVICE OF PROCESS BE MADE BY REGISTERED
-7-
<PAGE>
MAIL DIRECTED TO UAG AT THE ADDRESS SET FORTH ON THE SIGNATURE PAGE HEREOF AND
SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED FIVE (5) DAYS AFTER THE SAME
SHALL HAVE BEEN DEPOSITED IN THE U.S. MAILS, POSTAGE PREPAID. UAG HEREBY WAIVES
ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER ARISING
IN CONTRACT, TORT, OR OTHERWISE BETWEEN UAG AND ANY AFC PARTY ARISING OUT OF,
CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP BETWEEN THEM IN
CONNECTION WITH THIS AGREEMENT. INSTEAD, ANY DISPUTE RESOLVED IN COURT WILL BE
RESOLVED IN A BENCH TRIAL WITHOUT A JURY. UAG HEREBY WAIVES ANY OBJECTION BASED
ON FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED
HEREUNDER AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS
DEEMED APPROPRIATE BY THE COURT. NOTHING IN THIS SECTION 5.9 SHALL AFFECT THE
RIGHT OF ANY AFC PARTY TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW OR AFFECT THE RIGHT OF ANY AFC PARTY TO BRING ANY ACTION OR PROCEEDING
AGAINST UAG OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION.
Section 5.10. SEVERABILITY. Wherever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any Provision of this Agreement shall be prohibited
by or invalid under such law, such provision shall be ineffective to the extent
of such prohibition or invalidity without invalidating the remainder of such
provision or the remaining provisions of the Agreement.
Section 5.11. EXECUTION IN COUNTERPARTS. This Agreement may be
executed in counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
which when taken together shall constitute one and the same agreement.
-8-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by UAG as of
the day and year first above written.
UNITED AUTO GROUP, INC.
By: /s/ Carl Spielvogel
-------------------------------------
Name: Carl Spielvogel
Title: Chairman and CEO
375 Park Avenue, 22nd Floor
New York, New York 10152
Acknowledged and accepted
this 14th day of June, 1996.
ATLANTIC AUTO SECOND FUNDING CORPORATION
By: /s/ Suzanne A. O'Connor
--------------------------------
Name: Suzanne A. O'Connor
Title: Vice President
800 Perinton Hills Office Park
Fairport, New York 14450
Telecopy No.: 716-421-1954
-9-
<PAGE>
EX 10.4.19
The Benton
State Bank
- ----------
146 West South Street
Benton, Arkansas 72015
"LENDER"
-------------------------------------
BORROWER
LANDERS OLDSMOBILE-GMC, INC.
COMMERCIAL
ADDRESS LOAN
17821 I-30 AGREEMENT
BENTON, AR 72015
TELEPHONE NO. IDENTIFICATION NO.
778-8262 71-0678428
---------------------------------------------------------------------------
MORTGAGOR OWNER OF COLLATERAL
ADDRESS ADDRESS
TELEPHONE NO. IDENTIFICATION NO. TELEPHONE NO. IDENTIFICATION NO.
---------------------------------------------------------------------------
AGREEMENTS
1. FINANCING. Subject to the following conditions, Lender shall provide
Borrower with the advances, loans and/or other financial accommodations
identified in Schedule A, as amended from time to time, which is incorporated
into this Agreement by this reference, as well as any other advances, loans
and/or financial accommodations that Borrower and Lender may agree to in
writing.
Such advances, loans and/or other financial accommodations shall be evidenced
and, if applicable, guarantied by guarantors pursuant to and/or secured by
collateral set forth in loan documents that are acceptable to Lender
including, but not limited to, the documents identified in Schedule B, as
amended from time to time (collectively "Loan Documents"), which is
incorporated into this Agreement by this reference.
Borrower shall pay to Lender the principal, interest, fees, expenses and any
other amounts pertaining to the advances, loans and/or other financial
accommodations as described in this Agreement and the Loan Documents.
2. GUARANTIES. [X] If checked, Borrower shall cause the Guarantor(s)
listed on the Guaranty Schedule attached to this Agreement (collectively
"Guarantor") to deliver to Lender executed Guaranties on Lender's guaranty
forms, and in such amounts as Lender shall require, that jointly and
severally, absolutely and unconditionally, guaranty the payment and
performance of all of the Borrower's present and future, joint and/or
several, direct and indirect, absolute and contingent, express and implied,
indebtedness, liabilities, obligations, and covenants to Lender as described
in this Agreement and the Loan Documents. In addition, the Guarantor must
agree to provide Lender with appropriate financial information including tax
returns, a balance sheet and income information satisfactory to the Lender
from time to time as the Lender requires but not less than annually.
3. COLLATERAL. Borrower shall grant and/or cause:
Owner of Collateral identified above whose tax identification and/or social
security number(s) is ______________________ and who is a resident of the
State(s) of _________________________________ or a ________________________
duly organized, validly existing, and in good standing under the laws of the
State(s) of ________________________________________ ; and/or Mortgagor
identified above whose tax identification and/or social security number(s)
is _________________________________ and who is a resident of the State(s) of
____________________________________ or a ___________________________________ ,
duly organized, validly existing, and in good standing under the laws of
the State(s) of _________________________________; (COLLECTIVELY OWNER OF
COLLATERAL AND MORTGAGOR IDENTIFIED ABOVE WILL BE REFERRED TO AS "DEBTOR") to
grant Lender a lien, security interest or other encumbrance upon the
collateral (collectively "Collateral") belonging to the Borrower and/or any
Debtors, as described in the Loan Documents, to secure the payment and
performance of all of the Borrower's present and future, joint and/or
several, direct and indirect, absolute and contingent, express and implied,
indebtedness, liabilities, obligations and covenants to Lender as described
in this Agreement and the Loan Documents.
4. SUPERIOR AND CONTINUING LIENS AND GUARANTIES.
a. Superiority of Lender's Lien. The liens, security interests and
other encumbrances granted to Lender shall be superior to any other
liens, security interests, encumbrances and claims with respect to
the Collateral (unless specifically noted otherwise in the Loan
Documents).
b. Guaranties, Liens and Other Encumbrances. The guaranties and liens,
security interests, and other encumbrances described in the Loan
Documents shall continue and not be released until all of the
indebtedness, liabilities, obligations and covenants guarantied or
secured thereby shall have been paid and/or performed in
<PAGE>
full and Lender shall not be obligated to provide any additional
advances, loans or other financial accommodations to or for the
benefit of Borrower (or, if applicable, any of the Debtors) of any
kind.
5. CONDITIONS PRECEDENT. Lender's obligation to provide Borrower with any
advances, loans and/or other financial accommodations shall be subject to the
following conditions precedent. All of the information, Uniform Commercial
Code financing statement lien searches and any other lien searches, insurance
policies, environmental risk assessments, opinion letter(s), appraisals,
credit information, and other materials and documents provided or to be
provided to Lender and all of the actions taken or to be taken for the
attachment, creation, perfection, recording, maintenance, subordination,
release, termination, and giving of notice with respect to the liens,
security interests, and other encumbrances in the Collateral shall be
provided or taken at Borrower's expense:
a. Evidence of Good Standing. Lender shall be provided with such
written evidence of the Borrower and any Guarantors' and Debtors'
legal names and good standing, authorization to conduct business, and
authorization to execute and perform their respective obligations
under this Agreement and the Loan Documents as required by Lender;
b. Execution and Delivery. Borrower shall execute and deliver this
Agreement and the necessary Loan Documents and cause any Guarantors
and Debtors to execute and deliver to Lender the necessary Loan
Documents, and all other documents relating thereto, each in form and
substance acceptable to Lender;
c. Authorization. Lender shall be provided with such written evidence
as required by Lender that the representatives of the Borrower and
any Guarantors and Debtors are authorized to execute this Agreement
and the Loan Documents on behalf of those parties and bind the
Borrower and any Guarantors and Debtors to the terms and conditions
set forth therein;
d. Liens. Lender's liens, security interests, and other encumbrances
upon the Collateral shall be attached, created, filed, perfected and
recorded in accordance with applicable law and notice of such liens,
security interests and encumbrances shall be provided to such parties
as required by Lender;
e. Lien Searches. Lender shall be provided with UCC searches, title
insurance policies, or other written evidence as required by Lender
with respect to the validity, enforceability and priority of its
liens, security interests and other encumbrances upon the Collateral;
f. Environmental Assessments. Lender shall be provided with
environmental risk assessments and indemnifications as required by
Lender with respect to the existence of and indemnification for any
past, present or future environmental hazard pertaining to the
Borrower or any Guarantors' and Debtors' business and assets
(including, but not limited to, the Collateral);
g. Legal Opinions. A signed opinion of counsel for the Borrower
addressed to the Lender (i) to the effect that no litigation is
pending or threatened against the Borrower, except such as has been
disclosed to the Lender or is covered by insurance, (ii) to the
effect that the Loan Documents have been duly and validly authorized,
executed and delivered by the Borrower and are enforceable, except as
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors'
rights generally and except to the extent that general equitable
principles may limit the right to obtain specific performance, (iii)
the representations and warranties of the Borrower in this Agreement
are true, (iv) the loan transactions entered into pursuant to this
Agreement are not usurious, (v) no registration with, consent of,
approval of, or other action by any Federal, State, or other
governmental authority or regulatory body to the execution and
delivery of the Loan Documents is required by law, or if so required,
such registration has been made, and consent or approval given or
such other appropriate action taken, and (vi) addressing such other
matters as the Lender may reasonably request;
h. Financial Information. Borrower shall provide and cause any
Guarantors and Debtors to provide Lender with such financial
information and business records as required by Lender. Such
financial information and business records shall be acceptable to
Lender and shall not cause Lender to believe in good faith that the
Borrower or any Guarantors or Debtors shall not be able to perform
its respective obligations under this Agreement or the Loan Documents;
i. Absence of Breach. All of the respective representations and
warranties of the Borrower or any Guarantor or Debtor under this
Agreement or the Loan Documents shall be true and correct on and as
of the date of the execution of those documents or the date of any
advances and/or extensions of the loans and/or other financial
accommodations described therein;
j. Absence of Events of Default. No event of default shall exist under
this Agreement or the Loan Documents nor shall any circumstances
exist that would constitute such an event of default except for
giving of notice or the passage of time or both on or before the date
of execution of those documents or the date of any advances and/or
extensions of the loans and/or other financial accommodations
described therein;
k. Borrower shall have paid or cause to have been paid to Lender all
fees and expenses due and payable under this Agreement or any other
Loan Document on or before the date of execution of those documents
or the date of any advances and/or extensions of the loans and/or
other financial accommodations described therein; and
l. Other:
<PAGE>
6. REPRESENTATIONS, WARRANTIES AND COVENANTS. Borrower represents and
warrants to and covenants with Lender that:
a. Tax Identification. The tax identification and/or social security
numbers of Borrower are as follows: TAX I.D. #71-0678428
b. Borrower's Residency. Borrower is a resident of the State(s) of N/A
or a CORPORATION duly organized, validly existing and
in good standing under the laws of the State(s) of ARKANSAS and
licensed to conduct business in all of the jurisdictions in which
its business is conducted;
c. Guarantor's Tax Identification and Residency. Guarantors are
residents of the State(s) or duly organized, validly existing and in
good standing under the laws of the State(s) shown in the Guaranty
Schedule attached to this Agreement and licensed to conduct business
in all of the jurisdictions in which their business is conducted.
Guarantors' tax identification and/or social security numbers are
those shown in the Guaranty Schedule attached to this Agreement;
d. Debtor's Tax Identification and Residency. Debtors are residents of
the State(s) or duly organized, validly existing and in good standing
under the laws of the State(s) shown in Section 3 of this Agreement
and licensed to conduct business in all of the jurisdictions in which
their business is conducted. Guarantors' tax identification and/or
social security numbers are those shown in Section 3 of this
Agreement;
e. Ownership of Collateral. Borrower and any Debtors are and shall
remain sole owners of their respective Collateral free of all tax and
other liens, security interests, encumbrances and claims of any kind
except for those specifically described in this Agreement and the
Loan Documents without Lender waiving the event of default as a
result thereof, Borrower shall take and cause any Debtors to take any
action and execute any document needed to discharge any unauthorized
liens, security interests, encumbrances and claims;
f. Location of Offices. The sole executive offices, places of business,
offices where their business records are located, residences and
domiciles of the Borrower and any Guarantors and Debtors are
specifically described in this Agreement and the Loan Documents.
Borrower shall immediately advise and cause any Guarantors and
Debtors to immediately advise Lender in writing of any change in or
addition to the foregoing addresses;
g. Restructuring. Neither Borrower nor any Guarantor or Debtor shall
become a party to any restructuring of its form of business or
participate in any consolidation, merger, liquidation or dissolution
without obtaining Lender's prior written consent thereto;
h. Beneficiaries. Each of the Guarantors and Debtors, if any, by virtue
of their interest in or relation to Borrower, shall receive a
substantial benefit from Lender's advances, loans and/or other
financial accommodations to Borrower and such benefit shall
constitute adequate consideration for the obligations assumed by any
Guarantor and Debtors under this Agreement and the Loan Documents;
i. Change of Name. Borrower shall provide and cause any Guarantors and
Debtors to provide Lender with thirty (30) or more days' prior
written notice of the nature of any intended change in their
respective names, or the use of any tradename, and when such change
or use shall become effective;
j. Location of Collateral. All of Borrower's and any Debtors' property
constituting a portion of the Collateral is and shall be located at
Borrower's and such Debtors' respective executive offices, places of
business, residences and domiciles specifically described in this
Agreement and the Loan Documents or at such locations to which
Borrower and such Debtors have obtained Lender's prior written
consent;
k. Use of Collateral. Borrower shall use and cause any Debtors to use
the Collateral solely in the ordinary course of their respective
businesses, for the usual purposes intended by the manufacturer (if
applicable), with due care, and in compliance with the laws,
ordinances, regulations, requirements and rules of all federal,
state, county and municipal authorities and insurance policies.
Borrower shall not make or cause any Debtors to refrain from making
any alterations, additions or improvements to the Collateral without
the prior written consent of Lender. Without limiting the foregoing,
all alterations, additions and improvements made to the Collateral
shall be subject to the security interest belonging to Lender, shall
not be removed without the prior written consent of Lender, and shall
be made at Borrower's and the Debtors' sole expense. Borrower shall
take and cause any Debtors to take all actions and make any repairs
or replacements needed to maintain the Collateral in good condition
and working order;
l. Insurance. Borrower shall maintain and cause any Debtors to maintain
insurance on the Collateral in an amount and form and from such
companies as are acceptable to Lender and/or specifically provided in
the Loan Documents. The insurance policies shall require the
insurance companies to provide Lender with at least 10 days'
written notice before such policies are altered or cancelled in
any manner. The insurance policies shall name Lender as a loss payee
and provide that no act or omission of Borrower, any Debtor, or any
other person shall affect the right of Lender to be paid the
insurance proceeds pertaining to the loss or damage of the Collateral;
m. Possession of Chattel Paper. Borrower shall provide and cause any
Debtors to provide Lender with possession of all chattel paper and
instruments constituting a portion of the Collateral and mark such
chattel paper and instruments to reflect Lender's security interest
therein;
<PAGE>
n. Enforceability of Certain Collateral. All of Borrower's and any
Debtors' accounts, contract rights, chattel paper, documents, general
intangibles, instruments, and other rights and agreements
constituting a portion of the Collateral are and shall be valid,
genuine and legally enforceable obligations and rights belonging to
Borrower and such Debtors against one or more third parties and are
not and shall not be subject to any claim, defense, setoff or
counterclaim of any kind;
o. Substitution of Certain Collateral. Borrower shall not amend,
modify, replace or substitute and shall cause any Debtors not to
amend, modify, replace or substitute any account, contract right,
chattel paper, document, general intangible, instrument, or other
right or agreement constituting the Collateral without the prior
written consent of Lender;
p. Collection Practices. Borrower shall continue to apply and cause any
Debtors to continue to apply their established credit policies with
respect to all future credit transactions. Borrower shall use and
cause any Debtors to use their best efforts to collect from their
account debtors and other third parties, as and when due, any and all
amounts owing under or with respect to each account, contract right,
document, general intangible, instrument or other agreement
(including, without limitation, engaging legal assistance to collect
delinquent obligations from their account debtors and other third
parties) and apply the collected amounts against the outstanding
balances on those obligations and agreements;
q. Records. Borrower shall maintain and cause any Guarantors and
Debtors to maintain complete and accurate books and records of their
respective financial conditions, businesses and properties and with
respect to the Collateral and such records shall be maintained in
accordance with generally accepted accounting principles ("GAAP")
consistently applied, and reflecting all financial transactions;
r. Financial Information. Borrower will, and shall cause any Guarantors
and Debtors to, at all times keep proper books of record and account
in which full, true and correct entries shall be made in accordance
with generally accepted accounting principles and will deliver to
Lender, within ninety (90) days after the end of each fiscal year of
Borrower, Guarantor, and Debtor a copy of the annual financial
statements of Borrower, Guarantor, and Debtor relating to such fiscal
year, such statements to include (i) the balance sheet of Borrower,
Guarantor, and Debtor as at the end of such fiscal year and (ii) the
related income statement, statement of retained earnings and
statement of changes in the financial position of Borrower,
Guarantor, and Debtor for such fiscal year, prepared by such
certified public accountants as may be reasonably satisfactory to
Lender. Borrower also agrees to deliver, and shall cause any
Guarantors and Debtors to deliver, to Lender within fifteen (15) days
after filing same, a copy of Borrower's, Guarantors', and Debtors'
income tax returns and also, from time to time, such other financial
information with respect to Borrower, Guarantor and Debtor as Lender
may request;
s. Inspection of Records. Borrower shall permit and cause any
Guarantors and Debtors to permit officers, agents and employees of
Lender to examine their business and financial records and properties
and the Collateral and to discuss any issues pertaining to their
business operations, financial conditions or the Collateral with
their officers, employees, accountants and other representatives and
agents;
t. Information. All information that has been provided to Lender by or
on behalf of Borrower or any Guarantor or Debtor is true and correct
and does not and shall not omit any material fact necessary to make
such information not misleading. All information that will be
provided to Lender by or on behalf of Borrower or any Guarantor or
Debtor shall be true and correct and shall not omit any material fact
necessary to make such information not misleading. Neither Borrower
nor any Guarantor or Debtor is aware of any fact which has or might
have a material and adverse effect on their business operations,
financial conditions, or assets or the Collateral or have failed or
shall fail to disclose any material facts to Lender that might be
relevant to Lender's decision to enter into or continue to advance
funds, make loans or provide financial accommodations under this
Agreement or any of the Loan Documents;
u. Obligations. This Agreement and each Loan Document constitutes the
Borrower's legal and binding obligations to Lender that are fully
enforceable in accordance with their respective terms and conditions;
v. Conflict of Laws. Borrower's and any Guarantors' and Debtors'
execution of this Agreement and the Loan Documents and performance of
their respective obligations thereunder does not and shall not
conflict with the provisions of any statute, regulation, ordinance,
rule of law, contract or other agreement which may now or hereafter
be binding on those entities;
w. Repayment. Borrower and any Guarantors and Debtors shall duly and
punctually repay the advances, loans and/or other financial
accommodations evidenced by this Agreement and the Loan Documents in
accordance with the terms of the Loan Documents and perform all of
their other respective obligations hereunder or thereunder;
x. Default in Other Obligations. Neither Borrower nor any Guarantor or
Debtor are or shall be in default under any material loan agreement,
indenture, mortgage, security agreement or other agreement or
obligation to which they are a party or by which any of their
respective properties may be bound;
y. Litigation and Claims. No action, suit, or proceeding governmental
investigation or arbitration is or shall be pending or, to the
knowledge of Borrower, threatened against Borrower or any Guarantor
or Debtor which might result in any material and adverse change in
their respective business operations or financial conditions or
materially affect the Collateral and there are and shall be no
outstanding judgments against Borrower or any Guarantor or Debtor;
<PAGE>
z. Transfer/Sale of Collateral. Borrower shall not transfer, sell,
lease, assign, convey or otherwise dispose of any of the Collateral
or the properties or assets used in connection with or incidental to
the operation of its business without the prior written consent of
Lender except for inventory sold in the ordinary course of its
business. No Guarantor, if any, shall transfer, sell, lease, assign,
convey or otherwise dispose of any of its properties or assets that
would materially and adversely affect its financial condition or
ability to satisfy it obligations under this Agreement and the Loan
Documents without the prior written consent of Lender. No Debtor, if
any, shall transfer, sell, lease, assign, convey or otherwise dispose
of any of the Collateral without the prior written consent of Lender
except for inventory sold in the ordinary course of its business;
aa. Guaranties. Neither Borrower nor any Guarantor shall assume,
guaranty or otherwise become liable for the obligations of any person
or entity except for such Guarantor's guaranty of Borrower's
obligations to Lender or by virtue of Borrower's or such Guarantor's
endorsement of commercial paper or similar instruments in the
ordinary course of business or except as follows:
ab. Insider Loans. Borrower shall not make a loan to any of its
shareholders, directors, officers or employees or any other person
outside the ordinary course of Borrower's business without the prior
written consent of Lender;
ac. Solvency. Borrower and any Guarantors and Debtors are Solvent and
shall continue to be Solvent after the execution of this Agreement
and the Loan Documents and the creation of Lender's security interest
in the Collateral. "Solvent" shall mean, with respect to the
Borrower and any Guarantor and Debtor, at the time of determination,
that the fair market value of its assets is in excess of the total
amounts of its liabilities including contingent liabilities, that it
is able and shall be able to pay its debts as they mature, and that
it has and shall have sufficient capital to conduct its business and
other financial transactions;
ad. Tax Returns. Borrower and each Guarantor and Debtor have filed and
shall file all tax returns required to be filed by federal, state or
local law (including, but not limited to, all income, franchise,
employment, property and sales tax returns) and have paid and shall
pay all of the tax liabilities and other fees and assessments charged
against that entity or its property when due. Neither Borrower nor
any Guarantor or Debtor knows of any pending investigation of those
entities by any taxing or other governmental authority or of any
pending but unassessed tax liability or other fee or assessment owing
by those entities;
ae. Margin Stock. Neither Borrower nor any Guarantor or Debtor is
engaged principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulations G, T, U or X
of the Board of Governors of the Federal Reserve System), and no part
of the advances, loans and/or other financial accommodations provided
by Lender under this Agreement or any of the Loan Documents shall be
used to purchase or carry any such margin stock or to extend credit
to others for the purpose of purchasing or carrying margin stock.
Neither Borrower, any Guarantor or Debtor, nor any person acting on
their behalf has taken or shall take any action that might cause the
transactions contemplated by this Agreement or the Loan Documents to
violate Regulations G, T, U or X or to violate the Securities
Exchange Act of 1934, as amended;
af. Compliance with ERISA. Borrower and any Guarantors and Debtors have
complied and shall comply with all applicable minimum funding and
other requirements of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and there are and shall be no existing
conditions that would give rise to liability thereunder including,
without limitation, any current or potential withdrawal liability
from a multiemployer plan (as defined in Section 3(37) of ERISA). No
reportable event (as defined in Section 4043 of ERISA) has occurred
or shall occur in connection with any employee benefit plan of those
entities that might constitute grounds for the termination thereof by
the Pension Benefit Guaranty Corporation or for the appointment of a
trustee to administer that plan. Borrower shall immediately notify
and cause such Guarantors and Debtors to immediately notify Lender of
any fact (including, but not limited to, any "reportable event" as
that term is defined in Section 4043 of ERISA) arising in connection
with any employee benefit plan belonging to those entities which
might constitute grounds for the termination thereof by the Pension
Benefit Guaranty Corporation or for the appointment of a trustee to
administer that plan and, following such notification, Borrower shall
provide or cause such Guarantors and Debtors to provide Lender with
any additional information or documents as may be requested by Lender
with respect thereto;
ag. Investment Company. Neither Borrower nor any Guarantor or Debtor is
or shall be an "investment company" within the meaning of the
Investment Company Act of 1940, as amended;
ah. Holding Companies and Affiliates. Neither Borrower nor any Guarantor
or Debtor is or shall be a "holding company" or a "subsidiary
company" of a "holding company" or an "affiliate" of a "holding
company" or a "public utility" within the meaning of the Public
Utility Holding Company Act of 1935, as amended;
<PAGE>
ai. Compliance with Applicable Environmental Law. Borrower, each
Guarantor and Debtor, and their respective properties are and shall
be in compliance with all environmental, health and safety laws,
rules and regulations and neither Borrower nor any Guarantor or
Debtor is or shall be subject to any liability or obligation for
remedial action thereunder. No investigation or inquiry by any
governmental authority is or shall be pending or, to the knowledge of
Borrower, threatened against Borrower, any Guarantor or Debtor, or
any of their respective properties with respect to any toxic waste,
toxic substance or Hazardous Material as defined herein. No
Hazardous Materials are or shall be located on or under Borrower or
any Guarantor or Debtor's properties. Neither Borrower, nor any
Guarantor or Debtor has caused or permitted or shall cause or permit
any toxic or hazardous waste or substance to be stored, transported,
or disposed of on or under or released from any of its properties.
The term "Hazardous Materials" shall mean any substance, material, or
waste which is or becomes regulated by any governmental authority
including, but not limited to: (i) petroleum, (ii) asbestos, (iii)
polychlorinated biphenyls, (iv) those substances, materials or wastes
designated as a "hazardous substance" pursuant to Section 311 of the
Clean Water Act or listed pursuant to Section 307 of the Clean Water
Act or any amendments or replacements to these statutes, (v) those
substances, materials or wastes defined as a "hazardous waste"
pursuant to Section 1004 of the Resource Conservation and Recovery
Act or any amendments or replacements to that statute, or (vi) those
substances, materials or wastes defined as a "hazardous substance"
pursuant to Section 101 of the Comprehensive Environmental Response,
Compensation and Liability Act, or any amendments or replacements to
that statute;
aj. Compliance with Other Laws. Neither Borrower nor any Guarantor or
Debtor has violated or shall violate any applicable federal, state,
county or municipal statute, regulation or ordinance which may
materially and adversely affect its respective business operations
or financial condition or the Collateral. No event of default (or
circumstances which, with notice or the passage of time or both,
would constitute an event of default) has occurred or shall occur
under this Agreement or the Loan Documents;
ak. Notification Regarding Events of Default. Without limiting any of
the representations, warranties and covenants contained herein,
Borrower shall immediately notify and cause any Guarantors and
Debtors to immediately notify Lender of: (i) the occurrence of any
event of default (or circumstances which, with notice or the passage
of time or both, would constitute an event of default) under this
Agreement or the Loan Documents, (ii) the commencement of any action,
suit, or proceeding or any other matter that might have a material
adverse effect on the Borrower, any Guarantor or Debtor, or the
Collateral, (iii) any change in the management of Borrower;
al. Commercial Purpose. This Agreement and the Loan Documents and the
obligations herein and therein are executed and incurred for
commercial and not consumer purposes and all proceeds of Lender's
advances, loans and/or other financial accommodations to Borrower
shall be used exclusively in the Borrower's business and for no other
purpose;
am. Lender's Influence. Lender has not exercised or attempted to
exercise, directly or indirectly, any degree of control or influence
of any kind whatsoever over the internal business operations or
financial affairs of Borrower, or to the best of Borrower's
knowledge, any Guarantor or Debtor. Borrower shall immediately
notify and cause any Guarantors and Debtors to immediately notify
Lender in writing of any actions that they consider to constitute an
exercise or attempt to exercise such control or influence in the
future. Lender has not acted as a business, investment or financial
consultant or advisor to Borrower or any Guarantor or Debtor.
Borrower shall notify and cause such Guarantors and Debtors to notify
Lender in writing of any attempt by Lender to act as a consultant or
advisor to those entities in the future;
an. Lender's Duty. Lender does not have and shall not have any fiduciary
or similar duty to Borrower, any Guarantor or Debtor;
ao. Lender's Relationship. Lender has not participated and shall not
participate in any type of joint venture or partnership with
Borrower, or any Guarantor or Debtor and the execution and
consummation of this Agreement and the Loan Documents and the
transactions contemplated therein do not and shall not constitute or
amount to a joint venture or partnership;
ap. Lender Not an Agent. Except as expressly set forth in this Agreement
or the Loan Documents, Lender has not acted and shall not act in any
respect as the agent of Borrower or any Guarantor or Debtor for any
purpose and no agency relationship has been or shall be created by
the execution of this Agreement and the Loan Documents or the
consummation of the transactions contemplated thereby;
aq. Borrower's Agreement to Take Action. Borrower shall execute and
deliver and cause any Guarantors and Debtors to execute and deliver
to Lender any documents and take any actions as may be requested by
Lender to carry out the intent and purposes of this Agreement and the
Loan Documents and the transactions contemplated thereby and to
preserve and perfect Lender's liens, security interests and other
encumbrances in the Collateral;
ar. Fiscal Year. Borrower or any Guarantor or Debtor shall not change
its fiscal year without the express written consent of Lender, which
shall not be unreasonably withheld;
as. Prepayments. Borrower or any Guarantors or Debtor shall not make any
voluntary or optional prepayment of any indebtedness for borrowed
money incurred or permitted to
<PAGE>
exist under the terms of this Agreement, other than indebtedness
evidenced by the Notes;
at. Lock Box. If Lender so requests at any time (whether or not Borrower
is in default of this Agreement), Borrower shall direct, and shall
cause Debtors to direct, each of its account debtors to make payments
due under the relevant account or chattel paper directly to a special
lock box to be under the control of Lender. Borrower hereby
authorizes and directs Lender to deposit into a special collateral
account to be established and maintained with Lender all checks,
drafts, and cash payments received in said lock box. All deposits in
said collateral account shall constitute proceeds of Collateral and
shall not constitute payment of any indebtedness under the Loan
Documents. At its option, Lender may, at any time, apply finally
collected funds on deposit in said collateral account to the payment
of the indebtedness in such order of application as Lender may
determine, or permit Borrower or Debtors to withdraw all or any part
of the balance on deposit in said collateral account. If the
collateral account is so established, Borrower agrees, and Borrower
shall cause Debtors to agree, promptly to deliver to Lender, for
deposit into said collateral account, all payments on accounts and
chattel paper received by Borrower or Debtors. All such payments
shall be delivered to Lender in the form received (except for any
necessary endorsement). Until so deposited all payments on accounts
and chattel paper received by Borrower or Debtors shall be held in
trust by the recipient for and as the property of Lender and shall
not be commingled with any other funds or property of the recipient;
and
au.
7. FINANCIAL COVENANTS. [ ] If checked, the Borrower covenants and agrees
that from the date hereof until payment in full of all indebtedness and the
performance of all obligations under the Loan Documents, the Borrower shall
at all times maintain the financial positions and ratios in accordance with
GAAP (unless otherwise specified) as stated on the Financial Covenants
Schedule attached to this Agreement.
8. PRESENTMENT, DEMANDS AND NOTICES. Borrower hereby waives and shall cause
any Guarantors and Debtors to waive all of their respective rights to
diligence, presentment, demand, protest, and notice (including, but not
limited to, notice of dishonor, default, non-payment, and the creation,
existence and extension of any and all indebtedness and obligations under
this Agreement and the Loan Documents and of any security and collateral
therefor) to the maximum extent permitted by law.
9. DEFAULT. Borrower shall be in default under this Agreement and the Loan
Documents in the event that Borrower, any Guarantor and Debtor, or any other
party guarantying or securing the advances, loans and/or other financial
accommodations described therein:
a. fails to pay any obligation to Lender when due;
b. fails to perform or observe any term, condition or covenant, or any
warranty or representation by or on behalf of Borrower should prove
to be false or misleading in any material respect;
c. allows or causes the Collateral to be damaged in any material
respect, destroyed, lost, stolen, seized, or confiscated;
d. seeks to revoke, terminate or otherwise limit its liability to Lender;
e. files a petition in voluntary bankruptcy or seeking relief under any
provision of any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation law, or consents to
the filing of any petition against such entity under such law, or a
petition is filed against such entity under any such law, or such
entity admits insolvency or bankruptcy or becomes insolvent or
bankrupt or makes an assignment for the benefit of creditors, or a
custodian (including, without limitation, a receiver, liquidator or
trustee) of such entity or any of its property is appointed by court
order or takes possession thereof;
f. any report, certificate, financial statement or other document
furnished prior to the execution of or pursuant to the terms of this
Agreement shall prove to be false or misleading in any material
respect;
g. permits the entry or service of any garnishment, judgment, tax levy,
attachment or lien against Borrower, or any Guarantor or any Debtor;
or
h. causes Lender to deem itself insecure in good faith for any reason.
10. RIGHTS OF LENDER ON DEFAULT. If there is a default under this Agreement
or any of the Loan Documents, Lender shall be entitled to exercise one or
more of the following remedies without notice, presentment or demand (except
as required by law):
a. Acceleration - to declare Borrower's and any Guarantors' or Debtors'
obligations to Lender to be immediately due and payable in full (such
acceleration shall be automatic and immediate in the event Borrower
is in default under paragraph 9, part (e) above)
b. Collection Without Judicial Process - to collect Borrower's and any
Guarantors' or Debtors' outstanding obligations with or without
resorting to judicial process;
<PAGE>
c. Delivery of Collateral - to require Borrower and any Debtors to
deliver and make available to Lender any Collateral at a place
reasonably convenient to Lender and those entities;
d. Take Possession - to take possession, management and control of the
Collateral without seeking the appointment of a receiver;
e. Collection of Proceeds - to collect all rents, issues, income,
profits and proceeds from the Collateral until Borrower's and any
Guarantors' and Debtors' obligations to Lender are satisfied in full;
f. Appointment of Receiver - to apply for and obtain, without notice and
upon ex parte application, the appointment of a receiver for the
Collateral without regard to Borrower's or any Guarantors' and
Debtors' financial condition or solvency, the adequacy of the
Collateral to secure the payment or performance of the obligations of
those entities to Lender, or the existence of any waste to the
Collateral;
g. Foreclosure - to foreclose any deed of trust, mortgage, lien,
security interest or other encumbrance on the Collateral;
h. Setoff - to setoff Borrower's and any Guarantors' and Debtors'
obligations to Lender against any amounts due to those entities
including, but not limited to, the Borrower's and Guarantors' and
Debtors' monies, instruments, and deposit accounts maintained with
Lender;
i. Additional Collateral - require Borrower or Guarantor or any Debtor
to pledge additional collateral to the Lender from the Borrower's or
Guarantor's or any Debtor's assets, the acceptability and sufficiency
of such collateral to be determined in the Lender's sole discretion;
and
j. Lender's Contractual Rights - to exercise all other rights available
to Lender under the Loan Documents, any other written agreement, or
applicable law.
Lender's rights and remedies are cumulative and may be exercised
together, separately, and in any order. In the event that Lender
institutes an action seeking recovery of any of the Collateral by way
of a prejudgment remedy in an action against Borrower or Debtors,
Borrower hereby waives and shall cause Debtors to waive the posting
of any bond which might otherwise be required.
11. BORROWING CERTIFICATE. [ ] If checked, every request for an advance
made by Borrower shall be made by mailing or telecopying to Lender a
completed Borrowing Certificate (each a "Borrowing Certificate") in the form
attached hereto as Exhibit A. In addition to the Borrowing Certificate,
Borrower shall submit to Lender such other documents and certifications as
may from time to time be required together with such other information as
Lender may request. Lender is hereby authorized by Borrower to make advances
upon the receipt of a Borrowing Certificate executed by an individual
purporting to be an officer of Borrower, unless the Lender has actual
knowledge that the individual executing such Borrowing Certificate is not so
authorized.
12. HOLD HARMLESS AND INDEMNIFICATION. Lender shall not be responsible for
the performance of any of Borrower's or any Debtors' obligations with respect
to the Collateral under any circumstances.
Borrower hereby indemnifies and holds Lender harmless, and shall cause any
Guarantors and Debtors to indemnify and hold Lender harmless, from all
claims, damages, liabilities (including attorneys' fees and legal expenses),
causes of action, actions, suits and other legal proceedings (cumulatively,
"Claims") in any matter relating to or arising out of this Agreement or any
Loan Documents or any act, event or transaction related or attendent thereto
or pertaining to their respective businesses or the Collateral (including,
but not limited to, those Claims involving Hazardous Materials). Borrower
shall immediately provide and cause any Guarantors and Debtors to immediately
provide Lender with written notice of any such Claim. Borrower, upon the
request of Lender, shall defend or cause such Guarantors and Debtors to
defend Lender from such Claims, and pay the attorneys' fees, legal expenses
and other costs incurred in connection therewith. In the alternative, Lender
shall be entitled to employ its own legal counsel to defend such Claims at
Borrower's and/or such Guarantors' and Debtors' cost.
13. REIMBURSEMENT FOR EXPENSES. Upon demand, Borrower shall immediately
reimburse or cause any Guarantors and Debtors to immediately reimburse Lender
for all amounts (including reasonable attorneys' fees and legal expenses)
expended by Lender, to the extent permitted by applicable law, in the: (i)
negotiation, preparation, amendment, extension, modification, replacement or
substitution of this Agreement or the Loan Documents, (ii) attachment,
creation, filing, perfection, and recording of Lender's liens, security
interests, and other encumbrances in the Collateral or any UCC and other
searches and title or insurance policies in connection therewith, (iii)
defense of the validity and priority of Lender's liens, security interests
and other encumbrances against the Collateral, and (iv) enforcement or
defense of any obligation or the exercise of any right or remedy described in
this Agreement or the Loan Documents, and (v) refinancing or restructuring of
the advances, loans and/or financial accommodations provided under this
Agreement in the nature of a "work out" or in any insolvency or bankruptcy
proceedings. These sums shall bear interest at the lower of the highest rate
described in any of the Loan Documents or the highest rate allowed by law
from the date of payment until the date of reimbursement and be secured by
the Collateral.
14. APPLICATION OF MONIES. All payments to Lender made by or on behalf of
Borrower or any Guarantors and Debtors or monies received by Lender from the
Collateral or otherwise may be applied against any amounts paid by Lender in
connection with the exercise of its rights or remedies described in this
Agreement and the Loan Documents (including attorneys' fees and legal
expenses together with interest at the rate described in the foregoing
paragraph) and then to the payment of the remaining obligations under this
Agreement and the Loan Documents in whatever order Lender chooses.
<PAGE>
15. POWER OF ATTORNEY. Borrower hereby appoints and shall cause any
Guarantors and Debtors, jointly and severally, to appoint Lender as their
attorney-in-fact to endorse their names on all instruments and other
documents payable to those entities. In addition, Lender shall be entitled,
but not required, to perform any action or execute any document required to
be taken or executed by Borrower or any Guarantors and Debtors under this
Agreement or the Loan Documents. Lender's performance of such action or
execution of such documents shall not relieve Borrower or any Guarantors and
Debtors from any obligation to cure any default under this Agreement and the
Loan Documents. The powers of attorney described in this paragraph are
coupled with an interest and are irrevocable.
16. ESSENCE OF TIME. Borrower and Lender agree that time is of the essence
with respect to this Agreement and the Loan Documents.
17. MODIFICATION AND WAIVER. The modification or waiver of any Borrower's or
any Guarantors' and Debtors' obligations or Lender's rights under this
Agreement or the Loan Documents must be contained in a writing signed by
Lender. Lender may perform any of Borrower's or any Guarantors' and Debtors'
obligations or delay or fail to exercise any of its rights without causing a
waiver of those obligations or rights. A waiver on one occasion shall not
constitute a waiver on any other occasion. Borrower's and any Guarantors'
and Debtors' obligations to Lender under this Agreement and the Loan
Documents shall not be affected if Lender amends, compromises, exchanges,
fails to exercise, impairs or releases any of the obligations belonging to
any co-borrower, Guarantor or obligor or any of its rights against any
co-borrower, Guarantor, obligor or Collateral.
18. SUCCESSORS AND ASSIGNS. This Agreement and the Loan Documents shall be
binding upon and inure to the benefit of Borrower, Lender and their
respective successors, assigns, trustees, receivers, administrators, personal
representatives, legatees and devisees.
19. ASSIGNMENT AND PARTICIPATIONS. Borrower and any Guarantors and Debtors
shall not be entitled to assign any of their rights, remedies or obligations
described in this Agreement or the Loan Documents without the prior written
consent of Lender which may be withheld by Lender in its sole discretion.
Lender shall be entitled to grant participations in or assign some or all of
its rights and remedies described in this Agreement and the Loan Documents
without notice to or the prior consent of Borrower or any Guarantors and
Debtors in any manner.
20. NOTICES. Any notice or other communication to be provided under this
Agreement or the Loan Documents shall be in writing and sent to the parties
at the addresses described in this Agreement or the Loan Documents or such
other address as the parties may designate in writing from time to
time.
21. SEVERABILITY. If any provision of this Agreement or the Loan Documents
is invalid, illegal or unenforceable, the remaining provisions of this
Agreement and the Loan Documents shall continue to be valid, legal and
enforceable in all respects.
22. CHOICE OF LAW AND CONSENT TO JURISDICTION AND VENUE. This Agreement and
the Loan Documents shall be governed by the laws of the state indicated in
the Lender's address (unless specified otherwise in such documents).
Borrower hereby consents and shall cause any Guarantors and Debtors to
consent to the jurisdiction and venue of any court located in the state
indicated in the Lender's address in the event of any legal proceeding with
respect to the negotiation, execution, or delivery of this Agreement or the
Loan Documents, the enforcement of any obligation, right or remedy
thereunder, or the assertion of any claim, defense, setoff or counterclaim in
connection therewith.
23. WAIVER OF JURY TRIAL. LENDER AND BORROWER KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN RESPECT
TO ANY LITIGATION BASED ON, OR ARISING OUT OF, UNDER OR IN CONJUNCTION WITH
THE FINANCIAL ACCOMMODATIONS DESCRIBED HEREIN, THIS AGREEMENT AND ANY OTHER
AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE
OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF EITHER PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDER
MAKING THE LOAN EVIDENCED BY THE PROMISSORY NOTE.
24. MISCELLANEOUS. All references to Borrower shall refer to all of the
parties signing below. Borrower's obligations to Lender, if there be more
than one Borrower signing below, shall be joint and several. This Agreement,
the Loan Documents and other documents delivered in connection therewith
represent the entire complete and integrated understanding between Borrower,
any Guarantors or Debtors, and Lender pertaining to the terms and conditions
of those documents and the advances, loans and/or other financial
accommodations described therein and supersedes all prior agreements and
commitments, written and oral, relating to the subject matter hereof.
25. ADDITIONAL TERMS.
DATED THIS 5TH DAY OF DECEMBER, 1994. LENDER: THE BENTON STATE BANK
/s/ Harry McCormick
----------------------------------------------
HARRY MCCORMICK
SENIOR VICE PRESIDENT
BORROWER: LANDERS OLDSMOBILE-GMC, INC. BORROWER: LANDERS OLDSMOBILE-GMC, INC.
/s/ Steve Landers
- -------------------------------------------------
STEVE LANDERS /s/ John Landers
PRESIDENT ----------------------------------------------
JOHN LANDERS
VICE PRESIDENT
<PAGE>
BORROWER: LANDERS OLDSMOBILE-GMC, INC. BORROWER:
/s/ Bob Landers
- -------------------------------------------------
BOB LANDERS
SECRETARY ----------------------------------------------
BORROWER: BORROWER:
- -------------------------------------------------
----------------------------------------------
BORROWER: BORROWER:
- -------------------------------------------------
----------------------------------------------
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
PRINCIPAL FUNDING/
TYPE OF INTEREST AMOUNT/ CREDIT AGREEMENT MATURITY CUSTOMER LOAN
LOAN RATE LIMIT DATE DATE NUMBER NUMBER
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
DRAW 8.500% $2,800,000.00 12/05/94 02/03/95 11125003 119512
- -------------------------------------------------------------------------------------------
</TABLE>
SCHEDULE B
<PAGE>
The Benton State Bank
--------------------------
146 West South Street
Benton, Arkansas 72015
"LENDER"
COMMERCIAL
SECURITY
AGREEMENT
- --------------------------------------------------------------------------------
BORROWER OWNER OF COLLATERAL
LANDERS OLDSMOBILE-GMC, INC. LANDERS AUTO SALES, INC.
ADDRESS ADDRESS
17821 I-30 17821 I-30
Benton, AR 72015 Benton, AR 72015
TELEPHONE NO. IDENTIFICATION NO. TELEPHONE NO IDENTIFICATION NO.
778-8268 71-0678428 778-8268 ###-##-####
- --------------------------------------------------------------------------------
1. SECURITY INTEREST. For good and valuable consideration, Owner of
Collateral ("Owner") grants to Lender identified above a continuing security
interest in the Collateral described below to secure the obligations described
in this Agreement.
2. OBLIGATIONS. The Collateral shall secure the payment and performance
of all of Borrower's and Owner's present and future, joint and/or several,
direct and indirect, absolute and contingent, express and implied, indebtedness,
(including costs of collection, legal expenses and attorneys' fees, incurred by
Lender upon the occurrence of a default under this Agreement, in collecting or
enforcing payment of such indebtedness, or preserving, protecting or realizing
on the Collateral herein), liabilities, obligations and covenants (cumulatively
"Obligations") to Lender including those arising under or pursuant to:
a. this Agreement and the following promissory notes and agreements:
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------------------------------------------
INTEREST PRINCIPAL FUNDING/ MATURITY CUSTOMER LOAN
RATE AMOUNT/ AGREEMENT DATE NUMBER NUMBER
CREDIT LIMIT DATE
8.500% $2,800,000.00 12/05/94 02/03/95 11125003 119512
- ------------------------------------------------------------------------------------
</TABLE>
(b) [ ] and all other evidences of indebtedness, agreements, instruments,
guaranties, or otherwise of Borrower or Owner to Lender of every type or
description that now exists or arises in the future (WHETHER INCURRED FOR
THE SAME OR DIFFERENT PURPOSES THAN THE FOREGOING);
(c) all renewals, extensions, amendments, modifications, replacements or
substitutions to any of the foregoing; and
(d) applicable law.
3. COLLATERAL. The Collateral shall consist of all of the following-
described property and Owner's rights, title and interest in such property
whether now or hereafter existing or now owned or hereafter acquired by Owner
and wheresoever located (collectively the "Collateral"):
[ ] All accounts and contract rights including, but not limited to, the
accounts and contract rights described on Schedule A attached hereto
and incorporated herein by this reference;
[ ] All chattel paper including, but not limited to, the chattel paper
described on Schedule A attached hereto and incorporated herein by
this reference;
[ ] All documents including, but not limited to, the documents described
on Schedule A attached hereto and incorporated herein by this
reference;
[ ] All equipment, including, but not limited to, the equipment described
on Schedule A attached hereto and incorporated herein by this
reference;
[ ] All fixtures, including, but not limited to, the fixtures located or
to be located on the real property described on Schedule B attached
hereto and incorporated herein by this reference;
[ ] All general intangibles including, but not limited to, the general
intangibles described on Schedule A attached hereto and incorporated
herein by this reference;
[ ] All instruments including, but not limited to, the instruments
described on Schedule A attached hereto and incorporated herein by
this reference;
[ ] All inventory including, but not limited to, the inventory described
on Schedule A attached hereto and incorporated herein by this
reference;
[ ] All minerals or the like located on or related to the real property
described on Schedule B attached hereto and incorporated herein by
this reference;
[ ] All standing timber located on the real property described on Schedule
B attached hereto and incorporated herein by this reference;
[X] Other: PRIOR COUNTY FILINGS 45126 & 25572 AND PRIOR SECRETARY OF
STATE FILINGS 783662 & 333151
<PAGE>
All monies, instruments, and savings, checking or other deposit accounts that
are now or in the future in Lender's custody or control (excluding IRA, Keogh,
trust accounts, and deposits subject to tax penalties if so assigned);
All accessions, accessories, additions, amendments, attachments, modifications,
replacements and substitutions to any of the above;
All proceeds and products of any of the above;
All policies of insurance pertaining to any of the above as well as any proceeds
and unearned premiums pertaining to such policies; and
All books and records pertaining to any of the above.
4. OWNER'S TAXPAYER IDENTIFICATION. Owner's social security number or
federal taxpayer identification number is: 71-0678428
5. RESIDENCY/LEGAL STATUS. Owner is an individual(s) and a resident of
the state of: n/a. Owner is a: [X] Corporation; [ ] Partnership; [ ] Non-
Profit Association; duly organized, validly existing and in good standing under
the laws of the state of: Arkansas.
6. REPRESENTATIONS, WARRANTIES, AND COVENANTS. Owner represents, warrants
and covenants to Lender that:
(a) Owner is and shall remain the sole owner of the Collateral;
(b) Neither Owner nor, to the best of Owner's knowledge, has any other
party used, generated, released, discharged, stored, or disposed of
any hazardous material, toxic substance, or related material on any of
the Collateral. Owner shall not commit or permit such actions to be
taken in the future. The term "Hazardous Materials" shall mean any
substance, material, or waste which is or becomes regulated by any
governmental authority including, but not limited to, (i) petroleum;
(ii) asbestos; (iii) polychlorinated biphenyls; (iv) those substances,
materials or wastes designated as a "hazardous substance" pursuant to
Section 311 of the Clean Water Act or listed pursuant to Section 307
of the Clean Water Act or any amendments or replacements to these
statutes; (v) those substances, materials or wastes defined as a
"hazardous waste" pursuant to Section 1004 of the Resource
Conservation and Recovery Act or any amendments or replacements to
that statute; or (vi) those substances, materials or wastes defined as
a "hazardous substance" pursuant to Section 101 of the Comprehensive
Environmental Response, Compensation and Liability Act, or any
amendments or replacements to that statute;
(c) Owner's chief executive office, chief place of business, office where
its business records relating to the Collateral and the Collateral is
located, or residence is the address identified above and have been
such during the four (4) month period prior to the date hereof.
Owner's other executive offices, places of business, locations of its
business records, or domiciles are described on Schedule C attached
hereto and incorporated herein by this reference. Owner shall
immediately advise Lender in writing of any change in or addition to
the foregoing addresses;
(d) Owner shall not become a party to any restructuring of its form of
business or participate in any consolidation, merger, liquidation or
dissolution without Lender's prior written consent;
(e) Owner shall notify Lender of the nature of any intended change of
Owner's name, or the use of any trade name, and the effective date of
such change;
(f) The Collateral is and shall at all times remain free of all tax and
other liens, security interests, encumbrances and claims of any kind
except for those belonging to Lender and those described on Schedule D
attached hereto and incorporated herein by this reference. Without
waiving the event of default as a result thereof, Owner shall take any
action and execute any document needed to discharge the foregoing
liens, security interests, encumbrances and claims;
(g) Owner shall defend the Collateral against all claims and demands of
all persons at any time claiming any interest therein;
(h) All of the goods, fixtures, minerals or the like, and standing timber
constituting the Collateral is and shall be located at Owner's
executive offices, places of business, residence and domiciles
specifically described in this Agreement. Owner shall not change the
location of any Collateral without the prior written consent of
Lender;
(i) Owner shall provide Lender with possession of all chattel paper and
instruments constituting the Collateral, and Owner shall promptly mark
all chattel paper, instruments, and documents constituting the
Collateral to show that the same are subject to Lender's security
interest;
(j) All of Owner's accounts or contract rights; chattel paper; documents;
general intangibles; instruments; and federal, state, county, and
municipal government and other permits and licenses; trusts, liens,
contracts, leases, and agreements constituting the Collateral are and
shall be valid, genuine and legally enforceable obligations and rights
belonging to Owner against one or more third parties and not subject
to any claim, defense, set-off or counterclaim of any kind;
(k) Owner shall not amend, modify, replace, or substitute any account or
contract right; chattel paper; document; general intangible; or
instrument constituting the Collateral without the prior written
consent of Lender;
(l) Owner has the right and is duly authorized to enter into and perform
its obligations under this Agreement. Owner's execution and
performance of these obligations do not and shall not conflict with
the provisions of any statute, regulation, ordinance, rule of law,
contract or other agreement which may now or hereafter be binding on
Owner;
(m) No action or proceeding is pending against Owner which might result in
any material or adverse change in its business operations or financial
condition or materially affect the Collateral;
(n) Owner has not violated and shall not violate any applicable federal,
state, county or municipal statute, regulation or ordinance (including
but not limited to those governing Hazardous Materials) which may
materially and adversely affect its business operations or financial
condition or the Collateral;
<PAGE>
(o) Owner shall, upon Lender's request, deposit all proceeds of the
Collateral into an account or accounts maintained by Owner or Lender
at Lender's institution;
(p) Owner will, upon receipt, deliver to Lender as additional Collateral
all securities distributed on account of the Collateral such as stock
dividends and securities resulting from stock splits, reorganizations
and recapitalizations; and
(q) This Agreement and the obligations described in this Agreement are
executed and incurred for business and not consumer purposes.
7. SALE OF COLLATERAL. Owner shall not assign, convey, lease, sell or
transfer any of the Collateral to any third party without the prior written
consent of Lender except for sales of inventory to buyers in the ordinary course
of business.
8. FINANCING STATEMENTS AND OTHER DOCUMENTS. Owner shall at any time and
from time to time take all actions and execute all documents required by Lender
to attach, perfect and maintain Lender's security interest in the Collateral and
establish and maintain Lender's right to receive the payment of the proceeds of
the Collateral including, but not limited to, executing any financing
statements, fixture filings, continuation statements, notices of security
interest and other documents required by the Uniform Commercial Code and other
applicable law. Owner shall pay the costs of filing such documents in all
offices wherever filing or recording is deemed by Lender to be necessary or
desirable. Lender shall be entitled to perfect its security interest in the
Collateral by filing carbon, photographic or other reproductions of the
aforementioned documents with any authority required by the Uniform Commercial
Code or other applicable law. Owner authorizes Lender to execute and file any
financing statements, as well as extensions, renewals and amendments of
financing statements in such form as Lender may require to perfect and maintain
perfection of any security interest granted in this Agreement.
9. INQUIRIES AND NOTIFICATION TO THIRD PARTIES. Owner hereby authorizes
Lender to contact any third party and make any inquiry pertaining to Owner's
financial condition or the Collateral. In addition, Lender is authorized to
provide oral or written notice of its security interest in the Collateral to any
third party and, following a default hereunder, to make payment to Lender.
10. LOCK BOX, COLLATERAL ACCOUNT. If Lender so requests at any time
(whether or not Owner is in default of this Agreement), Owner will direct each
of its account debtors to make payments due under the relevant account or
chattel paper directly to a special lock box to be under the control of Lender.
Owner hereby authorizes and directs Lender to deposit into a special collateral
account to be established and maintained with Lender all checks, drafts and cash
payments received in said lock box. All deposits in said collateral account
shall constitute proceeds of Collateral and shall not constitute payment of any
Obligation. At its option, Lender may, at any time, apply finally collected
funds on deposit in said collateral account to the payment of the Obligations in
such order of application as Lender may determine, or permit Owner to withdraw
all or any part of the balance on deposit in said collateral account. If a
collateral account is so established, Owner agrees that Owner will promptly
deliver to Lender, for deposit into said collateral account, all payments on
accounts and chattel paper received by Owner. All such payments shall be
delivered to Lender in the form received (except for Owner's endorsement if
necessary). Until so deposited, all payments on accounts and chattel paper
received by Owner shall be held in trust by Owner for and as the property of
Lender and shall not be commingled with any funds or property of Owner.
11. COLLECTION OF INDEBTEDNESS FROM THIRD PARTIES. Lender shall be
entitled to notify, and upon the request of Lender, Owner shall notify any
account debtor or other third party (including, but not limited to, insurance
companies) to pay any indebtedness or obligation owing to Owner and constituting
the Collateral (cumulatively "Indebtedness") to Lender whether or not a default
exists under this Agreement. Owner shall diligently collect the Indebtedness
owing to Owner from its account debtors and other third parties until the giving
of such notification. In the event that Owner possesses or receives possession
of any instruments or other remittances with respect to the Indebtedness
following the giving of such notification or if the instruments or other
remittances constitute the prepayment of any Indebtedness or the payment of any
insurance proceeds, Owner shall hold such instruments and other remittances in
trust for Lender apart from its other property, endorse the instruments and
other remittances to Lender, and immediately provide Lender with possession of
the instruments and other remittances. Lender shall be entitled, but not
required, to collect (by legal proceedings or otherwise), extend the time for
payment, compromise, exchange or release any obligor or collateral upon, or
otherwise settle any of the Indebtedness whether or not an event of default
exists under this Agreement. Lender shall not be liable to Owner for any
action, error, mistake, omission or delay pertaining to the actions described in
this paragraph or any damages resulting therefrom.
12. POWER OF ATTORNEY. Owner hereby appoints Lender as its attorney-in-
fact to endorse Owner's name on all instruments and other remittances payable to
Owner with respect to the Indebtedness, including any items received by Lender
in any lockbox account, or other documents pertaining to Lender's actions in
connection with the Indebtedness. In addition, Lender shall be entitled, but
not required, to perform any action or execute any document required to be taken
or executed by Owner under this Agreement. Lender's performance of such action
or execution of such documents shall not relieve Owner from any obligation or
cure any default under this Agreement. The powers of attorney described in this
paragraph are coupled with an interest and are irrevocable.
13. USE AND MAINTENANCE OF COLLATERAL. Owner shall use the Collateral
solely in the ordinary course of its business, for the usual purposes intended
by the manufacturer (if applicable), with due care, and in compliance with the
laws, ordinances, regulations, requirements and rules of all federal, state,
county and municipal authorities including environmental laws and regulations
and insurance policies. Owner shall not make any alterations, additions or
improvements to the Collateral without the prior written consent of Lender.
Owner shall ensure that Collateral which is not now a fixture
<PAGE>
does not become a fixture. Without limiting the foregoing, all alterations,
additions and improvements made to the Collateral shall be subject to the
security interest belonging to Lender, shall not be removed without the prior
written consent of Lender, and shall be made at Owner's sole expense. Owner
shall take all actions and make any repairs or replacements needed to maintain
the Collateral in good condition and working order.
14. LOSS OR DAMAGE. Owner shall bear the entire risk of any loss, theft,
destruction or damage (cumulatively "Loss or Damage") to all or any part of the
Collateral. In the event of any Loss or Damage, Owner will either restore the
Collateral to its previous condition, replace the Collateral with similar
property acceptable to Lender in its sole discretion, or pay or cause to be paid
to Lender the decrease in the fair market value of the affected Collateral.
15. INSURANCE. The Collateral will be kept insured for its full value
against all hazards including loss or damage caused by fire, collision, theft or
other casualty. If the Collateral consists of a motor vehicle, Owner will
obtain comprehensive and collision coverage in amounts at least equal to the
actual cash value of the vehicle with deductibles not to exceed $n/a. Insurance
coverage obtained by Owner shall be from a licensed insurer subject to Lender's
approval. Owner shall assign to Lender all rights to receive proceeds of
insurance not exceeding the amount owned under the obligations described above,
and direct the insurer to pay all proceeds directly to Lender. The insurance
policies shall require the insurance company to provide Lender with at least 10
days' written notice before such policies are altered or cancelled in any
manner. The insurance policies shall name Lender as a loss payee and provide
that no act or omission of Owner or any other person shall affect the right of
Lender to be paid the insurance proceeds pertaining to the loss or damage of the
Collateral. In the event Owner fails to acquire or maintain insurance, Lender
(after providing notice as may be required by law) may in its discretion procure
appropriate insurance coverage upon the Collateral and charge the insurance cost
as an advance of principal under the promissory note. Owner shall furnish
Lender with evidence of insurance indicating the required coverage. Lender may
act as attorney-in-fact for Owner in making and settling claims under insurance
policies, cancelling any policy or endorsing Owner's name on any draft or
negotiable instrument drawn by any insurer.
16. INDEMNIFICATION. Lender shall not assume or be responsible for the
performance of any of Owner's obligations with respect to the Collateral under
any circumstances. Owner shall immediately provide Lender with written notice
of and indemnify and hold Lender and its shareholders, directors, officers,
employees and agents harmless from all claims, damages, liabilities (including
attorneys' fees and legal expenses), causes of action, actions, suits and other
legal proceedings (cumulatively "Claims") pertaining to its business operations
or the Collateral including, but not limited to, those arising from Lender's
performance of Owner's obligations with respect to the Collateral. Owner, upon
the request of Lender, shall hire legal counsel to defend Lender from such
Claims, and pay the attorneys' fees, legal expenses and other costs to the
extent permitted by applicable law, incurred in connection therewith. In the
alternative, Lender shall be entitled to employ its own legal counsel to defend
such Claims at Owner's cost.
17. TAXES AND ASSESSMENTS. Owner shall execute and file all tax returns
and pay all taxes, licenses, fees and assessments relating to its business
operations and the Collateral (including, but not limited to, income taxes,
personal property taxes, withholding taxes, sales taxes, use taxes, excise taxes
and workers' compensation premiums) in a timely manner.
18. INSPECTION OF COLLATERAL AND BOOKS AND RECORDS. Owner shall allow
Lender or its agents to examine, inspect and make abstracts and copies of the
Collateral and Owner's books and records pertaining to Owner's business
operations and financial condition or the Collateral during normal business
hours. Owner shall provide any assistance required by Lender for these
purposes. All of the signatures and information pertaining to the Collateral or
contained in the books and records shall be genuine, true, accurate and complete
in all respects. Owner shall note the existence of Lender's security interest
in its books and records pertaining to the Collateral.
19. DEFAULT. Owner shall be in default under this Agreement in the event
that Owner, Borrower or any guarantor:
(a) fails to make any payment under this Agreement or any other
indebtedness to Lender when due;
(b) fails to perform any obligation or breaches any warranty or covenant
to Lender contained in this Agreement or any other present or future
written agreement regarding this or any other indebtedness to Lender;
(c) provides or causes any false or misleading signature or representation
to be provided to Lender;
(d) allows the Collateral to be destroyed, lost or stolen, damaged in any
material respect, or subjected to seizure or confiscation;
(e) seeks to revoke, terminate or otherwise limit its liability under any
continuing guaranty;
(f) permits the entry or service of any garnishment, judgment, tax levy,
attachment or lien against Owner, any guarantor, or any of their
property;
(g) dies, becomes legally incompetent, is dissolved or terminated, ceases
to operate its business, becomes insolvent, makes an assignment for
the benefit of creditors, fails to pay any debts as they become due,
or becomes the subject of any bankruptcy, insolvency or debtor
rehabilitation proceeding;
(h) allows the Collateral to be used by anyone to transport or store
goods, the possession, transportation, or use of which, is illegal; or
(i) causes Lender in good faith to deem itself insecure for any reason.
20. RIGHTS OF LENDER ON DEFAULT. If there is a default under this
Agreement, Lender shall be entitled to exercise one or more of the following
remedies without notice or demand (except as required by law):
(a) to declare the Obligations immediately due and payable in full;
<PAGE>
(b) to collect the outstanding Obligations with or without resorting to
judicial process;
(c) to change Owner's mailing address, open Owner's mail, and retain any
instruments or other remittances constituting the Collateral contained
therein;
(d) to take possession of any Collateral in any manner permitted by law;
(e) to apply for and obtain, without notice and upon ex parte application,
the appointment of a receiver for the Collateral without regard to
Owner's financial condition or solvency, the adequacy of the
Collateral to secure the payment or performance of the obligations, or
the existence of any waste to the Collateral;
(f) to require Owner to deliver and make available to Lender any
Collateral at a place reasonably convenient to Owner and Lender;
(g) to sell, lease or otherwise dispose of any Collateral and collect any
deficiency balance with or without resorting to legal process;
(h) to set-off Owner's obligations against any amounts due to Owner
including, but not limited to, monies, instruments, and deposit
accounts maintained with Lender; and
(i) to exercise all other rights available to Lender under any other
written agreement or applicable law.
Lender's rights are cumulative and may be exercised together, separately, and in
any order. If notice to Owner of intended disposition of Collateral is required
by law, Lender will provide reasonable notification of the time and place of any
sale or intended disposition as required under the Uniform Commercial Code. In
the event that Lender institutes an action to recover any Collateral or seeks
recovery of any Collateral by way of a prejudgment remedy in an action against
Owner, Owner waives the posting of any bond which might otherwise be required.
Upon any default, Owner shall segregate all proceeds of Collateral and hold such
proceeds in trust for Lender. Lender's remedies under this paragraph are in
addition to those available at common law, such as setoff.
21. APPLICATION OF PAYMENTS. Whether or not a default has occurred under
this Agreement, all payments made by or on behalf of Owner and all credits due
to Owner from the disposition of the Collateral or otherwise may be applied
against the amounts paid by Lender (including attorneys' fees and legal
expenses) in connection with the exercise of its rights or remedies described in
this Agreement and any interest thereon and then to the payment of the remaining
Obligations in whatever order Lender chooses.
22. REIMBURSEMENT OF AMOUNTS EXPENDED BY LENDER. Owner shall reimburse
Lender for all amounts (including attorneys' fees and legal expenses) expended
by Lender in the performance of any action required to be taken by Owner or the
exercise of any right or remedy belonging to Lender under this Agreement,
together with interest thereon at the lower of the highest rate described in any
promissory note or credit agreement executed by Borrower or Owner or the highest
rate allowed by law from the date of payment until the date of reimbursement.
These sums shall be included in the definition of Obligations, shall be secured
by the Collateral identified in this Agreement and shall be payable upon demand.
23. ASSIGNMENT. Owner shall not be entitled to assign any of its rights,
remedies or obligations described in this Agreement without the prior written
consent of Lender. Consent may be withheld by Lender in its sole discretion.
Lender shall be entitled to assign some or all of its rights and remedies
described in this Agreement without notice to or the prior consent of Owner in
any manner.
24. MODIFICATION AND WAIVER. The modification or waiver of any of Owner's
Obligations or Lender's rights under this Agreement must be contained in a
writing signed by Lender. Lender may perform any of Owner's Obligations or
delay or fail to exercise any of its rights without causing a waiver of those
Obligations or rights. A waiver on one occasion shall not constitute a waiver
on any other occasion. Owner's Obligations under this Agreement shall not be
affected if Lender amends, compromises, exchanges, fails to exercise, impairs or
releases any of the obligations belonging to any Owner or third party or any of
its rights against any Owner, third party or collateral.
25. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of Owner and Lender and their respective successors,
assigns, trustees, receivers, administrators, personal representatives,
legatees, and devisees.
26. NOTICES. Any notice or other communication to be provided under this
Agreement shall be in writing and sent to the parties at the addresses described
in this Agreement or such other address as the parties may designate in writing
from time to time.
27. SEVERABILITY. If any provision of this Agreement violates the law or
is unenforceable, the rest of the Agreement shall remain valid.
28. APPLICABLE LAW. This Agreement shall be governed by the laws of the
state identified in Lender's address. Owner consents to the jurisdiction and
venue of any court located in the state indicated in Lender's address in the
event of any legal proceeding pertaining to the negotiation, execution,
performance or enforcement of any term or condition contained in this Agreement
or any related document and agrees not to commence or seek to remove such legal
proceeding in or to a different court.
29. COLLECTION COSTS. If Lender hires an attorney to assist in collecting
any amount due or enforcing any right or remedy under this Agreement, Owner
agrees to pay Lender's reasonable attorneys' and collection costs.
30. MISCELLANEOUS. This Agreement is executed for commercial purposes.
Owner shall supply information regarding Owner's business operations and
financial condition or the Collateral in the form and manner as requested by
Lender
<PAGE>
from time to time. All information furnished by Owner to Lender shall be true,
accurate and complete in all respects. Owner and Lender agree that time is of
the essence. Owner waives presentment, demand for payment, notice or dishonor
and protest except as required by law. All references to Owner in this
Agreement shall include all parties signing below except Lender. This Agreement
shall be binding upon the heirs, successors and assigns of Owner and Lender. If
there is more than one Owner, their obligations shall be joint and several.
This Agreement shall remain in full force and effect until Lender provides Owner
with written notice of termination. This Agreement and any related documents
represent the complete and integrated understanding between Owner and Lender
pertaining to the terms and conditions of those documents.
31. WAIVER OF JURY TRIAL. LENDER AND OWNER HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN RESPECT
TO ANY LITIGATION BASED ON, OR ARISING OUT OF, UNDER OR IN CONJUNCTION WITH THE
OBLIGATIONS, THIS AGREEMENT AND ANY OTHER AGREEMENT CONTEMPLATED TO BE EXECUTED
IN CONJUNCTION HEREWITH OR THEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER PARTY.
THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDER MAKING THE LOAN EVIDENCED BY
THE PROMISSORY NOTE.
32. ADDITIONAL TERMS:
Owner acknowledges that Owner has read, understands, and agrees to the terms and
conditions of this Agreement.
Dated: DECEMBER 5, 1994
LENDER: The Benton State Bank
/s/ Harry McCormick
_____________________________
HARRY MCCORMICK
SENIOR VICE PRESIDENT
OWNER: LANDERS AUTO SALES, INC. OWNER: LANDERS AUTO SALES, INC.
/s/ Steve Landers /s/ John Landers
_______________________________ ______________________________
STEVE LANDERS JOHN LANDERS
PRESIDENT VICE PRESIDENT
OWNER: LANDERS AUTO SALES, INC. OWNER:
/s/ Bob Landers
_______________________________ ______________________________
BOB LANDERS
SECRETARY
OWNER: OWNER:
________________________________ ______________________________
OWNER: OWNER:
________________________________ ______________________________
<PAGE>
July 31, 1995
CERTIFIED MAIL
RETURN RECEIPT REQUESTED
PERSONAL AND CONFIDENTIAL
United Auto Group, Inc.
375 Park Avenue, 22nd Floor
New York, NY 10162
Attention: Mr. Carl Spielvogel, Chief Executive Officer
--------------------------------------------
Gentlemen:
On April 6, 1995 Oldsmobile Division on behalf of itself and GMC Truck Division
rejected a proposal submitted by United Auto Group, Inc. ("UAG") and Landers
Auto Sales, Inc. concerning a Stock Purchase Agreement executed between UAG and
Landers Auto Sales, Inc., Steve Landers, John Landers and Bob Landers of Benton,
Arkansas. That proposal contemplated the acquisition by UAG of eighty percent
of the ownership equity or Landers Auto Sales, Inc.
Oldsmobile's rejection of that proposal was based on the continuing failure of
UAG to meet General Motoros policies for Multiple Dealer Investors-Multiple
Dealer Operators (MDI-MDO) as set forth in NAO Dealer Bulletin 94-11. A copy of
that Bulletin was provided to all General Motors Dealers on September 14, 1994.
The fact that UAG has not fulfilled its responsibilities in the various General
Motors Dealerships in which it has a financial investment was covered in some
detail in a letter to UAG dated November 14, 1994 from Chevrolet Zone Manager,
A. A. Prince.
You have requested that Oldsmobile and GMC Truck reconsider our rejection of the
above-mentioned Stock Purchase Agreement. You have also proposed that as
condition of Oldsmobile and GMC Truck approval of the transactions contemplated
by such Stock Purchase Agreement, UAG will take the necessary steps to fulfill
its sales and service obilgations as outlined in each of the General Motors
Dealer Sales and Service Agreements to which it and/or any dealer company in
which UAG now has or hereafter acquires an ownership, financial, or management
interest (individually, a "Dealer Company" and collectively, the "Dealer
Companies") is a party, and that such level of performance shall be attained
within two years from the date of Oldsmobile and GMC Truck apprvoal of this
proposal. UAG has also agreed that, if UAG and/or any Dealer Company, fails to
achieve such level of performance within such period, UAG will voluntarily
terminate, and UAG will cause the applicable Dealer Company or Dealer Companies
to terminate the respective Dealer Agreements for all franchises at a location
at
<PAGE>
which the Dealer Company is not then meeting its sales and/or service
performance obligations.
In consideration of the above, Oldsmobile and GMC Truck are prepared to approve
the proposed changes in ownership at Lands Auto Sales, Inc. subject to your
acceptance and agreement to the following:
1. UAG agrees that within two years from the date of this letter each Dealer
Company will meet its sales and service obligations for each General Motors
Dealer Sales and Service Agreement in effect with such Dealer Company.
For purposes of this agreement "sales and service obligations" are defined
in the General Motors Multiple Dealer Investor Policy as follows:
SALES PERFORMANCE
A retail sales index of 100 or higher.
CUSTOMER SATISFACTION
A customer satisfaction index (CSi) that is equal to or above the Dealer
Company's respective Zone/Branch average.
2. In the event a Dealer Company is not meeting both its sales obligations and
its service obligations (as defined above), at the end of two years from
the date of this letter, which performance will be reviewed by the
respective General Motors Divisions, UAG agrees that at General Motors
request, UAG will terminate and will cause each such Dealer Company to
terminate, ALL the General Motors Dealer Sales and Service Agreements in
effect with such Dealer Company.
3. Termination of any Dealer Sales and Service Agreements as described in item
two (2) above shall occur within six (6) months of General Motors notice to
UAG and the applicable Dealer Company of the failure of performance of such
Dealer Company which notice shall be given, if at all, by General Motors
within a reasonable period following General Motors receipt and review.
4. Until such time as UAG is in compliance with the General Motors Multiple
Dealer Investor Policy, it will not attempt to make or acquire additional
investments in any General Motors Dealerships.
5. Nothing contained in this letter is intended to preclude or prohibit UAG
from disposing of its interest in any Dealer Company, in accordance with
the existing General Motors policies.
6. UAG will cause DeFeo Oldsmobile of Bound Brook to voluntarily terminate
their Oldsmobile Dealer Sales and Service Agreement
-2-
<PAGE>
on or before December 31, 1995 on terms mutually acceptable to both
parties.
7. UAG hereby warrants and represents to General Motors that it currently has,
and shall maintain throughout the term of this Letter Agreement, the
absolute and unconditional right, power and authority to cause each Dealer
Company to comply with the terms and conditions of this Letter Agreement.
8. This Letter Agreement shall remain in full force and effect through August
27, 1998.
Please acknowledge your acceptance and agreement with the above by signing the
attached copy of this letter in the space provided below and return it to the
writer.
Very truly yours,
J. J. Zubor
Retail Organization &
Development Director
Accepted and agreed this 31st
----
of July, 1995
By: /s/ Carl Spielvogel
-------------------------
Carl Spielvogel
Chief Executive Officer
DAH/lm
cc: GMC Truck
Chevrolet
Pontiac
Buick
Cadillac
-3-
<PAGE>
EXHIBIT 10.5.4
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND HAS
BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE ASSIGNED, SOLD, TRANSFERRED,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR THIS NOTE UNDER THE SECURITIES ACT OF 1933) OR AN OPINION OF COUNSEL
SATISFACTORY TO THE MAKER THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT.
$300,000.00 January 16, 1996
PROMISSORY NOTE
ATLANTA TOYOTA. INC., a Texas corporation (hereinafter called "Maker"), for
value received, promises and agrees to pay to First Extended Service
Corporation (hereinafter called "Payee"), in lawful money of the United
States of America, the principal sum of THREE HUNDRED THOUSAND DOLLARS
($300,000.00), together with interest thereon (calculated on the basis of a
365 day year, or a 366 day year in the case of a leap year) from and after
the date hereof until maturity at a rate per annum equal to eight and
one-half percent (8.5%) (the "Applicable Rate"), but in no event in excess of
the maximum rate of nonusurious interest allowed from time to time by law
(hereinafter called the "Highest Lawful Rate"). All past due amounts of
principal of, and to the extent permitted by applicable law, unpaid interest
on, this note from time to time outstanding, and all unpaid amounts of
principal of this note during any period in which an Event of Default (as
hereinafter defined) exists or would exist but for the giving of notice or
the passage of time, shall bear interest at the rate equal to the Applicable
Rate plus 5%, but in no event greater than the Highest Lawful Rate. All sums
due under this note are payable to Payee at such address as may be designated
in writing by Payee to the Maker.
THE PRINCIPAL of this Note shall be paid in installments of $150,000 on
January 2, 1997 and $150,000 on January 2, 1998.
ACCRUED INTEREST is due and payable on June 30, 1996, January 2, 1997, June
30, 1997 and January 2, 1998; provided however, that if the principal of this
note is prepaid in whole or in part, all accrued and unpaid interest is due
and payable on the date of such prepayment. If any amount owing under this
note is due and payable on a day that is not a business day, such payment
shall instead be due and payable on the next succeeding business day. Maker
has the right to prepay this note in whole or in part at any time and from
time to time without premium or penalty upon not less than five days' notice
to Payee.
SO LONG as any principal or interest remains unpaid on this note, Maker
will comply or cause compliance with each of the following covenants:
<PAGE>
$300,000.00 January 16, 1996
(a) Maker shall, within fifteen (15) days after such are prepared but
in no event later than 120 days after the close of each fiscal year of
United Auto Group, Inc. a Delaware corporation ("UAG"), furnish to Payee
the audited consolidated financial statements of UAG for such period;
provided, however, that if UAG's auditors have not delivered such
financial statements within said 120-day period despite UAG's diligent
requests of them to do so, such added delay shall not constitute a
default or an Event of Default (as hereinafter defined) under this note.
In addition, Maker shall furnish to Payee from time to time (but no
more than once in any given calendar year), within 30 days after a
request by Payee, current unaudited consolidated financial statements of
Maker.
(b) Maker shall promptly notify Payee in writing of any Event of
Default under this note or any event that with the giving of notice or
the passage of time or both would constitute an Event of Default under
this note.
FOR PURPOSES of this note, an "Event of Default" shall occur whenever: (a)
default is made in the payment when due of the principal of this note, (b)
default is made in the payment when due of any installment of interest on
this note and such default has not been cured within five days after the date
on which Maker receives notice of the default from Payee,. (c) Maker shall
fail to perform or observe any other term, covenant or agreement contained in
this note and any such failure shall remain unremedied for 10 days after
written notice thereof shall have been given to Maker by Payee, (d) Maker or
UAG or any of UAG's other subsidiaries shall fail to pay when due any
principal of or interest on any indebtedness (other than this note) in excess
of $500,000 and such failure shall continue after the applicable grace
period, if any, specified in the agreement or instrument related to such
indebtedness or any other default under any agreement or instrument related
to such indebtedness, or any other event, shall occur and shall continue
after the applicable grace period, if any, specified in such agreement or
instrument, if the effect of such default or event is to accelerate, or to
permit the acceleration of, the maturity of such indebtedness, or any such
indebtedness shall be declared to be due and payable, or required to be
prepaid (other than by a regularly scheduled required prepayment), prior to
stated maturity thereof, (e) UAG shall sell all or substantially all of its
assets or UAG shall pay a dividend or make a distribution to holders of its
securities generally (other than in shares of stock or other securities of
UAG or rights to purchase stock or other securities of UAG), which dividend
or distribution, together with all other dividends or distributions by UAG on
or after the date hereof, shall result in an amount in excess of twenty-five
percent (25%) of UAG's assets having been distributed to its shareholders,
(f) Maker or UAG institutes proceedings to
<PAGE>
$300,000.00 January 16, 1996
be adjudicated as bankrupt or insolvent, or consents to institution of
bankruptcy or insolvency proceedings against it or the filing by it of a
petition or answer or consent seeking reorganization or release under the
federal Bankruptcy Act or any other applicable federal or state law, or
consents to the filing of any such petition or the appointment of a receiver,
liquidator, assignee, trustee or other similar official of Maker or UAG, or
of any substantial part of its property, or makes an assignment for the
benefit of creditors, or takes corporate action in furtherance of any such
action, or (g) within 60 days after the commencement of an action against
Maker or UAG seeking any bankruptcy, insolvency, reorganization, liquidation,
dissolution or similar relief under any present or future statute, law or
regulation, such action shall not have been resolved in favor of Maker or
UAG, as applicable, or all orders or proceedings thereunder affecting the
operations or the business of Maker or UAG, as applicable, staged, or if the
stay of any such order or proceeding shall thereafter be set aside, or if,
within 60 days after the appointment without the consent or acquiescence of
Maker or UAG of any trustee, receiver or liquidator of Maker or UAG or all or
any substantial part of its properties, such appointment shall not have been
vacated.
UPON THE OCCURRENCE and during the continuance of any Event of Default
described in clause (a), (b), (c), (d) or (e) of the foregoing paragraph,
Payee may declare the entire principal amount then outstanding under this
note, together with interest then accrued thereon, to be immediately due and
payable. Upon the occurrence of any Event of Default described in clause (f)
or (g) of the foregoing paragraph, the entire principal amount of all
indebtedness then outstanding under this note, together with interest then
accrued thereon, shall automatically become immediately due and payable.
IT IS the intention of Maker and Payee to conform strictly to applicable
usury laws. Accordingly, if the transactions contemplated hereby would be
usurious under applicable law (including the laws of the State of Georgia and
the laws of the United States of America), then, in that event,
notwithstanding anything to the contrary herein or in any agreement entered
into in connection with or as security for this note, it is agreed that the
aggregate of all consideration which constitutes interest under applicable
law that is taken, reserved, contracted for, charged or received under this
note or under any of the other aforesaid agreements or otherwise in
connection with this note shall under no circumstances exceed the maximum
amount of interest allowed by applicable law, and any excess shall be
cancelled automatically and, if theretofore paid, shall be credited on the
note by the holder hereof (or, to the extent that this note shall have been
or would thereby be paid in full, refunded to the Maker).
<PAGE>
$300,000.00 January 16, 1996
IF THE holder hereof expends any effort in any attempt to enforce payment
of all or any part or installment of any sum due the holder hereunder, or if
this note is placed in the hands of an attorney for collection, or if it is
collected through any legal proceedings, Maker agrees to pay all reasonable
costs, expenses and fees incurred by the holder, including reasonable
attorney's fees.
MAKER AND each surety, guarantor, endorser and other party ever liable for
payment of any sums of money payable on this note jointly and severally waive
notice, presentment, demand for payment, protest, notice of protest and
non-payment or dishonor, notice of acceleration, notice of intent to
accelerate, notice of intent to demand, diligence in collecting, grace, and
all other formalities of any kind, and consent to all extensions without
notice for any period or periods of time and partial payments, before or
after maturity, all without prejudice to the holder.
MAKER AND each surety, guarantor, endorser and other party ever liable for
payment of any sums of money payable on this note jointly and severally do
hereby, to the extent permitted by applicable law, further convey and assign
to the holder hereof and waive and renounce any and all exemption rights
which they may have under or by virtue of the Constitution or laws of
Georgia, or any other state, or the United States, as may be allowed, against
this debt or any renewal thereof.
THIS NOTE has been executed and delivered in and shall be construed in
accordance with and governed by the laws of the State of Georgia and of the
United States of America.
ATLANTA TOYOTA, INC.
By: /s/ Illegible
-------------------------
Its: President
--------------------------
<PAGE>
GUARANTY
In order to induce Carl Westcott, an individual resident of the State
of Texas ("Westcott"), to sell one hundred percent (100%) percent of the issued
and outstanding shares of common stock of Atlanta Toyota, Inc., a Texas
corporation ("Atlanta Toyota"), to UAG Atlanta, Inc., a Delaware corporation and
a wholly-owned subsidiary of the undersigned ("UAG/Atlanta"), the undersigned
hereby irrevocably, unconditionally and absolutely guarantees the due
performance and punctual payment when due, whether at stated maturity, by
acceleration or otherwise, of all obligations of UAG/Atlanta now or hereafter
existing under that certain Promissory Note (the "Note") dated January 16, 1996
payable to the order of Westcott in the original principal amount of $2,100,100
(all such obligations being sometimes hereinafter referred to as the
"Obligations"), and agrees to pay any and all expenses (including reasonable
counsel fees and expenses) incurred by Westcott in enforcing any rights under
this Guaranty.
The undersigned hereby waives promptness, diligence, presentment,
protest, notice of dishonor, demand for payment, extension of time of payment,
notice of acceptance of this Guaranty, notice of non-payment when due of the
Obligations guaranteed hereby and indulgences and notices of every other kind
and hereby consents to any and all forebearances and extensions of time of
payment of the Obligations and to any and all of the changes in the terms,
covenants and conditions thereof hereafter made or guaranteed. The liability of
the undersigned under this Guaranty shall be absolute and unconditional
irrespective of (i) any lack of validity or enforceability of the Note, (ii) any
change in the time, manner or place of payment of, or in any other term of, all
or any of the Obligations, or any other amendment or waiver or any consent to
departure from the Note and any other agreement or instrument relating thereto,
(iii) any release or amendment or waiver of or consent to departure from any
other guaranty for all or any of the Obligations, or (iv) any other circumstance
which might otherwise constitute a defense available to, or a discharge of
UAG/Atlanta or a guarantor.
No delay or omission by Westcott in exercising any of his rights,
remedies, powers and privileges hereunder and no course of dealing between
Westcott, on the one hand, and UAG/Atlanta, Atlanta Toyota, the undersigned or
any other person, on the other hand, shall be deemed a waiver by Westcott of any
of his rights, remedies, powers, and privileges, even if such delay or omission
is continuous or repeated; nor shall any single or partial exercise of any
right, remedy, power or privilege preclude any other or further exercise thereof
by Westcott or the exercise of any other right, remedy, power or privilege by
Westcott. No notice or demand on UAG/Atlanta, Atlanta Toyota, the undersigned
or any other person in any instance shall entitle UAG/Atlanta, Atlanta Toyota
the undersigned or any other person to any other or further notice or demand in
similar or other circumstances or constitute a waiver of Westcott's right to any
other or further action in any circumstances without notice or demand.
<PAGE>
This Guaranty shall be enforceable without Westcott having to proceed
first against UAG/Atlanta (the right to require Westcott to take action against
UAG/Atlanta as required by O.C.G.A. Section 10-7-24 being hereby expressly
waived) or against any security for the payment of the Obligations, and shall be
effective regardless of the solvency or insolvency of UAG/Atlanta, any
reorganization, merger or consolidation of UAG/Atlanta, or any change in the
composition, nature, personnel or location of UAG/Atlanta.
This Guaranty shall remain in full force and effect, and the
undersigned shall continue to be liable for the payment of the Obligations in
accordance with the terms of the documents and instruments evidencing and
securing the same, notwithstanding the commencement of any bankruptcy,
reorganization or other debtor relief proceeding by or against UAG/Atlanta, and
notwithstanding any modification, discharge or extension of the Obligations, any
modification or amendment of any document or instrument evidencing or securing
any of the Obligations, any stay of the exercise by Westcott of any of his
rights and remedies against UAG/Atlanta with respect to any of the Obligations,
or any cure of any default by UAG/Atlanta under any document or instrument
evidencing or securing any of the Obligations, which may be effected in
connection with any such proceeding, whether permanent or temporary, and
notwithstanding any assent thereto by Westcott.
Wherever possible, each provision of this Guaranty shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Guaranty shall be prohibited by or be invalid under
such law, such provision shall be ineffective to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Guaranty.
The undersigned warrants and represents to Westcott that any financial
statements heretofore delivered by the undersigned to Westcott were true and
correct in all respects as of the date delivered to Westcott.
This Guaranty shall inure to the benefit of Westcott and his
successors and assigns, and shall be binding upon the undersigned and its
successors and assigns. This instrument constitutes the entire agreement as to
the subject matter contemplated hereby.
No amendment or waiver of any provision of this Guaranty nor consent
to any departure by Westcott therefrom shall in any event be effective unless
the same shall be in writing and signed by Westcott and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
This instrument has been made and delivered in Georgia and shall be
governed by the laws of Georgia.
-2-
<PAGE>
WITNESS the undersigned's signature as of the 16th day of January,
1996.
UNITED AUTO GROUP, INC.,
a Delaware corporation
By: /s/George Lowrance
-----------------------------
Its: Secretary
-----------------------------
-3-
<PAGE>
Exhibit 10.5.10
CONTINUING GUARANTY
FOR VALUE RECEIVED, the sufficiency of which is hereby acknowledged,
and in consideration of any loan, advance or other financial accommodation
heretofore or hereafter at any time made or granted to, of any purchase or other
acquisition of retail installment sales contracts, leases, conditional sales
contracts or other security agreements or instruments from, and of any extension
of credit or of the transaction of any business with UNITED NISSAN, INC.
("DEALER") by WORLD OMNI FINANCIAL CORP., WORLD OMNI LEASING, INC. or TOYOTA
MOTOR CREDIT CORPORATION (hereinafter, together with their transferees,
successors and assigns, individually referred to as a "LENDER" and collectively
referred to as the "LENDERS"), which loans, advances, purchases, acquisitions,
or extensions of credit would not have been made but for this Continuing
Guaranty, each of the undersigned (hereinafter, individually a "GUARANTOR" and
collectively the "GUARANTORS"), jointly and severally, and absolutely and
unconditionally, guarantee to each LENDER that DEALER shall fully, promptly and
faithfully perform and pay and discharge all DEALER's present and future
obligations to each LENDER (collectively, the "Obligations"), whether direct,
indirect or contingent, whether incurred by DEALER as the primary debtor, co-
maker, or guarantor, whether otherwise guaranteed or secured, or whether on open
account, evidenced by an instrument, or otherwise. The GUARANTORS agree to pay
in full on demand all sums due and to become due to each LENDER from DEALER if
not paid when due by DEALER, whether at maturity or earlier, by reason of
acceleration or otherwise, together with interest and all losses, costs,
attorneys' fees (provided, however, that if this Continuing Guaranty is governed
by and construed and enforced under the laws of the State of Georgia, the
GUARANTORS shall pay to each LENDER attorneys' fees at the rate of 15% of the
principal and interest owing by DEALER to each LENDER), other legal expenses,
and other expenses which each LENDER may suffer, including attorneys' fees for
any appellate procedure, arbitration or consultation, by reason of DEALER's
default. Each of the GUARANTORS warrants to each LENDER that it has adequate
means to obtain from the DEALER on a continuing basis information concerning the
financial condition of the DEALER and that it is not relying on the LENDERS to
provide such information either now or in the future.
The GUARANTORS hereby individually subordinate any sums now or
hereafter due to them from DEALER (the "Subordinated Indebtedness") to the
payment of any sums now or hereafter due each LENDER from the DEALER. The
GUARANTORS further agree that none of them, without prior written consent of
each LENDER, shall demand payment of, take steps for the collection of, assign,
transfer or otherwise dispose of any of the Subordinated Indebtedness, or any
part thereof, nor shall they enforce collection against any collateral securing
any Subordinated
<PAGE>
Indebtedness, nor demand or accept any property belonging to DEALER as security
for any Subordinated Indebtedness as long as DEALER should be indebted to any
LENDER. It is the understanding of the parties that payments (in fair and
reasonable amounts) shall be allowed to be paid by DEALER to the GUARANTORS for:
(i) wage and salary payments for services rendered after the date hereof or for
a current payroll period; (2) reimbursement for ordinary and necessary travel
and entertainment expenses actually incurred and paid by a GUARANTOR after the
date hereof for the benefit of DEALER; and (3) payments for materials or
services furnished by the GUARANTORS to the DEALER in the ordinary course of
business dealings between a GUARANTOR and DEALER. In all respects, except as
above set forth specifically, any indebtedness or other obligation of the DEALER
to the GUARANTORS shall be subordinate to the debt of each LENDER.
As security for the payment and performance of all of the GUARANTORS'
obligations hereunder, each of the GUARANTORS hereby assigns, transfers, and
sets over to the LENDERS, all of their right, title and interest in and to all
of the Subordinated Indebtedness and any collateral pledged, granted or given to
a GUARANTOR as security therefor and agrees to execute such instruments as may
be reasonably requested from time to time, in the discretion of each LENDER, to
effectuate, complete or further confirm this assignment and transfer; and each
GUARANTOR hereby agrees to hold in trust for and promptly remit to the LENDERS
for application upon the debt due the LENDERS from DEALER any amount such
GUARANTOR receives from DEALER or any other person on account of the
Subordinated Indebtedness. Each of the undersigned GUARANTORS shall furnish
each LENDER such balance sheets, statements of income, expenditure and surplus
statements, together with any other financial statements as may be reasonably
requested from time to time, at the discretion of each LENDER. Additionally,
each GUARANTOR shall execute and agree to all terms included in any assumption
agreement, subordination agreement or other guaranty reasonably requested by
each LENDER.
With respect to each LENDER, this Continuing Guaranty shall not be
terminable as long as there are any Obligations of DEALER to the LENDER in
effect or pending. If no such Obligations are in effect or pending, then this
Continuing Guaranty may be terminated by notice sent to the LENDER, by certified
mail, stating an effective date after the receipt of such notice. A notice of
termination shall not be effective for a period of 60 days after receipt by the
LENDER. No termination shall be effective as pertains to any Obligation of
DEALER incurred prior to the effective date of termination. No termination
shall likewise be effected by the death or incompetency of any of the
GUARANTORS. Notwithstanding a valid termination in accordance with this
paragraph, this Continuing Guaranty shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of any of the
Obligations is rescinded or must otherwise be returned by the LENDER upon the
insolvency, bankruptcy or reorganization of DEALER or otherwise,
-2-
<PAGE>
all as though such payment had not been made. If the obligations of one or more
GUARANTORS hereunder are terminated or if one or more GUARANTORS are released
from this Continuing Guaranty, for any reason whatsoever, whether by an act of
any LENDER or otherwise, such termination or release shall not operate to
terminate this Continuing Guaranty with respect to any other GUARANTOR or
operate to release any other GUARANTOR from the obligations hereunder. This
Continuing Guaranty remains fully enforceable irrespective of any defenses which
the DEALER may assert on the underlying debt including, but not limited to,
failure of consideration, breach of warranty, payment, statute of frauds,
statute of limitations, accord and satisfaction, and usury.
The GUARANTORS hereby consent that, without notice to, or further
consent of GUARANTORS: (a) the performance or observance by DEALER of the
Obligations may be waived or the time of performance thereof extended by a
LENDER; (b) the payment of any Obligation hereby guaranteed may be accelerated
or extended in accordance with any agreement between a LENDER and any party
liable with respect thereto; or (c) the Obligations may be renewed, in whole or
in part, or new Obligations may be created or incurred, or any collateral
therefor or any guaranty thereof may be exchanged, surrendered, released or
otherwise dealt with as each LENDER may determine, and any of the acts mentioned
in the Obligations may be done, all without affecting the liability of
GUARANTORS hereunder. Without in any way limiting the foregoing, the GUARANTORS
hereby waive any other act or omission of each LENDER which changes the scope of
the GUARANTORS' risk.
GUARANTORS hereby waive: (a) promptness, diligence, presentment of any
instrument, demand for payment, protest, notice of dishonor, notice of
presentment, notice of nonpayment, notice of protest, notice of default (or any
other notice of any kind to GUARANTORS, all of which are hereby expressly waived
by GUARANTORS to the fullest extent permitted by law); (b) notice of any
exchange, surrender, release or other handling of any GUARANTORS or collateral
relating to DEALER; (c) failure of any LENDER to obtain and perfect or maintain
the perfection or priority of any security interest or lien on property to
secure any of the Obligations; (d) defenses, offset and counterclaims which the
GUARANTORS may at any time have to any claim of any LENDER against the DEALER;
(e) any changes in the terms of the Obligations, whether deemed material or not,
including any interest rate adjustment; (f) any other change in the Obligations
including a change in the business structure of the DEALER; (g) surrender,
release, exchange or substitution of any collateral or dealing with or taking
any additional collateral; (h) abstaining from taking advantage of or realizing
upon any security interest or other guarantee; and (i) any impairment of any
collateral. Further, the GUARANTORS hereby waive all errors and omissions in
connection with each LENDER's administration of the Obligations, except behavior
which amounts to bad faith. Finally, without in any way limiting the foregoing,
each of the GUARANTORS hereby
-3-
<PAGE>
waives any other act or omission of any LENDER which changes the scope of each
of the GUARANTOR's risk.
It is contemplated that this is and is intended to be the personal
guaranty of payment and performance of each GUARANTOR and any language in
connection with any signature indicating a capacity other than personal shall be
deemed stricken from and shall not be part of the signature; however, this
provision shall not apply to the signature of a person who signs as an officer
of a corporation which executes this Continuing Guaranty as a Corporate
Guarantor of the DEALER. The liability of the GUARANTORS is primary, absolute
and unconditional, and shall not be subject to deduction for any claim of
setoff, counterclaim or defense of DEALER, or loss of contribution from any CO-
GUARANTORS hereunder or release or discharge of one or more of the CO-
GUARANTORS, and the GUARANTORS shall have no right of subrogation,
reimbursement, indemnity, or recourse to any assets or property of DEALER or to
any security for the indebtedness or Obligations owing to any LENDER by DEALER,
unless and until all of such indebtedness and Obligations shall have been
performed and paid in full with interest, fees and costs. If any amount shall
be paid to a GUARANTOR as payment on the Subordinated Indebtedness or on account
of such subrogation, reimbursement or indemnity rights at any time before all
Obligations have been paid in full, such amount shall be held in trust for the
benefit of the LENDERS and shall forthwith be paid to the LENDERS to be credited
and applied to the Obligations, whether matured or unmatured. The liability of
the GUARANTORS under this Continuing Guaranty shall be absolute and
unconditional irrespective of any lack of validity or enforceability of the
Obligations or any other agreement or instrument relating thereto or any other
circumstance which might otherwise constitute a defense available to, or a
discharge of, the DEALER or a GUARANTOR. Nothing shall discharge or satisfy the
joint and several liability of the GUARANTORS hereunder except such full
performance and payment.
This is a guaranty of payment, and not of collection, and the
GUARANTORS therefore agree that each LENDER shall not be obligated, prior to
seeking recourse against or receiving payment from the GUARANTORS, to do any of
the following acts (although each LENDER may do so, in whole or in part, at its
sole option), the performance of each of which is hereby unconditionally waived
by the GUARANTORS: (a) take any steps whatsoever to collect from DEALER or to
file any claim of any kind against DEALER; (b) take any steps whatsoever to
accept, perfect any LENDER's interest in, or foreclose or realize on, any
collateral security, if any, pledged or given as security for the payment of the
amounts due any LENDER, or any guaranty of such amounts; or (c) in any other
respect exercise any diligence whatever in collecting or attempting to collect
the amounts due any LENDER by any means. Each GUARANTOR agrees that this
Continuing Guaranty may be enforced by the LENDER without the necessity at any
time of resorting to or exhausting any other security or collateral,
-4-
<PAGE>
whether owned by Dealer or any CO-GUARANTOR, and each GUARANTOR hereby waives
any right it may otherwise have under any statute, regulation or other law to
require the LENDER to proceed against the DEALER or any CO-GUARANTOR or to
require the LENDER to pursue any other remedy or enforce any other right prior
to proceeding against the GUARANTOR.
No waiver by any LENDER of any default shall operate as a waiver of
any other default or of the same default on a future occasion. No delay or
omission on the part of any LENDER in exercising any right or remedy shall
operate as a waiver thereof, and no single or partial exercise by any LENDER of
any right or remedy shall preclude any other or further exercise thereof or the
exercise of any other right or remedy. Time is of the essence in relation to
this Continuing Guaranty. The provisions of this Continuing Guaranty are
cumulative and in addition to the provisions of any of the Obligations
guaranteed by this Continuing Guaranty or any other agreement executed in
conjunction herewith and each LENDER shall have all the benefits, rights and
remedies provided by any Obligation guaranteed hereby.
Each LENDER may employ an attorney or a law firm to enforce its rights
and remedies hereunder and GUARANTORS hereby agree, jointly and severally, to
pay to each LENDER reasonable attorneys' fees (provided, however, that if this
Continuing Guaranty is governed by and construed and enforced under the laws of
the State of Georgia, the GUARANTORS shall pay to each LENDER attorneys' fees at
the rate of 15% of the principal and interest owing by DEALER to each LENDER),
whether or not suit be brought, including attorneys' fees on appeal, plus all
other reasonable expenses incurred by a LENDER in exercising any of its rights
and remedies hereunder, including without limitation, court costs, other legal
expenses and attorneys' fees incurred in connection with consultation,
arbitration and litigation, and such fees, costs, and expenses shall bear
interest at the rate of 18% per annum until paid.
Except as otherwise provided herein, each LENDER may assign this
Continuing Guaranty or any of its rights and powers hereunder, with all of the
Obligations hereby guaranteed, and may assign and/or deliver to any such
assignee any of the security therefor, if any, and in the event of such
assignment, the assignee of such rights and powers and of such security, shall
have the same rights, duties, remedies and obligations as if originally named
herein in place of a LENDER and, upon such assignee's written acceptance and
assumption of same, the assigning LENDER shall be thereafter fully discharged
from all responsibility with respect to any such security so assigned and/or
delivered. Neither this guaranty nor any obligation hereunder may be assigned
by the GUARANTORS. This instrument shall bind the GUARANTORS' respective heirs,
administrators and personal representatives.
-5-
<PAGE>
This Continuing Guaranty is intended by the parties hereto as a final
expression of the guarantee agreement set forth herein and is also intended as a
complete and exclusive statement of the terms of that agreement. No course of
dealing, course of performance or trade usage, and no parol evidence of any
nature, shall be used to supplement or modify any terms, nor are there any
conditions to the full effectiveness of this Continuing Guaranty. The
obligations of the GUARANTORS hereunder shall be complete and binding upon
execution of this Continuing Guaranty and subject to no conditions, precedent or
otherwise. Each of the persons who has signed this Continuing Guaranty has
unconditionally delivered it to each LENDER, and failure to sign this or any
other guaranty by any other person shall not discharge the liability of any
signer.
This Continuing Guaranty shall be governed by and construed and
enforced under the laws of the State of GEORGIA without regard to its conflict
of laws principles. Whenever possible, each provision of this Continuing
Guaranty shall be interpreted so as to be effective and valid under applicable
law, but if any provision of this Continuing Guaranty shall be invalid under
applicable law, such provision shall be ineffective only to the extent of such
invalidity, without invalidating the remainder of such provision or the
remainder of this Continuing Guaranty. The singular when used herein shall
include the plural, the neuter shall include masculine and feminine, and the
masculine shall include the feminine.
GUARANTORS hereby knowingly, voluntarily and intentionally waive the
right to a trial by jury in respect of any litigation based on this Continuing
Guaranty, or arising out of, under, or in connection with any document executed
in connection with this Continuing Guaranty or any transaction related hereto,
or in connection with any course of conduct, course of dealing, statements
(whether verbal or written), or actions of any LENDER or any other person. This
waiver of trial by jury provision is a material inducement for the LENDERS to
-6-
<PAGE>
enter into the transactions guaranteed by this Continuing Guaranty.
The GUARANTORS hereby acknowledge receipt of a fully executed copy of
this Continuing Guaranty.
IN WITNESS WHEREOF, each of the undersigned GUARANTORS has caused this
Continuing Guaranty to be executed under hand and seal this 29 day of April
1996.
Guarantors:
(SEAL) Address
- ------------------------- --------------------
(SEAL) Address
- ------------------------- --------------------
Corporate Guarantor:
UNITED AUTO GROUP, INC. ATTEST:
(Print Name)
By:/s/ Carl Spielvogel By:/s/ George Lowrance
------------------- -------------------
Carl Spielvogel ,President George Lowrance, Secretary
------------------- ---------------
375 Park Avenue Address
-------------------
New York, NY 10152 (CORPORATE SEAL)
------------------
-7-
<PAGE>
EXHIBIT 10.5.12
SHAREHOLDERS' AGREEMENT
This Shareholders' Agreement, dated as of July 31, 1996, among United
Auto Group, Inc., a Delaware corporation ("UAG"), UAG Atlanta, Inc., a
Delaware corporation and a wholly owned subsidiary of UAG ("UAG/Atlanta"),
Atlanta Toyota, Inc., a Texas corporation (the "Company") and John R. Smith,
an individual resident of the State of Georgia ("Smith"). UAG/Atlanta and
Smith and each other person or entity that may become a party hereto as
contemplated hereby, are hereinafter individually referred to a "Shareholder"
and collectively referred to as the "Shareholders".
W I T N E S S E T H :
WHEREAS, immediately prior to consummation of the UAG Purchase (as
defined below), UAG/Atlanta will own 1,000 shares of Common Stock of the
Company, $.01 par value ("Common Stock"), which will constitute all of the
issued and outstanding capital stock of the Company as of such time; and
WHEREAS, Smith, UAG, UAG/Atlanta and the Company have entered into a
Stock Purchase Agreement, dated as of July 26, 1996 (the "Stock Purchase
Agreement"), pursuant to which Smith has agreed to purchase 50 shares (the
"Shares") of Common Stock from UAG/Atlanta (the "Smith Purchase"), such that
immediately after giving effect to the Smith Purchase, UAG and Smith will own
ninety-five (95%) percent and five (5%) percent, respectively, of all of the
issued and outstanding shares of Common Stock, on a fully-diluted basis; and
WHEREAS, pursuant to the Stock Purchase Agreement it is a condition
precedent to the obligations of UAG, UAG/Atlanta and Smith to consummate the
Smith Purchase that UAG, UAG/Atlanta, the Company and Smith shall have entered
into this Agreement; and
WHEREAS, UAG, UAG/Atlanta, the Company and Smith 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
DEFINITIONS
SECTION 1.1. CERTAIN DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings:
"AFFILIATE" shall mean, with respect to any Shareholder, (i) in all
cases, any Person that, directly or indirectly, controls, is controlled by or
is under common control with such Shareholder and (ii) in the case of a
Shareholder who is a natural person, his spouse, his issue, his estate and
any trust entirely for the benefit of his spouse and/or issue. Neither the
Company nor any of its Subsidiaries shall be deemed an Affiliate of any
Shareholder. For purposes of this definition, "control" (including, with
correlative meanings, the terms "controlled by" and "under common control
with") as used with respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of
voting securities, by contract or otherwise.
"BUSINESS DAY" shall mean each Monday, Tuesday, Wednesday, Thursday
and Friday, excluding Federal holidays.
"COMMON STOCK" shall have the meaning specified in the first recital
hereof.
"COMMON STOCK EQUIVALENTS" shall mean all rights, warrants, options,
indebtedness or other securities exercisable or exchangeable for, or convertible
into, directly or indirectly, Common Stock.
"COMPANY" shall have the meaning set forth in the preamble hereof.
"EFFECTIVE DATE" shall have the meaning set forth in Section 2.1 hereto.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated by the SEC thereunder.
"FIRST OFFER" shall have the meaning specified in Section 3.3(a) hereof.
"FIRST OFFER PERIOD" shall have the meaning specified in Section 3.3(a)
hereof.
"FULLY-DILUTED SHARES" shall mean, at any time, the outstanding Common
Stock plus (without duplication) all shares of Common Stock issuable, whether at
such time, upon the passage of
-2-
<PAGE>
time or occurrence of future events, upon the exercise, conversion or
exchange of all then outstanding Common Stock Equivalents.
"GAAP" shall mean generally accepted accounting principles which are in
effect in the United States at the time.
"MANAGING UNDERWRITER" shall have the meaning specified in Section
4.1(b) hereof.
"MINORITY INTEREST PERCENTAGE" shall have the meaning specified in
Section 4.1(c) hereof.
"MINORITY SHARES" shall have the meaning specified in Section 4.1(c)
hereof.
"OFFERED SHARES" shall have the meaning specified in Section 3.3(a)
hereof.
"OTHER MINORITY HOLDERS" shall have the meaning specified in Section
4.1(c) hereof.
"OTHER MINORITY INTEREST" shall have the meaning specified in Section
4.1(c) hereof.
"OUTSTANDING UAG SHARES" shall have the meaning specified in Section
4.1(c) hereof.
"PERSON" shall mean an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
government (or an agency or political subdivision thereof) or other entity of
any kind.
"PUBLIC FLOAT DATE" shall mean the date on which shares of Common Stock
shall have been sold by the Company or its shareholders pursuant to a Public
Offering.
"PUBLIC OFFERING" shall mean the completion of a sale of Common Stock
pursuant to a registration statement which has become effective under the
Securities Act, excluding registration statements on Form S-4, S-8 or similar
forms.
"PURCHASE OFFER" shall have the meaning specified in Section 3.3(a)
hereof.
"PURCHASER" shall have the meaning specified in Section 3.3(a) hereof.
"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, and
the rules and regulations promulgated by the SEC thereunder.
-3-
<PAGE>
"SELLING SHAREHOLDER" shall have the meaning specified in Section 3.3(a)
hereof.
"SHAREHOLDERS" shall have the meaning specified in the preamble hereof.
"SHARES" shall have the meaning specified in the third recital hereof.
"SMITH EXCHANGED SHARES" shall have the meaning specified in Section
4.1(c) hereof.
"SMITH INTEREST" shall have the meaning specified in Section 4.1(a)
hereof.
"SMITH INTEREST PERCENTAGE" shall have the meaning specified in Section
4.1(c) hereof.
"SMITH INTEREST VALUE" shall have the meaning specified in Section
4.1(b) hereof.
"SMITH" shall have the meaning specified in the preamble hereof.
"SMITH PURCHASE" shall have the meaning specified in third recital
hereof.
"STOCK PURCHASE AGREEMENT" shall have the meaning specified in the third
recital hereof.
"SUBSIDIARY" shall mean (i) a corporation a majority of whose capital
stock with voting power, under ordinary circumstances, to elect directors is
at the time, directly or indirectly, owned by the Company, by a Subsidiary or
by the Company and a Subsidiary or (ii) any other Person (other than a
corporation) in which the Company, a Subsidiary or the Company and a
Subsidiary, directly or indirectly, at the date of determination thereof, has
at least a majority ownership interest.
"TAG-ALONG OFFER" shall have the meaning specified in Section 3.3(b)
hereof.
"TAG-ALONG PARTICIPATION NOTICE" shall have the meaning specified in
Section 3.3(b) hereof.
"TAG-ALONG SALE" shall have the meaning specified in Section 3.3 (b)
hereof.
"TAG-ALONG SALE NOTICE" shall have the meaning specified in Section
3.3(b) hereof.
"TAKE-ALONG SALE" shall have the meaning specified in Section 3.3(c)
hereof.
-4-
<PAGE>
"TOTAL EXCHANGED SHARES" shall have the meaning specified in Section
4.1(c) hereof.
"TOTAL INTEREST PERCENTAGE" shall have the meaning specified in Section
4.1(c) hereof.
"TRANSFER" shall have the meaning specified in Section 4.1(a) hereof.
"UAG" shall have the meaning specified in the preamble hereof.
"UAG/ATLANTA" shall have the meaning specified in the preamble hereof.
"UAG COMMON STOCK" shall have the meaning specified in Section 4.1(a)
hereof.
"UAG COMMON STOCK EQUIVALENTS" shall have the meaning specified in
Section 4.1(c) hereof.
"UAG COMMON STOCK PRICE" shall have the meaning specified in Section
4.1(b) hereof.
"UAG EXCHANGE" shall have the meaning specified in Section 4.1(a)
hereof.
"UAG EXCHANGE DATE" shall have the meaning specified in Section 4.1(c)
hereof.
"UAG Public Offering" shall have the meaning specified in Section 4.1(c)
hereof.
"UAG SHAREHOLDERS AGREEMENT" shall mean the Stockholders' Agreement,
dated as of October 15, 1993, among UAG and certain shareholders of UAG named
therein.
ARTICLE 2
EFFECTIVENESS OF AGREEMENT
SECTION 2.1. EFFECTIVE DATE.
This Agreement shall become effective as of the date and time (the
"Effective Date") the Smith Purchase shall have been consummated, and this
Agreement shall have no effect for any purpose unless and until the Smith
Purchase shall have occurred.
SECTION 2.2. STOCK PURCHASE AGREEMENT RESTRICTIONS.
Notwithstanding anything contained in this Agreement to the contrary,
Smith shall not transfer the Shares unless the
-5-
<PAGE>
Transfer is in accordance with the provisions of Section 1.3 of the Stock
Purchase Agreement.
ARTICLE 3
TRANSFER OF SECURITIES
SECTION 3.1. CONSENT OF UAG.
(a) Subject to the rights of Smith contained in Sections 3.3(b) and
4.1 hereof and for as long as UAG/Atlanta (or an Affiliate thereof) shall own
35% of the Fully-Diluted Shares, no Shareholder other than UAG/Atlanta shall
directly or indirectly Transfer (as defined below) any shares of capital
stock of the Company now or hereafter at any time owned by such Shareholder
or any interest therein, or the stock certificate or certificates
representing any such shares, or any voting trust certificate or certificates
issued with respect to such shares, without the prior written consent of UAG.
Any Transfer effected, or purported or attempted to be effected, not in
accordance with the terms and conditions of this Section 3.1, or to a Person
prohibited by law from holding shares of capital stock of the Company, shall
be void and shall not bind the Company. As used in this Agreement, the term
"Transfer" shall mean and include (i) when used as a verb, the act of
selling, pledging, mortgaging, hypothecating, giving, transferring, creating
a security interest, lien or trust (voting or otherwise), assigning or
otherwise encumbering or disposing of, and (ii) when used as a noun, any
sale, pledge, mortgage, hypothecation, gift, transfer, creation of security
interest, lien or trust, any assignment or other encumbrance or disposition.
(b) Notwithstanding the provisions of Section 3.1(a) hereof, but
subject to the provisions of Section 3.2(a) and (b) hereof, a Shareholder may
effect a Transfer of shares of capital stock of the Company by will or the laws
of descent and distribution to the legal representative of such Shareholder or
to such Shareholder's spouse, immediate family members or lineal descendants or
a trust the primary beneficiaries of which are such persons.
SECTION 3.2. GENERAL RESTRICTIONS.
No Shareholder (including UAG/Atlanta and any other Shareholder
permitted to Transfer shares of capital stock of the Company or any interest
therein in accordance with Section 3.1 hereof) shall, directly or indirectly,
Transfer any shares of capital stock of the Company or any interest therein,
whether voluntarily or involuntarily, unless:
(a) (i) such Transfer complies with the provisions of this Agreement,
including Section 3.3 hereof, if applicable, and (ii) the transferee (if other
than another Shareholder) agrees to
-6-
<PAGE>
be bound by this Agreement and executes a counterpart hereof and such further
documents as may be necessary, in the opinion of the Company, to make it a
party hereto (any such transferee shall be deemed to be a Shareholder for
purposes of this Agreement); and
(b) such Transfer is made pursuant to either (i) an effective
registration statement under the Securities Act and any applicable state
securities laws, or (ii) an available exemption from the registration
requirements of the Securities Act and such laws and, prior to any such
Transfer (other than a Transfer to another Shareholder), the Person proposing
the Transfer provides to the Company a written opinion of legal counsel
satisfactory in form and substance to the Company and its counsel to the
effect that the proposed Transfer may be effected without registration under
the Securities Act and any applicable state securities laws.
SECTION 3.3. RIGHT OF FIRST REFUSAL AND CO-SALE RIGHTS AND OBLIGATIONS.
(a) RIGHT OF FIRST REFUSAL.
(i) FIRST OFFER NOTICE. Except as otherwise permitted by Section
3.1(b) hereof, subject to Section 3.1(a) hereof, at any time prior to the
Public Float Date, no Shareholder (other than UAG/Atlanta (or an Affiliate
thereof)) shall transfer all or any of his shares of Common Stock (which
shall include all or any Common Stock Equivalents) (the "Offered Shares")
unless (x) such Shareholder (the "Selling Shareholder") has received a bona
fide written offer (the "Purchase Offer") from the proposed transferee of
the Offered Shares (the "Purchaser") to purchase the Offered Shares, which
offer shall be in writing signed by the Purchaser, and (y) the Selling
Shareholder first offers to sell to UAG/Atlanta the Offered Shares. Prior
to making any transfer that is subject to this Section 3.3(a), the Selling
Shareholder shall give UAG/Atlanta written notice (the "Offer Notice") which
shall include (x) the identity of the Purchaser, (y) a copy of the Purchase
Offer, and (z) an offer (the "First Offer") to sell to UAG/Atlanta the
Offered Shares upon the same terms and conditions as those provided for in
the Purchase Offer. The First Offer shall be irrevocable for a period of
thirty (30) days following receipt by UAG/Atlanta of the Offer Notice (the
"First Offer Period").
(ii) ACCEPTANCE OF FIRST OFFER. At any time during the First Offer
Period, UAG/Atlanta may accept the First Offer of the Offered Shares by
giving written notice to the Selling Shareholder of such acceptance. In the
event UAG/ Atlanta accepts the First Offer, the closing of the sale of the
Offered Shares shall take place within thirty (30) days after the First
Offer is accepted by UAG or, if later, the date of closing set forth in the
Purchaser Offer. At such
-7-
<PAGE>
closing, the Selling Shareholder will deliver certificates for such Offered
Shares against payment of the purchase price therefor, and UAG/Atlanta will
acquire the Offered Shares free and clear of all liens, pledges,
encumbrances, restrictions and security interests of any kind. If
UAG/Atlanta does not accept the First Offer, the Selling Shareholder may sell
the Offered Shares to the Purchaser at any time within thirty (30) days after
the last day of the First Offer Period, provided that such sale shall be made
on terms no less favorable to the Selling Shareholder than the terms
contained in the Purchase Offer and provided further that such sale complies
with the terms, conditions and restrictions of this Agreement. In the event
that the Offered Shares are not sold in accordance with the terms of the
preceding sentence, the Offered Shares shall again be subject to all of the
conditions and restrictions of this Section 3.3(a).
(b) TAG-ALONG-RIGHT.
(i) TAG-ALONG SALE NOTICE. If, at any time prior to the Public
Float Date, UAG/Atlanta (or an Affiliate thereof) receives a bona fide offer
(a "Tag-Along Offer") from a third party to purchase shares of Common Stock
from UAG (or an Affiliate thereof) or UAG/Atlanta otherwise proposes to sell
shares of Common Stock for value, in each case other than in connection with
a Public Offering (a "Tag-Along Sale"), UAG/Atlanta shall be required to
notify Smith, not less than fifteen (15) days prior to such proposed Tag-
Along Sale, of such Tag-Along Offer or proposed Tag-Along Sale and Smith
shall have the option to participate in such Tag-Along Sale as set forth in
clause (ii) of this Section 3.3(b). The notice from UAG/Atlanta (the "Tag-
Along Sale Notice") shall set forth: (A) the number of shares of Common
Stock proposed to be transferred, (B) the name and address of the proposed
purchaser, (C) the proposed amount of consideration and terms and conditions
of payment offered by or to such proposed purchaser, and (D) that the
proposed purchaser has been informed of the "tag-along" rights provided for
in this Section 3.3(b) and has agreed to purchase shares of Common Stock in
accordance with the terms hereof.
(ii) TAG-ALONG RIGHT. Any time prior to the Public Float Date,
Smith shall have the right to require the proposed purchaser to purchase
from him a number of whole shares of Common Stock up to the number of shares
equal to the total number of shares to be sold to the proposed purchaser
multiplied by a fraction, the numerator of which is the number of shares of
Common Stock held by him and the denominator of which is the total number of
shares of Common Stock held by him and UAG (or an Affiliate thereof). Any
shares of Common Stock purchased from Smith pursuant to this Section 3.3(b)
shall be paid for upon the same terms and conditions (includ-
-8-
<PAGE>
ing as to price and type of consideration) received by UAG/Atlanta.
(iii) TAG-ALONG NOTICE. If Smith elects to exercise the tag-along
right provided for in this Section 3.3(b), he must deliver written notice to
UAG/Atlanta (the "Tag-Along Participation Notice") within five (5) days
following receipt by him of the Tag-Along Sale Notice. If Smith does not
deliver a Tag-Along Participation Notice within such five-day period he
shall be deemed to have waived his tag-along right with respect to the
proposed Tag-Along Sale. Each Tag-Along Participation Notice shall state
the number of shares of Common Stock that Smith proposes to include in such
transfer to the proposed purchaser up to the number of shares determined in
accordance with Section 3.3(b)(ii) hereof.
(c) TAKE-ALONG RIGHT.
(i) TAKE-ALONG NOTICE. If UAG/Atlanta (or an Affiliate thereof)
at any time receives a bona fide offer from a third party to purchase shares
of Common Stock from UAG/Atlanta (or an Affiliate thereof) or UAG/Atlanta
(or an Affiliate thereof) otherwise proposes to sell shares of Common Stock
for value (a "Take-Along Sale"), UAG/Atlanta can require the other
Shareholders, to participate in such Take-Along Sale as set forth in clause
(ii) of this Section 3.3(c). If UAG/Atlanta elects to exercise the take-
along right provided for in this Section 3.3(c), it must provide, at least
twenty (20) days before the date of consummation of the proposed Take-Along
Sale, notice to each other Shareholder setting forth: (i) the number of
shares of Common Stock proposed to be transferred, (ii) the number of shares
of Common Stock that such Shareholder must include in such transfer to the
proposed purchaser as determined in accordance with clause (ii) of this
Section 3.3(c), (iii) the name and address of the proposed purchaser, (iv)
the proposed amount of consideration and terms and conditions of payment
offered by or to such proposed purchaser, and (v) that the proposed
purchaser has been informed of the "take-along" rights provided for in this
Section 3.3(c) and has agreed to purchase shares of Common Stock in
accordance with the terms hereof.
(ii) TAKE-ALONG RIGHT. UAG/Atlanta shall at any time have the
right to require each other Shareholder to sell to the proposed purchaser a
number of whole shares of Common Stock up to the number of shares equal to
the total number of shares to be sold to the proposed purchaser multiplied
by a fraction, the numerator of which is the number of shares of Common
Stock held by such other Shareholder and the denominator of which is the
total number of shares of Common Stock held by all of the Shareholders,
including UAG/Atlanta (or an Affiliate thereof). Any shares of Common Stock
purchased
-9-
<PAGE>
from Shareholders other than UAG/Atlanta pursuant to this Section
3.3(c) shall be paid for upon the same terms and conditions (including price
and type of consideration) received by UAG/Atlanta.
SECTION 3.4. LEGENDS ON STOCK CERTIFICATES.
For so long as shares of capital stock of the Company held by a Share-
holder 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 July 26, 1996, as the same
may be amended from time to time, by and among United Auto
Group, Inc., UAG Atlanta, Inc., Inc., Atlanta Toyota (the
"Company"), John Smith and certain other shareholders of the
Company who may from time to time become parties to such
Shareholders' Agreement, a copy of which may be obtained at the
offices of the Company.
SECTION 3.5. IMPROPER TRANSFERS INEFFECTIVE.
Any purported transfer of Common Stock by a Shareholder which is not
permitted by the foregoing provisions of this Article 3, or which is in
violation of such provisions, shall be void and of no force and effect
whatsoever.
ARTICLE 4
EXCHANGE; LOAN TO SMITH
SECTION 4.1. EXCHANGE FOR UAG COMMON STOCK.
(a) In the event of an underwritten public offering pursuant to an
effective registration statement under the Securities Act covering the offering
and sale of common stock, par value $.0001 per share, of UAG ("UAG Common
Stock") for the account of UAG on a firm commitment basis (the "UAG Public
Offering"), Smith (and any transferee or Affiliate of Smith holding shares of
Common Stock) shall be required to exchange all shares of Common Stock
beneficially owned by them (and their transferees and Affiliates) (the "Smith
Interest") immediately prior to the closing of the UAG Public Offering for
shares of UAG Common Stock under the terms and conditions set forth below, and
UAG shall be required to exchange the Smith Interest for UAG Common Stock (such
exchange is hereinafter referred to as the "UAG Exchange").
-10-
<PAGE>
(b) If the parties are required to consummate the UAG Exchange, the
value of UAG (the "UAG Value") and the Company (the "Company Value") shall be
determined by the investment banking firm which is acting as managing
underwriter (the "Managing Underwriter") for the UAG Public Offering and such
determination shall be binding upon the parties hereto. In determining the
Company value, the Managing Underwriter shall satisfy itself that UAG's
overhead expenses are attributed to the Company and UAG's other subsidiaries
equitably. The value of the Smith Interest (the "Smith Interest Value") shall
be an amount equal to (A) the Company Value multiplied by (B) a fraction, the
numerator of which shall be equal to the aggregate number of shares of Common
Stock comprising the Smith Interest immediately prior to the UAG Exchange,
and the denominator of which shall be the total number of shares of Common
Stock outstanding immediately prior to the UAG Exchange. The additional cost
which the Managing Underwriter charges to compute the UAG Value and the
Company Value shall be paid by UAG.
(c) The number of shares of UAG Common Stock to which Smith is
entitled upon the consummation of the UAG Exchange (the "Smith Exchanged
Shares") shall be determined by multiplying the Smith Interest Percentage (as
defined below) by the total number of shares of UAG Common Stock outstanding
immediately prior to the closing of the UAG Public Offering, which such
number of shares shall include all shares of UAG Common Stock issued in
respect of the Smith Interest pursuant to this Section 4.1 and to holders of
minority interests (the "Other Minority Holders") in subsidiaries of UAG (the
"Other Minority Interests") pursuant to agreements comparable to the
agreement contained in this Section 4.1 (collectively, the "Minority
Shares"), but shall not include any other shares of UAG Common Stock issuable
upon the exercise, conversion or exchange of all then outstanding rights,
warrants, options, indebtedness or other securities exercisable or
exchangeable for, or convertible into, directly or indirectly, UAG Common
Stock (collectively, "UAG Common Stock Equivalents"). Specifically, the
number of Smith Exchange Shares shall be determined by multiplying (A) the
number of Total Exchanged Shares (as defined below) by (B) a fraction, the
numerator of which shall be equal to the Smith Interest Percentage, and the
denominator of which shall be equal to the Total Interest Percentage (as
defined below). For purposes of this Section 4.1, (i) the "Smith Interest
Percentage" shall be determined by dividing the Smith Interest Value by the
UAG Value, (ii) the "Total Interest Percentage" shall equal the sum of all of
the "Minority Interest Percentages," each of which shall be determined
pursuant to the agreements between UAG and the Other Minority Holders
relating to the exchange of the Other Minority Interests for shares of UAG
Common Stock in connection with the UAG Public Offering, and (iii) the "Total
Exchanged Shares" shall be determined by dividing (A) the product of (x) the
Total Interest Percentage and (y) the total number of shares of UAG Common
Stock outstanding immediately prior to the closing of the UAG Public Offering
(the
-11-
<PAGE>
"Outstanding UAG Shares") (not including the Minority Shares and any shares
of UAG Common Stock issuable upon the exercise, conversion or exchange of any
UAG Common Stock Equivalent) by (B) an amount equal to 1 minus the Total
Interest Percentage. Expressed as a formula, the number of Smith Exchanged
Shares shall be determined as follows:
(TIP X OUS) WIP
-------------- x ---
(1 - TIP) TIP,
where "TIP" refers to the Total Interest Percentage, "OUS" refers to the
Outstanding UAG Shares and "WIP" refers to the Smith Interest Percentage.
(d) The Smith Exchanged Shares shall be issued immediately prior to the
occurrence of the UAG Public Offering and UAG shall not be required to issue
such shares if the UAG Public Offering is not consummated for any reason.
(e) Upon consummation of the UAG Exchange, (i) if the UAG Public
Offering is not a Qualified Public Offering (as such term is defined in UAG's
Amended and Restated Certificate of Incorporation) or the UAG Shareholders
Agreement otherwise remains in full force or effect, then Smith shall become a
party to the UAG Shareholders Agreement and (ii) Smith agrees to take such
actions and to execute such instruments as UAG may reasonably request to
evidence the consummation of the UAG Exchange and the change in the agreement
between the parties hereto as a result of the UAG Exchange.
SECTION 4.2. LOAN TO SMITH.
If the Smith Interest is exchanged for UAG Common Stock pursuant to
Section 4.1 hereof prior to the third anniversary of the date of this
Shareholders' Agreement, then UAG shall, at Smith's request, loan to Smith an
amount equal to fifty (50%) percent of the amount of any income taxes that
Smith incurs as a result of the exchange if Smith is required to make a tax
payment within 120 days after the date of the exchange, such loan to bear
interest at the prime rate set by NationsBank, N.A. on the date of the
exchange with interest and principal payable in full 120 days after the date
of the exchange.
ARTICLE 5
MISCELLANEOUS
SECTION 5.1. TERM.
All provisions of this Agreement shall terminate upon consummation of
the UAG Exchange or, in respect of any Shareholder, when such Shareholder no
longer owns any capital stock of the Company.
-12-
<PAGE>
SECTION 5.2. AMENDMENT; WAIVER.
This Agreement may be altered or amended only with the written consent
of all of the parties hereto. Any term of this Agreement and the observance
of any term herein may be waived (either generally or in a particular
instance and either retroactively or prospectively) by any party hereto only
with the written consent of such party, provided that any such waiver by any
party hereto shall not operate or be construed as a waiver of any other term
or observance of any term herein, whether or not similar.
SECTION 5.3. 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 5.4. ASSIGNMENT.
Except as otherwise expressly provided herein, the terms and
conditions of this Agreement shall inure to the benefit of and be binding
upon the respective successors and permitted assigns of the parties hereto.
This Agreement may be assigned by a Shareholder only in connection with a
Transfer of any shares of Common Stock in accordance with the terms of this
Agreement; PROVIDED, HOWEVER, that the rights of Smith contained in Sections
3.3 and 4.2 hereof cannot be assigned or otherwise transferred in connection
with any Transfer of shares of Common Stock by Smith without the prior
written consent of UAG. No assignment of this Agreement shall relieve the
assignor from any liability hereunder.
SECTION 5.5. 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.
SECTION 5.6. ADDITIONAL SHAREHOLDERS.
The Company covenants that it shall not issue or cause to be issued at
any time prior to the Public Float Date any shares of capital stock of the
Company to any Person in any transaction not involving a Public Offering of
such shares, unless as a condition to such issuance such Person agrees to
become a party to this Agreement and to be bound by all the obligations of a
Shareholder under this Agreement. Stock certificates issued to
-13-
<PAGE>
such Persons shall be marked as provided in Section 3.4 hereof. No shares of
capital stock of the Company shall be transferred on the books of the Company
until all the applicable provisions of this Agreement have been complied with.
SECTION 5.7. LEGEND.
Certificates evidencing shares of capital stock shall bear such legends
as the Company shall reasonably deem necessary to protect the rights of the
parties hereunder.
SECTION 5.8. NOTICES.
All notices and other communications required or permitted to be given
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified, registered, or
express mail, postage prepaid, to the parties at the addresses sent forth
below. Notices or other communications given by certified, registered, or
express mail shall be deemed given three (3) Business Days after the date of
mailing. Notices or other communications sent in any other manner shall be
deemed given only when actually received.
If to Smith:
Mr. John Smith
c/o Atlanta Toyota, Inc.
2345 Pleasant Hill Road
Duluth, Georgia 30136
If to UAG or UAG/Atlanta or the Company:
United Auto Group, Inc.
375 Park Avenue
New York, New York 10022
Facsimile No.: (212) 223-5148
Attn: George G. Lowrance, Esq.,
Executive Vice President and
General Counsel
with a copy to:
Rogers & Hardin
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 three (3) days after the date so mailed;
PROVIDED, HOWEVER, that
-14-
<PAGE>
any notice or communication changing any of the addresses set forth above
shall be effective and deemed given only upon its receipt.
SECTION 5.9. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, and which counterparts together shall
constitute one and the same agreement of the parties hereto.
SECTION 5.10. SECTION HEADINGS.
Headings contained in this Agreement are inserted only as a matter of
convenience and in no way define, limit or extend the scope or intent of this
Agreement or any provisions hereof.
SECTION 5.11. GOVERNING LAW.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Georgia, without giving effect to the choice-of-law
provisions thereof.
SECTION 5.12. ENTIRE AGREEMENT.
This Agreement contains the entire understanding of the parties hereto
respecting the subject matter hereof and supersedes all prior agreements,
discussions, and understandings among such parties with respect to such subject
matter.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
UNITED AUTO GROUP, INC.
By: /s/ Carl Spielvogel
--------------------------------
Name: Carl Spielvogel
------------------------------
Title: CEO
-----------------------------
UAG ATLANTA, INC.
By: /s/ Carl Spielvogel
-------------------------------
Name: Carl Spielvogel
Title: CEO
-15-
<PAGE>
ATLANTA TOYOTA, INC.
By: /s/ Carl Spielvogel
------------------------------
Name: Carl Spielvogel
John Smith
----------------------------------
JOHN R. SMITH, Individually
-16-
<PAGE>
Exhibit 10.7.10
UAG GUARANTY OF ESTATE LEASE
THIS GUARANTY OF LEASE ("Guaranty"), made as of the 12th day of July, 1996,
by UNITED AUTO GROUP, INC. ("Guarantor") to and for the benefit of LYNDA JANE
HICKMAN, as Executrix under the Will of James Franklin Hickman, Jr., Deceased,
her successors, successors-in-title and assigns ("Estate").
W I T N E S S E T H:
WHEREAS, Estate, as "Landlord," and Hickman Nissan, Inc., a Georgia
corporation and second-tier subsidiary of Guarantor (hereinafter referred to as
the "Corporation,") as Tenant, have entered into a Lease Agreement of even date
herewith (the "Lease"), demising the Premises commonly known as 5211 and 5214
Peachtree Industrial Road, Chamblee, Georgia 30341; and
WHEREAS, Estate has required, as a condition precedent to the effectiveness
of the Lease, that Guarantor execute and deliver this Guaranty; and
WHEREAS, the Guarantor, as the corporate parent of the Corporation, and,
having a financial interest in the Corporation, has agreed to execute and
deliver this Guaranty.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, Guarantor agrees as follows:
1. GUARANTY. Guarantor absolutely, unconditionally and irrevocably
guarantees to Estate:
(a) the full and prompt payment of any amounts required to be paid by
Corporation, or for which the Corporation shall be liable, under
the Lease, including without limitation Rent, Base Rent,
additional rent, real estate taxes, assessments, maintenance and
repair, governmental charges, interest, attorneys' fees and
premiums for insurance policies payable by the Corporation under
the Lease, including all interest and other charges with respect
thereto;
(b) the payment of all Enforcement Costs (as hereinafter defined);
(c) the full, complete and punctual observance, performance and
satisfaction of the obligations, duties and agreements of the
Corporation under the Lease.
All amounts due, debts, liabilities and payment obligations described in
subparagraphs (a) and (b) of this Paragraph 1 are referred to herein as the
"Indebtedness." All obligations described in subparagraph (c) of this
Paragraph 1 are referred to herein as the "Obligations." The Obligations of
the Guarantor hereunder are primary and unconditional and shall be
enforceable before, concurrently or after any claim or demand made or suit
filed against the Corporation.
<PAGE>
2. DEFAULT. All sums guaranteed hereby shall be deemed to become
immediately due and payable to Estate if:
(a) there is an Event of Default (as defined in the Lease) by
Corporation under the Lease; or
(b) the Guarantor becomes insolvent or unable to pay debts as they
mature or admits in writing to such effect, makes a conveyance
fraudulent as to creditors under any state or federal law, makes
an assignment for the benefit of creditors, or any proceeding is
instituted by or against the Guarantor alleging that the
Guarantor is insolvent or unable to pay debts as they mature, or
a petition under any provision of Title 11 of the United States
Code, as amended, is brought by or against the Guarantor, or a
receiver is appointed for any part of the property or assets of
the Corporation or the Guarantor.
3. REMEDIES REGARDING INDEBTEDNESS. If there is an Event of Default by
Corporation under the Lease, the Guarantor's liability and obligation for
payment of the outstanding balance of the Indebtedness hereunder shall not be
limited in any respect. Guarantor agrees to pay the amount of such
Indebtedness, regardless of any defense, right of set-off or claims which the
Corporation or the Guarantor may have against Estate. Estate shall have the
option of joining the Guarantor as a party to any such enforcement proceeding.
This is an absolute, irrevocable, present and continuing guaranty of payment and
not of collection.
4. REMEDIES REGARDING OBLIGATIONS. If there is an Event of Default by
the Corporation under the Lease, then, in any such event, Guarantor agrees to
immediately (i) perform the Obligations; (ii) pay any and all costs and expenses
necessary for said timely performance; and (iii) indemnify and hold Estate
harmless from and against any and all loss, damage, cost, expense, injury, or
liability Estate may suffer or incur in connection with the exercise of its
rights under this Guaranty.
5. RETURN OF PAYMENTS. Guarantor agrees that, if at any time all or any
part of any payment theretofore applied by Estate to any Indebtedness is
rescinded or returned by Estate for any reason whatsoever (including, without
limitation, the insolvency, bankruptcy, liquidation or reorganization of any
party), such Indebtedness shall, for the purposes of this Guaranty, be deemed to
have continued in existence to the extent of such payment, notwithstanding such
application by Estate, and this Guaranty shall continue to be effective or be
reinstated, as the case may be, as to such Indebtedness, all as though such
application by Estate had not been made.
6. NO DISCHARGE. Guarantor agrees that the obligations, covenants and
agreements of Guarantor under this Guaranty shall not be affected or impaired by
any act of Estate, or any event or condition except full performance (as called
for herein) of the Obligations and repayment of the Indebtedness and any other
sums due hereunder. Guarantor agrees that, without full performance (as called
for herein) of the Obligations and payment in full of the Indebtedness (as
called for herein), the liability of Guarantor hereunder shall not be discharged
by: (i) the renewal or extension of time for the payment of the Indebtedness or
performance
-2-
<PAGE>
of the Obligations under the Lease or any other agreement relating to the
Indebtedness or the Obligations, whether made with or without the knowledge or
consent of Guarantor; or (ii) any transfer, waiver, compromise, settlement,
modification, surrender, or release of the Lease; or (iii) the existence of any
defenses to enforcement of the Lease; (iv) any failure, omission, delay or
inadequacy, whether entire or partial, of Estate to exercise any right, power or
remedy regarding the Lease; (v) the existence of any set-off, claim, reduction,
or diminution of the Indebtedness, or any defense or any kind or nature, which
Guarantor may have against the Corporation or which any party has against
Estate; (vi) the addition of any and all other endorsers, guarantors, obligors,
and other persons liable for the payment of the Indebtedness and performance of
the Obligations; all whether or not Guarantor shall have had notice or knowledge
or any act or omission referred to in the foregoing clauses (i) through (vi) of
this Paragraph. Guarantor intends that Guarantor shall remain liable hereunder
as a principal until all Indebtedness shall have been paid in full and all
Obligations have been performed, notwithstanding any fact, act, event or
occurrence which might otherwise operate as a legal or equitable discharge of a
surety or guarantor.
7. APPLICATION OF AMOUNTS RECEIVED. Any amounts received by Estate from
whatsoever source on account of any Indebtedness may be applied by Estate to the
payment of such Indebtedness, and in such order or application, as Estate may
from time to time elect. Notwithstanding any payments made by or for the
account of Guarantor on account of the Indebtedness, such Guarantor shall not be
subrogated to any rights of Estate until such time as Estate shall have received
payment of the full amount of all Indebtedness and the Obligations shall have
been performed to Estate's satisfaction.
8. WAIVER. Guarantor expressly waives: (i) notice of the acceptance by
Estate of this Guaranty; (ii) notice of the existence, creation, payment or
nonpayment of the Indebtedness; (iii) presentment, demand, notice of dishonor,
protest, and all other notices whatsoever; (iv) any failure by Estate to inform
Guarantor of any facts Estate may now or hereafter know about the Corporation or
the Lease, it being understood and agreed that Estate has no duty to inform and
that Guarantor is fully responsible for being and remaining informed by the
Corporation of all circumstances bearing on the existence or creation, or the
risk of nonpayment of the Indebtedness; and (v) the provisions of O.C.G.A.
Section 10-7-24 (or any similar statute of any other jurisdiction) relating to
the Guarantor's right to discharge upon giving notice to Estate to proceed
against the Corporation for collection, and the failure or refusal by Estate to
commence an action or foreclose any collateral within a period of time or at any
time. Credit may be granted or continued from time to time by Estate to
Corporation without notice to or authorization from Guarantor, regardless of the
financial or other condition of the Corporation at the time of any such grant or
continuation. No modification or waiver of any of the provisions of this
Guaranty will be binding upon Estate except as expressly set forth in a writing
duly signed and delivered on behalf of Estate.
9. ENFORCEMENT COSTS. If: (i) this Guaranty or the Lease is placed in
the hands of an attorney for collection or enforcement through any legal
proceeding; (ii) an attorney is retained to represent Estate in any bankruptcy,
reorganization, receivership, or other proceedings affecting creditors' rights
and involving a claim under this Guaranty or the Lease; (iii) an attorney is
retained to protect or enforce the Lease; or (iv) an attorney is retained to
-3-
<PAGE>
represent Estate in any other proceedings whatsoever in connection with this
Guaranty or the Lease or any property subject thereto, then Guarantor shall pay
to Estate upon demand the costs of collection and the actual reasonable
attorneys' fees and expenses incurred by Estate, including without limitation
court costs, filing fees, recording costs, and all other costs and expenses
incurred in connection therewith (all of which are referred to herein as
"Enforcement Costs"), in addition to all other amounts due hereunder.
10. TRANSFER OF INDEBTEDNESS OR OBLIGATIONS. Notwithstanding any
assignment or transfer of the Indebtedness or any Obligations or any interest
therein, all portions of the Indebtedness or the Obligations or any interest
therein, including those assigned, and each and every immediate and successive
assignee or transferee of such Indebtedness or Obligations or interest shall, to
the extent of the Indebtedness or Obligations or interests assigned or
transferred, be entitled to the benefits of this Guaranty to the same extent as
if such assignee or transferee were Estate; provided, however, that unless the
assignor or transferor shall otherwise consent in writing, the assignor or
transferor shall have an unimpaired right, prior and superior to that of such
assignee or transferee, to enforce this Guaranty for its benefit as to such
portions of the Indebtedness or interest therein not assigned or transferred.
11. GOVERNING LAW; INTERPRETATION. This Guaranty and the Lease Agreement
has been negotiated and delivered in Atlanta, Georgia, and shall be governed by
the laws of the State of Georgia without reference to the conflicts of law
principles of that State. The headings of sections and paragraphs in this
Guaranty are for convenience only and shall not be construed in any way to limit
or define the content, scope, or intent of the provisions hereof. As used in
this Guaranty, the singular shall be fully interchangeable, where the context so
requires. If any provision of this Guaranty, or any paragraph, sentence,
clause, phrase, or word, or the application thereof, in any circumstances, is
adjucated by a court of competent jurisdiction to be invalid, the validity of
the remainder of this Guaranty shall be construed as if such invalid part were
never included herein. Time is of the essence of the Guaranty. All payments to
be made hereunder shall be made in currency and coin of the United States of
America which is legal tender for public and private debts at the time of
payment.
12. ENTIRE AGREEMENT. This Guaranty and the Lease Agreement constitute
the entire agreements among the parties with respect to the subject matter
hereof and supersede all prior such agreements and understandings, both written
and oral. This Guaranty may not be modified or amended except by a written
instrument signed by Estate and Guarantor. If this Guaranty is executed in
several counterparts, each of those counterparts shall be deemed an original,
and all them together shall constitute one and the same instrument.
13. SUCCESSORS AND ASSIGNS; JOINT AND SEVERAL LIABILITY. This Guaranty
shall bind Guarantor and the heirs, assigns, successors, executors and legal
and personal representatives of Guarantor. If this Guaranty is executed by
more than one person, it shall be the joint and several undertaking of each
of the undersigned. Irrespective of whether this Guaranty is executed by
more than one person, it is agreed that the undersigned's liability hereunder
is several and independent of any other guaranties or other obligations at
any time in effect with respect to the Indebtedness, the Obligation or any
part thereof and that Guarantor's liability
-4-
<PAGE>
hereunder may be enforced regardless of the existence, validity, enforcement
or non-enforcement of any such other guaranties or other obligations.
14. NOTICES. Any notice, demand or other communication which either party
may desire or may be required to give to the other shall be in writing, and
shall be deemed given if and when personally delivered, or on the second
business day after being deposited in United States registered or certified
mail, postage prepaid, addressed to the other party at its address set forth
below, or to such other address as either party may have designated to the other
party in writing:
If to Estate:
Lynda Jane Hickman, as Executrix under
the Will of James Franklin Hickman, Jr., Deceased,
her successors, successors-in-title and assigns
339 Argonne Drive
Atlanta, Georgia 30305
with a copy to:
Davis, Matthews & Quigley, P.C.
14th Floor, Lenox Towers II
3400 Peachtree Road
Atlanta, Georgia 30326
Attn: William M. Matthews, Esq.
If to Guarantor:
United Auto Group, Inc.
375 Park Avenue
New York, New York 10022
Facsimile No.: (212) 223-5148
Attn: Georgia G. Lowrance, Esq.
with a copy to:
Rogers & Hardin
2700 Cain Tower, Peachtree Center
229 Peachtree Street, NE
Atlanta, Georgia 30303
Facsimile No.: (404) 525-2224
Attn: Michael Rosenzweig
Except as otherwise specifically required herein, notice of the exercise of
any right, option or power granted to Estate by this Guaranty is not required to
be given.
-5-
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed, sealed and delivered this
instrument as of the day and year first above written.
GUARANTOR:
UNITED AUTO GROUP, INC.
By: /s/ George Lowrance
Its: Executive Vice President
[Corporate Seal]
-6-
<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
-2-
<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:
-3-
<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
-4-
<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
-5-
<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)
-6-
<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
-7-
<PAGE>
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
-8-
<PAGE>
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.
-9-
<PAGE>
(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:
-10-
<PAGE>
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
-11-
<PAGE>
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.
-12-
<PAGE>
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
-13-
<PAGE>
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.
-14-
<PAGE>
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
-15-
<PAGE>
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,
-16-
<PAGE>
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;
-17-
<PAGE>
(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
-18-
<PAGE>
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
-19-
<PAGE>
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
-20-
<PAGE>
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.
-21-
<PAGE>
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
-22-
<PAGE>
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-
-23-
<PAGE>
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
-24-
<PAGE>
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
-25-
<PAGE>
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
-26-
<PAGE>
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
-27-
<PAGE>
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.
-28-
<PAGE>
(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
-29-
<PAGE>
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.
-30-
<PAGE>
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-
-31-
<PAGE>
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
-32-
<PAGE>
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
-33-
<PAGE>
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-
-34-
<PAGE>
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
-35-
<PAGE>
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-
-36-
<PAGE>
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
-37-
<PAGE>
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.
-38-
<PAGE>
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
-39-
<PAGE>
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
-40-
<PAGE>
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:
-41-
<PAGE>
(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
-42-
<PAGE>
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.
-43-
<PAGE>
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
-44-
<PAGE>
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.
-45-
<PAGE>
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
-46-
<PAGE>
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
-47-
<PAGE>
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
-48-
<PAGE>
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.
-49-
<PAGE>
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.
-50-
<PAGE>
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,
-51-
<PAGE>
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
-52-
<PAGE>
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.
-53-
<PAGE>
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
-54-
<PAGE>
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
-55-
<PAGE>
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-
-56-
<PAGE>
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);
-57-
<PAGE>
(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-
-58-
<PAGE>
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
-59-
<PAGE>
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.
-60-
<PAGE>
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
-61-
<PAGE>
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
-62-
<PAGE>
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:
-63-
<PAGE>
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.
-64-
<PAGE>
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.
-65-
<PAGE>
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
-66-
<PAGE>
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
-67-
<PAGE>
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
-------------------------------
-68-
<PAGE>
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
-69-
<PAGE>
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
-70-
<PAGE>
PURCHASE AND SALE AGREEMENT
6905 E. MCDOWELL ROAD
THIS PURCHASE AND SALE AGREEMENT OF REAL PROPERTY (hereinafter called
the "Agreement"), made and entered into this ___ day of May 1996, by and between
STEVEN KNAPPENBERGER, as Trustee of the Steven Knappenberger Revocable Trust II,
as to an undivided fifty percent interest and BRUCE KNAPPENBERGER, as Trustee of
the Bruce Knappenberger Revocable Trust, as to an undivided fifty percent
interest (collectively and severally, "Seller") and UAG WEST, 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 all that tract or parcel of land lying and being in Scottsdale,
Arizona and being more particularly described on EXHIBIT "A" attached hereto and
by this reference made a part hereof (the "Land"), together with that certain
building (the "Building"), all other improvements, [VERIFY NO PERSONAL PROPERTY
OWNED BY SELLER] 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. Within three (3) business days after the full
execution of this Agreement, Purchaser shall deliver to First American Title
Insurance Company ("Escrow Agent"), at the address for notices set forth in this
Agreement, Purchaser's check, payable to Escrow Agent, in the amount of FIVE
THOUSAND AND NO/100 DOLLARS ($5,000.00) (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
<PAGE>
Price. If the Earnest Money is forfeited to Seller as provided by this
Agreement, the Earnest Money, with any interest earned thereon, shall be paid
immediately to Seller. 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 NINE HUNDRED FIFTY
THOUSAND AND NO/100 DOLLARS ($950,000.00) plus Purchaser's assumption of that
certain promissory note made by Seller and held by Bank of America ("Bank")
dated ______________, in the original principal amount of ________________
_________________________________ ($______________) ("Promissory Note") secured
by the Property pursuant to that certain Deed of Trust dated ___________,
recorded in Book ____, Page ____, Maricopa County, Arizona, __________ Records
("Deed of Trust").
4. PURCHASER'S INSPECTION AND REVIEW RIGHTS. Commencing on the
effective date of this Agreement, Purchaser and its agents, engineers, and
representatives, with Seller's full cooperation, shall have the privilege of
going upon the Property following reasonable prior notice to Seller as needed to
inspect, examine, test, and survey the Property at all reasonable times and from
time to time. Such privilege shall include the right to make soils tests,
borings, percolation tests, tank tightness, environmental, and other tests to
obtain information necessary to determine surface and subsurface conditions, and
tests and inspections to determine the fitness of the Building and Improvements,
as well as any other tests deemed reasonably necessary by Purchaser. Purchaser
agrees to indemnify and hold Seller harmless from any injury, cost, liability or
expense to person or property arising out of Purchaser's exercise of the
inspection rights granted by this Paragraph and this indemnity shall survive the
Closing or the cancellation of this Agreement. Seller shall make available for
inspection by Purchaser all books, records, and files relating to the ownership
and operation of the Property, including, without limitation, copies of Seller's
title policy and the exceptions shown thereon, surveys, environmental reports,
investigation and governmental filings with respect thereto, appraisals,
contracts, books, accounts, records, licensure, inventory and other information
relating to the Property which is in Seller's possession or control. Seller
further agrees to in good faith assist and cooperate with Purchaser in coming to
a thorough understanding of all such information and to respond to such
additional requests for information as Purchaser may make, provided Seller shall
not be obligated to incur expenses in order to so assist Purchaser except for
reasonable personnel assistance and copying costs. Within three (3) business
days after the effective date of this Agreement, Seller shall deliver to
Purchaser copies of the most recent title
2
<PAGE>
policy, survey and environmental phase 1 and, if applicable, phase 2 reports in
Seller's possession or control.
5. INSPECTION PERIOD. Purchaser shall have thirty (30) [MAKE
CONSISTENT WITH SPA] days after the effective date of this Agreement (the
"Inspection Period") in order to determine, in Purchaser's sole and absolute
opinion and discretion, whether the Property is suitable for Purchaser's needs.
Purchaser shall have the right to terminate this Agreement at any time prior to
the expiration of the Inspection Period by giving written notice to Seller of
such election to terminate. In the event Purchaser so elects to terminate this
Agreement, Seller shall be entitled to receive $100.00 of the Earnest Money, the
balance of the Earnest Money shall be refunded by Escrow Agent to Purchaser,
whereupon, except as expressly provided to the contrary in this Agreement, no
party hereto shall have any other or further rights or obligations under this
Agreement. Seller acknowledges that the sum of $100.00 is good and adequate
consideration for the termination rights granted to Purchaser hereunder and that
Purchaser, in reliance on this Agreement, will expend far greater sums in
investigating and examining the Property to determine its suitability for
Purchaser's purposes.
6. GENERAL CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS REGARDING
THE CLOSING. In addition to Purchaser's right to terminate this Agreement as
set forth in Paragraph 5 above, 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 balance of the Earnest Money shall be
refunded by Escrow Agent to Purchaser:
(a) Seller and the other parties thereto have complied with and
otherwise performed each of the covenants and obligations set forth in this
Agreement, in that certain Stock Purchase Agreement of even date herewith
by and among Purchaser, United Auto Group, Inc., Scottsdale Jaguar, Ltd.,
SA Automotive, Ltd., SL Automotive, Ltd., SPA Automotive, Ltd., Scottsdale
Management Group, Ltd., Steven Knappenberger, Jay Beskind and George
Brochick, concerning the purchase of stock and assets regarding the
business conducted at the Property and other businesses ("SPA").
(b) All representations and warranties of Seller as set forth in
this Agreement and of Seller and the other parties thereto in the SPA shall
be in all respects true and correct as of the date of Closing.
(c) Title Company (as hereinafter defined) 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, subject only to the matters approved
by Purchaser.
3
<PAGE>
(d) The closing of the SPA transactions contemplated by the SPA.
(e) Purchaser's (i) ability to assume the Note and Deed of Trust
on terms acceptable to Purchaser and without any increase in interest rate,
decrease in term or payment of any amount for such assumption, provided
that Purchaser and United Auto Group, Inc. agree to guarantee the Note and
Deed of Trust as part of such assumption; (ii) obtaining written assurances
satisfactory to it that (w) the Deed of Trust is security only for the
Note, and (x) there is no default under the Note, Deed of Trust or any loan
documents related thereto. Seller's obligations and liabilities hereunder
shall be conditioned upon the full release of Seller and Steven
Knappenberger from all liability under the Note, Deed of Trust and all
related guarantees and loan documents related thereto prior to the Closing.
(f) The Lease (as hereinafter defined) is not in default and
Seller provides written evidence reasonably satisfactory to Purchaser to
such effect.
(g) The principal amount together with all accrued and unpaid
interest on the Note together with any other amounts owing with respect to
the Note and Deed of Trust shall not exceed _______________________ [DO WE
NEED TO DEAL WITH OTHER ASSUMED DEBT AMOUNTS?].
Purchaser may waive any of the foregoing conditions except the contingency
benefitting Seller set forth in paragraph 6(e), in Purchaser's sole discretion
on or prior to Closing.
7. PRELIMINARY TITLE REPORT: SURVEY.
(a) Within ten (10) days following the opening of escrow,
Seller, at its expense, shall cause Escrow Agent to deliver a current
preliminary title report (the "Report") on the Property to Purchaser and
Seller. The Report shall show the status of title to the Property as of
the date of the Report and shall be accompanied by legible copies of all
documents referred to in the Report.
(b) Promptly following the delivery of the Report, Purchaser
will cause an ALTA Survey of the Property (the "Survey") to be prepared by
an Arizona licensed civil engineer or land surveyor, at Purchaser's
expense. The Survey shall be certified to be accurate, complete, and
correct to Purchaser, Seller, and Escrow Agent and shall be in a form
acceptable to Escrow Agent for issuance of the Title Insurance Policy
required by Paragraph 8.
(c) Purchaser shall have ten (10) days (the "Review Period")
following receipt of both the Report and the Survey to approve or
disapprove any Survey matters and the status of title as shown by the
Report and the Survey. No later than
4
<PAGE>
ten (10) days but no earlier than fifteen (15) days prior to Closing,
Seller shall cause Escrow Agent to issue a supplemental or amended title
report and if it shows additional exceptions to title (an "Amended
Report"), Purchaser shall have a period of time equal to five (5) 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.
Purchaser shall also obtain a re-certified Survey prior to Closing
("Amended Survey"). If Purchaser is dissatisfied with any matter shown on
the Survey or Amended Survey or with any exception to title as shown in the
Report or on an Amended Report, then, at Purchaser's sole option, Purchaser
may either (i) cancel this Agreement by giving written notice of
cancellation to Seller and Escrow Agent within five (5) days after the
Review Period, or Supplemental Review Period, as appropriate, or (ii)
Purchaser may provisionally accept the title subject to Seller's removal of
any disapproved matters, exceptions, or objections, or Seller obtaining
title insurance endorsements satisfactory to Purchaser against such
matters, exceptions, and objections before the close of escrow; provided,
however, it is understood and agreed that, except as provided below, Seller
shall have no duty whatsoever to eliminate or secure a title endorsement
against any such matter or exception. If Seller cannot remove such
matters, exceptions, and objections before the close of escrow, then, at
Purchaser's option, the Earnest Money shall be returned to Purchaser upon
demand and, subject to Purchaser's rights herein, all obligations shall
terminate, or Purchaser may close the transaction as scheduled and pursue
any rights it may have hereunder.
(d) Notwithstanding anything herein contained to the contrary, it is
understood and agreed that title to the Property shall be delivered to
Purchaser at the close of escrow free and clear of all (i) monetary liens
and encumbrances (other than the Deed of Trust and any related documents
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 Property by Seller at Seller's sole expense on or before
the close of escrow or Purchaser may cause their release and the cost
thereof, together with Purchaser's reasonable expenses to accomplish same,
shall be credited against the Purchaser Price; and (ii) matters first
arising after the effective date of the Report which arise by the action or
inaction of Seller and that such matters shall be released from the
Property by Seller at Seller's sole expense on or before the close of
escrow, or Purchaser may 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, Purchaser may
pursue its remedies against Seller for default) (the matters in (i) and
(ii) sometimes referred to as "Seller Defects").
5
<PAGE>
(e) If Purchaser 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 Purchaser.
(f) Upon a cancellation in accordance with the provisions of
this Paragraph 7, all Earnest Money deposits shall be returned to
Purchaser, together with all documents deposited in escrow by Purchaser.
All documents deposited in escrow by Seller shall be returned to Seller,
and this Agreement shall terminate.
Seller represents and warrants that is currently owns good and
marketable fee simple title to the Property. Title to the Property shall be
conveyed from Seller to Purchaser at the Closing by Special [VERIFY] Warranty
Deed subject to current taxes and assessments not yet due and payable [VERIFY
LESSEE PAYS TAXES], easements, rights-of-way, reservations in patents,
covenants, conditions, restrictions and non-monetary encumbrances, as may appear
of record on the date of this Agreement (unless Seller agrees to remove any such
matters, in which case such shall not be a permitted exception), the Lease, Deed
of Trust and all matters which an accurate survey of the Property or a physical
inspection of the Property on the date of this Agreement would disclose (unless
Seller agrees to remove any such matters, in which case such shall not be a
permitted exception). Water rights, if any, shall be excluded from the coverage
of the deed warranties and shall be transferred by quitclaim only [VERIFY]. If
the Survey reflects a legal description that differs from that in the conveyance
document by which Seller acquired title to the Property, Seller shall also
convey, by quitclaim deed, the Property pursuant to the legal description
reflected on the Survey.
8. TITLE POLICY.
(a) At the close of escrow, Purchaser shall obtain an ALTA
extended coverage owner's policy of title insurance ("Title Insurance
Policy") issued by First American Title Insurance Company (the "Title
Company") in the full amount of the purchase price (including the assumed
amount of the Note obligation), effective as of the close of escrow,
insuring Purchaser that good and marketable fee simple title to the
Property is vested in Purchaser, subject only to the usual printed
exceptions and exclusions contained in such title insurance policies
[VERIFY], to the matters approved by Purchaser as provided above in
Paragraph 7, to any other matters approved in writing by Purchaser, and
containing any endorsements requested by Purchaser.
(b) The obligations of Escrow Agent to provide the Title
Insurance Policy shall be satisfied if, at the close of escrow, Escrow
Agent has issued a binding commitment to issue the policy in the form
required by this Paragraph and if such
6
<PAGE>
policy is delivered within a reasonable time following the close of escrow.
[VERIFY]
9. 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 except that
certain Lease in favor of SL Automotive, d/b/a Scottsdale Lexus dated
__________ with respect to the Property, a copy of which is attached hereto
and incorporated herein by reference as EXHIBIT "D" ("Lease"), and [VERIFY]
those agreements disclosed in the SPA.
(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 except as
described in Paragraph 29. 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. To the best knowledge of Seller, 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. To the best knowledge of
Seller, 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 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
7
<PAGE>
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 the Closing. [WHO HAS OBLIGATION
UNDER LEASE?]
(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
___________________ classification under the applicable zoning ordinances
and a new and used car dealership is 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 and 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. All rights to water with respect to
the Property are permanent and not subject to reduction or termination,
except as disclosed in Paragraph 29. [VERIFY]
(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 [VERIFY] 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 HAZARDOUS SUBSTANCES. To the best knowledge of Seller,
without any implied obligation to investigate such matters, (i) no
"hazardous substances", as that term is defined in the Comprehensive
Environmental Response, Compensation and Liability Act or any other State,
Federal or local law concerning health or the environment, and the rules
and regulations promulgated pursuant thereto, or any other pollutants,
toxic materials, or contaminants including, but not limited to, petroleum
or petroleum based products have been or shall prior to Closing be
discharged, disbursed, released, stored, treated, generated, disposed of,
or allowed to escape on or migrate under the Property, except for those
hazardous substances stored in compliance with applicable laws in the
normal course of the lessee's business operated on the Property, (ii) no
asbestos or asbestos containing materials have been installed, used,
incorporated into, or
8
<PAGE>
disposed of on the Property, (iii) no polychlorinated biphenyls are located
on or in the Property, (iv) there are only ____ (__) underground storage
tanks located on the Property, and Seller has no knowledge of any
underground storage tanks on the Property which have been removed or filled
nor has there been any spill from any past or present underground or
aboveground storage tank, (v) no investigation, administrative order,
consent order or agreement, litigation, or settlement with respect to
hazardous substances is in existence with respect to the Property or, to
the Seller's knowledge, is proposed, threatened or anticipated, and (vi)
the Property has not previously been used as a cemetery, landfill, or as a
dump for garbage or refuse.
(l) NO BANKRUPTCY. The two trusts comprising the Seller are
solvent and neither has 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 either party's properties (including the
Property) been appointed or a petition filed by or against either 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 either.
(m) 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.
(i) TAX RETURNS. 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.
(n) AUTHORIZATION. This Agreement has been duly executed on
behalf of each Trust comprising Seller and constitutes the valid and
binding agreement of each Trust comprising Seller, enforceable in
accordance with its terms, and all necessary action on the part of such
Trust to authorize the transactions herein contemplated has been taken, and
no further action is necessary for such purpose.
(o) 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.
(p) WARRANTIES CORRECT. All representations and warranties of
Seller contained in this Agreement are true and correct as of the date
hereof.
(q) KNOWLEDGE. As used herein, knowledge shall mean that Seller
knows or, in the exercise of reasonable diligence
9
<PAGE>
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. This indemnity shall survive the Closing for a
period of ______________ (___) months. Notwithstanding such limitation,
however, 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. 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 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 the Closing may, at Purchaser's option, be
postponed to permit Purchaser to pursue its rights against Seller as provided in
Paragraph 17 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 to Purchase and no
party shall have liability to the other except for those expressly stated herein
to survive termination of this Agreement.
10
<PAGE>
10. 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; PROVIDED, HOWEVER, the lessee under the Lease may
make such alterations in the ordinary course of business as are permitted under
the Lease including, without limitation, painting the Building. 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. Seller shall keep all insurance policies
regarding the Property in full force and effect until Closing. Seller shall pay
and perform all obligations under the Note and Deed of Trust until Closing.
11. 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 Purchaser may waive expressly and in
writing, at or prior to Closing, any conditions benefitting Purchaser 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 Closing Date as defined in the SPA, or at such specific
time and date as shall be mutually agreed upon by Seller and Purchaser.
12. 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 Special [VERIFY] Warranty Deed conveying
the Property to Purchaser in the form required by the Title Company to
issue the Title Insurance Policy;
(b) QUIT CLAIM DEED. A quitclaim deed, if required by the terms
of Paragraph 7;
(c) PROPERTY VALUE AFFIDAVIT. An affidavit of property value as
required by law;
(d) 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;
11
<PAGE>
(e) AFFIDAVITS. Affidavits from Seller and/or the Trusts
comprising Seller required by the Title Company to enable it to issue the
Title Insurance Policy.
(f) FIRPTA CERTIFICATE. A FIRPTA Certificate from both Trusts
comprising Seller in the form set forth in EXHIBIT "F" attached hereto and
by this reference made a part hereof;
(g) EVIDENCE OF CORPORATE AUTHORITY. Evidence of authority as
may be required by the Title Company to issue the Title Insurance Policy;
(h) LEASE ASSIGNMENT. An executed and acknowledged Assignment,
Indemnity and Assumption of Lease Agreement whereby Seller's interest as
lessor under the Lease is assigned to Purchaser, Seller indemnifies
Purchaser against defaults by Seller under the Lease prior to Closing and
Purchaser assumes Seller's obligations under the Lease on and after
Closing;
(i) 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; and
(j) 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
13. BUYER'S CLOSING DOCUMENTS. On or before the Closing, Purchaser
shall deposit with Escrow Agent the following documents for delivery to Seller
at the Closing, each of which shall have been duly executed, and where
appropriate, acknowledged and shall be in form and substance reasonably
satisfactory to Seller and Seller's legal counsel:
(a) ASSUMPTION DOCUMENTS. All documents required by the Bank in
connection with assumption of the Note and Deed of Trust by Purchaser;
(b) PROPERTY VALUE AFFIDAVIT. An Affidavit of Property Value as
required by law;
(c) LEASE ASSIGNMENT. An executed and acknowledged Assignment,
Indemnity and Assumption of Lease Agreement whereby Purchaser assumes
Seller's interest as lessor under the Lease from and after Closing; and
(d) OTHER DOCUMENTS. Such other documents as may be necessary
or appropriate to consummate this transaction in accordance with the terms
of this Agreement.
12
<PAGE>
14. CLOSING COSTS.
(a) Upon the Closing, Seller agrees to pay one-half of the
escrow charges, the attorneys' fees of Seller, and cost of the Report and
the Amended Report and all other costs and expenses incurred by Seller in
connection with this transaction.
(b) Upon the Closing, Purchaser agrees to pay one-half of the
escrow charges, the entire cost of the owner's policy of title insurance
including the cost of any endorsements requested by Purchaser [VERIFY], the
attorneys' fees of Purchaser, and all other costs and expenses incurred by
Purchaser in connection with this transaction.
15. PRORATIONS. Ad valorem real property taxes and any assessments
[VERIFY] against the Property for the calendar year of Closing shall be prorated
as of the date of Closing based on the latest available information. If at
Closing actual real estate tax statements are not available, then following the
Closing and within thirty (30) days of receipt by either party of actual tax
statements, the parties shall reprorate real estate taxes and assessments
[VERIFY] among themselves and make any necessary adjusting payment. The terms
and provisions of this paragraph shall expressly survive the Closing and shall
not merge upon execution and delivery of the Special [VERIFY] Warranty Deed.
16. PURCHASER'S DEFAULT. Except with respect to Purchaser's
indemnity set forth in Paragraph 4 above, in the event of default by Purchaser
under the terms of this Agreement, Seller's sole and exclusive remedy shall be
to receive the Earnest Money as liquidated damages and thereafter the parties
hereto shall have no further rights or obligations hereunder whatsoever. It is
hereby agreed that Seller's damages will be difficult to ascertain and that the
Earnest Money then held by Escrow Agent constitutes a reasonable estimate
thereof and is intended not as a penalty, but as fully liquidated damages.
Seller agrees that in the event of a default by Purchaser, it shall not initiate
any proceeding to recover damages from Purchaser, but shall limit its recovery
to the retention of the Earnest Money.
17. SELLER'S DEFAULT. In the event of default by Seller under the
terms of this Agreement, at Purchaser's option: (i) Purchaser may terminate this
Agreement by written notice to Seller, whereupon the Earnest Money 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.
13
<PAGE>
18. 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, and
Purchaser may by written notice to Seller given within ten (10) days after the
receipt of such notice from Seller, elect to cancel this Agreement. If
Purchaser chooses to cancel this Agreement in accordance with this Paragraph 18,
then the Earnest Money shall be returned immediately to Purchaser by Escrow
Agent and the rights, duties, obligations, and liabilities of the parties
hereunder, except for Purchaser's indemnity as set forth in Paragraph 4 above,
shall immediately terminate and be of no further force and effect. If Purchaser
does not elect to cancel this Agreement in accordance herewith, 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 and Purchaser shall not have elected to
terminate this Agreement as hereinabove provided, 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.
19. 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 have the right to: (i) terminate this Agreement and receive
a full refund of the Earnest Money from Escrow Agent in which case this
Agreement shall be null and void and of no further force and effect; or (ii)
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.
20. 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.
21. NO BROKER. Purchaser and Seller hereby represent
14
<PAGE>
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 21 shall
survive the Closing or any termination of this Agreement.
22. 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 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: Steven Knappenberger, as Trustee
___________________________
___________________________
___________________________
Bruce Knappenberger, as Trustee
___________________________
___________________________
___________________________
15
<PAGE>
ESCROW AGENT: First American Title Insurance Company
111 West Monroe
Suite 202
Phoenix, Arizona 85003
ATTN: Carol Peterson, Escrow Officer
Telephone: 602/252-5941
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.
23. POSSESSION. Full and exclusive possession of the Property,
subject to the Lease and the lessee's rights thereunder, shall be delivered by
Seller to Purchaser on the date of Closing.
24. 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.
25. 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.
26. 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.
27. 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, and no representations, inducements, promises, or agreements,
oral or otherwise, between the parties not embodied herein shall be of any force
or effect. 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
16
<PAGE>
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 in 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 Arizona.
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.
28. 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.
29. GENERAL STREAM ADJUDICATION. Purchaser acknowledges that
Purchaser is aware that there is pending in Maricopa County Superior Court a
general stream adjudication of all rights to use water in and from the Lower
Gila River system and source and that such adjudication may involve rights to
use water on and from the Property. [VERIFY]
30. FORM 1099-B. Escrow Agent is hereby authorized and instructed to
file with the U.S. Internal Revenue Service Form 1099-B, Proceeds From Real
Estate, Broker, and Barter Exchange Transactions, as required by Section 6045(e)
of the Internal Revenue Code of 1986.
31. SECTION 1031 EXCHANGE. This Agreement is intended to constitute
an Exchange Escrow and these provisions shall control the agreement of the
parties. Either or both entities comprising the Seller may elect to exchange
the Property for other property of like kind in order to qualify such exchange
under Section 1031 of the Internal Revenue Code. The exchange of the Property
may be handled in accordance with one or more of the following provisions, at
Seller's election, but subject in any event to the requirement that no such
exchange shall delay the Closing and in no event shall Purchaser be obligated to
take title to any property other than the Property:
(a) SIMULTANEOUS EXCHANGE WITH THIRD-PARTY PARTICIPATION.
Seller may exchange the Property for other property so long as the party or
parties acquiring the Property are obligated to sell the Property to
Purchaser at the purchase price and on the terms and conditions set forth
in this Agreement and that such conveyance is not a default
17
<PAGE>
under the Note and/or Deed of Trust. The close of any such exchange escrow
shall be contingent upon the contemporaneous closing of the escrow provided
for herein. In the event Seller does not effect such an exchange at the
time set for the closing of this escrow, Seller than agrees to sell, and
Purchaser agrees to buy, the Property at the purchase price and upon the
terms and conditions set forth in this Agreement.
(b) EXCHANGE WITH INTERMEDIARY. Seller may, prior to the close
of escrow, assign this Agreement to an intermediary of Seller's sole and
absolute choice (including all rights of Seller and subject to all
conditions and obligations of Seller hereunder). Notwithstanding such
assignment, Seller, or Seller's assignee, shall convey the Property
directly to Purchaser at close of escrow pursuant to this Agreement.
(c) PURCHASER COOPERATION. Purchaser agrees to cooperate fully
with Seller and Seller's intermediary, if applicable, in facilitating and
accomplishing the 1031 exchange contemplated herein.
(d) NO FINANCIAL OBLIGATION OF PURCHASER. Purchaser shall have
no liability or obligation whatsoever for any additional costs or expenses,
including attorneys' fees, which may be incurred by virtue of the exchange
transactions contemplated by this Paragraph 31.
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:
STEVEN KNAPPENBERGER, as Trustee of
the Steven Knappenberger Revocable
Trust II
/s/ Steven Knappenberger
-----------------------------------
STEVEN KNAPPENBERGER, as Trustee as
aforesaid
BRUCE KNAPPENBERGER, as Trustee of
the Bruce Knappenberger Revocable
Trust
/s/ Bruce Knappenberger
-----------------------------------
BRUCE KNAPPENBERGER, as Trustee as
aforesaid
18
<PAGE>
PURCHASER:
UAG WEST, INC., a Delaware
corporation
By: /s/ illegible
--------------------------
Its:
-------------------------
Date: Attest:
------------------- ----------------------
19
<PAGE>
EMPLOYMENT AGREEMENT
This Employment Agreement is dated as of _____________, 1996, and is
entered into between United Auto Group, Inc., a Delaware corporation ("UAG"),
UAG West, Inc., a Delaware corporation (the "Company") and Steven Knappenberger,
an individual resident of the State of Arizona ("Executive").
WHEREAS, Executive and the Company desire to embody in this Agreement
the terms and conditions of Executive's employment by the Company.
NOW, THEREFORE, the parties hereby agree:
ARTICLE
EMPLOYMENT, DUTIES AND RESPONSIBILITIES
SECTION 1.1 EMPLOYMENT.
Executive shall be employed as President, Chief Operating Officer and
Director of the Company, as Chairman of the Board of each subsidiary of the
Company and as dealer principal for the manufacturers of the existing
dealerships of the Company and its subsidiaries. Executive hereby accepts such
employment.
SECTION 1.2 DUTIES AND RESPONSIBILITIES.
(a) Executive shall be required to perform such duties and
responsibilities as are consistent with his positions and as the Chief Executive
Officer of UAG may from time to time reasonably prescribe. Executive's duties
shall include the management and oversight of operations of the Company's
subsidiaries. Executive shall report, in the performance of his duties,
directly to the Chief Executive Officer of UAG. Executive agrees to perform his
duties, responsibilities and obligations hereunder to the best of his ability.
Executive agrees that all of his activities as an employee of the Company shall
be in material conformity with all reasonable and lawful policies, rules and
regulations of the Company not inconsistent with this Agreement.
(b) Executive shall submit annual operating budgets for each of the
Company's subsidiaries to the Chief Executive Officer of UAG for approval, which
approval shall not be unreasonably withheld, and shall obtain approval, which
approval shall not be unreasonably withheld, from the Chief Executive Officer of
UAG for unbudgeted capital expenditures by any of the Company's subsidiaries in
excess of $100,000 per dealership.
SECTION 1.3 EXECUTIVE'S OFFICE.
Executive shall perform his duties hereunder at his offices in Arizona
or California.
<PAGE>
SECTION 1.3 UAG'S DUTIES
UAG and UAG West shall permit UAG West's operating subsidiaries to
retain earnings (i) sufficient to operate their respective businesses consistent
with past practices and consistent with the annual operating budgets of such
subsidiaries, and (ii) sufficient to fund any capital expenditures made pursuant
to the provisions of Section 1.2(b) hereof.
ARTICLE 2
TERM
SECTION 2.1 TERM.
The term of this Agreement shall begin on the date hereof (the
"Effective Date") and, unless otherwise earlier terminated pursuant to ARTICLE 5
hereof, shall end on the date which is five years following the Effective Date;
PROVIDED, HOWEVER, that such term shall be extended automatically for an
additional year on each anniversary of the Effective Date unless either party
hereto gives written notice to the other party not to so extend within ninety
(90) days prior to an anniversary, in which case no further extension shall
occur (such term, including any extension thereof, shall herein be referred to
as the "Term").
ARTICLE 3
COMPENSATION AND BENEFITS
SECTION 3.1 SALARY AND BENEFITS.
As compensation and consideration for the performance by Executive of
his obligations under this Agreement, Executive shall be entitled to the
following (subject, in each case, to the provisions of Article 5 hereof):
(a) SALARY. The Company shall pay Executive a salary during the first two
years of the Term, payable in accordance with the normal payment procedures of
the Company and subject to such withholdings and other normal employee
deductions as may be required by law, at the rate of Three Hundred Sixty
Thousand Dollars ($360,000) per annum (or such PRO RATA amount thereof for any
period of less than one year). After the first two years of the Term,
Executive's salary shall be increased to Seven Hundred Fifty Thousand Dollars
($750,000) per annum. At the end of the first year of the Term, and annually
thereafter, the Chief Executive Officer of UAG shall review Executive's salary
and, at the time of such review, Executive's salary may be increased (but not
decreased) by mutual agreement of Executive and the Company.
-2-
<PAGE>
(b) BENEFITS. During the Term, the Company shall, either directly or
through UAG or one of its wholly-owned subsidiaries, provide the Executive, at
the Company's expense, with the employee benefits set forth on EXHIBIT A hereto.
(c) EXPENSES. The Company will reimburse Executive for reasonable
business-related expenses incurred by him in connection with the performance of
his duties hereunder during the Term, including travel, facsimile, telephone and
other direct expenses incurred in respect of his California office, subject,
however, to the Company's reasonable policies relating to expense reimbursement.
(d) VACATION. Executive shall be entitled to four weeks paid vacation (or
such additional vacation as the Chief Executive Officer of UAG shall determine)
in accordance with the Companies' policies during the Term.
(e) VEHICLES. Executive shall be entitled to the use of two vehicles
selected by Executive including insurance, maintenance and registration
expenses. Executive shall also be reimbursed for gasoline for the vehicles.
(f) EXPENSES. The Companies will reimburse Executive for reasonable
business-related expenses incurred by him in connection with the performance of
his duties hereunder, including a monthly budget of $1,500 for entertainment
expenses for business purposes.
(g) STOCK OPTIONS. Executive shall be entitled to receive, from time to
time, stock options on terms and conditions comparable to the stock options, if
any, that UAG grants to employees of UAG or any of its subsidiaries with
responsibilities and duties similar to the responsibilities and duties of
Executive under this Agreement; PROVIDED, HOWEVER, that the decision to grant
stock options to Executive and to others similarly situated shall be made by UAG
in its sole discretion.
(h) TAXES. The Companies shall not be responsible for the payment of
Executive's tax liabilities (if any) relating to the compensation and benefits
the Companies provide to the Executive pursuant to this Agreement, except that
the Companies shall pay Executive an additional amount equal to the amount of
Executive's tax liability directly related to (i) the benefits set forth in
subparagraph (e) hereof and (ii) the payment of Executive's medical insurance
premiums as set forth in EXHIBIT A hereto.
SECTION 3.2 MANAGEMENT BONUS.
In addition to paying Executive's base salary, UAG West shall pay to
Executive or persons designated by Executive, and agreed upon by UAG West, a
bonus (the "Management Bonus") for each dealership or dealership group (each an
"Acquired Dealership" and collectively, the "Acquired Dealerships") that the
Company acquires
-3-
<PAGE>
or opens in the Territory (as defined below) during the period commencing on the
Closing Date and ending at the end of the Term (the "Management Bonus Period").
Each Management Bonus shall consist of a cash payment (of not less than $0)
equal to eight (8%) percent of the Acquired Dealership's Pre-Tax Earnings (as
defined below) for each twelve (12) month period commencing on the date the
Company acquires the Acquired Dealership and ending on the date Executive's
employment with the Company terminates, except as provided in Section 5.4(b);
PROVIDED that if either Jay Beskind or George Brochick are terminated as
employees of UAG West or any subsidiary or affiliate, any similar bonus then
payable to either of them shall also inure to the benefit of Executive. Eighty
percent (80%) of the Management Bonus shall be paid within 15 days of the end of
each quarter and any balance shall be paid within 30 days of the end of each
twelve (12) month period. Bonuses shall be pro rated for partial twelve-month
periods except as provided in Section 5.4(b). For purposes of this Section 3.2,
each Acquired Dealership's Pre-Tax Earnings shall mean the consolidated net
earnings (or losses) before taxes, of such Acquired Dealership, computed in
accordance with generally accepted accounting principles; PROVIDED, HOWEVER,
that the calculation of the Acquired Dealership's Pre-Tax Earnings shall add
back any LIFO inventory adjustment and shall not include any start-up expenses,
depreciation or amortization expense, or expenses incurred in connection with
the acquisition, including acquisition-related indebtedness and covenants not to
compete, or any overhead expenses of UAG or the Company . For purposes of this
Section 3.2, "Territory" shall mean the States of Arizona, Colorado, New Mexico
and Utah and the counties in the State of California listed on EXHIBIT B hereto.
ARTICLE 4
CONFIDENTIALITY; NON-COMPETE
SECTION 4.1 CONFIDENTIALITY.
Executive agrees that he will not, at any time during, or for six
months after the termination of, Executive's employment, make use of or divulge
to any other person, firm or corporation any confidential or proprietary
information concerning the business or policies of the Company, any of its
subsidiaries or their affiliates. Executive agrees and acknowledges that all of
such information, in any form, and copies and extracts thereof, are and shall
remain the sole and exclusive property of the Company, and upon termination of
his employment with the Company (except as provided in the Broker's Agreement or
Stock Purchase Agreement), Executive shall return to the Company the originals
and all copies of any such information provided to or acquired by Executive in
connection with the performance of his duties for the Company, and shall return
to the Company all files, correspondence and/or other communications received,
maintained and/or originated by Executive during the course of his employment,
and no copy of any such materials shall be retained by him. As used herein,
confidential
-4-
<PAGE>
information shall mean all information concerning UAG, the Company or any of
their subsidiaries or affiliates except information (i) ascertainable or
obtained from public information, (ii) received from a third party not employed
by or otherwise affiliated with UAG, the Company or any of their subsidiaries or
affiliates, or (iii) which is or becomes known to the public, other than through
a breach by Executive of the terms of this Agreement.
SECTION 4.2 NON-COMPETE.
(a) For the Non-Compete Period (defined below), Executive shall not,
directly or indirectly, for himself or on behalf of or in conjunction with any
person, partnership, corporation or other entity, compete, own, operate,
control, or participate or engage in the ownership, management, operation or
control of, or be connected with as an officer, employee, partner, director,
shareholder, representative, consultant, independent contractor, guarantor,
advisor or in any other similar capacity or otherwise have a financial interest
in, a proprietorship, partnership, joint venture, association, firm, corporation
or other business organization or enterprise that competes with the business of
the Company or any of its subsidiaries or their affiliates. For purposes
hereof, the Company shall be deemed to be in the business of operating
dealerships located in the United States of America that engage in the retail
sale of new and used automobiles or light duty trucks and businesses ancillary
thereto, PROVIDED, HOWEVER, that with respect to any post-termination employment
Non-Compete Period, for any business of Executive to be deemed competitive for
purposes hereof, it must be located within a 50 mile radius of any automobile or
truck dealership or ancillary business in which the Company (or any affiliate
thereof), directly or indirectly, has an ownership interest of 20% or more at
the time the competing activities commence. During the Non-Compete Period,
Executive shall not interfere with or disrupt, or attempt to interfere with or
disrupt, the relationship, contractual or otherwise, between the Company or any
of its subsidiaries or their affiliates and any customer, client, supplier,
manufacturer, distributor, consultant, independent contractor or employee of the
Company or any of its subsidiaries or their affiliates.
(b) The Non-Compete Period shall mean (i) the term of Executive's
employment, if he is employed for five (5) years or more or (ii) five (5) years
from execution of this Agreement; provided, however, if Executive is terminated
without Cause (as defined in Section 5.1), the Non-Compete Period shall
terminate on the date of his termination.
(c) Notwithstanding anything herein to the contrary, Executive may
own, directly or indirectly, up to 4.9% of the outstanding capital stock of any
competitive business having a class of capital stock which is traded on any
national stock exchange or in the over-the-counter market. Further, the
activities of
-5-
<PAGE>
Executive on behalf of Broker under that Broker's Agreement dated the date
hereof are expressly permitted by UAG and UAG West.
(d) Executive acknowledges that (i) the agreements and covenants
contained in this Section 4.2 are essential to protect the value of the
Company's and its subsidiaries' and their affiliates' business and assets, (ii)
by virtue of his employment with the Company and its subsidiaries, Executive has
obtained and will obtain knowledge, contacts, know-how, training, experience and
other information relating to the Company's and its subsidiaries' and their
affiliates' business operations, and (iii) there is a substantial probability
that such knowledge, know-how, contacts, training, experience and information
could be used to the substantial advantage of a competitor of the Company and
its subsidiaries and their affiliates and to the Company's and its subsidiaries'
and their affiliates' detriment.
ARTICLE 5
TERMINATION
SECTION 5.1 TERMINATION BY THE COMPANY.
Subject to Section 5.4, the Company shall have the right to terminate
Executive's employment at any time for Cause. For purposes of this Agreement,
"Cause" shall mean: (i) Executive's material failure, neglect or refusal to
perform his duties hereunder, which material failure, neglect or refusal shall
not be remedied by Executive within thirty (30) days of receipt by Executive of
written notice from the Company of such neglect, (ii) Executive's refusal to
follow the reasonable and lawful instructions, orders or directives of the Chief
Executive Officer of UAG with respect to his material duties and
responsibilities hereunder which refusal is not remedied promptly after receipt
by Executive of written notice from the Chief Executive Officer of UAG of such
refusal, (iii) Executive's conviction for, or the entry of a plea (including
nolo contendere or its equivalent) by Executive with respect to any act of
fraud, misappropriation or embezzlement or any felony under federal or state
law, or (iv) any wilful or intentional act of Executive that has the effect of
causing injury to the reputation or business of UAG, the Company or their
subsidiaries or affiliates in any material respect.
SECTION 5.2 DEATH.
In the event Executive dies during the Term, this Agreement shall
automatically terminate (subject to Section 5.4 hereof), such termination to be
effective on the date of Executive's death.
SECTION 5.3 DISABILITY.
In the event that Executive shall suffer a disability which shall have
prevented him from performing satisfactorily his
-6-
<PAGE>
obligations hereunder for a period of at least 90 consecutive days, or 180 non-
consecutive days within any 365 day period, the Company shall have the right to
terminate this Agreement (subject to Section 5.4 hereof).
SECTION 5.4 EFFECT OF TERMINATION.
(a) In the event of termination of Executive's employment for any
reason, the Company shall pay to Executive (or his beneficiary in the event of
his death) any salary or bonuses earned but not paid to Executive prior to the
effective date of such termination.
(b) In the event that the Company terminates Executive's employment
without Cause prior to the expiration of the Term, the Company shall, for a
period equal to the remainder of the Term, continue to (i) pay to Executive his
salary and Management Bonus and reimburse him for all business-related expenses
incurred through the date of termination, (ii) provide Executive with benefits
on the terms set forth in Section 3.1(b), and (iii) vest in full all stock
options granted to him, the term (exercise period) of which shall remain in full
force and effect notwithstanding Executive's termination.
ARTICLE 6
MISCELLANEOUS
SECTION 6.1 UAG GUARANTY.
UAG hereby guarantees the due and punctual performance of the
obligations of the Company hereunder.
SECTION 6.2 NO VIOLATION.
Executive represents and warrants to the Company that neither the
execution and delivery of this Agreement nor the performance of his duties
hereunder violates or will violate the provisions of any other agreement to
which he is a party or by which he is bound. The Company represents and
warrants to Executive that neither the execution and delivery of this Agreement
nor the performance of its duties hereunder violates or will violate the
provisions of any other agreement to which it is a party or by which it is
bound.
SECTION 6.3 BENEFIT OF AGREEMENT; ASSIGNMENT; BENEFICIARY.
This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns, including, without limitation, any
corporation or person which may acquire all or substantially all of the
Company's assets or business, or with or into which the Company may be
consolidated or merged. This Agreement shall also inure to the benefit of, and
be enforceable by,
-7-
<PAGE>
Executive and his personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If Executive should die
while any amount would still be payable to Executive hereunder if he had
continued to live, all such amounts shall be paid in accordance with the terms
of this Agreement to Executive's beneficiary, devisee, legatee or other
designee, or if there is no such designee, to Executive's estate.
SECTION 6.4 NOTICES.
Any notice required or permitted hereunder shall be in writing and
shall be sufficiently given if personally delivered or if sent by telegram or
telex or by registered or certified mail, postage prepaid, with return receipt
requested, addressed: (a) in the case of the Company to c/o United Auto Group,
Inc. 375 Park Avenue, New York, New York 10022, facsimile no. (212) 223-5148,
Attention: General Counsel, or to such other address and/or to the attention of
such other person as the Company shall designate by written notice to Executive;
and (b) in the case of Executive, to Steven Knappenberger at 6725 E. McDowell
Road, Scottsdale, Arizona 85257-3103, or to such other address as Executive
shall designate by written notice to the Company. Any notice given hereunder
shall be effective and deemed to have been given as of the date received.
SECTION 6.5 AMENDMENT.
This Agreement may not be changed or modified except by an instrument
in writing signed by both of the parties hereto.
SECTION 6.6 WAIVER.
The waiver by either party of a breach of any provision of this
Agreement shall not operate or be construed as a continuing waiver or as a
consent to or waiver of any subsequent breach hereof. Any waiver must be in
writing and signed by Executive or the Company, as the case may be.
SECTION 6.7 HEADINGS.
The Article and Section headings herein are for convenience of
reference only, do not constitute a part of this Agreement and shall not be
deemed to limit or affect any of the provisions hereof.
SECTION 6.8 AGREEMENT TO TAKE ACTIONS.
Each party hereto shall execute and deliver such documents,
certificates, agreements and other instruments, and shall take such other
actions, as may be reasonably necessary or desirable in order to perform his or
its obligations under this Agreement or to effectuate the purposes hereof.
-8-
<PAGE>
SECTION 6.9 SURVIVORSHIP.
The respective rights and obligations of the parties hereunder shall
survive any termination of this Agreement to the extent necessary to the
intended preservation of such rights and obligations.
SECTION 6.10 VALIDITY.
The invalidity or unenforceability of any provision or provisions of
this Agreement shall not affect the validity or enforceability of any other
provision or provisions of this Agreement, which shall remain in full force and
effect.
SECTION 6.11 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.
SECTION 6.12 GOVERNING LAW.
This Agreement shall be governed by the laws of the State of Arizona
without regard to conflict of law principles.
SECTION 6.13 INDEMNIFICATION.
UAG, the Company and the Company's subsidiaries (a) shall indemnify
and hold Executive harmless to the full extent permitted by law, if Executive is
made or is threatened to be made a party or is otherwise involved in any action,
suit or proceeding (other than an action, suit or proceeding commenced by
Executive without approval of the Company's Board of Directors) by reason of the
fact that he is or was an officer or employee of the Company or its subsidiaries
after the date hereof against all liability and loss suffered and expenses
reasonably incurred by Executive, (b) shall maintain (or cause to be maintained)
in the certificate of incorporation of the Company and the articles of
incorporation of its subsidiaries, provisions limiting the liability of officers
and directors from stockholders to the full extent permitted by law and (c)
shall maintain directors and officers liability insurance with terms,
deductibles and coverages customary for companies of similar size and nature.
Nothing herein shall be interpreted as requiring UAG, the Company or its
subsidiaries to indemnify Executive for any claim arising out of a breach by
Executive of the terms of this Agreement or of the terms of that certain Stock
Purchase Agreement dated June 6, 1996 between Executive, UAG, the Company and
certain other parties.
-9-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement effective as of the date first above written.
UNITED AUTO GROUP, INC.
By: _______________________________
Its: _______________________________
UAG WEST, INC.
By: _______________________________
Its: _______________________________
____________________________________
Steven Knappenberger, Individually
-10-
<PAGE>
EXHIBIT A
EXECUTIVE BENEFITS
- - family health insurance coverage
- - annual health physical
- - $2.5 million life insurance coverage - at rate not to exceed premium paid
in 1996
- - directors / officers liability insurance
- - $10 million umbrella liability insurance coverage - as additional insured
under Company policy
- - Arizona Country Club and Arizona Club dues
- - first class air travel for business
- - personal secretarial services - as part of secretary's duties
- - home personal computer
- - YPO time / expenses
<PAGE>
EXHIBIT "B"
Counties
State of California
Los Angeles
Orange
Riverside
Ventura
San Bernadino
San Diego
<PAGE>
BROKER'S AGREEMENT
This Agreement (the "Broker's Agreement") is dated as of
_____________, 1996, and is entered into between UAG West, Inc., a Delaware
corporation ("UAG West") and KBB, Inc., an Arizona corporation ("Broker").
In consideration of the mutual covenants contained herein, and other
good and valuable consideration, Broker and UAG West agree as follows:
1. ENGAGEMENT. UAG West hereby engages Broker, and Broker accepts
such engagement, as a broker for UAG West (i) to locate prospective automobile
and light truck dealerships and dealership groups for UAG West to acquire within
the Territory (as defined below) and (ii) to assist UAG West in obtaining new
dealerships in the Territory. For purposes of this Agreement, the "Territory"
shall mean the States of Arizona, New Mexico, Colorado and Utah, and the
counties in the State of California listed on Exhibit "A" hereto.
2. TERM. The Term of this Agreement shall begin on the date hereof
(the "Effective Date") and, unless otherwise terminated pursuant to Section 4
hereof, shall end on the date which is five years following the Effective Date;
PROVIDED, HOWEVER, that such term shall be extended automatically for an
additional year on each anniversary of the Effective Date unless either party
hereto gives written notice to the other party not to so extend within ninety
(90) days prior to an anniversary, in which case no further extension shall
occur (such term, including any extension thereof, shall hereinafter be referred
to as the "Term").
3. BROKER'S FEE. In return for Broker's efforts in identifying
dealerships and dealership groups in the Territory for UAG West to acquire or
open and in assisting in the acquisition or opening of such dealerships and
dealership groups, UAG West shall pay to Broker a fee (the "Broker's Fee") for
each dealership or dealership group (each an "Acquired Dealership" and
collectively, the "Acquired Dealerships") that UAG West acquires or opens in the
Territory during the Term other than the dealerships owned by the persons listed
on Exhibit "B" hereto. Each Broker Fee shall consist of a cash payment (not
less than $0) calculated as follows:
(i) If the Acquired Dealership is an existing dealership or
dealership group in the Territory, then the Broker's Fee shall be a cash
payment on the date of the acquisition of the Acquired Dealership (the
"Acquisition Closing Date") in an amount equal to the Acquired Dealership's
Pre-Tax Earnings (as defined below) for the 12-month period immediately
preceding the Acquisition Closing Date; PROVIDED, HOWEVER, that in the
event an Acquired Dealership's sales exceed Five Hundred Million Dollars
($500,000,000) during the twelve (12) month period immediately preceding
the Acquisition
<PAGE>
Closing Date, then the Broker's Fee shall be an amount to be mutually
agreed to by Broker and UAG West;
(ii) If the Acquired Dealership is a dealership that UAG West is
opening ("New Dealership") within Maricopa County, Arizona, then the
Broker's Fee shall be a cash payment on the thirteenth month anniversary of
the date on which the New Dealership commenced business ("Opening Date") in
an amount equal to three times the New Dealership's Pre-Tax Earnings (as
defined below) for the twelve (12) month period commencing on the Opening
Date; and
(iii) If the Acquired Dealership is a New Dealership that UAG West
is opening within the Territory but not within Maricopa County, Arizona,
then the Broker's Fee shall be a cash payment on the thirteenth month
anniversary of the Opening Date in an amount equal to the New Dealership's
Pre-Tax Earnings for the twelve (12) month period commencing on the Opening
Date.
For purposes of this Agreement, each Acquired Dealership's Pre-Tax
Earnings shall mean the consolidated net earnings (or losses), before taxes, of
such Acquired Dealership, computed in accordance with generally accepted
accounting principles; PROVIDED, HOWEVER, that the calculation of the Acquired
Dealership's Pre-Tax Earnings shall add back any LIFO inventory adjustment and
shall not include any depreciation or amortization expense or expenses incurred
in connection with the acquisition, and shall be recast (consistent with UAG
West's past practices in connection with acquisitions) to reflect extraordinary
owners compensation, personal expenses and other expenses not related to the
continuing operations of the dealership, and without any allocation of overhead
expenses of UAG or UAG West or any acquisition-related expenses, such as
acquisition-related indebtedness. For purposes of this Agreement, each New
Dealership's Pre-Tax Earnings shall mean the consolidated net earnings (or
losses), before taxes, of such New Dealership, computed in accordance with
generally accepted accounting principles less the New Dealership's start-up
expenses; PROVIDED, HOWEVER, that the calculation of the New Dealership's Pre-
Tax Earnings shall add back any LIFO inventory adjustment and shall not include
any depreciation or amortization expense or any allocation of overhead expenses
of UAG or UAG West.
The Broker and UAG West may from time to time agree in writing as to
other fee arrangements in particular circumstances, such as an acquisition where
the target is not profitable.
4. TERMINATION. This Agreement shall terminate (a) at the
expiration of the Term; (b) at any time with the mutual consent of UAG West and
Broker; or (c) if Steven Knappenberger's employment with UAG West terminates
unless he is succeeded as President (provided that any decision with respect to
succession shall be at the sole discretion of the Board of Directors of UAG
West) by Jay Beskind or George Brochick. In addition, notwithstanding any
-2-
<PAGE>
termination, Broker shall be entitled to fees on any transaction that is the
subject of an agreement on the date of the termination or with respect to any
transaction that closes within one year from the date of termination and as to
which Broker rendered substantial assistance.
5. INDEMNIFICATION BY BROKER. Broker shall indemnify and defend UAG
West, its affiliates and their respective directors, officers, shareholders,
employees and agents and hold them harmless to the fullest extent permitted by
law, from and against any and all claims, liabilities, losses, damages and
expenses (including attorneys' fees and costs) as they are incurred that are
directly or indirectly related to or otherwise incurred in connection with
Broker's bad faith, negligence or willful misconduct, or of any breach of this
Agreement by Broker.
6. INDEMNIFICATION BY UAG WEST. UAG West shall indemnify and defend
the Broker and each of its directors, officers, shareholders, employees and
agents and hold each of them harmless to the fullest extent permitted by law,
from and against any and all claims, liabilities, losses, damages and expenses
(including attorneys' fees and costs) as they are incurred that are directly or
indirectly related to or otherwise incurred in connection with the activities
set forth in Paragraph 1 hereof other than arising out of Broker's bad faith,
negligence or willful misconduct, or any breach of this Agreement by UAG West.
7. CONFIDENTIAL INFORMATION. Broker shall hold in the strictest
confidence any and all confidential and proprietary information and materials
provided to Broker by UAG West or any of its affiliates. Broker shall not use
any of the same except for purposes contemplated by this Agreement. Except to
enforce its rights hereunder, Broker shall, on UAG West's demand, return to UAG
West all documents and other materials previously provided to Broker by UAG West
or any of its affiliates and all copies thereof and excerpts therefrom in
Broker's possession. As used herein, confidential information shall mean all
information concerning UAG West or any of its affiliates except information (i)
ascertainable or obtained from public information, (ii) received from a third
party not employed by or otherwise affiliated with UAG West or any of its
affiliates, or (iii) which is or becomes known to the public, other than through
a breach by Broker of the terms of this Agreement.
8. NO VIOLATION. Broker represents and warrant to UAG West that
neither the execution and delivery of this Agreement nor the performance of its
duties hereunder violates or will violate the provisions of any other agreement
to which Broker or any of its directors, officers, shareholders, employees and
agents are bound. UAG West represents and warrants to Broker that neither the
execution and delivery of this Agreement nor the performance of its duties
hereunder violates or will violate the provisions of any
-3-
<PAGE>
other agreement to which it or any of its affiliates are parties or by which it
or any of its affiliates are bound.
9. BENEFIT OF AGREEMENT. This Agreement shall enure to the benefit
of and be binding upon UAG West and its successors, including, without
limitation, any corporation or person which may acquire all or substantially all
of UAG West's assets or business, or into which UAG West may be consolidated or
merged. This Agreement shall also enure to the benefit of, and be enforceable
by, Broker and its successors.
10. NOTICES. Any notice required or permitted hereunder shall be in
writing and shall be sufficiently given if personally delivered or if sent by
telegram or telex or by registered or certified mail, postage pre-paid, with
return receipt requested, addressed (a) in the case of UAG West, to c/o United
Auto Group, Inc., 375 Park Avenue, New York, New York 10022, Attn: General
Counsel, or to such other address and/or to the attention of such other person
as UAG West shall designate by written notice to Broker; and (b) in the case of
Broker, (i) to Steven Knappenberger at 6725 E. McDowell Road, Scottsdale,
Arizona 85257, (ii) George Brochick at 6242 E. Laurel Lane, Scottsdale, Arizona
85254, and (iii) Jay Beskind at 6513 E. Paradise Lane, Scottsdale, Arizona 85254
or to such other address as Messrs. Knappenberger, Brochick or Beskind,
respectively, shall designate by written notice to UAG West. Any notice given
hereunder shall be effective and deemed to have been given as of the date of
receipt.
11. AMENDMENT. This Agreement may not be changed or modified except
by an instrument in writing signed by both of the parties hereto.
12. WAIVER. The waiver by either party of the breach of any
provision of this Agreement shall not operate or be construed as a continuing
waiver or as a consent to or waiver of any subsequent breach hereof. Any waiver
must be in writing and signed by Broker or UAG West, as the case may be.
13. HEADINGS. The Section headings herein are for convenience of
reference only, do not constitute a part of this Agreement, and should not be
deemed to limit or affect any of the provisions hereof.
14. VALIDITY. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision or provisions of this Agreement, which shall remain in full
force and effect.
15. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, though all of
which together shall constitute one and the same instrument.
-4-
<PAGE>
16. ASSIGNMENT. Neither this Agreement nor any rights under this
Agreement are assignable and no duties or obligations under this Agreement are
delegable. Any attempted purported assignment or delegation shall be void.
17. ENTIRE AGREEMENT. This Agreement, together with its exhibits,
contains the entire agreement of the parties with respect to the subject matter
hereof and supersedes all prior or contemporaneous negotiations, correspondence,
or understandings and agreements between the parties.
18. GOVERNING LAW. This Agreement shall be governed by the laws of
the State of Arizona without regard to conflict of law principles.
UAG WEST, INC.
By: _______________________________
Its: _______________________________
KBB, INC.
By: _______________________________
Its: _______________________________
-5-
<PAGE>
EXHIBIT "A"
Counties
State of California
Los Angeles
Orange
Riverside
Ventura
San Bernadino
San Diego
<PAGE>
STOCK PURCHASE AGREEMENT
DATED AS OF AUGUST 5, 1996
AMONG
UNITED AUTO GROUP, INC.,
UAG ATLANTA IV, INC.,
CHARLES EVANS BMW, INC.,
AND
CHARLES F. EVANS
<PAGE>
This STOCK PURCHASE AGREEMENT, as of August 5, 1996 is by and among
United Auto Group, Inc., a Delaware corporation ("UAG"), UAG Atlanta IV, Inc., a
Delaware corporation ("Sub"), Charles Evans BMW, Inc., a Georgia corporation
(the "Company"), and Charles F. Evans ("Evans" or the "Stockholder").
W I T N E S S E T H:
WHEREAS, the Company operates a BMW automobile dealership and related
businesses in Duluth, Georgia;
WHEREAS, the Stockholder owns all of the issued and outstanding shares of
common stock of the Company (the "Common Stock");
WHEREAS, Sub is a wholly-owned subsidiary of UAG; and
WHEREAS, Sub desires to purchase all of the issued and outstanding
shares of the Common Stock from the Stockholder (such shares being
collectively referred to herein as the "Shares"), and the Stockholder desires
to sell the Shares to Sub (upon the terms and subject to the conditions set
forth in this Agreement), such that immediately after giving effect to such
purchase and sale, Sub will own one hundred (100%) percent of all of the
issued and outstanding shares of Common Stock, on a fully diluted basis;
NOW, THEREFORE, in consideration of the mutual terms, conditions and
other agreements set forth herein, the parties hereto hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE OF SHARES
1.1 PURCHASE AND SALE OF THE SHARES.
(a) PURCHASE AND SALE. Upon the terms and subject to the conditions
set forth in this Agreement, the Stockholder shall sell to Sub, and Sub shall
purchase from the Stockholder, the Shares for an aggregate purchase price equal
to Ten Million Dollars ($10,000,000) (the "Base Price"), which Base Price is
subject to adjustment after Closing as provided in SECTION 1.2 hereof. At the
Closing referred to in SECTION 1.1(b) hereof:
(i)the Stockholder shall sell, assign, transfer and deliver to Sub
the Shares representing 100% of the outstanding Common Stock, free and clear
of all Liens (as defined in SECTION 10.11), and shall deliver the
certificates representing such Shares accompanied by stock powers duly
executed in blank; and
(ii) Sub shall accept and purchase the Shares from the Stockholder and
in payment therefor shall deliver to the Stockholder immediately available
funds in an
<PAGE>
aggregate amount equal to the Base Price by wire transfer to an
account designated in writing by the Stockholder or by certified funds.
(b) CLOSING. Subject to the conditions set forth in this Agreement, the
purchase and sale of the Shares pursuant to this Agreement (the "Closing") shall
take place at the offices of Rogers & Hardin, 2700 Cain Tower, Peachtree Center,
229 Peachtree Street, N.E., Atlanta, Georgia 30303, or such other location as
the parties shall agree, within ten (10) Business Days of the UAG Public
Offering Date (as defined in SECTION 10.11) or on November 30, 1996, whichever
occurs first (the "Closing Date") The date on which the Closing occurs is
herein referred to as the "Closing Date". The Closing shall take place on the
same date as the closing of the Stock Purchase Agreement dated as of August 5,
1996 between UAG, Sub, Charles Evans Nisan, Inc. and Evans.
(c) DELIVERIES AT THE CLOSING. Subject to the conditions set forth in
this Agreement, at the Closing:
(i) The Stockholder shall deliver to Sub (A) certificates representing
the Shares bearing the restrictive legend customarily placed on securities
that have not been registered under applicable federal and state securities
laws and accompanied by stock powers as required by SECTION 1.1(a)(i)
hereof, and any other documents that are necessary to transfer to Sub good
title to all the Shares, and (B) all opinions, certificates and other
instruments and documents required to be delivered by the Stockholder at or
prior to the Closing or otherwise required in connection herewith;
(ii) Sub shall pay and deliver to the Stockholder funds as required by
SECTION 1.1(a)(ii) hereof and all opinions, certificates and other
instruments and documents required to be delivered by Sub at or prior to the
Closing or otherwise required in connection herewith;
(iii) The Stockholder and Sub shall enter into a real estate purchase
agreement in a form mutually acceptable to the parties (the "Real Estate
Purchase Agreement") pursuant to which Sub shall agree to purchase the real
property used in the business of the Company and commonly known as 3624
Commerce Ave., Duluth, Georgia (the "BMW Property"), on or before the
eighteen-month anniversary of the Closing Date. If the closing of the Real
Estate Purchase Agreement (the "Real Estate Closing") takes place on or
before the six-month anniversary of the Closing Date, the purchase price for
the BMW Property (the "Real Estate Purchase Price") shall be Six Million
Dollars ($6,000,000). If the Real Estate Closing takes place after the six-
month anniversary of the Closing Date but on or before the one-year
anniversary of the Closing Date, then the Real Estate Purchase Price shall
be Six Million Five Hundred Thousand Dollars ($6,500,000). If the Real
Estate Closing takes place after the one-year anniversary of the Closing
Date, the Real Estate Purchase Price shall be Seven Million Five Hundred
Thousand Dollars ($7,500,000).
-2-
<PAGE>
(iv) Sub shall pay and deliver to Stockholder a deposit in the amount
of Seven Hundred Thousand Dollars ($700,000) (the "Real Estate Deposit"),
such deposit to be credited against the Real Estate Purchase Price at the
Real Estate Closing. The Real Estate Deposit shall be non-refundable;
PROVIDED, HOWEVER, that the Stockholder shall refund the Real Estate Deposit
if the Stockholder is unwilling or unable to consummate the sale of the BMW
Property pursuant to the terms of the Real Estate Purchase Agreement; and
(v) the Stockholder, Sub and the Company shall enter into a lease for
the BMW Property in a form mutually acceptable to the parties (the "BMW
Lease"). The initial lease rate shall be $45,000 per month and on the six-
month anniversary of the Closing Date shall increase to $55,000 per month.
The BMW Lease payments shall be paid monthly commencing on the Closing Date.
The Lease shall terminate at the Real Estate Closing.
1.2 NET WORTH ADJUSTMENT.
(a) As soon as practicable after the Closing Date, the Stockholder shall
deliver to Sub a balance sheet of the Company dated as of the Closing Date (such
balance sheet so delivered is referred to herein as the "Closing Date Balance
Sheet"). The Closing Date Balance Sheet shall be prepared in good faith on the
same basis and in accordance with the accounting principles, methods and
practices used in preparing the Company Financial Statements (as defined in
SECTION 2.5 hereof), subject to the modifications, adjustments and exceptions to
such accounting principles, methods and practices set forth on SCHEDULE 1.2(a)
hereto (such accounting principles, methods and practices as so modified and
adjusted, and such procedures, are referred to herein as the "Accounting
Principles"). In connection with the preparation of the Closing Date Balance
Sheet, the Stockholder and the Company and the Reviewer (as defined below) and
other representatives of Sub will conduct a physical inventory at each location
where inventory is held by the Company. From the results of such inventory and
prior to the Closing Date, Sub and the Stockholder (or the respective
representatives thereof) will prepare a schedule, which shall be signed by each
of Sub and the Stockholder, setting forth the nature and quality of such inven-
tory and such other items as shall be agreed upon by Sub and the Stockholder to
be included in the Closing Date Balance Sheet.
(b) Within forty-five (45) days after delivery of the Closing Date
Balance Sheet, (i) Coopers & Lybrand or such other national accounting firm (the
"Reviewer") selected by Sub, shall audit or otherwise review the Closing Date
Balance Sheet in such manner as Sub and the Reviewer deem appropriate, and (ii)
Sub shall deliver such reviewed balance sheet (the "Reviewed Balance Sheet"),
together with the Reviewer's report thereon, to the Stockholder. The Reviewed
Balance Sheet (i) shall be prepared on the same basis and in accordance with the
Accounting Principles and (ii) shall include a schedule showing the computation
of the Final Net Worth (as defined in SECTION 1.2(g)(i) hereof), computed in
accordance with the definition of Net Worth set forth in SECTION 1.2(g)(iii)
hereof. Sub and the Reviewer shall have the opportunity to consult with the
Stockholder, the Company and
-3-
<PAGE>
each of the accountants and other representatives of the Stockholder and the
Company and examine the work papers, schedules and other documents prepared
by the Stockholder, the Company and each of such accountants and other
representatives during the preparation of the Closing Date Balance Sheet.
The Stockholder and the Stockholder's independent public accountants shall
have the opportunity to consult with the Reviewer and examine the work
papers, schedules and other documents prepared by Sub and the Reviewer during
the preparation of the Reviewed Balance Sheet.
(c) The Stockholder shall have a period of forty-five (45) days after
delivery to the Stockholder of the Reviewed Balance Sheet to present in writing
to Sub all objections the Stockholder may have to any of the matters set forth
or reflected therein, which objections shall be set forth in reasonable detail.
During said forty-five (45) day period, the Stockholder, their accountants and
other representatives of the Stockholder may, at the office of the Company or
the office of the Reviewer, as determined by Stockholder, examine Reviewer's
work papers, schedules, research notes and all correspondence between Reviewer
and Sub or UAG or any representative of Sub or UAG, which relate to the Closing
Date Balance Sheet or Reviewed Balance Sheet and any entry thereto made,
considered or proposed by Reviewer. If no objections are raised within such 45-
day period, the Reviewed Balance Sheet shall be deemed accepted and approved by
the Stockholder and a supplemental closing (the "Supplemental Closing") shall
take place within five (5) Business Days following the expiration of such 45-day
period, or on such other date as may be mutually agreed upon in writing by Sub
and the Stockholder.
(d) If the Stockholder shall raise any objection within the 45-day
period, Sub and the Stockholder shall attempt to resolve the matter or matters
in dispute and, if resolved, the Supplemental Closing shall take place within
five (5) Business Days following such resolution.
(e) If such dispute cannot be resolved by Sub and the Stockholder within
sixty (60) days after the delivery of the Reviewed Balance Sheet, then the
specific matters in dispute shall be submitted to a firm of independent
certified public accountants having a reputation for special expertise in
automobile dealership accounting and mutually acceptable to Sub and the
Stockholder, which firm shall make a final and binding determination as to such
matter or matters. Such accounting firm shall send its written determination to
Sub and the Stockholder and the Supplemental Closing, if any, shall take place
five (5) Business Days following the receipt of such determination by Sub and
the Stockholder. The fees and expenses of the accounting firm referred to in
this SECTION 1.2(e) shall be paid one half by Sub and one half by the
Stockholder.
(f) Sub and the Stockholder agree to cooperate with each other and each
other's authorized representatives and with any accounting firm selected by Sub
and the Stockholder pursuant to SECTION 1.2 (e) hereof in order that any and all
matters in dispute shall be resolved as soon as practicable.
-4-
<PAGE>
(g) (i) If the Net Worth as shown on the Reviewed Balance Sheet as
finally determined through the operation of SECTIONS 1. 2 (a) THROUGH (e) hereof
shall be less than Two Million Three Hundred Thousand Dollars ($2,300,000) (the
amount of any such deficiency being referred to herein as the "Net Worth Defi-
ciency"), the Stockholder shall pay to Sub at the Supplemental Closing, by wire
transfer of immediately available funds to an account designated in writing by
Sub within two (2) Business Days of the date of the Supplemental Closing, an
amount equal to the Net Worth Deficiency, together with interest on such amount
from the date that is two Business Days after the Reviewed Balance Sheet is
delivered to the Stockholder until such amount is paid in full at the prime rate
or its equivalent (as announced from time to time by Citibank, N.A.).
(ii) If the Net Worth as shown on the Closing Date Balance Sheet is
equal to or greater than Two Million Three Hundred Thousand Dollars ($2,300,000)
and the Net Worth as shown on the Reviewed Balance Sheet as finally determined
through the operation of SECTIONS 1.2(a) THROUGH (e) hereof shall be greater
than the Net Worth as shown on the Closing Date Balance Sheet, then Sub shall
pay to the Stockholder at the Supplemental Closing an amount equal to the
difference between the Net Worth as shown on the Reviewed Balance Sheet and the
Net Worth as shown on the Closing Date Balance Sheet.
(iii) "Net Worth" computed in connection with the Closing Date
Balance Sheet and the Reviewed Balance Sheet shall mean the amount by which the
total assets exceed the total liabilities reflected, in each case, on the
balance sheet of Company comprising the Closing Date Balance Sheet or the
Reviewed Balance Sheet, as the case may be.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE STOCKHOLDER
Subject to the parties' agreement and acknowledgment that the Schedules
referred to in this ARTICLE 2 are to be delivered by the Company and the
Stockholder no later than August 15, 1996, the Company and the Stockholder
hereby jointly and severally represent and warrant to UAG and Sub as follows:
2.1 ORGANIZATION AND GOOD STANDING.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Georgia and has the corporate power and
authority to own, lease and operate the properties used in its business and to
carry on its business as now being conducted. The Company has not conducted its
business under any assumed names during the last five years. Attached as
SCHEDULE 2.1(b) are complete and correct copies of the Company's Articles of
Incorporation and Bylaws as amended and presently in effect.
-5-
<PAGE>
2.2 SUBSIDIARIES.
The Company does not have any interest or investment in any Person (as
defined in SECTION 10.11 hereof).
2.3 CAPITALIZATION.
The authorized stock of the Company and the number of shares of capital
stock that are issued and outstanding are set forth on SCHEDULE 2.3 hereto. The
shares listed on SCHEDULE 2.3 hereto constitute all the issued and outstanding
shares of capital stock of the Company and have been validly authorized and
issued, are fully paid and nonassessable, have not been issued in violation of
any preemptive rights or of any federal or state securities law and no personal
liability attaches to the ownership thereof. There is no security, option,
warrant, right, call, subscription, agreement, commitment or understanding of
any nature whatsoever, fixed or contingent, that directly or indirectly (i)
calls for the issuance, sale, pledge or other disposition of any shares of
capital stock of the Company or any securities convertible into, or other rights
to acquire, any shares of capital stock of the Company, or (ii) obligates the
Company to grant, offer or enter into any of the foregoing, or (iii) relates to
the voting or control of such capital stock, securities or rights, except as
provided in this Agreement. The Company has not agreed to register any
securities under the Securities Act.
2.4 AUTHORITY; APPROVALS AND CONSENTS.
The Company has the corporate power and authority to enter into this
Agreement and to perform its obligations hereunder and thereunder. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby and thereby have been duly authorized and
approved by the Board of Directors of the Company and no other corporate
proceedings on the part of the Company are necessary to authorize and approve
this Agreement and the transactions contemplated hereby and thereby. This
Agreement has been duly executed and delivered by, and constitutes a valid and
binding obligation of, the Company, enforceable against the Company in
accordance with its terms. The execution, delivery and performance by the
Company and the Stockholder of this Agreement and Real Estate Purchase Agreement
and the consummation of the transactions contemplated hereby and thereby do not
and will not:
(i) contravene any provisions of the Articles of Incorporation or By-
Laws of the Company;
(ii) (after notice or lapse of time or both) conflict with, result in a
breach of any provision of, constitute a default under, result in the
modification or cancellation of, or give rise to any right of termination or
acceleration in respect of, any Company Agreement (as defined in SECTION
2.15 hereof) or, require any consent or waiver of any party to any Company
Agreement (except for the rights of BMW of North America, Inc. ("BMW") under
the BMW Dealer Agreement between BMW and Evans (the "BMW Agreement");
-6-
<PAGE>
(iii) result in the creation of any Lien upon, or any Person obtaining
any right to acquire, any properties, assets or rights of the Company (other
than the rights of Sub to acquire the Shares pursuant to this Agreement);
(iv) violate or conflict with any Legal Requirements (as defined in
SECTION 2.9 hereof) applicable to the Company or any of its businesses or
properties; or
(v) require any authorization, consent, order, permit or approval of,
or notice to, or filing, registration or qualification with, any
governmental, administrative or judicial authority, except in connection
with or in compliance with the provisions of the H-S-R Act (as defined in
SECTION 5.11 hereof).
Except as referred to above, no permit or approval of, or notice to any
governmental, administrative or judicial authority is necessary to be obtained
or made by the Company to enable the Company to continue to conduct its business
and operations and use its properties after the Closing in a manner which is in
all material respects consistent with that in which they are presently
conducted.
2.5 FINANCIAL STATEMENTS.
Attached as SCHEDULE 2.5 are true and complete copies of:
(i) (A) the audited balance sheet of the Company as of December 31,
1995 (the "Company Balance Sheet"), and the related statements of income,
stockholders' equity and cash flow for the fiscal year ended December 31,
1995, together with the notes thereto, in each case examined by and
accompanied by the report of independent certified public accountants, and
(B) the audited balance sheet of the Company as of December 31, 1994, and
the related statements of income, stockholders' equity and cash flow for the
fiscal year ended December 31, 1994, together with the notes thereto, in
each case examined by and accompanied by the report of independent certified
public accountants; and
(ii) the most recent unaudited balance sheet of the Company and the
unaudited statements of income and stockholders' equity for the periods
ended on such date, together with the notes thereto;
(iii) the most recent monthly and year-to-date financial statements
provided to BMW (the "Company Factory Statements");
(the financial statements referred to in clauses (i) and (ii) above, including
the notes thereto, being referred to herein collectively as the "Company
Financial Statements"). The Company Financial Statements are in accordance with
the books and records of the Company, fairly present the consolidated financial
position, results of operations, stockholders' equity and changes in the
financial position of the Company as of the dates and for the periods indi-
cated, in the case of the financial statements referred to in clauses (i) and
(ii) above in
-7-
<PAGE>
conformity with GAAP consistently applied (except as otherwise
indicated in such statements) during such periods, and can be legitimately
reconciled with the financial statements and the financial records maintained
and the accounting methods applied by the Company for federal income tax pur-
poses, and the unaudited financial statements included in the Company Financial
Statements include all adjustments, which consist of only normal recurring
accruals, necessary for such fair presentations. The statements of income
included in the Company Financial Statements do not contain any items of special
or nonrecurring income except as expressly specified therein, and the balance
sheets included in the Company Financial Statements do not reflect any write-up
or revaluation increasing the book value of any assets except as expressly
stated therein. The books and accounts of the Company are complete and correct
in all material respects and fairly reflect all of the transactions, items of
income and expense and all assets and liabilities of the businesses of the
Company consistent with prior practices of the Company.
2.6 ABSENCE OF UNDISCLOSED LIABILITIES.
The Company does not have any liability of any nature whatsoever (whether
asserted or unasserted, due or to become due, accrued, absolute, contingent or
otherwise), including, without limitation, any unfunded obligation under
employee benefit plans or arrangements as described in SECTION 2.17 AND 2.18
hereof or liabilities for Taxes (as defined in SECTION 2.8 hereof), except for
(i) liabilities reflected or reserved against in the most recent Company
Financial Statement, (ii) current liabilities incurred in the ordinary course of
business and consistent with past practice after the date of the Company Balance
Sheet which, individually and in the aggregate, do not have, and cannot reason-
ably be expected to have, a Material Adverse Effect, and (iii) liabilities
disclosed on SCHEDULE 2.6 hereto. The Company is not a party to any Company
Agreement, or subject to any articles of incorporation or bylaw provision, any
other corporate limitation or any Legal Requirement which has, or can reasonably
be expected to have, a Material Adverse Effect.
2.7 ABSENCE OF MATERIAL ADVERSE EFFECT; CONDUCT OF BUSINESS.
(a) Since December 31, 1995, except as set forth on SCHEDULE 2.7(a)
hereto, the Company has operated in the ordinary course of business consistent
with past practice and there has not been:
(i) any material adverse change in the assets, properties, business,
operations, prospects, net income or financial condition of the Company and
no factor, event, condition, circumstance or prospective development exists
which threatens or may threaten to have a Material Adverse Effect;
(ii) any material loss, damage, destruction or other casualty to the
property or other assets of the Company, whether or not covered by
insurance;
(iii) any change in any method of accounting or accounting practice of
the Company; or
-8-
<PAGE>
(iv) any loss of the employment, services or benefits of any key
employee of the Company (except for any such loss occurring after the
execution of this Agreement but prior to the Closing Date and disclosed to
UAG on or before the Closing Date).
(b) Since December 31, 1995, except as set forth in SCHEDULE 2.7(b)
hereto, the Company has not:
(i) incurred any material obligation or liability (whether absolute,
accrued, contingent or otherwise), except in the ordinary course of business
consistent with past practice;
(ii) failed to disclose or satisfy any lien or pay or satisfy any
obligation or liability (whether absolute, accrued, contingent or
otherwise), other than liabilities being contested in good faith and for
which adequate reserves have been provided;
(iii) mortgaged, pledged or subjected to any lien any of its property
or other assets except for mechanics' liens and liens for taxes not yet due
and payable;
(iv) sold or transferred any assets or cancelled any debts or claims or
waived any rights, except in the ordinary course of business consistent with
past practice;
(v) defaulted on any material obligation;
(vi) entered into any material transaction, except in the ordinary
course of business consistent with past practice;
(vii) written down the value of any inventory or written off as
uncollectible any accounts receivable or any portion thereof not reflected
in the Company Financial Statements;
(viii) granted any increase in the compensation or benefits of
employees other than increases in accordance with past practice not
exceeding 10% or entered into any employment or severance agreement
or arrangement with any of them (except for agreements or arrangements
that are in the ordinary course of business consistent with past
practices, that will be reflected as expenses on the Company's financial
statements prior to the Closing Date and that will not bind the Company
after the Closing Date);
(ix) made any individual capital expenditure in excess of $75,000, or
aggregate capital expenditures in excess of $200,000, or additions to
property, plant and equipment other than ordinary repairs and maintenance;
(x) discontinued any franchise or the sale of any products or product
line;
(xi) incurred any obligation or liability to any employee for the
payment of severance benefits; or
-9-
<PAGE>
(x) entered into any agreement or made any commitment to do any of the
foregoing.
2.8 TAXES.
The Company and, for any period during all or part of which the tax
liability of any other corporation was determined on a combined or consolidated
basis with the Company any such other corporation, have filed timely all
federal, state, local and foreign tax returns, reports and declarations required
to be filed correctly reflecting the Taxes (as defined below) and all other
information required to be reported thereon and have paid, or made adequate
provision for the payment of, all Taxes which are due pursuant to such returns
or pursuant to any assessment received by the Company or any such other cor-
poration. As used herein, "Taxes" shall mean all taxes, fees, levies or other
assessments, including but not limited to income, excise, property (including
property taxes paid by the Company pursuant to any lease), sales, franchise,
withholding, social security and unemployment taxes imposed by the United
States, any state, county, local or foreign government, or any subdivision or
agency thereof or taxing authority therein, and any interest, penalties or
additions to tax relating to such taxes, charges, fees, levies or other
assessments. Copies of all tax returns for each fiscal year since the formation
of the Company have been furnished or made available to UAG or its
representatives and such copies are accurate and complete as of the date hereof.
The Company has also furnished or made available to UAG correct and complete
copies of all notices and correspondence sent or received since the formation of
the Company by the Company to or from any federal, state or local tax
authorities. The Company filed all returns and paid all taxes for the period
ending December 31, 1995. In the ordinary course, the Company makes adequate
provision on its books for the payment of all Taxes (including for the current
fiscal period) owed by the Company. Except to the extent reserves therefor are
reflected on the Company Balance Sheet, the Company is not liable, or will not
become liable, for any Taxes for any period ending on, prior to or through the
date of the Company Balance Sheet. On the Closing Date Balance Sheet, the
Company will have adequately reserved for the payment of any Taxes for any
period ending on, prior to or through the date of the Closing Date Balance
Sheet. Except as set forth on SCHEDULE 2.8 hereto, the Company has not been
subject to a federal or state tax audit of any kind, and no adjustment has been
proposed by the Internal Revenue Service ("IRS") with respect to any return for
any subsequent year. With respect to the audits referred to on SCHEDULE 2.8
hereto, no such audit has resulted in an adjustment in excess of $50,000. Nei-
ther the Company nor the Stockholder knows of any basis for an assertion of a
deficiency for Taxes against the Company. The Stockholder will cooperate with
the Company in the filing of any returns and in any audit or refund claim
proceedings involving Taxes for which the Company may be liable or with respect
to which the Company may be entitled to a refund.
2.9 LEGAL MATTERS.
(a) Except as set forth on SCHEDULE 2.9(a) hereto and except for Claims
(as defined below) that do not exceed Thirty Thousand Dollars ($30,000), (i)
there is no claim, action, suit, litigation, investigation, inquiry, review or
proceeding (collectively, "Claims")
-10-
<PAGE>
pending against, or, to the knowledge of the Company or the Stockholder,
threatened against or affecting, the Company, any ERISA Plan (as defined in
SECTION 2.18(a) hereof) or any of their respective assets, properties or
rights before or by any court, arbitrator, panel, agency or other
governmental, administrative or judicial entity, domestic or foreign, nor is
any basis known to the Stockholder or the Company for any such Claims, and
(ii) the Company is not subject to any judgment, decree, writ, injunction,
ruling or order (collectively, "Judgments") of any governmental,
administrative or judicial authority, domestic or foreign. SCHEDULE 2.9(a)
hereto identifies each Claim and Judgment disclosed thereon which is fully
covered by an insurance policy.
(b) The businesses of the Company are being conducted in compliance with
all laws, ordinances, codes, rules, regulations, standards, judgments and other
requirements of all governmental, administrative or judicial entities
(collectively, "Legal Requirements") applicable to the Company or any of its
respective businesses or properties. The Company holds, and is in compliance
with, all franchises, licenses, permits, registrations, certificates, consents,
approvals or authorizations (collectively, "Permits") required by all applicable
Legal Requirements. A list of all such permits is set forth on SCHEDULE 2.9(b)
hereof.
(c) The Company owns or holds all Permits material to the conduct of its
business. No event has occurred and is continuing which permits, or after
notice or lapse of time or both would permit, any modification or termination of
any Permit.
2.10 PROPERTY.
(a) The properties and assets owned by or leased to the Company are
adequate for the conduct of the respective businesses of the Company as
presently conducted. Set forth on SCHEDULE 2.10 hereto is a list of all
interests in real property owned by or leased to the Company (including all
real property owned or leased by the Stockholder (directly or indirectly) and
used in the businesses of the Company) and of all options or other contracts
to acquire any such interest (collectively, the "Real Property"). All
improvements to the Real Property ("Improvements") and all machinery,
equipment and other tangible property owned or used by or leased to the
Company are in good operating condition and in good repair and are fit for
the particular purposes for which they are used by the Company, subject only
to ordinary wear and tear. Such tangible properties and all Improvements
owned or leased by the Company conform in all material respects with all
applicable laws, ordinances, rules and regula-tions and other Legal
Requirements and such Improvements do not encroach in any respect on property
of others. There are no latent defects with respect to the Improvements.
The Real Property is currently zoned to permit the conduct of the respective
businesses of the Company as presently conducted. A Certificate of Occupancy
has been issued with respect to the Improvements without special conditions
or restrictions. All utilities servicing the Real Property and the
Improvements are provided by publicly-dedicated utility lines and are located
within public rights-of-way and do not cross or encumber any private land.
No notice of any pending, threatened or contemplated action by any
governmental authority or agency having the power of eminent domain has been
given to the Company or the Stockholder with respect to the Real Property.
-11-
<PAGE>
2.11 ENVIRONMENTAL MATTERS.
(a) Except as set forth on SCHEDULE 2.11(a) hereto, (i) the Company, the
Real Property, the Improvements and any property formerly owned, occupied or
leased by the Company are in full compliance with all Environmental Laws (as
defined below), (ii) the Company has obtained all Environmental Permits (as
defined below), (iii) such Environmental Permits are in full force and effect,
and (iv) the Company is in full compliance with all terms and conditions of such
Environmental Permits. As used herein, "Environmental Laws" shall mean all
applicable requirements of environmental, public or employee health and safety,
public or community right-to-know, ecological or natural resource laws or
regulations or controls, including all applicable requirements imposed by any
law (including without limitation common law), rule, order, or regulations of
any federal, state, or local executive, legislative, judicial, regulatory, or
administrative agency, board, or authority, or any applicable private agreement
(such as covenants, conditions and restrictions), which relate to, (i) noise,
(ii) pollution or protection of the air, surface water, groundwater, or soil,
(iii) solid, gaseous, or liquid waste generation, treatment, storage, disposal
or transportation, (iv) exposure to Hazardous Materials (as defined below), or
(v) regulation of the manufacture, processing, distribution and commerce, use,
or storage of Hazardous Materials. As used herein, "Environmental Permits"
shall mean all permits, licenses, approvals, authorizations, consents or
registrations required under applicable Environmental Law in connection with the
ownership, use and/or operation of the Company's business or the Real Property
or Improvements.
As used in this SECTION 2.11, "Hazardous Materials" shall mean,
collectively, (i) those substances included within the definitions of or
identified as "hazardous chemicals," "hazardous waste," "hazardous
substances," "hazardous materials," "toxic substances" or similar terms in or
pursuant to, without limitation, the Comprehensive Environmental Response
Compensation and Liability Act of 1980 (42 U.S.C. 9601 ET SEQ.) ("CERCLA"),
as amended by Superfund Amendments and Reauthorization Act of 1986 (Pub. L.
99-499, 100 State, 1613), the Resource Conservation and Recovery Act of 1976
(42 U.S.C. Section 6901 ET SEQ.) ("RCRA"), the Occupational Safety and
Health Act of 1970 (29 U.S.C. Section 651 ET SEQ.) ("OSHA"), and the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 ET SEQ.
("HMTA"), and in the regulations promulgated pursuant to such laws, all as
amended, (ii) those substances listed in the United States Department of
Transportation Table (49 CFR 172.101 and amendments thereto) or by the
Environmental Protection Agency (or any successor agency) as hazardous
substances (40 CFR part 302 and amendments thereto), (iii) any material,
waste or substance which is or contains (A) petroleum, including crude oil or
any fraction thereof, natural gas, or synthetic gas usable for fuel or any
mixture thereof, (B) asbestos, (C) polychlorinated biphenyls, (D) designated
as a "hazardous substance" pursuant to Section 311 of the Clean Water Act, 33
U.S.C. Section 1251 ET SEQ. (33 U.S.C. Section 1321) or listed pursuant
to Section 307 of the Clean Water Act (33 U.S.C. Section 1317), (E)
flammable explosives, (F) radioactive materials, and (iv) such other
substances, materials and wastes which are or become regulated or classified
as hazardous, toxic or as "special wastes" under any Environmental Laws.
-12-
<PAGE>
(b) The Company and the Stockholder have not violated, done or suffered
any act which could give rise to liability under, and are not otherwise exposed
to liability under, any Environmental Law. No event has occurred with respect
to the Real Property, the Improvements or any property formerly owned, occupied
or leased by the Company, which, with the passage of time or the giving of
notice, or both, would constitute a violation of or non-compliance with any
applicable Environmental Law. The Company has no contingent liability under any
Environmental Law. There are no liens under any Environmental Law on the Real
Property.
(c) Except as set forth on SCHEDULE 2.11(c) hereto, (i) neither the
Company, the Real Property or any portion thereof, the Improvements or any
property formerly owned, occupied or leased by the Company, nor, to the
knowledge of the Company or the Stockholder, any property adjacent to the Real
Property is being used or has been used for the treatment, generation,
transportation, processing, handling, production or disposal of any Hazardous
Materials or as a landfill or other waste disposal site 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 Company's business in full
compliance with all Environmental Laws including the existing regulations of the
United States Environmental Protection Agency and the State of Georgia requiring
spill protection, overfill protection and corrosion protection by December 22,
1998), (ii) none of the Real Property or portion thereof, the Improvements or
any property formerly owned, occupied or leased by the Company has been subject
to investigation by any governmental authority evaluating the need to
investigate or undertake Remedial Action (as defined below) at such property,
and (iii) none of the Real Property, the Improvements or any property formerly
owned, occupied or leased by the Company, or, to the knowledge of the Company or
the Stockholder, any site or location where the Company sent waste of any kind,
is identified on the current or proposed (A) National Priorities List under 40
C.F.R. 300 Appendix B, (B) Comprehensive Environmental Response Compensation and
Liability Inventory System list, or (C) any list arising from any statute
analogous to CERCLA. As used herein, "Remedial Action" shall mean any action
required to (i) clean up, remove or treat Hazardous Materials, (ii) prevent a
release or threat of release of any Hazardous Material, (iii) perform pre-
remedial studies, investigations or post-remedial monitoring and care, (iv) cure
a violation of Environmental Law or (v) take corrective action under sections
3004(u), 3004(v) or 3008(h) of RCRA or analogous state law.
(d) Except as set forth on SCHEDULE 2.11(d) hereto, there have been and
are no (i) aboveground or underground storage tanks, subsurface disposal
systems, or wastes, drums or containers disposed of or buried on, in or under
the ground or any surface waters, (ii) asbestos or asbestos containing
materials or radon gas, (iii) polychlorinated biphenyls ("PCB") or
PCB-containing equipment, including transformers, or (iv) wetlands (as
defined under any Environmental Law) located within any portion of the Real
Property, nor have any liens been placed upon any portion of the Real
Property, the Improvements or any property formerly owned, occupied or leased
by the Company in connection with any actual or alleged liability under any
Environmental Law.
-13-
<PAGE>
(e) Except as set forth on SCHEDULE 2.11(e) hereto, (i) there is no
pending or threatened claim, litigation, or administrative proceeding, or
known prior claim, litigation or administrative proceeding, arising under any
Environmental Law involving any of the Company, the Real Property, the
Improvements, any property formerly owned, leased or occupied by the Company,
any offsite contamination affecting the business of the Company or any
operations conducted at the Real Property, (ii) there are no ongoing
negotiations with or agreements with any governmental authority relating to
any Remedial Action or other environmentally related claim, (iii) the Company
has not submitted notice pursuant to Section 103 of CERCLA or analogous
statute or notice under any other applicable Environmental Law reporting a
release of a Hazardous Material into the environment, and (iv) the Company
has not received any notice, claim, demand, suit or request for information
from any governmental or private entity with respect to any liability or
alleged liability under any Environmental Law, nor to knowledge of the
Stockholder and the Company, has any other entity whose liability therefor,
in whole or in part, may be attributed to the Company, received such notice,
claim, demand, suit or request for information.
(f) The Stockholder and the Company have provided to UAG all
environmental studies and reports obtained by them or known to them
pertaining to the Real Property, the Improvements, the Company and any
property formerly owned, occupied or leased by the Company, and have
permitted (or will have permitted as of the Closing Date), the testing of the
soil, groundwater, building components, tanks, containers and equipment on
the Real Property, the Improvements, and any property formerly owned,
occupied or leased by the Company, by UAG or UAG's agents or experts as they
have or shall have deemed necessary or appropriate to confirm the condition
of such properties.
2.12 INVENTORIES.
The values at which inventories are carried on the Company Balance Sheet
reflect the normal inventory valuation policies of the Company, and such
values are in conformity with GAAP consistently applied. All inventories
reflected on the Company Balance Sheet and Company Factory Statement or
arising since the date thereof are currently marketable and can reasonably be
anticipated to be sold at normal mark-ups within 120 days after the date
hereof in the ordinary course of business (subject to the reserve for
obsolete, off-grade or slow-moving items that is reflected in the Company
Balance Sheet or will be reflected in the Closing Date Balance Sheet), except
for spare parts inventory which inventory is good and usable.
2.13 ACCOUNTS RECEIVABLE.
All accounts receivable reflected on the Company Balance Sheet are, and all
accounts receivable that will be or will have been reflected on the Closing
Date Balance Sheet will be, good and have been or will have been collected or
are collectible, without resort to litigation, within 90 days of the Closing
Date, and are subject to no defenses, setoffs or counterclaims other than
normal cash discounts accrued in the ordinary course of business.
-14-
<PAGE>
2.14 INSURANCE.
All material properties and assets of the Company which are of an insurable
character are insured against loss or damage by fire and other risks to the
extent and in the manner reasonable in light of the risks attendant to the
businesses and activities in which the Company is engaged and customary for
companies engaged in similar businesses or owning similar assets. Set forth
on SCHEDULE 2.14 hereto is a list and brief description (including the name
of the insurer, the type of coverage provided, the amount of the annual
premium for the current policy period, the amount of remaining coverage and
deductibles and the coverage period) of all policies for such insurance and
the Company has made or will make available to UAG true and complete copies
of all such policies. All such policies are in full force and effect
sufficient for all applicable requirements of law and will not in any way be
effected by or terminated or lapsed by reason of the consummation of the
transactions contemplated by this Agreement and the Lease. No notice of
cancellation or non-renewal with respect to, or disallowance of any claim
under, any such policy has been received by the Company.
2.15 CONTRACTS; ETC.
As used in this Agreement, the term "Company Agreements" shall mean all
mortgages, indenture notes, agreements, contracts, leases, licenses,
franchises, obligations, instruments or other commitments, arrangements or
understandings of any kind, whether written or oral, binding or non-binding,
(including all leases and other agreements referred to on SCHEDULE 2.10
hereto) to which the Company is a party or by which the Company or any of its
assets or properties (including the Real Property and the Improvements) may
be bound or affected, including all amendments, modifications, extensions or
renewals of any of the foregoing. Set forth on SCHEDULE 2.15 hereto is a
complete and accurate list of each Company Agreement which is material to the
businesses, operations, assets, condition (financial or otherwise) or
prospects of the Company. True and complete copies of all written Company
Agreements referred to on SCHEDULE 2.15 and SCHEDULE 2.10 hereto have been
delivered or made available to UAG, and the Company has provided UAG with
accurate and complete written summaries of all such Company Agreements which
are unwritten. Except as set forth on SCHEDULE 2.15, the Company is not,
nor, to the knowledge of the Company and the Stockholder is, any other party
thereto, in breach of or default under any Company Agreement, and no event
has occurred which (after notice or lapse of time or both) would become a
breach or default under, or would permit modification, cancellation,
acceleration or termination of, any Company Agreement or result in the
creation of any Lien upon, or any Person obtaining any right to acquire, any
properties, assets or rights of the Company. There are no material
unresolved disputes involving the Company under any Company Agreement.
2.16 LABOR RELATIONS.
(a) The Company has paid or made provision for the payment of all
salaries and accrued wages and has complied in all material respects with all
applicable laws, rules and
-15-
<PAGE>
regulations relating to the employment of labor, including those relating to
wages, hours, collective bargaining and the payment and withholding of taxes,
and has withheld and paid to the appropriate govern-mental authority, or is
holding for payment not yet due to such authority, all amounts required by
law or agreement to be withheld from the wages or salaries of its employees.
(b) Except as set forth on SCHEDULE 2.16(b) hereto, the Company is not a
party to any (i) outstanding employment agreements or contracts with officers
or employees that are not terminable at will, or that provide for payment of
any bonus or commission, (ii) agreement, policy or practice that requires it
to pay termination or severance pay to salaried, non-exempt or hourly
employees (other than as required by law), (iii) collective bargaining
agreement or other labor union contract applicable to persons employed by the
Company, nor do the Stockholder or the Company know of any activities or
proceedings of any labor union to organize any such employees. The Company
has furnished to UAG complete and correct copies of all such agreements
("Employment and Labor Agreements"). The Company has not breached or
otherwise failed to comply with any provisions of any Employment or Labor
Agreement.
(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 Stockholder's
or the Company's knowledge, threatened, against or affecting the Company, and
the Company has not experienced any strike, material slow down or material
work stoppage, lockout or other collective labor action by or with respect to
employees of the Company, (iii) there is no representation claim or petition
pending before the NLRB or any similar foreign agency and no question
concerning representation exists relating to the employees of the Company,
(iv) there are no charges with respect to or relating to the Company pending
before the Equal Employment Opportunity Commission or any state, local or
foreign agency responsible for the prevention of unlawful
employment-practices and (v) the Company has not received formal notice from
any federal, state, local or foreign agency responsible for the enforcement
of labor or employment laws of an intention to conduct an investigation of
the Company and, to the knowledge of the Company, no such investigation is in
progress.
(d) The Company has never caused any "plant closing" or "mass layoff" as
such actions are defined in the Worker Adjustment and Retraining Notification
Act, as codified at 29 U.S.C. Sections 2101-2109, and the regulations
promulgated therein.
2.17 EMPLOYEE BENEFIT PLANS.
(a) Set forth on SCHEDULE 2.17(a) hereto is a true and complete list of:
(i) each employee pension benefit plan, as defined in Section 3(2) of
the Employee Retirement Income Security Act of 1974 ("ERISA"), maintained by
the
-16-
<PAGE>
the Company or to which the Company is required to make contributions
("Pension Benefit Plan"); and
(ii) each employee welfare benefit plan, as defined in Section 3(i) of
ERISA, maintained by the Company or to which the Company is required to make
contributions ("Welfare Benefit Plan").
True and complete copies of all Pension Benefit Plans and Welfare Benefit
Plans (collectively, "ERISA Plans") have been delivered to or made available to
UAG together with, as applicable with respect to each such ERISA Plan, trust
agreements, summary plan descriptions, all IRS determination letters or
applications therefor with respect to any Pension Benefit Plan intended to be
qualified pursuant to Section 401 (a) of the Internal Revenue Code of 1986, as
amended (the "Code"), and valuation or actuarial reports, accountant's opinions,
financial statements, IRS Form 5500s (or 5500-C or 5500-R) and summary annual
reports for the last three years.
(b) With respect to the ERISA Plans:
(i) no event has occurred or (to the knowledge of the Company or the
Stockholder) is threatened or about to occur which would constitute a
prohibited transaction under Section 406 of ERISA or under Section 4975 of
the Code;
(ii) each ERISA Plan has operated since its inception in accordance
with the reporting and disclosure requirements imposed under ERISA and the
Code and has timely filed Form 5500e (or 5500-C or 5500-R) and predecessors
thereof; and
(iii) 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 there exists no fact which would adversely affect its qualified
status; and
(iii) is not currently under investigation, audit or review by the IRS
or (to the knowledge of the Company or the Stockholder) no such action is
contemplated or under consideration and the IRS has not asserted that any
Pension Benefit Plan is not qualified under Section 401(a) of the Code or
that any trust established under a Pension Benefit Plan is not exempt under
Section 501(a) of the Code.
-17-
<PAGE>
(d) With respect to each Pension Benefit Plan which is a defined benefit
plan under Section 414(j) and, for the purpose solely of SECTION 2.17(d)(iv)
hereof, each defined contribution plan under Section 414(i) of the Code:
(i) no liability to the Pension Benefit Guaranty Corporation ("PBGC")
under Sections 4062-4064 of ERISA has been incurred by the Company since the
effective date of ERISA and all premiums due and owing to the PBGC have been
timely paid;
(ii) the PBGC has not notified the Company or any Pension Benefit Plan
of the commencement of proceedings under Section 4042 of ERISA to terminate
any such plan;
(iii) no event has occurred since the inception of any Pension Benefit
Plan or (to the knowledge of the Company or the Stockholder) is threatened
or about to occur which would constitute a reportable event within the
meaning of Section 4043(b) of ERISA;
(iv) no Pension Benefit Plan ever has incurred any "accumulated funding
deficiency" (as defined in Section 302 of ERISA and Section 412 of the
Code); and
(v) if any of such Pension Benefit Plans were to be terminated on the
Closing Date (A) no liability under Title IV of ERISA would be incurred by
the Company and (B) all benefits accrued to the day prior to the Closing
Date (whether or not vested) would be fully funded in accordance with the
actuarial assumptions and method utilized by such plan for valuation
purposes.
(e) With respect to each Pension Benefit Plan, SCHEDULE 2.17(e) contains
a list of all Pension Benefit Plans to which ERISA has applied which have been
or are being terminated, or for which a termination is contemplated, and a
description of the actions taken by the PBGC and the IRS with respect thereto.
(f) The estimated aggregate amounts of contributions to be paid or
accrued by the Company under ERISA Plans for the current fiscal year is set
forth on SCHEDULE 2.17(f). To the extent required in accordance with GAAP, the
Company Balance Sheet reflects in the aggregate an accrual of all amounts of
employer contributions accrued but unpaid by the Company under the ERISA Plans
as of the date of the Company Balance Sheet.
(g) With respect to any Multiemployer Plan (1) the Company has not,
since its formation, made or suffered a "complete withdrawal" or "partial
withdrawal" as such terms are respectively defined in Sections 4203 and 4205 of
ERISA; (2) there is no withdrawal liability of the Company under any
Multiemployer Plan, computed as if a "complete withdrawal" by the Company had
occurred under each such Plan as of December 31, 1995; and (3) the Company has
not received notice to the effect that any Multiemployer Plan is either in
reorganization (as defined in Section 4241 of ERISA) or insolvent (as defined in
Section 4245 of ERISA).
-18-
<PAGE>
(h) With respect to the Welfare Benefit Plans:
(i) There are no liabilities of the Company under Welfare Benefit
Plans with respect to any condition which relates to a claim filed on or
before the Closing Date.
(ii) No claims for benefits are in dispute or litigation.
2.18 OTHER BENEFIT AND COMPENSATION PLANS OR ARRANGEMENTS.
(a) Set forth on SCHEDULE 2.18(a) hereto is a true and complete list of:
(i) each employee stock purchase, employee stock option, employee
stock ownership, deferred compensation, performance, bonus, incentive,
vacation pay, holiday pay, insurance, severance, retirement, excess benefit
or other plan, trust or arrangement which is not an ERISA Plan whether
written or oral, which the Company maintains or is required to make
contributions to;
(ii) each other agreement, arrangement, commitment and understanding of
any kind, whether written or oral, with any current or former officer,
director or consultant of the Company pursuant to which payments may be re-
quired to be made at any time following the date hereof (including, without
limitation, any employment, deferred compensation, severance, supplemental
pension, termination or consulting agreement or arrangement); and
(iii) each employee of the Company whose aggregate compensation for the
fiscal year ended December 31, 1995 exceeded, and whose aggregate
compensation for the fiscal year ended December 31, 1996 is likely to
exceed, $50,000. True and complete copies of all of the written plans,
arrangements and agreements referred to on SCHEDULE 2.18(a) ("Compensation
Commitments") have been provided to UAG together with, where prepared by or
for the Company, any valuation, actuarial or accountant's opinion or other
financial reports with respect to each Compensation Commitment for the last
three years. An accurate and complete written summary has been provided to
UAG with respect to any Compensation Commitment which is unwritten.
(b) Each Compensation Commitment:
(i) since its inception, has been operated in all material respects in
accordance with its terms;
(ii) is not currently under investigation, audit or review by the IRS
or any other federal or state agency and (to the knowledge of the Company or
the Stockholder) no such action is contemplated or under consideration;
(iii) has no liability for any federal, state, local or foreign Taxes;
-19-
<PAGE>
(iv) has no claims subject to dispute or litigation;
(v) has met all applicable requirements, if any, of the Code; and
(vi) has operated since its inception in material compliance with the
reporting and disclosure requirements imposed under ERISA and the Code.
2.19 TRANSACTIONS WITH INSIDERS.
Set forth on SCHEDULE 2.19 hereto is a complete and accurate description
of all material transactions between the Company or any ERISA Plan, on the one
hand, and any Insider, on the other hand, that have occurred since January 1,
1995. For purposes of this Agreement:
(i) the term "Insider" shall mean the Stockholder, any director or
officer of the Company, and any Affiliate, Associate or Relative of any of
the foregoing persons;
(ii) the term "Associate" used to indicate a relationship with any
person means (A) any corporation, partnership, joint venture or other entity
of which such person is an officer or partner or is, directly or indirectly,
through one or more intermediaries, the beneficial owner of 30% or more of
(1) any class or type of equity securities or other profits interest or (2)
the combined voting power of interests ordinarily entitled to vote for
management or otherwise, and (B) any trust or other estate in which such
person has a substantial beneficial interest or as to which such person
serves as trustee or in a similar fiduciary capacity; and
(iii) a "Relative" of a person shall mean such person's spouse, such
person's parents, sisters, brothers, children and the spouses of the
foregoing, and any member of the immediate household of such person.
2.20 PROPRIETY OF PAST PAYMENTS.
No funds or assets of the Company have been used for illegal purposes; no
unrecorded funds or assets of the Company have been established for any purpose;
no accumulation or use of the Company's corporate funds or assets has been made
without being properly accounted for in the respective books and records of the
Company; all payments by or on behalf of the Company have been duly and properly
recorded and accounted for in their respective books and records; no false or
artificial entry has been made in the books and records of the Company for any
reason; no payment has been made by or on behalf of the Company with the
understanding that any part of such payment is to be used for any purpose other
than that described in the documents supporting such payment; and the Company
has not made, directly or indirectly, any illegal contributions to any political
party or candidate, either domestic or foreign. Neither the IRS nor any other
federal, state, local or foreign government agency or entity has initiated or
threatened any investigation of any
-20-
<PAGE>
payment made by the Company of, or alleged to be of, the type described in
this SECTION 2.20.
2.21 INTEREST IN COMPETITORS.
Except as set forth on SCHEDULE 2.21, neither the Company nor the
Stockholder, nor any of their Affiliates, have any interest, either by way of
contract or by way of investment (other than as holder of not more than 2% of
the outstanding capital stock of a publicly traded Person, so long as such
holder has no other connection or relationship with such Person) or otherwise,
directly or indirectly, in any Person other than the Company that is engaged in
the retail sale of light duty trucks or automobiles in Georgia.
2.22 BROKERS.
Neither the Company, nor any director, officer or employee thereof, nor
the Stockholder or any representative of the Stockholder, has employed any
broker or finder or has incurred or will incur any broker's, finder's or similar
fees, commissions or expenses, in each case in connection with the transactions
contemplated by this Agreement or the Real Estate Purchase Agreement, except
that the Stockholder has employed Patrick McNulty as a broker (the "Broker") in
connection with this transaction. The Stockholder will satisfy any obligations
of UAG, Sub, the Stockholder or the Company relating to the employment of the
Broker, and will hold UAG, Sub and the Company harmless therefrom.
2.23 ACCOUNTS.
SCHEDULE 2.23 hereof correctly identifies each bank account maintained by
or on behalf or for the benefit of the Company and the name of each person with
any power or authority to act with respect thereto.
2.24 DISCLOSURE.
Neither the Company nor the Stockholder has made any material
misrepresentation to UAG relating to the Company or the Shares and neither the
Company nor the Stockholder has omitted to state to UAG any material fact
relating to the Company or the Shares which is necessary in order to make the
information given by or on behalf of the Company or the Stockholder to UAG not
misleading or which if disclosed would reasonably affect the decision of a
person considering an acquisition of the Shares. No fact, event, condition or
contingency exists or has occurred which has, or in the future can reasonably be
expected to have, a Material Adverse Effect, which has not been disclosed in the
Company's Financial Statements or the schedules to this Agreement.
2.25 NET WORTH AND WORKING CAPITAL.
On the Closing Date, the Net Worth of the Company, as determined in
accordance with the Accounting Principles, will be equal to or greater than Two
Million Three Hundred
-21-
<PAGE>
Thousand Dollars ($2,300,000). On the Closing Date, the net working capital
of the Company, as reflected on the Estimated Closing Date Balance Sheet (as
defined in Section 6.6 hereof) will be equal to or greater than the net
working capital of the Company as of December 31, 1995 as reflected on the
Company Balance Sheet and such net working capital will be sufficient to
operate the businesses of the Company consistent with past practice.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDER
Subject to the parties' agreement and acknowledgment that the Schedules
referred to in this ARTICLE 3 are to be delivered by the Stockholder to UAG and
Sub no late than August 15, 1996, the Stockholder hereby represents and warrants
to UAG and Sub as follows:
3.1 OWNERSHIP OF SHARES; TITLE.
The Stockholder is the owner of record and beneficially of the Shares set
forth on SCHEDULE 3.1 hereof and has, and shall transfer to Sub at the Closing,
good and marketable title to the Shares owned by him, free and clear of any and
all Liens, claims and encumbrances and free and clear of any restrictions on
transfer (other than restrictions on transfer imposed by applicable federal and
state securities laws), proxies and voting or other agreements.
3.2 AUTHORITY.
The Stockholder has all requisite power and authority and has full legal
capacity and is competent to execute, deliver and perform this Agreement and to
consummate the transactions contemplated hereby (including the disposition of
the Shares to Sub as contemplated by this Agreement). This Agreement has been
duly executed and delivered by the Stockholder and constitutes a valid and
binding obligation of the Stockholder, enforceable against the Stockholder in
accordance with its terms. Except as set forth on SCHEDULE 3.2, the execution,
delivery and performance of this Agreement by the Stockholder and the consum-
mation of the transactions contemplated hereby do not and will not:
(i) (after notice or lapse of time or both) conflict with, result in a
breach of any provision of, constitute a default under, result in the
modification or cancellation of, or give rise to any right of termination or
acceleration in respect of, any material contract, agreement, commitment,
understanding, arrangement or restriction to which the Stockholder is a
party or to which the Stockholder or the Stockholder's property is subject;
(ii) violate or conflict with any Legal Requirements applicable to the
Stockholder or the Stockholder's businesses or properties; or
-22-
<PAGE>
(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 Stockholder owns the Real Property and Improvements in fee simple,
free and clear of all Liens, claims and encumbrances, except those disclosed in
SCHEDULE 3.3(a), none of which currently or, to the Stockholder's knowledge, in
the future will affect the use of the Real Property or the Improvements for the
conduct of the respective businesses of the Company as presently conducted. No
assessments have been made against any portion of the Real Property which are
unpaid (except ad valorem taxes for the current year that are not yet due and
payable), whether or not they have become Liens. There are no disputes
concerning the location of the lines and corners of the Real Property. Except
as set forth in ARTICLE 1 hereof, no one has been granted any right to purchase
or lease the Real Property or Improvements other than the existing lease in
favor of the Company, which is to be terminated at Closing. Attached as
SCHEDULE 3.3 are all surveys, title binders, title policies and copies of any
exceptions to title.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF UAG AND SUB
Subject to the parties' agreement and acknowledgment that the Schedules
referred to in this ARTICLE 4 are to be delivered by UAG and Sub no later than
August 15, 1996, UAG and Sub hereby represent and warrant to the Company and the
Stockholder as follows:
4.1 ORGANIZATION AND GOOD STANDING.
Each of UAG and Sub 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 Sub is duly qualified to do business and is in good standing as a foreign
corporation in each state and jurisdiction where qualification as a foreign
corporation is required, except for such failures to be qualified and in good
standing, if any, which when taken together with all other such failures of UAG
and its subsidiaries would not, or could not reasonably be expected to, in the
aggregate have a material adverse effect on UAG and its subsidiaries, taken as a
whole.
4.2 AUTHORITY; APPROVALS AND CONSENTS.
UAG and Sub have the corporate power and authority to enter into this
Agreement and to perform their respective obligations hereunder. This Agreement
has been duly executed and delivered by, and constitutes valid and binding
obligation of, UAG and Sub,
-23-
<PAGE>
enforceable against UAG and Sub in accordance with its terms. Except as set
forth on SCHEDULE 4.3 hereto, the execution, delivery and performance by UAG
and Sub of this Agreement and the consummation of the transactions
contemplated hereby do not and will not:
(i) contravene any provisions of the certificate of incorporation or
bylaws of UAG or Sub;
(ii) (after notice or lapse of time or both) conflict with, result in a
breach of any provision of, constitute a default under, result in the
modification or cancellation of, or give rise to any right of termination or
acceleration in respect of, any UAG Agreement (as defined below) or, require
any consent or waiver of any party to any UAG Agreement other than
agreements the breach or violation of which could not reasonably be expected
to have a material adverse effect on UAG and its subsidiaries, taken as a
whole;
(iii) violate or conflict with any Legal Requirements applicable to UAG
or any of its subsidiaries or any of their respective businesses or
properties; or
(iv) require any authorization, consent, order, permit or approval of,
or notice to, or filing, registration or qualification with, any
governmental, administrative or judicial authority, except in connection
with or in compliance with the provisions of the H-S-R Act.
4.3 BROKERS.
Neither UAG, Sub nor any of their directors, officers or employees has
employed any broker or finder or has incurred or will incur any broker's,
finder's or similar fees, commissions or expenses, in each case in connection
with the transactions contemplated by this Agreement or the Real Estate Purchase
Agreement.
4.4 DISCLOSURE.
Neither UAG nor Sub has made any material misrepresentation to the
Stockholder and neither UAG nor Sub has omitted to state to the Stockholder any
material fact relating to UAG or Sub which is necessary in order to make the
information given by UAG or Sub not misleading or which if disclosed would
reasonably affect the decision of a person considering the sale of the Shares.
-24-
<PAGE>
ARTICLE 5
COVENANTS AND ADDITIONAL AGREEMENTS
5.1 ACCESS; CONFIDENTIALITY.
Between the date hereof and the Closing Date, the Stockholder and the
Company will (i) provide to the officers and other authorized representatives of
UAG and Sub full access, during normal business hours, to any and all files,
books, records, documents, and other information of the Company and will cause
the Company's officers to furnish to UAG and its authorized representatives any
and all financial, technical and operating data and other information pertaining
to the businesses and properties of the Company (including the Real Property and
the Improvements), (ii) provide to the officers and other authorized
representatives of UAG and Sub reasonable access to any and all premises and
properties of the Company (including the Real Property and Improvements)
provided that such access shall not unreasonably disrupt the normal business of
the Company; and (iii) make available for inspection and copying by UAG and Sub
true and complete copies of any documents relating to the foregoing. UAG and
Sub will hold, and will cause their representatives to hold, in confidence
(unless and to the extent compelled to disclose by judicial or administrative
process or, in the opinion of its counsel, by other requirements of law) all
Confidential Information (as defined below) and will not disclose the same to
any third party except in connection with obtaining financing and otherwise as
may reasonably be necessary to carry out this Agreement and the transactions
contemplated hereby, including any due diligence review by or on behalf of UAG
and Sub. If this Agreement is terminated, UAG and Sub will, and will cause
their representatives to, promptly return to the Company, upon the reasonable
request of the Company, all Confidential Information furnished by the Company,
including all copies and summaries thereof. As used herein, "Confidential
Information" shall mean all information concerning the Company obtained by UAG,
Sub and their representatives from the Company in connection with the trans-
actions contemplated by this Agreement, except information (x) ascertainable or
obtained from public information, (y) received from a third party not employed
by or otherwise affiliated with the Company or (z) which is or becomes known to
the public, other than through a breach by UAG or Sub or any of their
representatives of this Agreement.
5.2 FURNISHING INFORMATION; ANNOUNCEMENTS.
The Stockholder and the Company, on the one hand, and UAG and Sub, on the
other hand, will, as soon as practicable after reasonable request therefor,
furnish to the other all the information concerning the Stockholder and the
Company or UAG and Sub, respectively, required for inclusion in any statement or
application made by UAG or Sub or the Company or the Stockholder to any
governmental or regulatory body or to any manufacturer or distributor or in
connection with obtaining any third party consent in connection with the
transactions contemplated by this Agreement. Neither the Stockholder or the
Company, on the one hand, nor UAG or Sub, on the other hand, nor any
representative thereof, shall issue any press releases or otherwise make any
public statement with respect to
-25-
<PAGE>
the transactions contemplated hereby without the prior consent of the other,
except as may be required by law.
5.3 CERTAIN CHANGES AND CONDUCT OF BUSINESS.
(a) From and after the date of this Agreement and until the Closing
Date, the Company shall, and the Stockholder shall cause the Company to, conduct
its businesses solely in the ordinary course consistent with past practices and,
without the prior written consent of UAG, neither the Stockholder nor the
Company will, except as required or permitted pursuant to the terms hereof,
permit the Company to:
(i) make any material change in the conduct of its businesses and
operations or enter into any transaction other than in the ordinary course
of business consistent with past practices;
(ii) make any change in its Articles of Incorporation or Bylaws, issue
any additional shares of capital stock or equity securities or grant any
option, warrant or right to acquire any capital stock or equity securities
or issue any security convertible into or exchangeable for its capital stock
or alter any material term of any of its outstanding securities or make any
change in its outstanding shares of capital stock or other ownership
interests or its capitalization, whether by reason of a reclassification,
recapitalization, stock split or combination, exchange or readjustment of
shares, stock dividend or otherwise;
(iii) (A) incur, assume or guarantee any indebtedness for borrowed
money, issue any notes, bonds, debentures or other corporate securities or
grant any option, warrant or right to purchase any thereof, except pursuant
to transactions in the ordinary course of business consistent with past
practices, (B) issue any securities convertible or exchangeable for debt
securities of the Company, or (C) issue any options or other rights to
acquire from the Company, directly or indirectly, debt securities of the
Company or any security convertible into or exchangeable for such debt
securities;
(iv) make any sale, assignment, transfer, abandonment or other
conveyance of any of its assets or any part thereof, except transactions
pursuant to existing contracts (which will be set forth in SCHEDULE 2.15
hereto) and dispositions in the ordinary course of business consistent with
past practices;
(v) subject any of its assets, or any part thereof, to any lien or
suffer such to be imposed other than such liens as may arise in the ordinary
course of business consistent with past practices;
(vi) declare, set aside or pay any dividends or other distribution
(whether in cash, stock, property or any combination thereof) in respect of
any shares of its capital stock which would decrease the Net Worth of the
Company below Two Million Three
-26-
<PAGE>
Million Dollars ($2,300,000) 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 (other than agreements in the ordinary
course of business consistent with past practices that will be reflected on
the Company's financial statement prior to the Closing Date and that will
not bind the Company after the Closing Date), grant any general increase in
the compensation of officers or employees (including any such increase
pursuant to any bonus, pension, profit-sharing or other plan or commitment)
or grant any increase in the compensation payable or to become payable to
any employee, except in accordance with pre-existing contractual provisions
or consistent with past practices;
(ix) make or commit to make any individual material capital expenditure
in excess of $50,000, or aggregate capital expenditures in excess of
$150,000, except in the ordinary course of business;
(x) pay, loan or advance any amount to, or sell, transfer or lease any
properties or assets to, or enter into any agreement or arrangement with,
any of its Affiliates, except in the ordinary course of business;
(xi) guarantee any indebtedness for borrowed money or any other
obligation of any other Person, other than in the ordinary course of
business consistent with past practice;
(xii) fail to keep in full force and effect insurance comparable in
amount and scope to coverage maintained by it (or on behalf of it) on the
date hereof;
(xiii) make any loan, advance or capital contribution to or investment
in any Person, except in the ordinary course of business;
(xiv) make any change in any method of accounting or accounting
principle, method, estimate or practice except for any such change required
by reason of a concurrent change in 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;
-27-
<PAGE>
(xvi) make, enter into, modify, amend in any material respect or
terminate any material commitment, bid or expenditure, other than in the
ordinary course of business consistent with past practice; or
(xvii) commit itself to do any of the foregoing.
(b) From and after the date hereof and until the Closing Date, the
Stockholder and the Company will use their reasonable best efforts to cause
the Company to:
(i) continue to maintain, in all material respects, the Company's
properties, the Real Property and the Improvements in accordance with
present practices in a condition suitable for their current use;
(ii) comply with all applicable Environmental Laws, and, in the event
it shall receive notice that there exists a violation of any Environmental
Law with respect to its operations, the Improvements or any Real Property,
promptly (and in any event within the time period permitted by the applic-
able governmental authority) remove or remedy such violation in accordance
with all applicable Environmental Laws;
(iii) file, when due or required, federal, state, foreign and other tax
returns and other reports required to be filed and pay when due all taxes,
assessments, fees and other charges lawfully levied or assessed against it
unless the validity thereof is contested in good faith and by appropriate
proceedings diligently conducted;
(iv) keep its books of account, records and files in the ordinary
course and in accordance with existing practices;
(v) preserve its business organization intact and continue to maintain
existing business relationships with suppliers, customers and others with
whom business relationships exist other than relationships that are, at the
same time, not economically beneficial to it; and
(vi) continue to conduct its business in the ordinary course
consistent with past practices.
5.4 NO INTERCOMPANY PAYABLES OR RECEIVABLES.
At the Closing there will be no intercompany payables or intercompany
receivables due and/or owing between the Stockholder and any of their
Affiliates, on the one hand, and the Company, on the other hand.
5.5 NEGOTIATIONS.
Until the earlier of 180 days from the date hereof and the termination
of this Agreement pursuant to SECTION 8.1 hereof, neither the Stockholder nor
the Company, nor the
-28-
<PAGE>
Company's officers, directors, employees, advisors, agents, representatives,
Affiliates or anyone acting on behalf of the Stockholder, the Company or such
persons, shall, directly or indirectly, encourage, solicit, initiate or
engage in discussions or negotiations with, or provide any information to,
any person (other than UAG or its representatives) concerning any merger,
sale of assets (other than in the ordinary course of business), purchase or
sale of shares of capital stock or similar transaction involving the Company.
The Stockholder shall promptly communicate to UAG any inquiries or
communications concerning any such transaction (including the identity of any
person making such inquiry or communication) which the Stockholder may
receive or of which the Stockholder may become aware.
5.6 CONSENTS; COOPERATION.
Subject to the terms and conditions hereof, the Stockholder and the
Company and UAG and Sub will use their respective best efforts at their own
expense:
(i) to obtain prior to the earlier of the date required (if so
required) or the Closing Date, all waivers, permits, licenses, approvals,
authorizations, qualifications, orders and consents of all third parties and
governmental authorities, and make all filings and registrations with
governmental authorities which are required on their respective parts for
(A) the consummation of the transactions contemplated by this Agreement, (B)
the ownership or leasing and operating after the Closing by the Company of
all its material properties and (C) the conduct after the Closing by the
Company of its businesses as conducted by it on the date hereof.
(ii) to defend, consistent with applicable principles and requirements
of law, any lawsuit or other legal proceedings, whether judicial or
administrative, whether brought derivatively or on behalf of third persons
(including governmental authorities) challenging this Agreement or the
transactions contemplated hereby; and
(iii) to furnish each other such information and assistance as may
reasonably be requested in connection with the foregoing.
5.7 ADDITIONAL AGREEMENTS.
Subject to the terms and conditions of this Agreement, each of the
parties hereto agrees to use its best efforts at its own expense to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
In case at any time after the Closing any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper officers of
the Company shall take all such necessary action.
-29-
<PAGE>
5.8 INTERIM FINANCIAL STATEMENTS.
Within thirty (30) days after the end of each calendar month after May
31, 1996, the Company will deliver to UAG unaudited consolidated balance sheets
of the Company at the end of such calendar month and at the end of the
corresponding calendar month of the preceding fiscal year, together with the
related unaudited consolidated statements of income and cash flow for the fiscal
months then ended. The Company will also deliver to UAG copies of the Company
Factory Statements provided to BMW after the date hereof within five days of
their delivery to BMW. All such financial statements shall fairly present the
financial position and results of operations of the Company as of the date or
for the periods indicated. All unaudited financial statements delivered
pursuant to this SECTION 5.9 shall be prepared on a basis consistent with the
Company Financial Statements.
5.9 NOTIFICATION OF CERTAIN MATTERS.
Between the date hereof and the Closing, each party to this Agreement
will give prompt notice in writing to the other party hereto of: (i) any
information that indicates that any representation and warranty of such party
contained herein was not true and correct as of the date made or will not be
true and correct as of the Closing, (ii) the occurrence of any event which could
result in the failure to satisfy a condition specified in ARTICLE 6 or ARTICLE 7
hereof, as applicable, (iii) any notice or other communication from any third
person alleging that the consent of such third person is or may be required in
connection with the transactions contemplated by this Agreement, and (iv) in the
case of the Stockholder and the Company, any notice of, or other communication
relating to, any default or event which, with notice or lapse of time or both,
would become a default under any Company Agreement set forth on SCHEDULE 2.15.
The Company and the Stockholder will (x) promptly advise UAG of any event that
has, or could reasonably be expected in the future to have, a Material Adverse
Effect on the Company, (y) confer on a regular and frequent basis with one or
more designated representatives of UAG to report operational matters and to
report the general status of ongoing operations, and (z) notify UAG of any
emergency or other change in the normal course of business or relating to the
Real Property or Improvements of the Company and of any governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated) or adjudicatory proceedings involving the Company, the Real
Property or the Improvements and will keep UAG fully informed of such events and
permit UAG's representatives access to all materials prepared in connection
therewith. The Stockholder shall give prompt notice to UAG of any notice or
other communication from any third person asserting any right, title or interest
in any of the Shares held by the Stockholder (including, without limitation, any
threat to commence, or notice of the commencement of any action or other
proceeding with respect to the Shares) or the occurrence of any other event of
which such Stockholder has knowledge which could result in any failure to
consummate the sale of the Shares as contemplated hereby.
-30-
<PAGE>
5.10 ASSURANCE BY THE STOCKHOLDER.
The Stockholder shall use its best efforts to cause the Company to comply
with its respective covenants set forth in this Agreement.
5.11 ANTITRUST IMPROVEMENTS ACT COMPLIANCE.
UAG, the Stockholder and the Company, as applicable, shall each file or
cause to be filed with the Federal Trade Commission and the United States
Department of Justice any notifications required to be filed by the respective
"ultimate parent" entities under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "H-S-R Act"), and the rules and regulations
promulgated thereunder, with respect to the transactions contemplated herein.
The parties shall use their best efforts to make such filings promptly, to
respond to any requests for additional information made by either of such
agencies, to cause the waiting periods under the H-S-R Act to terminate or
expire at the earliest possible date and to resist vigorously (including,
without limitation, the institution or defense of legal proceedings), any
assertion that the transactions contemplated herein constitute a violation of
the antitrust laws, all to the end of expediting consummation of the
transactions contemplated herein; PROVIDED, HOWEVER, that if UAG or the
Stockholder shall determine after issuance of any preliminary injunction that
continuing such resistance is not in its or their best interests, UAG or the
Stockholder, as the case may be, may, by written notice to the other party,
terminate this Agreement with the effect set forth in SECTION 8.2 hereof. In
the event that the Stockholder incurs any expense in connection with any
assertion that the transactions contemplated herein constitute a violation of
the antitrust laws, UAG shall reimburse the Stockholder for such expense unless
the Stockholder incurred such expense after UAG notified the Stockholder that
UAG intended to terminate the Agreement.
5.12 USE OF CHARLES EVANS NAME.
UAG, Sub and the Company shall have the right to use the name "Charles
Evans" in connection with the business of the Company for up to one year after
the Closing Date. After the Closing and until the one year anniversary of the
Closing Date, Evans shall not use the name "Charles Evans" or "Evans" in
connection with the sale of new or used automobiles or light duty trucks in the
metropolitan Atlanta area.
5.13 DEMONSTRATOR VEHICLES.
During their lifetimes, Evans and Mrs. Charles Evans shall each be
entitled to the use of one demonstrator vehicle (which vehicle shall be a
750 il equivalent) subject to the same terms and conditions applicable to other
employees of the Company who are provided with a demonstrator vehicle. During
Evans' lifetime, Evans shall also be entitled to an additional demonstrator
vehicle (which vehicle shall be a 740 il equivalent) for the use of Sarah
Pilgrim or, in the event that Ms. Pilgrim ceases to be employed by Evans, any
person who assumes her position. In the event that Evans, directly or
indirectly, acquires an ownership interest in or becomes employed by an entity
that is engaged in the business of
-31-
<PAGE>
selling automobiles or light-duty trucks, then Evans', Mrs. Evans' and Ms.
Pilgrim's right to the use of demonstrator vehicles pursuant to this Section
shall terminate.
5.14 MOTOR HOME.
The Company acknowledges that, from time to time, Mr. Michael Spooner
performs maintenance work on Evans' motor home and the Company agrees that to
the extent Mr. Spooner performs such work after the Closing Date, Evans shall
not be liable to the Company for any labor charges relating thereto.
ARTICLE 6
CONDITIONS TO THE OBLIGATIONS
OF UAG AND SUB TO EFFECT THE CLOSING
The obligations of UAG and Sub required to be performed by them at the
Closing shall be subject to the satisfaction, at or prior to the Closing, of
each of the following conditions, each of which may be waived by UAG and Sub as
provided herein except as otherwise required by applicable law:
6.1 REPRESENTATIONS AND WARRANTIES; AGREEMENTS; COVENANTS.
Each of the representations and warranties of the Company and the
Stockholder contained in this Agreement shall be true and correct on the date
made and shall be true and correct in all material respects as of the Closing.
Each of the obligations of the Company and the Stockholder required by this
Agreement to be performed by them at or prior to the Closing shall have been
duly performed and complied with in all material respects as of the Closing. At
the Closing, Sub shall have received a certificate, dated the Closing Date and
duly executed by the Stockholder and the chief financial officer of the Company,
to the effect that the conditions set forth in the two preceding sentences have
been satisfied.
6.2 AUTHORIZATION; CONSENTS.
(a) All corporate action necessary to authorize the execution, delivery
and performance of this Agreement and the Real Estate Purchase Agreement, and
the consummation of the transactions contemplated hereby shall have been duly
and validly taken by the Company. All filings required to be made under the H-
S-R Act in connection with the transactions contemplated hereby shall have been
made and all applicable waiting periods with respect to each such filing,
including extensions thereof, shall have expired or been terminated.
(b) All notices to, and declarations, filings and registrations with,
and consents, authorizations, approvals and waivers from, governmental and
regulatory bodies and third persons (including, but not limited to, all
automobile manufacturers with whom the Company has a franchise agreement (or
comparable instrument)) required to consummate the
-32-
<PAGE>
transactions contemplated hereby and all consents or waivers shall have
been made or obtained.
6.3 OPINIONS OF THE COMPANY'S AND THE STOCKHOLDER' COUNSEL.
UAG and Sub shall have been furnished with the opinion of the Company's
and the Stockholder' counsel, dated the Closing Date, in form and substance
satisfactory to UAG and Sub and their counsel, which opinion shall have been
rendered with respect to those matters contained in SECTIONS 2.1, 2.3, 2.4, 2.9,
3.1 AND 3.2 hereof. In rendering the foregoing opinion, such counsel may rely
as to factual matters upon certificates or other documents furnished by officers
and directors of the Company and by government officials and upon such other
documents and data as such counsel deem appropriate as a basis for their
opinions. Such opinions may be limited to Georgia and federal laws.
6.4 ABSENCE OF LITIGATION.
No order, stay, injunction or decree of any court of competent
jurisdiction in the Untied States shall be in effect (i) that prevents or delays
the consummation of any of the transactions contemplated hereby or (ii) would
impose any limitation on the ability of UAG or Sub effectively to exercise full
rights of ownership of the Shares. No action, suit or proceeding before any
court or any governmental or regulatory entity shall be pending (or threatened
by any governmental or regulatory entity), and no investigation by any
governmental or regulatory entity shall have been commenced (and be pending),
seeking to restrain or prohibit (or questioning the validity or legality of) the
consummation of the transactions contemplated by this Agreement or seeking
damages in connection therewith which UAG or Sub, in good faith and with the
advice of counsel, believes makes it undesirable to proceed with the
consummation of the transactions contemplated hereby.
6.5 NO MATERIAL ADVERSE EFFECT.
During the period from December 31, 1995 to the Closing Date, there shall
not have been any material adverse change in the assets, properties, business,
operations, prospects, net income or financial condition of the Company.
6.6 WORKING CAPITAL REQUIREMENTS.
On the Closing Date, the Stockholder shall deliver to Sub a balance sheet
of the Company dated as of the most recent practicable date preceding the
Closing Date, prepared in accordance with the Accounting Principles (the
"Estimated Closing Date Balance Sheet"). The Estimated Closing Date Balance
Sheet shall show as of the date thereof, after taking into account the payment
of any of the fees, costs and expenses by the Company incurred in connection
with this Agreement, consolidated net working capital equal to or greater than
the consolidated net working capital of the Company as set forth on the Company
Balance Sheet.
-33-
<PAGE>
6.7 COMPLETION OF DUE DILIGENCE.
UAG and Sub shall have completed their due diligence examination of the
Company, the Real Property and the Improvements and the results of such
examination, including any Phase I or Phase II environmental audits of the
Company, shall be satisfactory to UAG and Sub. Sub will pay the costs for a
Phase I environmental audit. If, after obtaining the results of the Phase I
environmental audit, Sub determines that a Phase II environmental audit is
required, the expenses of the Phase II environmental audit shall be paid one-
half by Sub and one-half by the Stockholder.
6.8 LEASE AND REAL ESTATE PURCHASE AGREEMENT.
The Stockholder and the Company shall have agreed upon the terms of the
BMW Lease and the Real Estate Purchase Agreement on or before August 15, 1996
and shall have entered into the BMW Lease and the Real Estate Purchase Agreement
at the time of the Closing.
6.9 BOARD APPROVAL.
The Board of Directors of UAG and Sub shall have approved the
consummation of all of the transactions contemplated by this Agreement.
6.10 CERTIFICATES.
The Stockholder and the Company shall have furnished UAG and Sub with a
certificate, dated as of the Closing Date, executed by the Stockholder
certifying to the fulfillment of the conditions set forth in SECTIONS 6.5, 6.6
AND 6.13 hereof and shall have furnished UAG and Sub with such any other
certificates of its officers and others as UAG and Sub may reasonably request to
evidence compliance with the conditions set forth in this ARTICLE 6.
6.11 LEGAL MATTERS.
All certificates, instruments, opinions and other documents required to
be executed or delivered by or on behalf of the Stockholder and the Company
under the provisions of this Agreement, and all other actions and proceedings
required to be taken by or on behalf of the Stockholder and the Company in
furtherance of the transactions contemplated hereby, shall be reasonably
satisfactory in form and substance to counsel for UAG and Sub.
-34-
<PAGE>
6.12 APPROVAL OF MANUFACTURER AND DISTRIBUTOR.
The Stockholder and the Company shall have obtained the consent,
authorization and approval of BMW and BMW distributor on terms no less favorable
to those granted to the Company immediately prior to the execution of this
Agreement.
6.13 ENVIRONMENTAL LAWS.
The Company shall be in compliance with all applicable Environmental
Laws.
6.14 TITLE INSURANCE.
The Company shall have obtained title insurance with respect to the Real
Property in form and substance satisfactory to UAG. UAG shall pay the title
insurance premium.
6.15 LEASE TERMINATION AGREEMENT/MEMORANDUM OF LEASE.
The appropriate parties shall have executed a Lease Termination Agreement
and a Memorandum of Lease in form and substance satisfactory to UAG and the
Company.
6.16 RESIGNATION OF THE COMPANY'S DIRECTORS.
Each of the persons who is a director of the Company on the Closing Date
shall have tendered to Sub in writing his resignation as such in form and
substance satisfactory to UAG.
6.17 SCHEDULES.
The Company and the Stockholder shall have delivered to UAG and Sub all
Schedules referred to in ARTICLES 2 AND 3 and such Schedules shall be reasonably
acceptable in form and substance to UAG and Sub.
ARTICLE 7
CONDITIONS TO THE OBLIGATIONS OF
THE STOCKHOLDER TO EFFECT THE CLOSING
The obligations of the Stockholder and the Company required to be
performed by them at the Closing shall be subject to the satisfaction, at or
prior to the Closing, of each of the following conditions, each of which may be
waived by the Company and the Stockholder as provided herein except as otherwise
required by applicable law:
-35-
<PAGE>
7.1 REPRESENTATIONS AND WARRANTIES; AGREEMENTS.
Each of the representations and warranties of UAG and Sub contained in
this Agreement shall be true and correct on the date made and shall be true and
correct in all material respects as of the Closing. Each of the obligations of
UAG and Sub required by this Agreement to be performed by them at or prior to
the Closing shall have been duly performed and complied with in all material
respects as of the Closing. At the Closing, the Stockholder shall have received
a certificate, dated the Closing Date and duly executed by the chief financial
officer of UAG and of Sub to the effect that the conditions set forth in the
preceding two sentences have been satisfied.
7.2 AUTHORIZATION OF THE AGREEMENT, CONSENTS.
(a) All corporate action necessary to authorize the execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby shall have been duly and validly taken by UAG and Sub. All
filings required to be made under the H-S-R Act in connection with the transac-
tions contemplated hereby shall have been made and all applicable waiting
periods with respect to each such filing, including extensions thereof, shall
have expired or been terminated.
(b) All notices to, and declarations, filings and registrations with,
and consents, authorizations, approvals and waivers from, governmental and
regulatory bodies and third persons (including, but not limited to, all
automobile manufacturers with whom the Company has entered into a franchise
agreement (or comparable instrument)) required to consummate the transactions
contemplated hereby and all consents or waivers shall have been made or
obtained.
7.3 OPINIONS OF UAG'S AND SUB'S COUNSEL.
The Stockholder shall have been furnished with the opinion of Rogers &
Hardin, counsel to UAG and Sub, dated the Closing Date, in form and substance
satisfactory to the Stockholder and their counsel, which opinions, when taken
together, shall have been rendered with respect to those matters contained in
SECTIONS 4.1 AND 4.2 hereof. In rendering the foregoing opinions, such counsel
may rely as to factual matters upon certificates or other documents furnished by
officers and directors of UAG and Sub and by government officials, and upon such
other documents and data as such counsel deems appropriate as a basis for its
opinion. Such opinions may be limited to Georgia and federal laws and the
General Corporation Law of the State of Delaware.
7.4 ABSENCE OF LITIGATION.
No order, stay, judgment or decree shall have been issued by any court
and be in effect restraining or prohibiting the consummation of the transactions
contemplated hereby.
-36-
<PAGE>
7.5 LEASE AND REAL ESTATE PURCHASE AGREEMENT.
The Company and Sub shall have agreed upon the terms of the BMW Lease and
the Real Estate Purchase Agreement on or before August 15, 1996 and the Company
and Sub shall have entered into the BMW Lease and Sub shall have entered into
the Real Estate Purchase Agreement at the time of the Closing.
7.6 CERTIFICATES.
UAG and Sub shall have furnished the Stockholder with such certificates
of its officers and others to evidence compliance with the conditions set forth
in this ARTICLE 7 as may be reasonably requested by the Stockholder.
7.7 LEGAL MATTERS.
All certificates, instruments, opinions and other documents required to
be executed or delivered by or on behalf of UAG or Sub under the provisions of
this Agreement, and all other actions and proceedings required to be taken by or
on behalf of UAG or Sub in furtherance of the transactions contemplated hereby,
shall be reasonably satisfactory in form and substance to counsel for the
Stockholder.
ARTICLE 8
TERMINATION
8.1 TERMINATION.
This Agreement may be terminated at any time prior to Closing:
(i) by mutual consent of UAG, Sub and the Stockholder;
(ii) by either UAG, Sub, or the Stockholder if the Closing shall not
have taken place on or prior to November 30, 1996, or such later date as
shall have been approved by UAG, Sub and the Stockholder (provided that the
terminating party is not otherwise in material breach of its represen-
tations, warranties, covenants or agreements under this Agreement);
(iii) by UAG, Sub, or the Stockholder if any court of competent
jurisdiction in the United States or other United States governmental body
shall have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the transactions contem-
plated by this Agreement, and such order, decree, ruling or other action
shall have become final and non-appealable;
(iv) by UAG or Sub if any of the conditions specified in ARTICLE 6
hereof have not been met or waived by UAG and Sub at such time as such
condition is no
-37-
<PAGE>
longer capable of satisfaction (provided that neither UAG
nor Sub is otherwise in material breach of its representations, warranties,
covenants or agreements under this Agreement);
(v) by the Stockholder if any of the conditions specified in ARTICLE 7
hereof have not been met or waived by the Stockholder at such time as such
condition is no longer capable of satisfaction (provided that neither the
Stockholder nor the Company is otherwise in material breach of his or its
representations, warranties covenants or agreements under this Agreement);
or
(vi) by either UAG, Sub or the Stockholder if there has been a material
breach on the part of the other of any representation, warranty, covenant or
agreement set forth in this Agreement, which breach has not been cured
within ten (10) Business Days following receipt by the breaching party of
written notice of such breach.
If UAG, Sub or the Stockholder shall terminate this Agreement pursuant to
the provisions hereof, such termination shall be effected by notice to the other
parties specifying the provision hereof pursuant to which such termination is
made.
8.2 EFFECT OF TERMINATION.
Except (i) for any breach of this Agreement prior to its termination, and
(ii) for the obligations contained in SECTIONS 5.1 AND 10.2 hereof, and (iii) as
set forth in SECTION 9.1 and SECTION 9.2 hereof, upon the termination of this
Agreement pursuant to SECTION 8.1 hereof, this Agreement shall forthwith become
null and void and none of the parties hereto or any of their respective
officers, directors, employees, agents, Affiliates, consultants, stockholders or
principals shall have any liability or obligation hereunder or with respect
hereto.
ARTICLE 9
INDEMNIFICATION
9.1 INDEMNIFICATION BY THE STOCKHOLDER.
Notwithstanding the Closing or the delivery of the Shares, the
Stockholder indemnifies and agrees to fully defend, save and hold harmless on
an after-tax basis UAG, Sub, the Company (after the Closing), and any of
their respective officers, directors, employees, stockholders, advisors,
repre-sentatives, agents and Affiliates (other than the Stockholder) (each a
"UAG Indemnified Party"), if a UAG Indemnified Party (including the Company
after the Closing Date) shall at any time or from time to time suffer any
Costs (as defined in SECTION 9.6 below) arising, directly or indirectly, out
of or resulting from, or shall pay or become obligated to pay any sum on
account of, (i) any and all Stockholder Events of Breach (as defined below)
or, (ii) any Claim before or by any court, arbitrator, panel, agency or other
governmental, administrative or judicial entity, which Claim involves,
affects or relates to any assets, properties or operations of the Company or
the conduct of the
-38-
<PAGE>
business of the Company prior to the Closing Date (a "Stockholder Third Party
Claim"). As used herein, "Stockholder Event of Breach" shall be and mean any
one or more of the following: (i) any untruth or inaccuracy in any
representation of the Stockholder or the Company or the breach of any
warranty of the Stockholder or the Company contained in this Agreement,
including, without limitation, any misrepresentation in, or omission from,
any statement, certificate, schedule, exhibit, annex or other document
furnished pursuant to this Agreement by the Stockholder or the Company (or
any representative of the Stockholder or the Company) to UAG or Sub (or any
representative of UAG or Sub) and any misrepresentation in or omission from
any document furnished to UAG or Sub in connection with the Closing, and (ii)
any failure of the Stockholder or the Company duly to perform or observe any
term, provision, covenant, agreement or condition on the part of the
Stockholder or the Company to be performed or observed.
9.2 INDEMNIFICATION BY UAG.
Notwithstanding the Closing, UAG indemnifies and agrees to fully defend,
save and hold harmless on an after-tax basis the Stockholder, the Company (prior
to the Closing), and any of their respective officers, directors, employees,
advisors, representatives, agents and Affiliates (each a "Stockholder
Indemnified Party"), if a Stockholder Indemnified Party (including the Company
prior to Closing) shall at any time or from time to time suffer any Costs
arising, directly or indirectly, out of or resulting from, or shall pay or
become obligated to pay any sum on account of, (i) any and all UAG Events of
Breach (as defined below) or (ii) any Claim before or by any court, arbitrator,
panel, agency or other governmental, administrative or judicial entity, which
Claim involves, affects or relates to any assets, properties or operations of
UAG or Sub or the conduct of the business of UAG prior to the Closing Date or
any Claim relating to or arising out of any violation of the Environmental Laws
by the Company after the Closing Date (a "UAG Third Party Claim"). As used
herein, "UAG Event of Breach" shall be and mean any one or more of the
following: (i) any untruth or inaccuracy in any representation of UAG or Sub or
the breach of any warranty of UAG or Sub contained in this Agreement, including,
without limitation, any misrepresentation in, or omission from, any statement,
certificate, schedule, exhibit, annex or other document furnished pursuant to
this Agreement by UAG or Sub (or any representative of UAG or Sub) to the Stock-
holder (or any representative of the Stockholder) and any misrepresentation in
or omission from any document furnished to the Stockholder in connection with
the Closing, and (ii) any failure of UAG or Sub duly to perform or observe any
term, provision, covenant, agreement or condition on the part of UAG or Sub to
be performed or observed.
9.3 PROCEDURES.
If (i) any Stockholder Event of Breach occurs or is alleged and a UAG
Indemnified Party asserts that the Stockholder have become obligated to a UAG
Indemnified Party pursuant to SECTION 9.1, or if any Stockholder's Third Party
Claim is begun, made or instituted as a result of which the Stockholder may
become obligated to a UAG Indemnified Party hereunder, or (ii) a UAG Event of
Breach occurs or is alleged and a Stockholder
-39-
<PAGE>
Indemnified Party asserts that UAG has become obligated to a Stockholder
Indemnified Party pursuant to SECTION 9.2, or if any UAG Third Party Claim is
begun, made or instituted as a result of which UAG may become obligated to a
Stockholder Indemnified Party hereunder (for purposes of this ARTICLE 9, any
UAG Indemnified Party and any Stockholder Indemnified Party is sometimes
referred to as an "Indemnified Party" and UAG and the Stockholder are
sometimes referred to as an "Indemnifying Party," and any UAG Third Party
Claim and any Stockholder Third Party Claim is sometimes referred to as a
"Third Party Claim," in each case as the context so requires), such
Indemnified Party shall give written notice to the Indemnifying Party of its
or his obligation to provide indemnification hereunder, provided that any
failure to so notify the Indemnifying Party shall not relieve them from any
liability that it or he may have to the Indemnified Party under this ARTICLE
9. If such notice relates to a Third Party Claim, each Indemnifying Party,
jointly and severally, agrees to defend, contest or otherwise protect such
Indemnified Party against any such Third Party Claim at his or its sole cost
and expense. Such Indemnified Party shall have the right, but not the
obligation, to participate at its own expense in the defense thereof by
counsel of such Indemnified Party's choice and shall in any event cooperate
with and assist the Indemnifying Party to the extent reasonably possible. If
the Indemnifying Party fails timely to defend, contest or otherwise protect
against such Third Party Claim, such Indemnified Party shall have the right
to do so, including, without limitation, the right to make any compromise or
settlement thereof, and such Indemnified Party shall be entitled to recover
the entire Cost thereof from the Indemnifying Party, including, without
limitation, attorneys' fees, disburse-ments and amounts paid (or of which
such Indemnified Party has become obligated to pay) as the result of such
Third Party Claim. Failure by the Indemnifying Party to notify such
Indemnified Party of its or their election to defend any such Third Party
Claim within fifteen (15) days after notice thereof shall have been given to
the Indemnifying Party shall be deemed a waiver by the Indemnifying Party of
its or their right to defend such Third Party Claim. If the Indemnifying
Party assumes the defense of the particular Third Party Claim, the
Indemnifying Party shall not, in the defense of such Third Party Claim,
consent to entry of any judgment or enter into any settlement, except with
the written consent of such Indemnified Party. In addition, the Indemnifying
Party shall not enter into any settlement of any Third Party Claim (except
with the written consent of such Indemnified Party) which does not include as
an unconditional term thereof the giving by the claimant or the plaintiff to
such Indemnified Party a full release from all liability in respect of such
Third Party Claim. Notwithstanding the foregoing, the Indemnifying Party
shall not be entitled to control (but shall be entitled to participate at
their own expense in the defense of), and the Indemnified Party shall be
entitled to have sole control over, the defense or settlement of any Third
Party Claim to the extent the Third Party Claim seeks an order, injunction or
other equitable relief against the Indemnified Party which, if successful,
could materially interfere with the business, operations, assets, condition
(financial or otherwise) or prospects of the Indemnified Party.
9.4 OFFSET.
In addition to and not in limitation of all rights of offset that an
Indemnified Party may have under applicable law, the parties agree that, at any
Indemnified Party's option, any
-40-
<PAGE>
or all amounts owing to such Indemnified Party under this ARTICLE 9 or any
other provision of this Agreement or any other liability of the other parties
(or any Affiliate of the other parties) to such Indemnified Party in
connection with this Agreement or the transactions contemplated hereby, may
be recovered by the Indemnified Party by an offset against any or all amounts
due to such other parties pursuant to this Agreement or the transactions
contemplated hereby.
9.5 REMEDIES.
The rights of an Indemnified Party under this ARTICLE 9 are in addition
to such other rights and remedies which such Indemnified Party may have under
this Agreement, applicable law or otherwise.
9.6 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.
ARTICLE 10
MISCELLANEOUS
10.1 SURVIVAL OF PROVISIONS.
(a) The respective representations, warranties, covenants and agreements
of each of the parties to this Agreement (except covenants and agreements which
are expressly required to be performed and are performed in full on or before
the Closing Date) shall survive the Closing Date and the consummation of the
transactions contemplated by this Agreement. In the event of a breach of any
such representations, warranties or covenants, the party to whom such repre-
sentations, warranties or covenants have been made shall have, subject to
ARTICLE 9 hereof, all rights and remedies for such breach available to it under
the provisions of this Agreement or otherwise, whether at law or in equity,
regardless of any disclosure to, or investigation made by or on behalf of, such
party on or before the Closing Date.
(b) The representations and warranties contained in SECTION 2.11 shall
survive (and not be affected in any respect by) the Closing for a period
terminating on the later of (i) the date five years after the Closing Date, and
(ii) with respect to any claim asserted with respect to any breach of such
representation or warranty or pursuant to SECTION 9.3 hereof before the
expiration of such representation or warranty, on the date such claim is finally
liquidated or otherwise resolved.
-41-
<PAGE>
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 SECTION 5.5 hereof is breached, then the Stockholder or the Company shall
pay to UAG, within five (5) Business Days after receipt of a request
therefor, an amount equal to all of the legal and other fees, costs and
expenses incurred by UAG in connection with this Agreement and the
transactions contemplated hereby.
10.3 HEADINGS.
The section headings herein are for convenience of reference only, do not
constitute part of this Agreement and shall not be deemed to limit or otherwise
affect any of the provisions hereof.
10.4 NOTICES.
All notices or other communications required or permitted hereunder shall
be given in writing and shall be deemed sufficient if delivered by hand,
recognized overnight delivery service or facsimile transmission or mailed by
registered or certified mail, postage prepaid (return receipt requested), as
follows:
If to the Company before the Closing Date:
Charles Evans Nissan, Inc.
3180 Zingara Road
Route 1
Conyers, Georgia 30207
Attn: Charles F. Evans
with a copy to:
Lance & Associates
884 Green Street
Conyers, Georgia 30207
Facsimile No.: (770) 388-7944
Attn: Forrest Jack Lance, Esq.
-42-
<PAGE>
If to the Company after the Closing Date:
United Auto Group, Inc.
375 Park Avenue
New York, New York 10022
Facsimile No.: (212) 223-5148
Attn: George G. Lowrance, Esq.
Executive Vice President
with a copy to:
Rogers & Hardin
2700 Cain Tower, Peachtree Center
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Facsimile No.: (404) 525-2224
Attn: Michael Rosenzweig, Esq.
If to the Stockholder:
Charles F. Evans
3180 Zingara Road
Route 1
Conyers, Georgia 30207
with a copy to:
Lance & Associates
884 Green Street
Conyers, Georgia 30207
Facsimile No.: (770) 388-7944
Attn: Forrest Jack Lance, Esq.
If to UAG or Sub:
United Auto Group, Inc.
375 Park Avenue
New York, New York 10022
Facsimile No.: (212) 223-5148
Attn: George G. Lowrance, Esq.
Executive Vice President
-43-
<PAGE>
with a copy to:
Rogers & Hardin
2700 Cain Tower, Peachtree Center
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Facsimile No.: (404) 525-2224
Attn: Michael Rosenzweig, 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 Stockholder,
the personal representatives and heirs of the Stockholder) and their respective
successors and permitted assigns, and the provisions of ARTICLE 9 hereof shall
inure to the benefit of the Indemnified Parties referred to therein; PROVIDED,
HOWEVER, that neither this Agreement nor any of the rights, interests, or
obligations hereunder may be assigned by any of the parties hereto without the
prior written consent of the other parties which consent shall not be
unreasonably withheld. Notwithstanding the foregoing, UAG and Sub shall have
the unrestricted right to assign this Agreement and to delegate all or any part
of their obligations hereunder, 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 Real Estate
Purchase Agreement embody the entire agreement and understanding of the parties
with respect to the transactions contemplated hereby and supersede all prior
written or oral commitments, arrangements or understandings between the parties
with respect thereto and all prior drafts of this Agreement. There are no
restrictions, agreements, promises, warranties, covenants or undertakings with
respect to the transactions contemplated hereby other than those expressly set
forth herein or in the Lease. Prior drafts of this Agreement shall not be used
as a basis for interpreting this Agreement.
10.7 WAIVER AND AMENDMENTS.
Each of the Stockholder, the Company, UAG and Sub may by written notice
to the other parties (i) extend the time for the performance of any of the
obligations or other actions of the other parties, (ii) waive any inaccuracies
in the representations or warranties of the
-44-
<PAGE>
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 in any number of counterparts, all of
which shall be considered one and the same agreement and each of which shall be
deemed an original.
10.9 GOVERNING LAW.
This Agreement shall be governed by the laws of the State of Georgia.
10.10 ACCOUNTING TERMS.
All accounting terms used herein which are not expressly defined in this
Agreement shall have the respective meanings given to them in accordance with
GAAP.
10.11 CERTAIN DEFINITIONS.
For purposes of this Agreement:
(a) "Affiliate" of a specified Person shall mean a Person that directly
or indirectly, through one or more intermediaries, controls, or is controlled
by, or is under common control with, the Person specified, and in the case of a
specified Person who is a natural person, his spouse, his issue, his parents,
his estate and any trust entirely for the benefit of his spouse and/or issue.
(b) "best efforts" shall be deemed to not include any obligation on the
part of any Person to undertake any liabilities, expend any funds or perform
acts (except liabilities, expenditures or performance, other than any best
efforts obligations, expressly required to be undertaken by the terms of this
Agreement) which are materially burdensome to such Person; PROVIDED, HOWEVER,
that notwithstanding the foregoing, the term "best efforts" shall include an
obligation to take such actions which are normally incident to or reasonably
foreseeable in connection with such obligation or the transactions contemplated
hereby.
(c) "Business Day" shall mean any day excluding Saturday, Sunday and any
day which is a legal holiday under Federal law.
(d) "GAAP" shall mean generally accepted accounting principles which are
in effect in the United States on the Closing Date.
-45-
<PAGE>
(e) "Liens" shall mean any mortgages, pledges, title defects or
objections, liens, claims, security interests, conditional and installment sale
agreements, encumbrances or charges of any kind.
(f) "Material Adverse Effect" shall mean any change in, or effect on,
the Company (including the business thereof) which is, or could reasonably be
expected to be, materially adverse to the business, operations, assets,
condition (financial or otherwise) or prospects of the Company.
(g) "Person" shall mean and include an individual, corporation, limited
liability company, partnership, joint venture, association, trust, any other
incorporated or unincorporated organization or entity and a governmental entity
or any department or agency thereto.
(h) "UAG Public Offering Date" shall mean the date of the consummation
of an underwritten public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended, covering the offering
and sale of shares of common stock, par value $.0001 per share of UAG. on a firm
commitment basis.
10.12 SCHEDULES.
Disclosure of any matter in any Schedule hereto or in the Financial
Statements shall not be considered as disclosure pursuant to any other
provision, subprovision, section or subsection of this Agreement or Schedule to
this Agreement.
10.13 SEVERABILITY.
If any one or more of the provisions of this Agreement shall be held to
be invalid, illegal or unenforceable, the validity, legality or enforceability
of the remaining provisions of this Agreement shall not be affected thereby. To
the extent permitted by applicable law, each party waives any provision of law
which renders any provision of this Agreement invalid, illegal or unenforceable
in any respect.
10.14 REMEDIES.
None of the remedies provided for in this Agreement, including
termination of this Agreement as set forth in ARTICLE 8, indemnification as set
forth in ARTICLE 9, the payment of certain fees, costs and expenses as set forth
in SECTION 10.2 or specific performance as set forth in this SECTION 10.14,
shall be the exclusive remedy of either party for a breach of this Agreement,
the parties hereto having the right to seek any other remedy in law or equity in
lieu of or in addition to any remedies provided in this Agreement, including an
action for damages for breach of contract.
-46-
<PAGE>
10.15 TIME IS OF THE ESSENCE.
Time is of the essence for purposes of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
UNITED AUTO GROUP, INC.
By: /s/ GEORGE LOWRANCE
__________________________________
Name: George G. Lowrance
__________________________________
Title: Executive Vice-President
_________________________________
UAG ATLANTA IV, INC.
By: /s/ GEORGE LOWRANCE
__________________________________
Name: George G. Lowrance
__________________________________
Title: Vice President
_________________________________
CHARLES EVANS BMW, INC.
By: /s/ SARAH H. PILGRIM
__________________________________
Name: Sarah H. Pilgrim
__________________________________
Title: President
_________________________________
/s/ CHARLES F. EVANS
_________________________________
Charles F. Evans, Individually
-47-
<PAGE>
STOCK PURCHASE AGREEMENT
DATED AS OF AUGUST 5, 1996
AMONG
UNITED AUTO GROUP, INC.,
UAG ATLANTA IV, INC.,
CHARLES EVANS NISSAN, INC.,
AND
CHARLES F. EVANS
<PAGE>
This STOCK PURCHASE AGREEMENT, dated as of August 5, 1996 is by and
among United Auto Group, Inc., a Delaware corporation ("UAG"), UAG Atlanta IV,
Inc., a Delaware corporation ("Sub"), Charles Evans Nissan, Inc., a Georgia
corporation (the "Company"), and Charles F. Evans ("Evans" or the
"Stockholder").
W I T N E S S E T H:
-------------------
WHEREAS, the Company operates a Nissan automobile dealership and related
businesses in Conyers, Georgia;
WHEREAS, the Stockholder owns all of the issued and outstanding shares
of common stock of the Company (the "Common Stock");
WHEREAS, Sub is a wholly-owned subsidiary of UAG; and
WHEREAS, Sub desires to purchase all of the issued and outstanding
shares of the Common Stock from the Stockholder (such shares being collectively
referred to herein as the "Shares"), and the Stockholder desires to sell the
Shares to Sub (upon the terms and subject to the conditions set forth in this
Agreement), such that immediately after giving effect to such purchase and
sale, Sub will own one hundred (100%) percent of all of the issued and
outstanding shares of Common Stock, on a fully diluted basis;
NOW, THEREFORE, in consideration of the mutual terms, conditions and
other agreements set forth herein, the parties hereto hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE OF SHARES
1.1 PURCHASE AND SALE OF THE SHARES.
(a) PURCHASE AND SALE. Upon the terms and subject to the conditions
set forth in this Agreement, the Stockholder shall sell to Sub, and Sub shall
purchase from the Stockholder, the Shares for an aggregate purchase price equal
to Two Million Dollars ($2,000,000) (the "Base Price"), which Base Price is
subject to adjustment after Closing as provided in SECTION 1.2 hereof. At the
Closing referred to in SECTION 1.1(b) hereof:
(i) the Stockholder shall sell, assign, transfer and deliver to Sub
the Shares representing 100% of the outstanding Common Stock, free and
clear of all Liens (as defined in SECTION 10.11), and shall deliver the
certificates representing such Shares accompanied by stock powers duly
executed in blank; and
(ii) Sub shall accept and purchase the Shares from the Stockholder and
in payment therefor shall deliver to the Stockholder immediately available
funds in an
<PAGE>
aggregate amount equal to the Base Price by wire transfer to an account
designated in writing by the Stockholder or by certified funds.
(b) CLOSING. Subject to the conditions set forth in this Agreement,
the purchase and sale of the Shares pursuant to this Agreement (the "Closing")
shall take place at the offices of Rogers & Hardin, 2700 Cain Tower, Peachtree
Center, 229 Peachtree Street, N.E., Atlanta, Georgia 30303, or such other
location as the parties shall agree, within ten (10) Business Days of the UAG
Public Offering Date (as defined in SECTION 10.11) or on November 30, 1996,
whichever occurs first (the "Closing Date"). The date on which the Closing
occurs is herein referred to as the "Closing Date". The Closing shall take
place on the same date as the closing of the Stock Purchase Agreement dated as
of August 5, 1996 between UAG, Sub, Charles Evans BMW, Inc. and Evans (the "BMW
Stock Purchase Agreement").
(c) DELIVERIES AT THE CLOSING. Subject to the conditions set forth in this
Agreement, at the Closing:
(i) The Stockholder shall deliver to Sub (A) certificates representing
the Shares bearing the restrictive legend customarily placed on securities
that have not been registered under applicable federal and state securities
laws and accompanied by stock powers as required by SECTION 1.1(a)(i)
hereof, and any other documents that are necessary to transfer to Sub good
title to all the Shares, and (B) all opinions, certificates and other
instruments and documents required to be delivered by the Stockholder at or
prior to the Closing or otherwise required in connection herewith;
(ii) Sub shall pay and deliver to the Stockholder funds as required by
SECTION 1.1(a)(ii) hereof and all opinions, certificates and other
instruments and documents required to be delivered by Sub at or prior to
the Closing or otherwise required in connection herewith;
(iii) the Stockholder and Sub shall enter into a real estate purchase
agreement in a form mutually acceptable to the parties (the "Real Estate
Purchase Agreement") pursuant to which Sub shall agree to purchase the real
property used in the business of the Company and commonly known as 1420
Iris Drive, Conyers, Georgia 30207 (the "Nissan Property") on or before the
eighteenth month anniversary of the Closing Date for a purchase price equal
to Two Million Nine Hundred Forty-Five Thousand Dollars ($2,945,000). The
closing of the purchase of the Nissan Property shall take place on the same
date as the Real Estate Closing as that term is defined in the BMW Stock
Purchase Agreement;
(iv) the Stockholder, Sub and the Company shall enter into a lease for
the Nissan Property in a form mutually acceptable to the parties (the
"Nissan Lease"). The initial lease rate shall be $20,000 per month and on
the one year anniversary of the Closing Date shall increase by a percentage
equal to the percentage increase in the Consumer Price Index published by
the United States Department of Labor for the
-2-
<PAGE>
preceding twelve months. The Nissan Lease payments shall be paid
monthly commencing on the Closing Date. The Lease shall terminate at the
Real Estate Closing.
1.2 NET WORTH ADJUSTMENT.
(a) As soon as practicable after the Closing Date, the Stockholder
shall deliver to Sub a balance sheet of the Company dated as of the Closing Date
(such balance sheet so delivered is referred to herein as the "Closing Date
Balance Sheet"). The Closing Date Balance Sheet shall be prepared in good faith
on the same basis and in accordance with the accounting principles, methods and
practices used in preparing the Company Financial Statements (as defined in
SECTION 2.5 hereof), subject to the modifications, adjustments and exceptions to
such accounting principles, methods and practices set forth on SCHEDULE 1.2(a)
hereto (such accounting principles, methods and practices as so modified and
adjusted, and such procedures, are referred to herein as the "Accounting
Principles"). In connection with the preparation of the Closing Date Balance
Sheet, the Stockholder and the Company and the Reviewer (as defined below) and
other representatives of Sub will conduct a physical inventory at each location
where inventory is held by the Company. From the results of such inventory and
prior to the Closing Date, Sub and the Stockholder (or the respective
representatives thereof) will prepare a schedule, which shall be signed by each
of Sub and the Stockholder, setting forth the nature and quality of such
inventory and such other items as shall be agreed upon by Sub and the
Stockholder to be included in the Closing Date Balance Sheet.
(b) Within forty-five (45) days after delivery of the Closing Date
Balance Sheet, (i) Coopers & Lybrand or such other national accounting firm (the
"Reviewer") selected by Sub, shall audit or otherwise review the Closing Date
Balance Sheet in such manner as Sub and the Reviewer deem appropriate, and (ii)
Sub shall deliver such reviewed balance sheet (the "Reviewed Balance Sheet"),
together with the Reviewer's report thereon, to the Stockholder. The Reviewed
Balance Sheet (i) shall be prepared on the same basis and in accordance with the
Accounting Principles and (ii) shall include a schedule showing the computation
of the Final Net Worth (as defined in SECTION 1.2(g)(i) hereof), computed in
accordance with the definition of Net Worth set forth in SECTION 1.2(g)(iii)
hereof. Sub and the Reviewer shall have the opportunity to consult with the
Stockholder, the Company and each of the accountants and other representatives
of the Stockholder and the Company and examine the work papers, schedules and
other documents prepared by the Stockholder, the Company and each of such
accountants and other representatives during the preparation of the Closing Date
Balance Sheet. The Stockholder and the Stockholder's independent public
accountants shall have the opportunity to consult with the Reviewer and examine
the work papers, schedules and other documents prepared by Sub and the Reviewer
during the preparation of the Reviewed Balance Sheet.
(c) The Stockholder shall have a period of forty-five (45) days after
delivery to the Stockholder of the Reviewed Balance Sheet to present in writing
to Sub all objections the Stockholder may have to any of the matters set forth
or reflected therein, which objections
-3-
<PAGE>
shall be set forth in reasonable detail. During said forty-five (45) day period,
the Stockholder, their accountants and other representatives of the
Stockholder may, at the office of the Company or the office of the Reviewer,
as determined by Stockholder, examine Reviewer's work papers, schedules,
research notes and all correspondence between Reviewer and Sub or UAG or any
representative of Sub or UAG, which relate to the Closing Date Balance Sheet
or Reviewed Balance Sheet and any entry thereto made, considered or proposed
by Reviewer. If no objections are raised within such 45-day period, the
Reviewed Balance Sheet shall be deemed accepted and approved by the
Stockholder and a supplemental closing (the "Supplemental Closing") shall
take place within five (5) Business Days following the expiration of such
45-day period, or on such other date as may be mutually agreed upon in
writing by Sub and the Stockholder.
(d) If the Stockholder shall raise any objection within the 45-day
period, Sub and the Stockholder shall attempt to resolve the matter or matters
in dispute and, if resolved, the Supplemental Closing shall take place within
five (5) Business Days following such resolution.
(e) If such dispute cannot be resolved by Sub and the Stockholder
within sixty (60) days after the delivery of the Reviewed Balance Sheet, then
the specific matters in dispute shall be submitted to a firm of independent
certified public accountants having a reputation for special expertise in
automobile dealership accounting and mutually acceptable to Sub and the
Stockholder, which firm shall make a final and binding determination as to such
matter or matters. Such accounting firm shall send its written determination to
Sub and the Stockholder and the Supplemental Closing, if any, shall take place
five (5) Business Days following the receipt of such determination by Sub and
the Stockholder. The fees and expenses of the accounting firm referred to in
this SECTION 1.2(e) shall be paid one half by Sub and one half by the
Stockholder.
(f) Sub and the Stockholder agree to cooperate with each other and
each other's authorized representatives and with any accounting firm selected by
Sub and the Stockholder pursuant to SECTION 1.2 (e) hereof in order that any and
all matters in dispute shall be resolved as soon as practicable.
(g) (i) If the Net Worth as shown on the Reviewed Balance Sheet as
finally determined through the operation of SECTIONS 1. 2 (a) through (e) hereof
shall be less than the net worth of the Company as set forth on the Company
Balance Sheet (the "December 31 Net Worth") (the amount of any such deficiency
being referred to herein as the "Net Worth Deficiency"), the Stockholder shall
pay to Sub at the Supplemental Closing, by wire transfer of immediately
available funds to an account designated in writing by Sub within two (2)
Business Days of the date of the Supplemental Closing, an amount equal to the
Net Worth Deficiency, together with interest on such amount from the date the
Reviewed Balance Sheet is delivered to the Stockholder until paid at the prime
rate or its equivalent (as announced from time to time by Citibank, N.A.).
-4-
<PAGE>
(ii) If the Net Worth as shown on the Closing Date Balance Sheet is
equal to or greater than the December 31 Net Worth and the Net Worth as shown on
the Reviewed Balance Sheet as finally determined through the operation of
SECTIONS 1.2(a) THROUGH (e) hereof shall be greater than the Net Worth as shown
on the Closing Date Balance Sheet, then Sub shall pay to the Stockholder at the
Supplemental Closing an amount equal to the difference between the Net Worth as
shown on the Reviewed Balance Sheet of the Net Worth as shown on the Closing
Date Balance Sheet.
(iii) "Net Worth" computed in connection with the Closing Date
Balance Sheet and the Reviewed Balance Sheet shall mean the amount by which the
total assets exceed the total liabilities reflected, in each case, on the
balance sheet of Company comprising the Closing Date Balance Sheet or the
Reviewed Balance Sheet, as the case may be.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE STOCKHOLDER
Subject to the parties' agreement and acknowledgment that the Schedule
referred to in ARTICLE 2 are to be delivered by the Company and the Stockholder
no later than August 15, 1996, the Company and the Stockholder hereby jointly
and severally represent and warrant to UAG and Sub as follows:
2.1 ORGANIZATION AND GOOD STANDING.
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Georgia and has the corporate
power and authority to own, lease and operate the properties used in its
business and to carry on its business as now being conducted. The Company
has not conducted its business under any assumed names during the last five
years. Attached as SCHEDULE 2.1(b) are complete and correct copies of the
Company's ARTICLEs of Incorporation and Bylaws as amended and presently in
effect.
2.2 SUBSIDIARIES.
The Company does not have any interest or investment in any Person (as
defined in SECTION 10.11 hereof).
2.3 CAPITALIZATION.
The authorized stock of the Company and the number of shares of capital
stock that are issued and outstanding are set forth on SCHEDULE 2.3 hereto.
The shares listed on SCHEDULE 2.3 hereto constitute all the issued and
outstanding shares of capital stock of the Company and have been validly
authorized and issued, are fully paid and nonassessable, have not been issued
in violation of any preemptive rights or of any federal or state securities
law
-5-
<PAGE>
and no personal liability attaches to the ownership thereof. There is no
security, option, warrant, right, call, subscription, agreement, commitment
or understanding of any nature whatsoever, fixed or contingent, that directly
or indirectly (i) calls for the issuance, sale, pledge or other disposition
of any shares of capital stock of the Company or any securities convertible
into, or other rights to acquire, any shares of capital stock of the Company,
or (ii) obligates the Company to grant, offer or enter into any of the
foregoing, or (iii) relates to the voting or control of such capital stock,
securities or rights, except as provided in this Agreement. The Company has
not agreed to register any securities under the Securities Act.
2.4 AUTHORITY; APPROVALS AND CONSENTS.
The Company has the corporate power and authority to enter into this
Agreement and to perform its obligations hereunder and thereunder. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby and thereby have been duly authorized
and approved by the Board of Directors of the Company and no other corporate
proceedings on the part of the Company are necessary to authorize and approve
this Agreement and the transactions contemplated hereby and thereby. This
Agreement has been duly executed and delivered by, and constitutes a valid
and binding obligation of, the Company, enforceable against the Company in
accordance with its terms. The execution, delivery and performance by the
Company and the Stockholder of this Agreement and Real Estate Purchase
Agreement and the consummation of the transactions contemplated hereby and
thereby do not and will not:
(i) contravene any provisions of the ARTICLEs of Incorporation or By-
Laws of the Company;
(ii) (after notice or lapse of time or both) conflict with, result in a
breach of any provision of, constitute a default under, result in the
modification or cancellation of, or give rise to any right of termination
or acceleration in respect of, any Company Agreement (as defined in SECTION
2.15 hereof) or, require any consent or waiver of any party to any Company
Agreement (except for the rights of [Nissan] ("Nissan") under the Dealer
Agreement between Nissan and Evans (the "Nissan Agreement");
(iii) result in the creation of any Lien upon, or any Person obtaining
any right to acquire, any properties, assets or rights of the Company
(other than the rights of Sub to acquire the Shares pursuant to this
Agreement);
(iv) violate or conflict with any Legal Requirements (as defined in
SECTION 2.9 hereof) applicable to the Company or any of its businesses or
properties; or
(v) require any authorization, consent, order, permit or approval of,
or notice to, or filing, registration or qualification with, any
governmental, administrative or judicial authority, except in connection
with or in compliance with the provisions of the H-S-R Act (as defined in
SECTION 5.11 hereof).
-6-
<PAGE>
Except as referred to above, no permit or approval of, or notice to any
governmental, administrative or judicial authority is necessary to be
obtained or made by the Company to enable the Company to continue to conduct
its business and operations and use its properties after the Closing in a
manner which is in all material respects consistent with that in which they
are presently conducted.
2.5 FINANCIAL STATEMENTS.
Attached as SCHEDULE 2.5 are true and complete copies of:
(i) (A) the audited balance sheet of the Company as of December
31, 1995 (the "Company Balance Sheet"), and the related statements of
income, stockholders' equity and cash flow for the fiscal year ended
December 31, 1995, together with the notes thereto, in each case examined
by and accompanied by the report of independent certified public
accountants, and (B) the audited balance sheet of the Company as of
December 31, 1994, and the related statements of income, stockholders'
equity and cash flow for the fiscal year ended December 31, 1994, together
with the notes thereto, in each case examined by and accompanied by the
report of independent certified public accountants; and
(ii) the most recent unaudited balance sheet of the Company and the
unaudited statements of income and stockholders' equity for the periods
ended on such date, together with the notes thereto;
(iii) the most recent monthly and year-to-date financial statements
provided to Nissan (the "Company Factory Statements");
(the financial statements referred to in clauses (i) and (ii) above,
including the notes thereto, being referred to herein collectively as the
"Company Financial Statements"). The Company Financial Statements are in
accordance with the books and records of the Company, fairly present the
consolidated financial position, results of operations, stockholders'
equity and changes in the financial position of the Company as of the
dates and for the periods indicated, in the case of the financial
statements referred to in clauses (i) and (ii) above in conformity with
GAAP consistently applied (except as otherwise indicated in such
statements) during such periods, and can be legitimately reconciled with
the financial statements and the financial records maintained and the
accounting methods applied by the Company for federal income tax purposes,
and the unaudited financial statements included in the Company Financial
Statements include all adjustments, which consist of only normal recurring
accruals, necessary for such fair presentations. The statements of income
included in the Company Financial Statements do not contain any items of
special or nonrecurring income except as expressly specified therein, and
the balance sheets included in the Company Financial Statements do not
reflect any write-up or revaluation increasing the book value of any
assets except as expressly stated therein. The books and accounts of the
Company are complete and correct in all material respects and fairly
reflect all of the transactions, items of
-7-
<PAGE>
income and expense and all assets and liabilities of the businesses of
the Company consistent with prior practices of the Company.
2.6 ABSENCE OF UNDISCLOSED LIABILITIES.
The Company does not have any liability of any nature whatsoever
(whether asserted or unasserted, due or to become due, accrued, absolute,
contingent or otherwise), including, without limitation, any unfunded
obligation under employee benefit plans or arrangements as described in
SECTION 2.17 AND 2.18 hereof or liabilities for Taxes (as defined in SECTION
2.8 hereof), except for (i) liabilities reflected or reserved against in the
most recent Company Financial Statement, (ii) current liabilities incurred in
the ordinary course of business and consistent with past practice after the
date of the Company Balance Sheet which, individually and in the aggregate,
do not have, and cannot reason-ably be expected to have, a Material Adverse
Effect, and (iii) liabilities disclosed on SCHEDULE 2.6 hereto. The Company
is not a party to any Company Agreement, or subject to any articles of
incorporation or bylaw provision, any other corporate limitation or any Legal
Requirement which has, or can reasonably be expected to have, a Material
Adverse Effect.
2.7 ABSENCE OF MATERIAL ADVERSE EFFECT; CONDUCT OF BUSINESS.
(a) Since December 31, 1995, except as set forth on SCHEDULE 2.7(a)
hereto, the Company has operated in the ordinary course of business
consistent with past practice and there has not been:
(i) any material adverse change in the assets, properties,
business, operations, prospects, net income or financial condition of
the Company and no factor, event, condition, circumstance or prospective
development exists which threatens or may threaten to have a Material
Adverse Effect;
(ii) any material loss, damage, destruction or other casualty to
the property or other assets of the Company, whether or not covered by
insurance;
(iii) any change in any method of accounting or accounting
practice of the Company; or
(iv) any loss of the employment, services or benefits of any key
employee of the Company (except for any such loss occurring after the
execution of this Agreement but prior to the Closing Date and disclosed
to UAG on or before the Closing Date).
(b) Since December 31, 1995, except as set forth in Schedule 2.7(b)
hereto, the Company has not:
(i) incurred any material obligation or liability (whether
absolute, accrued, contingent or otherwise), except in the ordinary
course of business consistent with past practice;
-8-
<PAGE>
(ii) failed to disclose or satisfy any lien or pay or satisfy
any obligation or liability (whether absolute, accrued, contingent or
otherwise), other than liabilities being contested in good faith and for
which adequate reserves have been provided;
(iii) mortgaged, pledged or subjected to any lien any of its
property or other assets except for mechanics' liens and liens for taxes
not yet due and payable;
(iv) sold or transferred any assets or cancelled any debts or
claims or waived any rights, except in the ordinary course of business
consistent with past practice;
(v) defaulted on any material obligation;
(vi) entered into any material transaction, except in the
ordinary course of business consistent with past practice;
(vii) written down the value of any inventory or written off as
uncollectible any accounts receivable or any portion thereof not
reflected in the Company Financial Statements;
(viii) granted any increase in the compensation or benefits of
employees other than increases in accordance with past practice not
exceeding 10% or entered into any employment or severance agreement or
arrangement with any of them (except for agreements or arrangements that
are in the ordinary course of business consistent with past practices,
that will be reflected as expenses on the Company's financial statements
prior to the Closing Date and that will not bind the Company after the
Closing Date);
(ix) made any individual capital expenditure in excess of
$75,000, or aggregate capital expenditures in excess of $200,000, or
additions to property, plant and equipment other than ordinary repairs
and maintenance;
(x) discontinued any franchise or the sale of any products or
product line;
(xi) incurred any obligation or liability to any employee for
the payment of severance benefits; or
(x) entered into any agreement or made any commitment to do any
of the foregoing.
2.8 TAXES.
The Company and, for any period during all or part of which the tax
liability of any other corporation was determined on a combined or
consolidated basis with the Company any such other corporation, have filed
timely all federal, state, local and foreign tax returns, reports and
declarations required to be filed correctly reflecting the Taxes (as defined
below) and all other information required to be reported thereon and have
paid, or made adequate
-9-
<PAGE>
provision for the payment of, all Taxes which are due pursuant to such
returns or pursuant to any assessment received by the Company or any such
other corporation. As used herein, "Taxes" shall mean all taxes, fees,
levies or other assessments, including but not limited to income, excise,
property (including property taxes paid by the Company pursuant to any
lease), sales, franchise, withholding, social security and unemployment taxes
imposed by the United States, any state, county, local or foreign government,
or any subdivision or agency thereof or taxing authority therein, and any
interest, penalties or additions to tax relating to such taxes, charges,
fees, levies or other assessments. Copies of all tax returns for each fiscal
year since the formation of the Company have been furnished or made available
to UAG or its representatives and such copies are accurate and complete as of
the date hereof. The Company has also furnished or made available to UAG
correct and complete copies of all notices and correspondence sent or
received since the formation of the Company by the Company to or from any
federal, state or local tax authorities. The Company filed all returns and
paid all taxes for the period ending December 31, 1995. In the ordinary
course, the Company makes adequate provision on its books for the payment of
all Taxes (including for the current fiscal period) owed by the Company.
Except to the extent reserves therefor are reflected on the Company Balance
Sheet, the Company is not liable, or will not become liable, for any Taxes
for any period ending on, prior to or through the date of the Company Balance
Sheet. On the Closing Date Balance Sheet, the Company will have adequately
reserved for the payment of any Taxes for any period ending on, prior to or
through the date of the Closing Date Balance Sheet. Except as set forth on
SCHEDULE 2.8 hereto, the Company has not been subject to a federal or state
tax audit of any kind, and no adjustment has been proposed by the Internal
Revenue Service ("IRS") with respect to any return for any subsequent year.
With respect to the audits referred to on SCHEDULE 2.8 hereto, no such audit
has resulted in an adjustment in excess of $50,000. Neither the Company nor
the Stockholder knows of any basis for an assertion of a deficiency for Taxes
against the Company. The Stockholder will cooperate with the Company in the
filing of any returns and in any audit or refund claim proceedings involving
Taxes for which the Company may be liable or with respect to which the
Company may be entitled to a refund.
2.9 LEGAL MATTERS.
(a) Except as set forth on SCHEDULE 2.9(a) hereto and except for Claims
(as defined below) that do not exceed Thirty Thousand Dollars ($30,000), (i)
there is no claim, action, suit, litigation, investigation, inquiry, review
or proceeding (collectively, "Claims") pending against, or, to the knowledge
of the Company or the Stockholder, threatened against or affecting, the
Company, any ERISA Plan (as defined in SECTION 2.18(a) hereof) or any of
their respective assets, properties or rights before or by any court,
arbitrator, panel, agency or other governmental, administrative or judicial
entity, domestic or foreign, nor is any basis known to the Stockholder or the
Company for any such Claims, and (ii) the Company is not subject to any
judgment, decree, writ, injunction, ruling or order (collectively,
"Judgments") of any governmental, administrative or judicial authority,
domestic or foreign. SCHEDULE 2.9(a) hereto identifies each Claim and
Judgment disclosed thereon which is fully covered by an insurance policy.
-10-
<PAGE>
(b) The businesses of the Company are being conducted in compliance
with all laws, ordinances, codes, rules, regulations, standards, judgments
and other requirements of all governmental, administrative or judicial
entities (collectively, "Legal Requirements") applicable to the Company or
any of its respective businesses or properties. The Company holds, and is in
compliance with, all franchises, licenses, permits, registrations,
certificates, consents, approvals or authorizations (collectively, "Permits")
required by all applicable Legal Requirements. A list of all such permits is
set forth on Schedule 2.9(b) hereof.
(c) The Company owns or holds all Permits material to the conduct of
its business. No event has occurred and is continuing which permits, or
after notice or lapse of time or both would permit, any modification or
termination of any Permit.
2.10 PROPERTY.
(a) The properties and assets owned by or leased to the Company are
adequate for the conduct of the respective businesses of the Company as
presently conducted. Set forth on SCHEDULE 2.10 hereto is a list of all
interests in real property owned by or leased to the Company (including all
real property owned or leased by the Stockholder (directly or indirectly) and
used in the businesses of the Company) and of all options or other contracts
to acquire any such interest (collectively, the "Real Property "). All
improvements to the Real Property ("Improvements") and all machinery,
equipment and other tangible property owned or used by or leased to the
Company are in good operating condition and in good repair and are fit for
the particular purposes for which they are used by the Company, subject only
to ordinary wear and tear. Such tangible properties and all Improvements
owned or leased by the Company conform in all material respects with all
applicable laws, ordinances, rules and regulations and other Legal
Requirements and such Improvements do not encroach in any respect on property
of others. There are no latent defects with respect to the Improvements.
The Real Property is currently zoned to permit the conduct of the respective
businesses of the Company as presently conducted. A Certificate of Occupancy
has been issued with respect to the Improvements without special conditions
or restrictions. All utilities servicing the Real Property and the
Improvements are provided by publicly-dedicated utility lines and are located
within public rights-of-way and do not cross or encumber any private land.
No notice of any pending, threatened or contemplated action by any
governmental authority or agency having the power of eminent domain has been
given to the Company or the Stockholder with respect to the Real Property.
2.11 ENVIRONMENTAL MATTERS.
(a) Except as set forth on SCHEDULE 2.11(a) hereto, (i) the Company,
the Real Property, the Improvements and any property formerly owned, occupied
or leased by the Company are in full compliance with all Environmental Laws
(as defined below), (ii) the Company has obtained all Environmental Permits
(as defined below), (iii) such Environmental Permits are in full force and
effect, and (iv) the Company is in full compliance with all terms and
conditions of such Environmental Permits. As used herein, "Environmental
Laws" shall mean all applicable requirements of environmental, public or
-11-
<PAGE>
employee health and safety, public or community right-to-know, ecological or
natural resource laws or regulations or controls, including all applicable
requirements imposed by any law (including without limitation common law),
rule, order, or regulations of any federal, state, or local executive,
legislative, judicial, regulatory, or administrative agency, board, or
authority, or any applicable private agreement (such as covenants, conditions
and restrictions), which relate to, (i) noise, (ii) pollution or protection
of the air, surface water, groundwater, or soil, (iii) solid, gaseous, or
liquid waste generation, treatment, storage, disposal or transportation, (iv)
exposure to Hazardous Materials (as defined below), or (v) regulation of the
manufacture, processing, distribution and commerce, use, or storage of
Hazardous Materials. As used herein, "Environmental Permits" shall mean all
permits, licenses, approvals, authorizations, consents or registrations
required under applicable Environmental Law in connection with the ownership,
use and/or operation of the Company's business or the Real Property or
Improvements.
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. 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) The Company and the Stockholder have not violated, done or suffered
any act which could give rise to liability under, and are not otherwise
exposed to liability under, any Environmental Law. No event has occurred
with respect to the Real Property, the Improvements or any property formerly
owned, occupied or leased by the Company, which, with the passage of time or
the giving of notice, or both, would constitute a violation of or
non-compliance with any applicable Environmental Law. The Company has no
contingent liability under any Environmental Law. There are no liens under
any Environmental Law on the Real Property.
-12-
<PAGE>
(c) Except as set forth on SCHEDULE 2.11(c) hereto, (i) neither the
Company, the Real Property or any portion thereof, the Improvements or any
property formerly owned, occupied or leased by the Company, nor, to the
knowledge of the Company or the Stockholder, any property adjacent to the
Real Property is being used or has been used for the treatment, generation,
transportation, processing, handling, production or disposal of any Hazardous
Materials or as a landfill or other waste disposal site 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 Company's business in full
compliance with all Environmental Laws including the existing regulations of
the United States Environmental Protection Agency and the State of Georgia
requiring spill protection, overfill protection and corrosion protection by
December 22, 1998), (ii) none of the Real Property or portion thereof, the
Improvements or any property formerly owned, occupied or leased by the
Company has been subject to investigation by any governmental authority
evaluating the need to investigate or undertake Remedial Action (as defined
below) at such property, and (iii) none of the Real Property, the
Improvements or any property formerly owned, occupied or leased by the
Company, or, to the knowledge of the Company or the Stockholder, any site or
location where the Company sent waste of any kind, is identified on the
current or proposed (A) National Priorities List under 40 C.F.R. 300 Appendix
B, (B) Comprehensive Environmental Response Compensation and Liability
Inventory System list, or (C) any list arising from any statute analogous to
CERCLA. As used herein, "Remedial Action" shall mean any action required to
(i) clean up, remove or treat Hazardous Materials, (ii) prevent a release or
threat of release of any Hazardous Material, (iii) perform pre-remedial
studies, investigations or post-remedial monitoring and care, (iv) cure a
violation of Environmental Law or (v) take corrective action under sections
3004(u), 3004(v) or 3008(h) of RCRA or analogous state law.
(d) Except as set forth on SCHEDULE 2.11(d) hereto, there have been and
are no (i) aboveground or underground storage tanks, subsurface disposal
systems, or wastes, drums or containers disposed of or buried on, in or under
the ground or any surface waters, (ii) asbestos or asbestos containing
materials or radon gas, (iii) polychlorinated biphenyls ("PCB") or
PCB-containing equipment, including transformers, or (iv) wetlands (as
defined under any Environmental Law) located within any portion of the Real
Property, nor have any liens been placed upon any portion of the Real
Property, the Improvements or any property formerly owned, occupied or leased
by the Company in connection with any actual or alleged liability under any
Environmental Law.
(e) Except as set forth on SCHEDULE 2.11(e) hereto, (i) there is no
pending or threatened claim, litigation, or administrative proceeding, or
known prior claim, litigation or administrative proceeding, arising under any
Environmental Law involving any of the Company, the Real Property, the
Improvements, any property formerly owned, leased or occupied by the Company,
any offsite contamination affecting the business of the Company or any
operations conducted at the Real Property, (ii) there are no ongoing
negotiations with or agreements with any governmental authority relating to
any Remedial Action or other environmentally related claim, (iii) the Company
has not submitted notice pursuant to SECTION
-13-
<PAGE>
103 of CERCLA or analogous statute or notice under any other applicable
Environmental Law reporting a release of a Hazardous Material into the
environment, and (iv) the Company has not received any notice, claim, demand,
suit or request for information from any governmental or private entity with
respect to any liability or alleged liability under any Environmental Law,
nor to knowledge of the Stockholder and the Company, has any other entity
whose liability therefor, in whole or in part, may be attributed to the
Company, received such notice, claim, demand, suit or request for information.
(f) The Stockholder and the Company have provided to UAG all
environmental studies and reports obtained by them or known to them
pertaining to the Real Property, the Improvements, the Company and any
property formerly owned, occupied or leased by the Company, and have
permitted (or will have permitted as of the Closing Date), the testing of the
soil, groundwater, building components, tanks, containers and equipment on
the Real Property, the Improvements, and any property formerly owned,
occupied or leased by the Company, by UAG or UAG's agents or experts as they
have or shall have deemed necessary or appropriate to confirm the condition
of such properties.
2.12 INVENTORIES.
The values at which inventories are carried on the Company Balance Sheet
reflect the normal inventory valuation policies of the Company, and such
values are in conformity with GAAP consistently applied. All inventories
reflected on the Company Balance Sheet and Company Factory Statement or
arising since the date thereof are currently marketable and can reasonably be
anticipated to be sold at normal mark-ups within 120 days after the date
hereof in the ordinary course of business (subject to the reserve for
obsolete, off-grade or slow-moving items that is reflected in the Company
Balance Sheet or will be reflected in the Closing Date Balance Sheet), except
for spare parts inventory which inventory is good and usable.
2.13 ACCOUNTS RECEIVABLE.
All accounts receivable reflected on the Company Balance Sheet are, and
all accounts receivable that will be or will have been reflected on the
Closing Date Balance Sheet will be, good and have been or will have been
collected or are collectible, without resort to litigation, within 90 days of
the Closing Date, and are subject to no defenses, setoffs or counterclaims
other than normal cash discounts accrued in the ordinary course of business.
2.14 INSURANCE.
All material properties and assets of the Company which are of an
insurable character are insured against loss or damage by fire and other
risks to the extent and in the manner reasonable in light of the risks
attendant to the businesses and activities in which the Company is engaged
and customary for companies engaged in similar businesses or owning similar
assets. Set forth on SCHEDULE 2.14 hereto is a list and brief description
(including the
-14-
<PAGE>
name of the insurer, the type of coverage provided, the amount of the annual
premium for the current policy period, the amount of remaining coverage and
deductibles and the coverage period) of all policies for such insurance and
the Company has made or will make available to UAG true and complete copies
of all such policies. All such policies are in full force and effect
sufficient for all applicable requirements of law and will not in any way be
effected by or terminated or lapsed by reason of the consummation of the
transactions contemplated by this Agreement and the Lease. No notice of
cancellation or non-renewal with respect to, or disallowance of any claim
under, any such policy has been received by the Company.
2.15 CONTRACTS; ETC.
As used in this Agreement, the term "Company Agreements" shall mean all
mortgages, indenture notes, agreements, contracts, leases, licenses,
franchises, obligations, instruments or other commitments, arrangements or
understandings of any kind, whether written or oral, binding or non-binding,
(including all leases and other agreements referred to on SCHEDULE 2.10
hereto) to which the Company is a party or by which the Company or any of its
assets or properties (including the Real Property and the Improvements) may
be bound or affected, including all amendments, modifications, extensions or
renewals of any of the foregoing. Set forth on SCHEDULE 2.15 hereto is a
complete and accurate list of each Company Agreement which is material to the
businesses, operations, assets, condition (financial or otherwise) or
prospects of the Company. True and complete copies of all written Company
Agreements referred to on SCHEDULE 2.15 and SCHEDULE 2.10 hereto have been
delivered or made available to UAG, and the Company has provided UAG with
accurate and complete written summaries of all such Company Agreements which
are unwritten. Except as set forth on SCHEDULE 2.15, the Company is not,
nor, to the knowledge of the Company and the Stockholder is, any other party
thereto, in breach of or default under any Company Agreement, and no event
has occurred which (after notice or lapse of time or both) would become a
breach or default under, or would permit modification, cancellation,
acceleration or termination of, any Company Agreement or result in the
creation of any Lien upon, or any Person obtaining any right to acquire, any
properties, assets or rights of the Company. There are no material
unresolved disputes involving the Company under any Company Agreement.
2.16 LABOR RELATIONS.
(a) The Company has paid or made provision for the payment of all
salaries and accrued wages and has complied in all material respects with all
applicable laws, rules and regulations relating to the employment of labor,
including those relating to wages, hours, collective bargaining and the
payment and withholding of taxes, and has withheld and paid to the
appropriate govern-mental authority, or is holding for payment not yet due to
such authority, all amounts required by law or agreement to be withheld from
the wages or salaries of its employees.
-15-
<PAGE>
(b) Except as set forth on SCHEDULE 2.16(b) hereto, the Company is not
a party to any (i) outstanding employment agreements or contracts with
officers or employees that are not terminable at will, or that provide for
payment of any bonus or commission, (ii) agreement, policy or practice that
requires it to pay termination or severance pay to salaried, non-exempt or
hourly employees (other than as required by law), (iii) collective bargaining
agreement or other labor union contract applicable to persons employed by the
Company, nor do the Stockholder or the Company know of any activities or
proceedings of any labor union to organize any such employees. The Company
has furnished to UAG complete and correct copies of all such agreements
("Employment and Labor Agreements"). The Company has not breached or
otherwise failed to comply with any provisions of any Employment or Labor
Agreement.
(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 Stockholder's
or the Company's knowledge, threatened, against or affecting the Company, and
the Company has not experienced any strike, material slow down or material
work stoppage, lockout or other collective labor action by or with respect to
employees of the Company, (iii) there is no representation claim or petition
pending before the NLRB or any similar foreign agency and no question
concerning representation exists relating to the employees of the Company,
(iv) there are no charges with respect to or relating to the Company pending
before the Equal Employment Opportunity Commission or any state, local or
foreign agency responsible for the prevention of unlawful
employment-practices and (v) the Company has not received formal notice from
any federal, state, local or foreign agency responsible for the enforcement
of labor or employment laws of an intention to conduct an investigation of
the Company and, to the knowledge of the Company, no such investigation is in
progress.
(d) The Company has never caused any "plant closing" or "mass layoff"
as such actions are defined in the Worker Adjustment and Retraining
Notification Act, as codified at 29 U.S.C. SECTIONS 2101-2109, and the
regulations promulgated therein.
2.17 EMPLOYEE BENEFIT PLANS.
(a) Set forth on SCHEDULE 2.17(a) hereto is a true and complete list of:
(i) each employee pension benefit plan, as defined in SECTION
3(2) of the Employee Retirement Income Security Act of 1974 ("ERISA"),
maintained by the Company or to which the Company is required to make
contributions ("Pension Benefit Plan"); and
(ii) each employee welfare benefit plan, as defined in SECTION
3(i) of ERISA, maintained by the Company or to which the Company is
required to make contributions ("Welfare Benefit Plan").
-16-
<PAGE>
True and complete copies of all Pension Benefit Plans and Welfare
Benefit Plans (collectively, "ERISA Plans") have been delivered to or made
available to UAG together with, as applicable with respect to each such ERISA
Plan, trust agreements, summary plan descriptions, all IRS determination
letters or applications therefor with respect to any Pension Benefit Plan
intended to be qualified pursuant to SECTION 401 (a) of the Internal Revenue
Code of 1986, as amended (the "Code"), and valuation or actuarial reports,
accountant's opinions, financial statements, IRS Form 5500s (or 5500-C or
5500-R) and summary annual reports for the last three years.
(b) With respect to the ERISA Plans:
(i) no event has occurred or (to the knowledge of the Company
or the Stockholder) is threatened or about to occur which would
constitute a prohibited transaction under SECTION 406 of ERISA or under
SECTION 4975 of the Code;
(ii) each ERISA Plan has operated since its inception in
accordance with the reporting and disclosure requirements imposed under
ERISA and the Code and has timely filed Form 5500e (or 5500-C or 5500-R)
and predecessors thereof; and
(iii) 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 there exists no fact which would adversely affect its
qualified status; and
(iii) is not currently under investigation, audit or review by
the IRS or (to the knowledge of the Company or the Stockholder) no such
action is contemplated or under consideration and the IRS has not
asserted that any Pension Benefit Plan is not qualified under SECTION
401(a) of the Code or that any trust established under a Pension Benefit
Plan is not exempt under SECTION 501(a) of the Code.
(d) With respect to each Pension Benefit Plan which is a defined
benefit plan under SECTION 414(j) and, for the purpose solely of SECTION
2.17(d)(iv) hereof, each defined contribution plan under SECTION 414(i) of
the Code:
(i) no liability to the Pension Benefit Guaranty Corporation
("PBGC") under SECTIONs 4062-4064 of ERISA has been incurred by the
Company since the effective date of ERISA and all premiums due and owing
to the PBGC have been timely paid;
-17-
<PAGE>
(ii) the PBGC has not notified the Company or any Pension
Benefit Plan of the commencement of proceedings under SECTION 4042 of
ERISA to terminate any such plan;
(iii) no event has occurred since the inception of any Pension
Benefit Plan or (to the knowledge of the Company or the Stockholder) is
threatened or about to occur which would constitute a reportable event
within the meaning of SECTION 4043(b) of ERISA;
(iv) no Pension Benefit Plan ever has incurred any "accumulated
funding deficiency" (as defined in SECTION 302 of ERISA and SECTION 412
of the Code); and
(v) if any of such Pension Benefit Plans were to be terminated
on the Closing Date (A) no liability under Title IV of ERISA would be
incurred by the Company and (B) all benefits accrued to the day prior to
the Closing Date (whether or not vested) would be fully funded in
accordance with the actuarial assumptions and method utilized by such
plan for valuation purposes.
(e) With respect to each Pension Benefit Plan, SCHEDULE 2.17(e)
contains a list of all Pension Benefit Plans to which ERISA has applied which
have been or are being terminated, or for which a termination is
contemplated, and a description of the actions taken by the PBGC and the IRS
with respect thereto.
(f) The estimated aggregate amounts of contributions to be paid or
accrued by the Company under ERISA Plans for the current fiscal year is set
forth on SCHEDULE 2.17(f). To the extent required in accordance with GAAP,
the Company Balance Sheet reflects in the aggregate an accrual of all amounts
of employer contributions accrued but unpaid by the Company under the ERISA
Plans as of the date of the Company Balance Sheet.
(g) With respect to any Multiemployer Plan (1) the Company has not,
since its formation, made or suffered a "complete withdrawal" or "partial
withdrawal" as such terms are respectively defined in SECTIONs 4203 and 4205
of ERISA; (2) there is no withdrawal liability of the Company under any
Multiemployer Plan, computed as if a "complete withdrawal" by the Company had
occurred under each such Plan as of December 31, 1995; and (3) the Company
has not received notice to the effect that any Multiemployer Plan is either
in reorganization (as defined in SECTION 4241 of ERISA) or insolvent (as
defined in SECTION 4245 of ERISA).
(h) With respect to the Welfare Benefit Plans:
(i) There are no liabilities of the Company under Welfare
Benefit Plans with respect to any condition which relates to a claim
filed on or before the Closing Date.
(ii) No claims for benefits are in dispute or litigation.
-18-
<PAGE>
2.18 OTHER BENEFIT AND COMPENSATION PLANS OR ARRANGEMENTS.
(a) Set forth on SCHEDULE 2.18(a) hereto is a true and complete list
of:
(i) each employee stock purchase, employee stock option,
employee stock ownership, deferred compensation, performance, bonus,
incentive, vacation pay, holiday pay, insurance, severance, retirement,
excess benefit or other plan, trust or arrangement which is not an ERISA
Plan whether written or oral, which the Company maintains or is required
to make contributions to;
(ii) each other agreement, arrangement, commitment and
understanding of any kind, whether written or oral, with any current or
former officer, director or consultant of the Company pursuant to which
payments may be required to be made at any time following the date
hereof (including, without limitation, any employment, deferred
compensation, severance, supplemental pension, termination or consulting
agreement or arrangement); and
(iii) each employee of the Company whose aggregate compensation
for the fiscal year ended December 31, 1995 exceeded, and whose
aggregate compensation for the fiscal year ended December 31, 1996 is
likely to exceed, $50,000. True and complete copies of all of the
written plans, arrangements and agreements referred to on SCHEDULE
2.18(a) ("Compensation Commitments") have been provided to UAG together
with, where prepared by or for the Company, any valuation, actuarial or
accountant's opinion or other financial reports with respect to each
Compensation Commitment for the last three years. An accurate and
complete written summary has been provided to UAG with respect to any
Compensation Commitment which is unwritten.
(b) Each Compensation Commitment:
(i) since its inception, has been operated in all material
respects in accordance with its terms;
(ii) is not currently under investigation, audit or review by
the IRS or any other federal or state agency and (to the knowledge of
the Company or the Stockholder) no such action is contemplated or under
consideration;
(iii) has no liability for any federal, state, local or foreign Taxes;
(iv) has no claims subject to dispute or litigation;
(v) has met all applicable requirements, if any, of the Code; and
(vi) has operated since its inception in material compliance
with the reporting and disclosure requirements imposed under ERISA and
the Code.
-19-
<PAGE>
2.19 TRANSACTIONS WITH INSIDERS.
Set forth on SCHEDULE 2.19 hereto is a complete and accurate description
of all material transactions between the Company or any ERISA Plan, on the
one hand, and any Insider, on the other hand, that have occurred since
January 1, 1995. For purposes of this Agreement:
(i) the term "Insider" shall mean the Stockholder, any director
or officer of the Company, and any Affiliate, Associate or Relative of
any of the foregoing persons;
(ii) the term "Associate" used to indicate a relationship with
any person means (A) any corporation, partnership, joint venture or
other entity of which such person is an officer or partner or is,
directly or indirectly, through one or more intermediaries, the
beneficial owner of 30% or more of (1) any class or type of equity
securities or other profits interest or (2) the combined voting power of
interests ordinarily entitled to vote for management or otherwise, and
(B) any trust or other estate in which such person has a substantial
beneficial interest or as to which such person serves as trustee or in a
similar fiduciary capacity; and
(iii) a "Relative" of a person shall mean such person's spouse,
such person's parents, sisters, brothers, children and the spouses of
the foregoing, and any member of the immediate household of such person.
2.20 PROPRIETY OF PAST PAYMENTS.
No funds or assets of the Company have been used for illegal purposes;
no unrecorded funds or assets of the Company have been established for any
purpose; no accumulation or use of the Company's corporate funds or assets
has been made without being properly accounted for in the respective books
and records of the Company; all payments by or on behalf of the Company have
been duly and properly recorded and accounted for in their respective books
and records; no false or artificial entry has been made in the books and
records of the Company for any reason; no payment has been made by or on
behalf of the Company with the understanding that any part of such payment is
to be used for any purpose other than that described in the documents
supporting such payment; and the Company has not made, directly or
indirectly, any illegal contributions to any political party or candidate,
either domestic or foreign. Neither the IRS nor any other federal, state,
local or foreign government agency or entity has initiated or threatened any
investigation of any payment made by the Company of, or alleged to be of, the
type described in this SECTION 2.20.
2.21 INTEREST IN COMPETITORS.
Except as set forth on SCHEDULE 2.21, neither the Company nor the
Stockholder, nor any of their Affiliates, have any interest, either by way of
contract or by way of investment (other than as holder of not more than 2% of
the outstanding capital stock of a
-20-
<PAGE>
publicly traded Person, so long as such holder has no other connection or
relationship with such Person) or otherwise, directly or indirectly, in any
Person other than the Company that is engaged in the retail sale of light
duty trucks or automobiles in Georgia.
2.22 BROKERS.
Neither the Company, nor any director, officer or employee thereof, nor
the Stockholder or any representative of the Stockholder, has employed any
broker or finder or has incurred or will incur any broker's, finder's or
similar fees, commissions or expenses, in each case in connection with the
transactions contemplated by this Agreement or the Real Estate Purchase
Agreement, except that the Stockholder has employed Patrick McNulty as a
broker (the "Broker") in connection with this transaction. The Stockholder
will satisfy any obligations of UAG, Sub, the Stockholder or the Company
relating to the employment of the Broker, and will hold UAG, Sub and the
Company harmless therefrom.
2.23 ACCOUNTS.
SCHEDULE 2.23 hereof correctly identifies each bank account maintained
by or on behalf or for the benefit of the Company and the name of each person
with any power or authority to act with respect thereto.
2.24 DISCLOSURE.
Neither the Company nor the Stockholder has made any material
misrepresentation to UAG relating to the Company or the Shares and neither
the Company nor the Stockholder has omitted to state to UAG any material fact
relating to the Company or the Shares which is necessary in order to make the
information given by or on behalf of the Company or the Stockholder to UAG
not misleading or which if disclosed would reasonably affect the decision of
a person considering an acquisition of the Shares. No fact, event, condition
or contingency exists or has occurred which has, or in the future can
reasonably be expected to have, a Material Adverse Effect, which has not been
disclosed in the Company's Financial Statements or the schedules to this
Agreement.
2.25 NET WORTH AND WORKING CAPITAL.
On the Closing Date, the Net Worth of the Company, as determined in
accordance with the Accounting Principles, will be equal to or greater than
the December 31 Net Worth. On the Closing Date, the net working capital of
the Company, as reflected on the Estimated Closing Date Balance Sheet (as
defined in SECTION 6.6 hereof) will be equal to or greater than the net
working capital of the Company as of December 31, 1995 as reflected on the
Company Balance Sheet and such net working capital will be sufficient to
operate the businesses of the Company consistent with past practice.
-21-
<PAGE>
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDER
Subject to the parties' agreement and acknowledgment that the SCHEDULEs
referred to in this ARTICLE 3 are to be delivered by the Stockholder to UAG
and Sub not later than August 15, 1996, the Stockholder hereby represents and
warrants to UAG and Sub as follows:
3.1 OWNERSHIP OF SHARES; TITLE.
The Stockholder is the owner of record and beneficially of the Shares
set forth on SCHEDULE 3.1 hereof and has, and shall transfer to Sub at the
Closing, good and marketable title to the Shares owned by him, free and clear
of any and all Liens, claims and encumbrances and free and clear of any
restrictions on transfer (other than restrictions on transfer imposed by
applicable federal and state securities laws), proxies and voting or other
agreements.
3.2 AUTHORITY.
The Stockholder has all requisite power and authority and has full legal
capacity and is competent to execute, deliver and perform this Agreement and
to consummate the transactions contemplated hereby (including the disposition
of the Shares to Sub as contemplated by this Agreement). This Agreement has
been duly executed and delivered by the Stockholder and constitutes a valid
and binding obligation of the Stockholder, enforceable against the
Stockholder in accordance with its terms. Except as set forth on SCHEDULE
3.2, the execution, delivery and performance of this Agreement by the
Stockholder and the consummation of the transactions contemplated hereby do
not and will not:
(i) (after notice or lapse of time or both) conflict with,
result in a breach of any provision of, constitute a default under,
result in the modification or cancellation of, or give rise to any right
of termination or acceleration in respect of, any material contract,
agreement, commitment, understanding, arrangement or restriction to
which the Stockholder is a party or to which the Stockholder or the
Stockholder's property is subject;
(ii) violate or conflict with any Legal Requirements applicable
to the Stockholder or the 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.
-22-
<PAGE>
3.3 REAL PROPERTY AND IMPROVEMENTS.
The Stockholder owns the Real Property and Improvements in fee simple,
free and clear of all Liens, claims and encumbrances, except those disclosed
in SCHEDULE 3.3(a), none of which currently or, to the Stockholder's
knowledge, in the future will affect the use of the Real Property or the
Improvements for the conduct of the respective businesses of the Company as
presently conducted. No assessments have been made against any portion of
the Real Property which are unpaid (except ad valorem taxes for the current
year that are not yet due and payable), whether or not they have become
Liens. There are no disputes concerning the location of the lines and
corners of the Real Property. Except as set forth in ARTICLE 1 hereof, no
one has been granted any right to purchase or lease the Real Property or
Improvements other than the existing lease in favor of the Company, which is
to be terminated at Closing. Attached as SCHEDULE 3.3 are all surveys, title
binders, title policies and copies of any exceptions to title.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF UAG AND SUB
Subject to the parties' agreement and acknowledgment that the Schedules
referred to in this ARTICLE 4 are to delivered by UAG and Sub no later than
August 15, 1996, UAG and Sub hereby represent and warrant to the Company and
the Stockholder as follows:
4.1 ORGANIZATION AND GOOD STANDING.
Each of UAG and Sub 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 Sub is duly qualified to do business and is in good standing
as a foreign corporation in each state and jurisdiction where qualification
as a foreign corporation is required, except for such failures to be
qualified and in good standing, if any, which when taken together with all
other such failures of UAG and its subsidiaries would not, or could not
reasonably be expected to, in the aggregate have a material adverse effect on
UAG and its subsidiaries, taken as a whole.
4.2 AUTHORITY; APPROVALS AND CONSENTS.
UAG and Sub have the corporate power and authority to enter into this
Agreement and to perform their respective obligations hereunder. This
Agreement has been duly executed and delivered by, and constitutes valid and
binding obligation of, UAG and Sub, enforceable against UAG and Sub in
accordance with its terms. Except as set forth on SCHEDULE 4.3 hereto, the
execution, delivery and performance by UAG and Sub of this Agreement and the
consummation of the transactions contemplated hereby do not and will not:
-23-
<PAGE>
(i) contravene any provisions of the certificate of
incorporation or bylaws of UAG or Sub;
(ii) (after notice or lapse of time or both) conflict with,
result in a breach of any provision of, constitute a default under,
result in the modification or cancellation of, or give rise to any right
of termination or acceleration in respect of, any UAG Agreement (as
defined below) or, require any consent or waiver of any party to any UAG
Agreement other than agreements the breach or violation of which could
not reasonably be expected to have a material adverse effect on UAG and
its subsidiaries, taken as a whole;
(iii) violate or conflict with any Legal Requirements applicable
to UAG or any of its subsidiaries or any of their respective businesses
or properties; or
(iv) require any authorization, consent, order, permit or
approval of, or notice to, or filing, registration or qualification
with, any governmental, administrative or judicial authority, except in
connection with or in compliance with the provisions of the H-S-R Act.
4.3 BROKERS.
Neither UAG, Sub nor any of their directors, officers or employees has
employed any broker or finder or has incurred or will incur any broker's,
finder's or similar fees, commissions or expenses, in each case in connection
with the transactions contemplated by this Agreement or the Real Estate
Purchase Agreement.
4.4 DISCLOSURE.
Neither UAG nor Sub has made any material misrepresentation to the
Stockholder and neither UAG nor Sub has omitted to state to the Stockholder
any material fact relating to UAG or Sub which is necessary in order to make
the information given by UAG or Sub not misleading or which if disclosed
would reasonably affect the decision of a person considering the sale of the
Shares.
ARTICLE 5
COVENANTS AND ADDITIONAL AGREEMENTS
5.1 ACCESS; CONFIDENTIALITY.
Between the date hereof and the Closing Date, the Stockholder and the
Company will (i) provide to the officers and other authorized representatives
of UAG and Sub full access, during normal business hours, to any and all
files, books, records, documents, and other information of the Company and
will cause the Company's officers to furnish to UAG and its authorized
representatives any and all financial, technical and operating data and other
-24-
<PAGE>
information pertaining to the businesses and properties of the Company
(including the Real Property and the Improvements), (ii) provide to the
officers and other authorized representatives of UAG and Sub reasonable
access to any and all premises and properties of the Company (including the
Real Property and Improvements) provided that such access shall not
unreasonably disrupt the normal business of the Company; and (iii) make
available for inspection and copying by UAG and Sub true and complete copies
of any documents relating to the foregoing. UAG and Sub will hold, and will
cause their representatives to hold, in confidence (unless and to the extent
compelled to disclose by judicial or administrative process or, in the
opinion of its counsel, by other requirements of law) all Confidential
Information (as defined below) and will not disclose the same to any third
party except in connection with obtaining financing and otherwise as may
reasonably be necessary to carry out this Agreement and the transactions
contemplated hereby, including any due diligence review by or on behalf of
UAG and Sub. If this Agreement is terminated, UAG and Sub will, and will
cause their representatives to, promptly return to the Company, upon the
reasonable request of the Company, all Confidential Information furnished by
the Company, including all copies and summaries thereof. As used herein,
"Confidential Information" shall mean all information concerning the Company
obtained by UAG, Sub and their representatives from the Company in connection
with the transactions contemplated by this Agreement, except information (x)
ascertainable or obtained from public information, (y) received from a third
party not employed by or otherwise affiliated with the Company or (z) which
is or becomes known to the public, other than through a breach by UAG or Sub
or any of their representatives of this Agreement.
5.2 FURNISHING INFORMATION; ANNOUNCEMENTS.
The Stockholder and the Company, on the one hand, and UAG and Sub, on
the other hand, will, as soon as practicable after reasonable request
therefor, furnish to the other all the information concerning the Stockholder
and the Company or UAG and Sub, respectively, required for inclusion in any
statement or application made by UAG or Sub or the Company or the Stockholder
to any governmental or regulatory body or to any manufacturer or distributor
or in connection with obtaining any third party consent in connection with
the transactions contemplated by this Agreement. Neither the Stockholder or
the Company, on the one hand, nor UAG or Sub, on the other hand, nor any
representative thereof, shall issue any press releases or otherwise make any
public statement with respect to the transactions contemplated hereby without
the prior consent of the other, except as may be required by law.
5.3 CERTAIN CHANGES AND CONDUCT OF BUSINESS.
(a) From and after the date of this Agreement and until the Closing
Date, the Company shall, and the Stockholder shall cause the Company to,
conduct its businesses solely in the ordinary course consistent with past
practices and, without the prior written consent of UAG, neither the
Stockholder nor the Company will, except as required or permitted pursuant to
the terms hereof, permit the Company to:
-25-
<PAGE>
(i) make any material change in the conduct of its businesses
and operations or enter into any transaction other than in the ordinary
course of business consistent with past practices;
(ii) make any change in its ARTICLEs of Incorporation or Bylaws,
issue any additional shares of capital stock or equity securities or
grant any option, warrant or right to acquire any capital stock or
equity securities or issue any security convertible into or exchangeable
for its capital stock or alter any material term of any of its
outstanding securities or make any change in its outstanding shares of
capital stock or other ownership interests or its capitalization,
whether by reason of a reclassification, recapitalization, stock split
or combination, exchange or readjustment of shares, stock dividend or
otherwise;
(iii) (A) incur, assume or guarantee any indebtedness for
borrowed money, issue any notes, bonds, debentures or other corporate
securities or grant any option, warrant or right to purchase any
thereof, except pursuant to transactions in the ordinary course of
business consistent with past practices, (B) issue any securities
convertible or exchangeable for debt securities of the Company, or (C)
issue any options or other rights to acquire from the Company, directly
or indirectly, debt securities of the Company or any security
convertible into or exchangeable for such debt securities;
(iv) make any sale, assignment, transfer, abandonment or other
conveyance of any of its assets or any part thereof, except transactions
pursuant to existing contracts (which will be set forth in SCHEDULE 2.15
hereto) and dispositions in the ordinary course of business consistent
with past practices;
(v) subject any of its assets, or any part thereof, to any lien
or suffer such to be imposed other than such liens as may arise in the
ordinary course of business consistent with past practices;
(vi) declare, set aside or pay any dividends or other
distribution (whether in cash, stock, property or any combination
thereof) in respect of any shares of its capital stock which would
decrease the Net Worth of the Company below the December 31, 1995 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 (other than agreements in
the ordinary course of business consistent with past practices that will
be reflected on the Company's financial statement prior to the Closing
Date and that will not bind the Company after the Closing Date), grant
any general increase in the compensation of officers or employees
(including any
-26-
<PAGE>
such increase pursuant to any bonus, pension, profit-sharing or other
plan or commitment) or grant any increase in the compensation payable or
to become payable to any employee, except in accordance with
pre-existing contractual provisions or consistent with past practices;
(ix) make or commit to make any individual material capital
expenditure in excess of $50,000, or aggregate capital expenditures in
excess of $150,000, except in the ordinary course of business;
(x) pay, loan or advance any amount to, or sell, transfer or
lease any properties or assets to, or enter into any agreement or
arrangement with, any of its Affiliates, except in the ordinary course
of business;
(xi) guarantee any indebtedness for borrowed money or any other
obligation of any other Person, other than in the ordinary course of
business consistent with past practice;
(xii) fail to keep in full force and effect insurance comparable
in amount and scope to coverage maintained by it (or on behalf of it) on
the date hereof;
(xiii) make any loan, advance or capital contribution to or
investment in any Person, except in the ordinary course of business;
(xiv) make any change in any method of accounting or accounting
principle, method, estimate or practice except for any such change
required by reason of a concurrent change in GAAP or write-down the
value of any inventory or write-off as uncollectible any accounts
receivable except in the ordinary course of business consistent with
past practices;
(xv) settle, release or forgive any material claim or litigation
or waive any material right;
(xvi) make, enter into, modify, amend in any material respect or
terminate any material commitment, bid or expenditure, other than in the
ordinary course of business consistent with past practice; or
(xvii) commit itself to do any of the foregoing.
(b) From and after the date hereof and until the Closing Date, the
Stockholder and the Company will use their reasonable best efforts to cause
the Company to:
(i) continue to maintain, in all material respects, the
Company's properties, the Real Property and the Improvements in
accordance with present practices in a condition suitable for their
current use;
-27-
<PAGE>
(ii) comply with all applicable Environmental Laws, and, in the
event it shall receive notice that there exists a violation of any
Environmental Law with respect to its operations, the Improvements or
any Real Property, promptly (and in any event within the time period
permitted by the applicable governmental authority) remove or remedy
such violation in accordance with all applicable Environmental Laws;
(iii) file, when due or required, federal, state, foreign and
other tax returns and other reports required to be filed and pay when
due all taxes, assessments, fees and other charges lawfully levied or
assessed against it unless the validity thereof is contested in good
faith and by appropriate proceedings diligently conducted;
(iv) keep its books of account, records and files in the
ordinary course and in accordance with existing practices;
(v) preserve its business organization intact and continue to
maintain existing business relationships with suppliers, customers and
others with whom business relationships exist other than relationships
that are, at the same time, not economically beneficial to it; and
(vi) continue to conduct its business in the ordinary course
consistent with past practices.
5.4 NO INTERCOMPANY PAYABLES OR RECEIVABLES.
At the Closing there will be no intercompany payables or intercompany
receivables due and/or owing between the Stockholder and any of their
Affiliates, on the one hand, and the Company, on the other hand.
5.5 NEGOTIATIONS.
Until the earlier of 180 days from the date hereof and the
termination of this Agreement pursuant to SECTION 8.1 hereof, neither
the Stockholder nor the Company, nor the Company's officers, directors,
employees, advisors, agents, representatives, Affiliates or anyone
acting on behalf of the Stockholder, the Company or such persons, shall,
directly or indirectly, encourage, solicit, initiate or engage in
discussions or negotiations with, or provide any information to, any
person (other than UAG or its representatives) concerning any merger,
sale of assets (other than in the ordinary course of business), purchase
or sale of shares of capital stock or similar transaction involving the
Company. The Stockholder shall promptly communicate to UAG any
inquiries or communications concerning any such transaction (including
the identity of any person making such inquiry or communication) which
the Stockholder may receive or of which the Stockholder may become aware.
-28-
<PAGE>
5.6 CONSENTS; COOPERATION.
Subject to the terms and conditions hereof, the Stockholder and the
Company and UAG and Sub will use their respective best efforts at their own
expense:
(i) to obtain prior to the earlier of the date required (if so
required) or the Closing Date, all waivers, permits, licenses,
approvals, authorizations, qualifications, orders and consents of all
third parties and governmental authorities, and make all filings and
registrations with governmental authorities which are required on their
respective parts for (A) the consummation of the transactions
contemplated by this Agreement, (B) the ownership or leasing and
operating after the Closing by the Company of all its material
properties and (C) the conduct after the Closing by the Company of its
businesses as conducted by it on the date hereof.
(ii) to defend, consistent with applicable principles and
requirements of law, any lawsuit or other legal proceedings, whether
judicial or administrative, whether brought derivatively or on behalf of
third persons (including governmental authorities) challenging this
Agreement or the transactions contemplated hereby; and
(iii) to furnish each other such information and assistance as
may reasonably be requested in connection with the foregoing.
5.7 ADDITIONAL AGREEMENTS.
Subject to the terms and conditions of this Agreement, each of the
parties hereto agrees to use its best efforts at its own expense to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this
Agreement. In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, the
proper officers of the Company shall take all such necessary action.
5.8 INTERIM FINANCIAL STATEMENTS.
Within thirty (30) days after the end of each calendar month after May
31, 1996, the Company will deliver to UAG unaudited consolidated balance
sheets of the Company at the end of such calendar month and at the end of the
corresponding calendar month of the preceding fiscal year, together with the
related unaudited consolidated statements of income and cash flow for the
fiscal months then ended. The Company will also deliver to UAG copies of the
Company Factory Statements provided to nissan after the date hereof within
five days of their delivery to Nissan. All such financial statements shall
fairly present the financial position and results of operations of the
Company as of the date or for the periods indicated. All unaudited financial
statements delivered pursuant to this SECTION 5.9 shall be prepared on a
basis consistent with the Company Financial Statements.
-29-
<PAGE>
5.9 NOTIFICATION OF CERTAIN MATTERS.
Between the date hereof and the Closing, each party to this Agreement
will give prompt notice in writing to the other party hereto of: (i) any
information that indicates that any representation and warranty of such party
contained herein was not true and correct as of the date made or will not be
true and correct as of the Closing, (ii) the occurrence of any event which
could result in the failure to satisfy a condition specified in ARTICLE 6 or
ARTICLE 7 hereof, as applicable, (iii) any notice or other communication from
any third person alleging that the consent of such third person is or may be
required in connection with the transactions contemplated by this Agreement,
and (iv) in the case of the Stockholder and the Company, any notice of, or
other communication relating to, any default or event which, with notice or
lapse of time or both, would become a default under any Company Agreement set
forth on SCHEDULE 2.15. The Company and the Stockholder will (x) promptly
advise UAG of any event that has, or could reasonably be expected in the
future to have, a Material Adverse Effect on the Company, (y) confer on a
regular and frequent basis with one or more designated representatives of UAG
to report operational matters and to report the general status of ongoing
operations, and (z) notify UAG of any emergency or other change in the normal
course of business or relating to the Real Property or Improvements of the
Company and of any governmental complaints, investigations or hearings (or
communications indicating that the same may be contemplated) or adjudicatory
proceedings involving the Company, the Real Property or the Improvements and
will keep UAG fully informed of such events and permit UAG's representatives
access to all materials prepared in connection therewith. The Stockholder
shall give prompt notice to UAG of any notice or other communication from any
third person asserting any right, title or interest in any of the Shares held
by the Stockholder (including, without limitation, any threat to commence, or
notice of the commencement of any action or other proceeding with respect to
the Shares) or the occurrence of any other event of which such Stockholder
has knowledge which could result in any failure to consummate the sale of the
Shares as contemplated hereby.
5.10 ASSURANCE BY THE STOCKHOLDER.
The Stockholder shall use its best efforts to cause the Company to
comply with its respective covenants set forth in this Agreement.
5.11 ANTITRUST IMPROVEMENTS ACT COMPLIANCE.
UAG, the Stockholder and the Company, as applicable, shall each file or
cause to be filed with the Federal Trade Commission and the United States
Department of Justice any notifications required to be filed by the respective
"ultimate parent" entities under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "H-S-R Act"), and the rules and regulations
promulgated thereunder, with respect to the transactions contemplated herein.
The parties shall use their best efforts to make such filings promptly, to
respond to any requests for additional information made by either of such
agencies, to cause the waiting periods under the H-S-R Act to terminate or
expire at the earliest possible date and to resist vigorously (including,
without limitation, the institution or defense of legal proceedings), any
-30-
<PAGE>
assertion that the transactions contemplated herein constitute a violation of
the antitrust laws, all to the end of expediting consummation of the
transactions contemplated herein; PROVIDED, HOWEVER, that if UAG or the
Stockholder shall determine after issuance of any preliminary injunction that
continuing such resistance is not in its or their best interests, UAG or the
Stockholder, as the case may be, may, by written notice to the other party,
terminate this Agreement with the effect set forth in SECTION 8.2 hereof. In
the event that the Stockholder incurs any expense in connection with any
assertion that the transactions contemplated herein constitute a violation of
the antitrust laws, UAG shall reimburse the Stockholder for such expense unless
the Stockholder incurred such expense after UAG notified the Stockholder that
UAG intended to terminate the Agreement.
5.12 USE OF CHARLES EVANS NAME.
UAG, Sub and the Company shall have the right to use the name "Charles
Evans" in connection with the business of the Company for up to one year after
the Closing Date. After the Closing and until the one year anniversary of the
Closing Date, Evans shall not use the name "Charles Evans" or "Evans" in
connection with the sale of new or used automobiles or light duty trucks in the
metropolitan Atlanta area.
ARTICLE 6
CONDITIONS TO THE OBLIGATIONS
OF UAG AND SUB TO EFFECT THE CLOSING
The obligations of UAG and Sub required to be performed by them at the
Closing shall be subject to the satisfaction, at or prior to the Closing, of
each of the following conditions, each of which may be waived by UAG and Sub as
provided herein except as otherwise required by applicable law:
6.1 REPRESENTATIONS AND WARRANTIES; AGREEMENTS; COVENANTS.
Each of the representations and warranties of the Company and the
Stockholder contained in this Agreement shall be true and correct on the date
made and shall be true and correct in all material respects as of the Closing.
Each of the obligations of the Company and the Stockholder required by this
Agreement to be performed by them at or prior to the Closing shall have been
duly performed and complied with in all material respects as of the Closing. At
the Closing, Sub shall have received a certificate, dated the Closing Date and
duly executed by the Stockholder and the chief financial officer of the Company,
to the effect that the conditions set forth in the two preceding sentences have
been satisfied.
6.2 AUTHORIZATION; CONSENTS.
(a) All corporate action necessary to authorize the execution, delivery
and performance of this Agreement and the Real Estate Purchase Agreement, and
the consummation of the transactions contemplated hereby shall have been duly
and validly taken
-31-
<PAGE>
by the Company. All filings required to be made under the H-S-R Act in
connection with the transactions contemplated hereby shall have been made and
all applicable waiting periods with respect to each such filing, including
extensions thereof, shall have expired or been terminated.
(b) All notices to, and declarations, filings and registrations with,
and consents, authorizations, approvals and waivers from, governmental and
regulatory bodies and third persons (including, but not limited to, all
automobile manufacturers with whom the Company has a franchise agreement (or
comparable instrument)) required to consummate the transactions contemplated
hereby and all consents or waivers shall have been made or obtained.
6.3 OPINIONS OF THE COMPANY'S AND THE STOCKHOLDER' COUNSEL.
UAG and Sub shall have been furnished with the opinion of the Company's
and the Stockholder' counsel, dated the Closing Date, in form and substance
satisfactory to UAG and Sub and their counsel, which opinion shall have been
rendered with respect to those matters contained in SECTIONs 2.1, 2.3, 2.4,
2.9, 3.1 AND 3.2 hereof. In rendering the foregoing opinion, such counsel
may rely as to factual matters upon certificates or other documents furnished
by officers and directors of the Company and by government officials and upon
such other documents and data as such counsel deem appropriate as a basis for
their opinions. Such opinions may be limited to Georgia and federal laws.
6.4 ABSENCE OF LITIGATION.
No order, stay, injunction or decree of any court of competent
jurisdiction in the Untied States shall be in effect (i) that prevents or
delays the consummation of any of the transactions contemplated hereby or
(ii) would impose any limitation on the ability of UAG or Sub effectively to
exercise full rights of ownership of the Shares. No action, suit or
proceeding before any court or any governmental or regulatory entity shall be
pending (or threatened by any governmental or regulatory entity), and no
investigation by any governmental or regulatory entity shall have been
commenced (and be pending), seeking to restrain or prohibit (or questioning
the validity or legality of) the consummation of the transactions
contemplated by this Agreement or seeking damages in connection therewith
which UAG or Sub, in good faith and with the advice of counsel, believes
makes it undesirable to proceed with the consummation of the transactions
contemplated hereby.
6.5 NO MATERIAL ADVERSE EFFECT.
During the period from December 31, 1995 to the Closing Date, there
shall not have been any material adverse change in the assets, properties,
business, operations, prospects, net income or financial condition of the
Company.
-32-
<PAGE>
6.6 WORKING CAPITAL REQUIREMENTS.
On the Closing Date, the Stockholder shall deliver to Sub a balance
sheet of the Company dated as of the most recent practicable date preceding
the Closing Date, prepared in accordance with the Accounting Principles (the
"Estimated Closing Date Balance Sheet"). The Estimated Closing Date Balance
Sheet shall show as of the date thereof, after taking into account the
payment of any of the fees, costs and expenses by the Company incurred in
connection with this Agreement, consolidated net working capital equal to or
greater than the consolidated net working capital of the Company as set forth
on the Company Balance Sheet.
6.7 COMPLETION OF DUE DILIGENCE.
UAG and Sub shall have completed their due diligence examination of the
Company, the Real Property and the Improvements and the results of such
examination, including any Phase I or Phase II environmental audits of the
Company, shall be satisfactory to UAG and Sub. Sub will pay the costs for a
Phase I environmental audit. If, after obtaining the results of the Phase I
environmental audit, Sub determines that a Phase II environmental audit is
required, the expenses of the Phase II environmental audit shall be paid one-
half by Sub and one-half by the Stockholder.
6.8 LEASE AND REAL ESTATE PURCHASE AGREEMENT.
The Stockholder and the Company shall have agreed up the terms of the
Nissan Lease and the Real Estate Purchase Agreement on or before August 15, 1996
and shall have entered into the Nissan Lease and the Real Estate Purchase
Agreement at the time of the Closing.
6.9 BOARD APPROVAL.
The Board of Directors of UAG and Sub shall have approved the
consummation of all of the transactions contemplated by this Agreement.
6.10 CERTIFICATES.
The Stockholder and the Company shall have furnished UAG and Sub with a
certificate, dated as of the Closing Date, executed by the Stockholder
certifying to the fulfillment of the conditions set forth in SECTIONs 6.5, 6.6
AND 6.13 hereof and shall have furnished UAG and Sub with such any other
certificates of its officers and others as UAG and Sub may reasonably request to
evidence compliance with the conditions set forth in this ARTICLE 6.
6.11 LEGAL MATTERS.
All certificates, instruments, opinions and other documents required to
be executed or delivered by or on behalf of the Stockholder and the Company
under the provisions of this
-33-
<PAGE>
Agreement, and all other actions and proceedings required to be taken by or
on behalf of the Stockholder and the Company in furtherance of the
transactions contemplated hereby, shall be reasonably satisfactory in form
and substance to counsel for UAG and Sub.
6.12 APPROVAL OF MANUFACTURER AND DISTRIBUTOR.
The Stockholder and the Company shall have obtained the consent,
authorization and approval of Nissan and [Nissan distributor] on terms no less
favorable to those granted to the Company immediately prior to the execution of
this Agreement.
6.13 ENVIRONMENTAL LAWS.
The Company shall be in compliance with all applicable Environmental
Laws.
6.14 TITLE INSURANCE.
The Company shall have obtained title insurance with respect to the Real
Property in form and substance satisfactory to UAG. UAG shall pay the title
insurance premium.
6.15 LEASE TERMINATION AGREEMENT/MEMORANDUM OF LEASE.
The appropriate parties shall have executed a Lease Termination
Agreement and a Memorandum of Lease in form and substance satisfactory to UAG
and the Company.
6.16 RESIGNATION OF THE COMPANY'S DIRECTORS.
Each of the persons who is a director of the Company on the Closing Date
shall have tendered to Sub in writing his resignation as such in form and
substance satisfactory to UAG.
6.17 SCHEDULEs.
The Company and the Stockholder shall have delivered to UAG and Sub all
Schedules referred to in ARTICLEs 2 and 3 and such Schedules shall be reasonably
acceptable in form and substance to UAG and Sub.
6.18 BMW Purchase.
The transactions contemplated by the BMW Stock Purchase Agreement shall
have been consummated.
-34-
<PAGE>
ARTICLE 7
CONDITIONS TO THE OBLIGATIONS OF
THE STOCKHOLDER TO EFFECT THE CLOSING
The obligations of the Stockholder and the Company required to be
performed by them at the Closing shall be subject to the satisfaction, at or
prior to the Closing, of each of the following conditions, each of which may be
waived by the Company and the Stockholder as provided herein except as otherwise
required by applicable law:
7.1 REPRESENTATIONS AND WARRANTIES; AGREEMENTS.
Each of the representations and warranties of UAG and Sub contained in
this Agreement shall be true and correct on the date made and shall be true and
correct in all material respects as of the Closing. Each of the obligations of
UAG and Sub required by this Agreement to be performed by them at or prior to
the Closing shall have been duly performed and complied with in all material
respects as of the Closing. At the Closing, the Stockholder shall have received
a certificate, dated the Closing Date and duly executed by the chief financial
officer of UAG and of Sub to the effect that the conditions set forth in the
preceding two sentences have been satisfied.
7.2 AUTHORIZATION OF THE AGREEMENT, CONSENTS.
(a) All corporate action necessary to authorize the execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby shall have been duly and validly taken by UAG and Sub. All
filings required to be made under the H-S-R Act in connection with the transac-
tions contemplated hereby shall have been made and all applicable waiting
periods with respect to each such filing, including extensions thereof, shall
have expired or been terminated.
(b) All notices to, and declarations, filings and registrations with,
and consents, authorizations, approvals and waivers from, governmental and
regulatory bodies and third persons (including, but not limited to, all
automobile manufacturers with whom the Company has entered into a franchise
agreement (or comparable instrument)) required to consummate the transactions
contemplated hereby and all consents or waivers shall have been made or
obtained.
7.3 OPINIONS OF UAG'S AND SUB'S COUNSEL.
The Stockholder shall have been furnished with the opinion of Rogers &
Hardin, counsel to UAG and Sub, dated the Closing Date, in form and substance
satisfactory to the Stockholder and their counsel, which opinions, when taken
together, shall have been rendered with respect to those matters contained in
SECTIONs 4.1 AND 4.2 hereof. In rendering the foregoing opinions, such counsel
may rely as to factual matters upon certificates or other documents furnished by
officers and directors of UAG and Sub and by government officials, and upon such
other documents and data as such counsel deems appropriate as a basis for its
-35-
<PAGE>
opinion. Such opinions may be limited to Georgia and federal laws and the
General Corporation Law of the State of Delaware.
7.4 ABSENCE OF LITIGATION.
No order, stay, judgment or decree shall have been issued by any court
and be in effect restraining or prohibiting the consummation of the transactions
contemplated hereby.
7.5 LEASE AND REAL ESTATE PURCHASE AGREEMENT.
The Company and Sub shall have agreed upon the terms of the Nissan Lease
and Real Estate Purchase Agreement on or before August 15, 1996. The Company
and Sub shall have entered into the Nissan Lease and Sub shall have entered into
the Real Estate Purchase Agreement at the time of the Closing.
7.6 CERTIFICATES.
UAG and Sub shall have furnished the Stockholder with such certificates
of its officers and others to evidence compliance with the conditions set forth
in this ARTICLE 7 as may be reasonably requested by the Stockholder.
7.7 LEGAL MATTERS.
All certificates, instruments, opinions and other documents required to
be executed or delivered by or on behalf of UAG or Sub under the provisions
of this Agreement, and all other actions and proceedings required to be taken
by or on behalf of UAG or Sub in furtherance of the transactions contemplated
hereby, shall be reasonably satisfactory in form and substance to counsel for
the Stockholder.
ARTICLE 8
TERMINATION
8.1 TERMINATION.
This Agreement may be terminated at any time prior to Closing:
(i) by mutual consent of UAG, Sub and the Stockholder;
(ii) by either UAG, Sub, or the Stockholder if the Closing shall not
have taken place on or prior to November 30, 1996, or such later date as
shall have been approved by UAG, Sub and the Stockholder (provided that the
terminating party is not otherwise in material breach of its represen-
tations, warranties, covenants or agreements under this Agreement);
-36-
<PAGE>
(iii) by UAG, Sub, or the Stockholder if any court of competent
jurisdiction in the United States or other United States governmental body
shall have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the transactions contem-
plated by this Agreement, and such order, decree, ruling or other action
shall have become final and non-appealable;
(iv) by UAG or Sub if any of the conditions specified in ARTICLE 6
hereof have not been met or waived by UAG and Sub at such time as such
condition is no longer capable of satisfaction (provided that neither UAG
nor Sub is otherwise in material breach of its representations, warranties,
covenants or agreements under this Agreement);
(v) by the Stockholder if any of the conditions specified in ARTICLE 7
hereof have not been met or waived by the Stockholder at such time as such
condition is no longer capable of satisfaction (provided that neither the
Stockholder nor the Company is otherwise in material breach of his or its
representations, warranties covenants or agreements under this Agreement);
or
(vi) by either UAG, Sub or the Stockholder if there has been a material
breach on the part of the other of any representation, warranty, covenant or
agreement set forth in this Agreement, which breach has not been cured
within ten (10) Business Days following receipt by the breaching party of
written notice of such breach.
If UAG, Sub or the Stockholder shall terminate this Agreement pursuant
to the provisions hereof, such termination shall be effected by notice to the
other parties specifying the provision hereof pursuant to which such termination
is made.
8.2 EFFECT OF TERMINATION.
Except (i) for any breach of this Agreement prior to its termination,
and (ii) for the obligations contained in SECTIONS 5.1 AND 10.2 hereof, and
(iii) as set forth in SECTION 9.1 and SECTION 9.2 hereof, upon the termination
of this Agreement pursuant to SECTION 8.1 hereof, this Agreement shall forthwith
become null and void and none of the parties hereto or any of their respective
officers, directors, employees, agents, Affiliates, consultants, stockholders or
principals shall have any liability or obligation hereunder or with respect
hereto.
ARTICLE 9
INDEMNIFICATION
9.1 INDEMNIFICATION BY THE STOCKHOLDER.
Notwithstanding the Closing or the delivery of the Shares, the Stockholder
indemnifies and agrees to fully defend, save and hold harmless on an
after-tax basis UAG,
-37-
<PAGE>
Sub, the Company (after the Closing), and any of their respective officers,
directors, employees, stockholders, advisors, representatives, agents and
Affiliates (other than the Stockholder) (each a "UAG Indemnified Party"), if
a UAG Indemnified Party (including the Company after the Closing Date) shall
at any time or from time to time suffer any Costs (as defined in SECTION 9.6
below) arising, directly or indirectly, out of or resulting from, or shall
pay or become obligated to pay any sum on account of, (i) any and all
Stockholder Events of Breach (as defined below) or, (ii) any Claim before or
by any court, arbitrator, panel, agency or other governmental, administrative
or judicial entity, which Claim involves, affects or relates to any assets,
properties or operations of the Company or the conduct of the business of the
Company prior to the Closing Date (a "Stockholder Third Party Claim"). As
used herein, "Stockholder Event of Breach" shall be and mean any one or more
of the following: (i) any untruth or inaccuracy in any representation of the
Stockholder or the Company or the breach of any warranty of the Stockholder
or the Company contained in this Agreement, including, without limitation,
any misrepresentation in, or omission from, any statement, certificate,
schedule, exhibit, annex or other document furnished pursuant to this
Agreement by the Stockholder or the Company (or any representative of the
Stockholder or the Company) to UAG or Sub (or any representative of UAG or
Sub) and any misrepresentation in or omission from any document furnished to
UAG or Sub in connection with the Closing, and (ii) any failure of the
Stockholder or the Company duly to perform or observe any term, provision,
covenant, agreement or condition on the part of the Stockholder or the
Company to be performed or observed.
9.2 INDEMNIFICATION BY UAG.
Notwithstanding the Closing, UAG indemnifies and agrees to fully defend,
save and hold harmless on an after-tax basis the Stockholder, the Company
(prior to the Closing), and any of their respective officers, directors,
employees, advisors, representatives, agents and Affiliates (each a
"Stockholder Indemnified Party"), if a Stockholder Indemnified Party
(including the Company prior to Closing) shall at any time or from time to
time suffer any Costs arising, directly or indirectly, out of or resulting
from, or shall pay or become obligated to pay any sum on account of, (i) any
and all UAG Events of Breach (as defined below) or (ii) any Claim before or
by any court, arbitrator, panel, agency or other governmental, administrative
or judicial entity, which Claim involves, affects or relates to any assets,
properties or operations of UAG or Sub or the conduct of the business of UAG
prior to the Closing Date or any Claim relating to or arising out of any
violation of the Environmental Laws by the Company after the Closing Date (a
"UAG Third Party Claim"). As used herein, "UAG Event of Breach" shall be and
mean any one or more of the following: (i) any untruth or inaccuracy in any
representation of UAG or Sub or the breach of any warranty of UAG or Sub
contained in this Agreement, including, without limitation, any
misrepresentation in, or omission from, any statement, certificate, schedule,
exhibit, annex or other document furnished pursuant to this Agreement by UAG
or Sub (or any representative of UAG or Sub) to the Stockholder (or any
representative of the Stockholder) and any misrepresentation in or omission
from any document furnished to the Stockholder in connection with the
Closing, and (ii) any failure of UAG or Sub duly to perform or observe
-38-
<PAGE>
any term, provision, covenant, agreement or condition on the part of UAG or
Sub to be performed or observed.
9.3 PROCEDURES.
If (i) any Stockholder Event of Breach occurs or is alleged and a UAG
Indemnified Party asserts that the Stockholder have become obligated to a UAG
Indemnified Party pursuant to SECTION 9.1, or if any Stockholder's Third
Party Claim is begun, made or instituted as a result of which the Stockholder
may become obligated to a UAG Indemnified Party hereunder, or (ii) a UAG
Event of Breach occurs or is alleged and a Stockholder Indemnified Party
asserts that UAG has become obligated to a Stockholder Indemnified Party
pursuant to SECTION 9.2, or if any UAG Third Party Claim is begun, made or
instituted as a result of which UAG may become obligated to a Stockholder
Indemnified Party hereunder (for purposes of this ARTICLE 9, any UAG
Indemnified Party and any Stockholder Indemnified Party is sometimes referred
to as an "Indemnified Party" and UAG and the Stockholder are sometimes
referred to as an "Indemnifying Party," and any UAG Third Party Claim and any
Stockholder Third Party Claim is sometimes referred to as a "Third Party
Claim," in each case as the context so requires), such Indemnified Party
shall give written notice to the Indemnifying Party of its or his obligation
to provide indemnification hereunder, provided that any failure to so notify
the Indemnifying Party shall not relieve them from any liability that it or
he may have to the Indemnified Party under this ARTICLE 9. If such notice
relates to a Third Party Claim, each Indemnifying Party, jointly and
severally, agrees to defend, contest or otherwise protect such Indemnified
Party against any such Third Party Claim at his or its sole cost and expense.
Such Indemnified Party shall have the right, but not the obligation, to
participate at its own expense in the defense thereof by counsel of such
Indemnified Party's choice and shall in any event cooperate with and assist
the Indemnifying Party to the extent reasonably possible. If the
Indemnifying Party fails timely to defend, contest or otherwise protect
against such Third Party Claim, such Indemnified Party shall have the right
to do so, including, without limitation, the right to make any compromise or
settlement thereof, and such Indemnified Party shall be entitled to recover
the entire Cost thereof from the Indemnifying Party, including, without
limitation, attorneys' fees, disbursements and amounts paid (or of which
such Indemnified Party has become obligated to pay) as the result of such
Third Party Claim. Failure by the Indemnifying Party to notify such
Indemnified Party of its or their election to defend any such Third Party
Claim within fifteen (15) days after notice thereof shall have been given to
the Indemnifying Party shall be deemed a waiver by the Indemnifying Party of
its or their right to defend such Third Party Claim. If the Indemnifying
Party assumes the defense of the particular Third Party Claim, the
Indemnifying Party shall not, in the defense of such Third Party Claim,
consent to entry of any judgment or enter into any settlement, except with
the written consent of such Indemnified Party. In addition, the Indemnifying
Party shall not enter into any settlement of any Third Party Claim (except
with the written consent of such Indemnified Party) which does not include as
an unconditional term thereof the giving by the claimant or the plaintiff to
such Indemnified Party a full release from all liability in respect of such
Third Party Claim. Notwithstanding the foregoing, the Indemnifying Party
shall not be entitled to control (but shall be entitled to participate at
their own expense in the defense of), and the
-39-
<PAGE>
Indemnified Party shall be entitled to have sole control over, the defense or
settlement of any Third Party Claim to the extent the Third Party Claim seeks
an order, injunction or other equitable relief against the Indemnified Party
which, if successful, could materially interfere with the business,
operations, assets, condition (financial or otherwise) or prospects of the
Indemnified Party.
9.4 OFFSET.
In addition to and not in limitation of all rights of offset that an
Indemnified Party may have under applicable law, the parties agree that, at any
Indemnified Party's option, any or all amounts owing to such Indemnified Party
under this ARTICLE 9 or any other provision of this Agreement or any other
liability of the other parties (or any Affiliate of the other parties) to such
Indemnified Party in connection with this Agreement or the transactions
contemplated hereby, may be recovered by the Indemnified Party by an offset
against any or all amounts due to such other parties pursuant to this Agreement
or the transactions contemplated hereby.
9.5 REMEDIES.
The rights of an Indemnified Party under this ARTICLE 9 are in addition
to such other rights and remedies which such Indemnified Party may have under
this Agreement, applicable law or otherwise.
9.6 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.
ARTICLE 10
MISCELLANEOUS
10.1 SURVIVAL OF PROVISIONS.
(a) The respective representations, warranties, covenants and
agreements of each of the parties to this Agreement (except covenants and
agreements which are expressly required to be performed and are performed in
full on or before the Closing Date) shall survive the Closing Date and the
consummation of the transactions contemplated by this Agreement. In the event
of a breach of any such representations, warranties or covenants, the party to
whom such representations, warranties or covenants have been made shall have,
subject to ARTICLE 9 hereof, all rights and remedies for such breach available
to it under the
-40-
<PAGE>
provisions of this Agreement or otherwise, whether at law or in
equity, regardless of any disclosure to, or investigation made by or on behalf
of, such party on or before the Closing Date.
(b) The representations and warranties contained in SECTION 2.11 shall
survive (and not be affected in any respect by) the Closing for a period
terminating on the later of (i) the date five years after the Closing Date,
and (ii) with respect to any claim asserted with respect to any breach of
such representation or warranty or pursuant to SECTION 9.3 hereof before the
expiration of such representation or warranty, on the date such claim is
finally liquidated or otherwise resolved.
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 SECTION 5.5 hereof is breached, then the Stockholder or the Company
shall pay to UAG, within five (5) Business Days after receipt of a request
therefor, an amount equal to all of the legal and other fees, costs and
expenses incurred by UAG in connection with this Agreement and the
transactions contemplated hereby.
10.3 HEADINGS.
The section headings herein are for convenience of reference only,
do not constitute part of this Agreement and shall not be deemed to limit or
otherwise affect any of the provisions hereof.
10.4 NOTICES.
All notices or other communications required or permitted hereunder
shall be given in writing and shall be deemed sufficient if delivered by hand,
recognized overnight delivery service or facsimile transmission or mailed by
registered or certified mail, postage prepaid (return receipt requested), as
follows:
If to the Company before the Closing Date:
Charles Evans Nissan, Inc.
3180 Zingara Road
Route 1
Conyers, Georgia 30207
- 41 -
<PAGE>
with a copy to:
Lance & Associates
884 Green Street
Conyers, Georgia 30207
Attn: Forrest Jack Lance, Esq.
Fac # 770-388-7944
If to the Company after the Closing Date:
United Auto Group, Inc.
375 Park Avenue
New York, New York 10022
Facsimile No.: (212) 223-5148
Attn: George G. Lowrance, Esq.
Executive Vice President
with a copy to:
Rogers & Hardin
2700 Cain Tower, Peachtree Center
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Facsimile No.: (404) 525-2224
Attn: Michael Rosenzweig, Esq.
If to the Stockholder:
Charles F. Evans
3180 Zingara Road
Route 1
Conyers, Georgia 30207
with a copy to:
Lance & Associates
884 Green Street
Conyers, Georgia 30207
Facsimile No.: (770) 388-7944
Attn: Forrest Jack Lance, Esq.
- 42 -
<PAGE>
If to UAG or Sub:
United Auto Group, Inc.
375 Park Avenue
New York, New York 10022
Facsimile No.: (212) 223-5148
Attn: George G. Lowrance, Esq.
Executive Vice President
with a copy to:
Rogers & Hardin
2700 Cain Tower, Peachtree Center
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Facsimile No.: (404) 525-2224
Attn: Michael Rosenzweig, 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
Stockholder, the personal representatives and heirs of the Stockholder) and
their respective successors and permitted assigns, and the provisions of
ARTICLE 9 hereof shall inure to the benefit of the Indemnified Parties
referred to therein; PROVIDED, HOWEVER, that neither this Agreement nor any
of the rights, interests, or obligations hereunder may be assigned by any of
the parties hereto without the prior written consent of the other parties
which consent shall not be unreasonably withheld. Notwithstanding the
foregoing, UAG and Sub shall have the unrestricted right to assign this
Agreement and to delegate all or any part of their obligations hereunder, 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 Real Estate
Purchase Agreement 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
- 43 -
<PAGE>
or undertakings with respect to the transactions contemplated hereby other than
those expressly set forth herein or in the Lease. Prior drafts of this
Agreement shall not be used as a basis for interpreting this Agreement.
10.7 WAIVER AND AMENDMENTS.
Each of the Stockholder, the Company, UAG and Sub may by written
notice to the other parties (i) extend the time for the performance of any of
the obligations or other actions of the other parties, (ii) waive any
inaccuracies in the representations or warranties of the other parties
contained in this Agreement, (iii) waive compliance with any of the covenants
of the other parties contained in this Agreement, (iv) waive performance of
any of the obligations of the other parties created under this Agreement, or
(v) waive fulfillment of any of the conditions to its own obligations under
this Agreement. The waiver by any party hereto of a breach of any provision
of this Agreement shall not operate or be construed as a waiver of any
subsequent breach, whether or not similar. This Agreement may be amended,
modified or supplemented only by a written instrument executed by the parties
hereto.
10.8 Counterparts.
This Agreement may be executed in any number of counterparts, all of
which shall be considered one and the same agreement and each of which shall
be deemed an original.
10.9 GOVERNING LAW.
This Agreement shall be governed by the laws of the State of Georgia.
10.10 ACCOUNTING TERMS.
All accounting terms used herein which are not expressly defined in
this Agreement shall have the respective meanings given to them in accordance
with GAAP.
10.11 CERTAIN DEFINITIONS.
For purposes of this Agreement:
(a) "Affiliate" of a specified Person shall mean a Person that
directly or indirectly, through one or more intermediaries, controls, or is
controlled by, or is under common control with, the Person specified, and in
the case of a specified Person who is a natural person, his spouse, his
issue, his parents, his estate and any trust entirely for the benefit of his
spouse and/or issue.
(b) "best efforts" shall be deemed to not include any obligation on
the part of any Person to undertake any liabilities, expend any funds or
perform acts (except liabilities, expenditures or performance, other than any
best efforts obligations, expressly required to be undertaken by the terms of
this Agreement) which are materially burdensome to such Person;
- 44 -
<PAGE>
PROVIDED, HOWEVER, that notwithstanding the foregoing, the term "best
efforts" shall include an obligation to take such actions which are normally
incident to or reasonably foreseeable in connection with such obligation or
the transactions contemplated hereby.
(c) "Business Day" shall mean any day excluding Saturday, Sunday and
any day which is a legal holiday under Federal law.
(d) "GAAP" shall mean generally accepted accounting principles which
are in effect in the United States on the Closing Date.
(e) "Liens" shall mean any mortgages, pledges, title defects or
objections, liens, claims, security interests, conditional and installment sale
agreements, encumbrances or charges of any kind.
(f) "Material Adverse Effect" shall mean any change in, or effect on,
the Company (including the business thereof) which is, or could reasonably be
expected to be, materially adverse to the business, operations, assets,
condition (financial or otherwise) or prospects of the Company.
(g) "Person" shall mean and include an individual, corporation,
limited liability company, partnership, joint venture, association, trust, any
other incorporated or unincorporated organization or entity and a governmental
entity or any department or agency thereto.
(h) "UAG Public Offering Date" shall mean the date of the consummation
of an underwritten public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended, covering the offering
and sale of shares of common stock, par value $.0001 per share of UAG. on a firm
commitment basis.
10.12 SCHEDULES.
Disclosure of any matter in any Schedule hereto or in the Financial
Statements shall not be considered as disclosure pursuant to any other
provision, subprovision, section or subsection of this Agreement or SCHEDULE
to this Agreement.
10.13 SEVERABILITY.
If any one or more of the provisions of this Agreement shall be held
to be invalid, illegal or unenforceable, the validity, legality or
enforceability of the remaining provisions of this Agreement shall not be
affected thereby. To the extent permitted by applicable law, each party
waives any provision of law which renders any provision of this Agreement
invalid, illegal or unenforceable in any respect.
- 45 -
<PAGE>
10.14 REMEDIES.
None of the remedies provided for in this Agreement, including
termination of this Agreement as set forth in ARTICLE 8, indemnification as
set forth in ARTICLE 9, the payment of certain fees, costs and expenses as
set forth in SECTION 10.2 or specific performance as set forth in this
SECTION 10.14, shall be the exclusive remedy of either party for a breach of
this Agreement, the parties hereto having the right to seek any other remedy
in law or equity in lieu of or in addition to any remedies provided in this
Agreement, including an action for damages for breach of contract.
10.15 TIME IS OF THE ESSENCE.
Time is of the essence for purposes of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
UNITED AUTO GROUP, INC.
By: /s/ George Lowrance
----------------------------------
Name: George G. Lowrance
----------------------------------
Title: Executive Vice-President
----------------------------------
UAG ATLANTA IV, INC.
By: /s/ George Lowrance
----------------------------------
Name: George G. Lowrance
----------------------------------
Title: Executive Vice-President
----------------------------------
CHARLES EVANS NISSAN, INC.
By: /s/ Sarah H. Pilgrim
----------------------------------
Name: Sarah H. Pilgrim
----------------------------------
Title: President
----------------------------------
/s/ Charles F. Evans
-----------------------------------------
Charles F. Evans, Individually
- 46 -
<PAGE>
STOCK PURCHASE AGREEMENT
DATED SEPTEMBER 5, 1996
AMONG
UNITED AUTO GROUP, INC.,
UAG TENNESSEE, INC.,
STANDEFER MOTOR SALES, INC.
d/b/a STANDEFER NISSAN,
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
<PAGE>
This STOCK PURCHASE AGREEMENT, dated September 5, 1996 is by and among
United Auto Group, Inc., a Delaware corporation ("UAG"), UAG Tennessee, Inc., a
Delaware corporation ("Sub"), Standefer Motor Sales, Inc., a Tennessee
corporation d/b/a Standefer Nissan (the "Company"), Charles A. Standefer
("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 (the "Trust" and together with Standefer, the
"Stockholders").
W I T N E S S E T H:
--------------------
WHEREAS, the Company operates a Nissan automobile dealership and related
businesses in Chattanooga, Tennessee;
WHEREAS, the Stockholders own all of the issued and outstanding shares of
common stock, no par value, of the Company (the "Common Stock");
WHEREAS, Sub is a wholly-owned subsidiary of UAG; and
WHEREAS, Sub desires to purchase all of the issued and outstanding shares
of Common Stock from the Stockholders (such shares being collectively referred
to herein as the "Shares"), and the Stockholders desire to sell the Shares to
Sub (upon the terms and subject to the conditions set forth in this Agreement),
such that immediately after giving effect to such purchase and sale, Sub will
own one hundred (100%) percent of all of the issued and outstanding shares of
Common Stock, on a fully diluted basis;
NOW, THEREFORE, in consideration of the mutual terms, conditions and
other agreements set forth herein, the parties hereto hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE OF SHARES
1.1 PURCHASE AND SALE OF THE SHARES.
(a) PURCHASE AND SALE. Upon the terms and subject to the conditions
set forth in this Agreement, the Stockholders shall sell to Sub, and Sub shall
purchase from the Stockholders, the Shares for an aggregate purchase price equal
to Eighteen Million Two Hundred Thousand Dollars ($18,200,000) (the "Base
Price"), which Base Price is subject to adjustment after Closing as provided in
SECTION 1.2 hereof. At the Closing referred to in SECTION 1.1(b) hereof:
(i) the Stockholders shall sell, assign, transfer and deliver
to Sub the Shares representing 100% of the outstanding Common Stock,
free and clear of all Liens (as defined in SECTION 10.11), and shall
deliver the certificates representing such Shares accompanied by
stock powers duly executed in blank; and
<PAGE>
(ii) Sub shall accept and purchase the Shares from the
Stockholders and in payment therefor shall deliver to the Stockholders
immediately available funds in an aggregate amount equal to the Base
Price less the Escrow Amount (as defined in Section 1.3) by certified
funds; and
(iii) the Escrow Agent (as defined in SECTION 1.3) shall deliver
to the Stockholders the Escrow Amount pursuant to the terms of the
Escrow Agreement.
(b) CLOSING. Subject to the conditions set forth in this Agreement, the
purchase and sale of the Shares pursuant to this Agreement (the "Closing") shall
take place at a location to be agreed upon by the parties, on the earlier of the
UAG Public Offering Date (as defined in SECTION 10.11) or a mutually agreeable
date no later than January 3, 1997. The date on which the Closing occurs is
herein referred to as the "Closing Date".
(c) DELIVERIES AT THE CLOSING. Subject to the conditions set forth in
this Agreement, at the Closing:
(i) the Stockholders shall deliver to Sub (A) certificates
representing the Shares bearing the restrictive legend customarily
placed on securities that have not been registered under applicable
federal and state securities laws and accompanied by stock powers as
required by SECTION 1.1(a)(i) hereof, and any other documents that are
necessary to transfer to Sub good title to all the Shares, and (B) all
opinions, certificates and other instruments and documents required to
be delivered by the Stockholders at or prior to the Closing or
otherwise required in connection herewith;
(ii) Sub shall pay and deliver to the Stockholders funds as
required by SECTION 1.1(a)(ii) hereof and all opinions, certificates
and other instruments and documents required to be delivered by Sub at
or prior to the Closing or otherwise required in connection herewith;
(iii) Standefer Investment Company, a Tennessee limited
partnership ("Landlord") and the Company shall enter into a lease for
the real property used in the business of the Company and known as
2121 Chapman Road, Chattanooga, Hamilton County, Tennessee 37412 in a
form mutually acceptable to the parties (the "Lease") and UAG shall
guarantee the performance of the obligations of Sub thereunder. The
Lease shall be for a twenty (20) year term commencing on the Closing
Date. The initial monthly lease rate shall be Twenty Seven Thousand
Five Hundred Dollars ($27,500), and (x) on the fifth anniversary of
the Closing Date the monthly lease rate shall be adjusted to an amount
equal to the greater of the then current lease rate and nine-tenths of
one percent (0.9%) of the then Appraised Value (as defined below), and
(y) on the tenth anniversary of the Closing Date the monthly lease
rate shall be adjusted to an amount equal to the greater of the then
current lease rate and one percent (1%) of the then Appraised Value,
and (z) on the fifteenth anniversary of the Closing Date the lease
rate shall be adjusted to an amount equal to the greater of the then
current lease rate and one percent (1%) of the then Appraised Value.
The Lease shall provide the Company
- 2 -
<PAGE>
with the option to extend the lease term for an additional five-year
period (the "First Option") commencing on the twentieth anniversary of
the Closing Date at a monthly lease rate equal to the greater of the
then current lease rate and one and five-one hundredths percent
(1.05%) of the then Appraised Value. The Lease shall further provide
that, in the event the Company exercises the First Option, the Company
shall have the option to extend the lease term for an additional
five-year period commencing with the twenty-fifth anniversary of the
Closing Date at a monthly lease rate equal to the greater of the then
current lease rate and one and five-one hundredth percent (1.05%) of
the then Appraised Value. For purposes of this section, Appraised
Value shall mean the value of the real property assuming it is leased
for use as a car dealership as appraised by a certified appraiser
agreed to by the lessor and lessee.
(iv) Sub, and the Company shall enter into an employee
agreement with Karen S. Nicely ("Nicely") in a form mutually
acceptable to UAG, Sub and Nicely (the "Employment Agreement"). The
Employment Agreement shall provide that Nicely shall be employed as
Executive Manager of the Company.
1.2 NET WORTH ADJUSTMENT.
(a) As soon as practicable after the Closing Date, the Stockholders
shall deliver to Sub a balance sheet of the Company dated as of the Closing Date
(such balance sheet so delivered is referred to herein as the "Closing Date
Balance Sheet"). UAG shall reimburse the Company for reasonable fees or
expenses incurred by the Company's certified public accountant in connection
with the preparation of the Closing Date Balance Sheet or the Estimated Closing
Date Balance Sheet referred to in SECTION 6.6. The Closing Date Balance Sheet
shall be prepared in good faith on the same basis and in accordance with the
accounting principles, methods and practices used in preparing the Company
Financial Statements (as defined in SECTION 2.5 hereof), subject to the
modifications, adjustments and exceptions to such accounting principles, methods
and practices set forth on SCHEDULE 1.2(a) hereto (such accounting principles,
methods and practices as so modified and adjusted, and such procedures, are
referred to herein as the "Accounting Principles"). In connection with the
preparation of the Closing Date Balance Sheet, the Stockholders and the Company
and the Reviewer (as defined below) and other representatives of Sub will
conduct a physical inventory at each location where inventory is held by the
Company. From the results of such inventory and prior to the Closing Date, Sub
and the Stockholders (or the respective representatives thereof) will prepare a
schedule, which shall be signed by each of Sub and the Stockholders, setting
forth the nature and quality of such inventory and such other items as shall be
agreed upon by Sub and the Stockholders to be included in the Closing Date
Balance Sheet.
(b) Within forty-five (45) days after delivery of the Closing Date
Balance Sheet, (i) Coopers & Lybrand or such other national accounting firm (the
"Reviewer") selected by Sub, shall audit or otherwise review the Closing Date
Balance Sheet in such manner as Sub and the Reviewer deem appropriate, and (ii)
Sub shall deliver such reviewed balance sheet (the "Reviewed Balance Sheet"),
together with the Reviewer's report thereon, to the
- 3 -
<PAGE>
Stockholders. The Reviewed Balance Sheet (i) shall be prepared on the same
basis and in accordance with the Accounting Principles and (ii) shall include
a schedule showing the computation of the final Net Worth, computed in
accordance with the definition of Net Worth set forth in SECTION 1.2(g)(iii)
hereof. Sub and the Reviewer shall have the opportunity to consult with the
Stockholders, the Company and each of the accountants and other
representatives of the Stockholders and the Company and examine the work
papers, schedules and other documents prepared by the Stockholders, the
Company and each of such accountants and other representatives during the
preparation of the Closing Date Balance Sheet. The Stockholders and the
Stockholders' independent public accountants shall have the opportunity to
consult with the Reviewer and examine the work papers, schedules and other
documents prepared by Sub and the Reviewer during the preparation of the
Reviewed Balance Sheet.
(c) The Stockholders shall have a period of forty-five (45) days after
delivery to the Stockholders of the Reviewed Balance Sheet to present in writing
to Sub all objections the Stockholders may have to any of the matters set forth
or reflected therein, which objections shall be set forth in reasonable detail.
During said forty-five (45) day period, the Stockholders, their accountants and
other representatives of the Stockholders may examine Reviewer's work papers,
schedules, research notes and all correspondence between Reviewer and Sub or UAG
or any representative of Sub or UAG, which relate to the Closing Date Balance
Sheet or Reviewed Balance Sheet and any entry thereto made or considered by
Reviewer. If no objections are raised within such 45-day period, the Reviewed
Balance Sheet shall be deemed accepted and approved by the Stockholders and a
supplemental closing (the "Supplemental Closing") shall take place within five
(5) Business Days following the expiration of such 45-day period, or on such
other date as may be mutually agreed upon in writing by Sub and the
Stockholders.
(d) If the Stockholders shall raise any objection within the 45-day
period, Sub and the Stockholders shall attempt to resolve the matter or matters
in dispute and, if resolved, the Supplemental Closing shall take place within
five (5) Business Days following such resolution.
(e) If such dispute cannot be resolved by Sub and the Stockholders
within sixty (60) days after the delivery of the Reviewed Balance Sheet, then
the specific matters in dispute shall be submitted to a firm of independent
certified public accountants having a reputation for special expertise in
automobile dealership accounting and mutually acceptable to Sub and the
Stockholders, which firm shall make a final and binding determination as to such
matter or matters. Such accounting firm shall send its written determination to
Sub and the Stockholders and the Supplemental Closing, if any, shall take place
five (5) Business Days following the receipt of such determination by Sub and
the Stockholders. The fees and expenses of the accounting firm referred to in
this SECTION 1.2(e) shall be paid one half by Sub and one half by the
Stockholders.
(f) Sub and the Stockholders agree to cooperate with each other and
each other's authorized representatives and with any accounting firm selected by
Sub and the Stockholders
- 4 -
<PAGE>
pursuant to SECTION 1.2 (e) hereof in order that any and all matters in
dispute shall be resolved as soon as practicable.
(g) (i) If the Net Worth as shown on the Reviewed Balance Sheet as
finally determined through the operation of SECTIONS 1. 2 (a) THROUGH (e) hereof
shall be less than Five Million Ninety Thousand Dollars ($5,090,000) (the amount
of any such deficiency being referred to herein as the "Net Worth Deficiency"),
the Stockholders shall pay to Sub at the Supplemental Closing, by wire transfer
of immediately available funds to an account designated in writing by Sub within
two (2) Business Days of the date of the Supplemental Closing, an amount equal
to the Net Worth Deficiency, together with interest on such amount from the
Closing Date to the date of the Supplemental Closing at the prime rate or its
equivalent (as announced from time to time by Citibank, N.A.).
(ii) If the Net Worth as shown on the Closing Date Balance Sheet is
equal to or greater than Five Million Ninety Thousand Dollars ($5,090,000) and
the Net Worth as shown on the Reviewed Balance Sheet as finally determined
through the operation of SECTIONS 1.2(a) THROUGH (e) hereof shall be greater
than the Net Worth as shown on the Closing Date Balance Sheet (the amount of any
such excess being referred to herein as the "Net Worth Excess"), Sub shall pay
to the Stockholders at the Supplemental Closing, by wire transfer of immediately
available funds to an account designated in writing within two (2) Business Days
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" computed in connection with the Closing Date
Balance Sheet and the Reviewed Balance Sheet shall mean the amount by which the
total assets (plus the amount of any Last-In First-Out ("LIFO") inventory
reserves) exceed the total liabilities reflected, in each case, on the balance
sheet of Company comprising the Closing Date Balance Sheet or the Reviewed
Balance Sheet, as the case may be.
1.3 ESCROW.
Within 5 days of the date on which all conditions to the obligations of
the parties hereunder (other than those requiring an exchange of certificates,
opinions or other documents, or the taking of other action, at the Closing) have
been satisfied or waived, Sub shall deposit into escrow funds in the amount of
Five Hundred Thousand Dollars ($500,000) (the "Escrow Amount") by delivering
such funds to Rogers & Hardin (the "Escrow Agent") which Escrow Amount shall be
held and disbursed by the Escrow Agent pursuant to the terms of an escrow
agreement to be agreed upon by the parties.
- 5 -
<PAGE>
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE STOCKHOLDERS
Subject to the parties' agreement and acknowledgement that certain of the
Schedules referred to in this ARTICLE 2 are to be delivered by the Company and
the Stockholders no later than September 6, 1996, the Company and the
Stockholders hereby jointly and severally represent and warrant to UAG and Sub
as follows:
2.1 ORGANIZATION AND GOOD STANDING.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Tennessee and has the corporate power
and authority to own, lease and operate the properties used in its business and
to carry on its business as now being conducted. The Company is duly qualified
to do business and is in good standing as a foreign corporation in each state
and jurisdiction where qualification as a foreign corporation is required,
except where the lack of such qualification would not have a material adverse
effect on the financial condition of the Company. SCHEDULE 2.1(a) hereto lists
(i) the states and other jurisdictions where the Company is so qualified and
(ii) the assumed names under which the Company conducts business and has
conducted business during the past five years. Attached as SCHEDULE 2.1(b) are
complete and correct copies of the Company's Charter and Bylaws as amended and
presently in effect.
2.2 SUBSIDIARIES.
Except as set forth in SCHEDULE 2.2 hereof, the Company does not have any
interest or investment in any Person (as defined in SECTION 10.11 hereof).
2.3 CAPITALIZATION.
The authorized stock of the Company and the number of shares of capital
stock that are issued and outstanding are set forth on SCHEDULE 2.3(a) hereto.
The shares listed on SCHEDULE 2.3 hereto constitute all the issued and
outstanding shares of capital stock of the Company and have been validly
authorized and issued, are fully paid and nonassessable, have not been issued in
violation of any preemptive rights or of any federal or state securities law and
no personal liability attaches to the ownership thereof. Except for the stock
restriction agreement set forth on SCHEDULE 2.3(b) hereto (the "Stock
Restriction Agreement") which will be terminated prior to the Closing Date,
there is no security, option, warrant, right, call, subscription, agreement,
commitment or understanding of any nature whatsoever, fixed or contingent, that
directly or indirectly (i) calls for the issuance, sale, pledge or other
disposition of any shares of capital stock of the Company or any securities
convertible into, or other rights to acquire, any shares of capital stock of the
Company, or (ii) obligates the Company to grant, offer or enter into any of the
foregoing, or (iii) relates to the voting or control of such capital stock,
securities or rights, except as provided in this Agreement. The Company has not
agreed to register any securities under the Securities Act.
- 6 -
<PAGE>
2.4 AUTHORITY; APPROVALS AND CONSENTS.
The Company has the corporate power and authority to enter into this
Agreement and to perform its obligations hereunder and thereunder. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby and thereby have been duly authorized and
approved by the Board of Directors of the Company and no other corporate
proceedings on the part of the Company are necessary to authorize and approve
this Agreement and the transactions contemplated hereby and thereby. This
Agreement has been duly executed and delivered by, and constitutes a valid and
binding obligation of, the Company, enforceable against the Company in
accordance with its terms. The execution, delivery and performance by the
Company and the Stockholders of this Agreement and the Lease and the
consummation of the transactions contemplated hereby and thereby do not and will
not:
(i) contravene any provisions of the Charter or By-Laws of the
Company;
(ii) to the knowledge of the Company or the Stockholders,
(after notice or lapse of time or both) conflict with, result in a
breach of any provision of, constitute a default under, result in the
modification or cancellation of, or give rise to any right of
termination or acceleration in respect of, any Company Agreement (as
defined in SECTION 2.15 hereof) or, require any consent or waiver of
any party to any Company Agreement, except where such conflict or
default would not have a material adverse effect on the financial
condition of the Company or on the ability of the parties to
consummate the transactions contemplated by this Agreement;
(iii) result in the creation of any Lien upon, or any Person
obtaining any right to acquire, any properties, assets or rights of
the Company (other than the rights of Sub to acquire the Shares
pursuant to this Agreement);
(iv) to the knowledge of the Company or the Stockholders,
violate or conflict with any Legal Requirements (as defined in SECTION
2.9 hereof) applicable to the Company or any of its businesses or
properties, except where such conflict or default would not have a
material adverse effect on the financial condition of the Company or
on the ability of the parties to consummate the transactions
contemplated by this Agreement; or
(v) require any authorization, consent, order, permit or
approval of, or notice to, or filing, registration or qualification
with, any governmental, administrative or judicial authority, except
in connection with or in compliance with the provisions of the H-S-R
Act (as defined in SECTION 5.11 hereof), except where such conflict or
default would not have a material adverse effect on the financial
condition of the Company or on the ability of the parties to
consummate the transactions contemplated by this Agreement.
- 7 -
<PAGE>
Except as referred to above, no permit or approval of, or notice to any
governmental, administrative or judicial authority is necessary to be obtained
or made by the Company to enable the Company to continue to conduct its business
and operations and use its properties after the Closing in a manner which is in
all material respects consistent with that in which they are presently
conducted.
2.5 FINANCIAL STATEMENTS.
Attached as SCHEDULE 2.5 are true and complete copies of:
(i) (A) the unaudited balance sheet of the Company 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, in each case accompanied by the
compilation report of independent certified public accountants, and
(B) the unaudited balance sheet of the Company as of December 31,
1994, and the related statements of income, stockholders' equity and
cash flow for the fiscal year ended December 31, 1994, together with
the notes thereto, in each case accompanied by the compilation report
of independent certified public accountants; and
(ii) the unaudited balance sheet of the Company as of June 30,
1996 (the "Company Balance Sheet") and the unaudited statements of
income and stockholders' equity for the periods ended on such date,
together with the notes thereto;
(iii) the most recent monthly and year-to-date financial
statements provided to Nissan (the "Company Factory Statements");
(the financial statements referred to in clause (i) and (ii) above, including
the notes thereto, being referred to herein collectively as the "Company
Financial Statements"). The Company Financial Statements are in accordance
with the books and records of the Company, fairly present the consolidated
financial position, results of operations, stockholders' equity and changes
in the financial position of the Company as of the dates and for the periods
indicated, in the case of the financial statements referred to in clause (i)
above in conformity with GAAP consistently applied (except as otherwise
indicated in such statements or on SCHEDULE 1.2 hereof) during such periods,
and can be legitimately reconciled with the financial statements and the
financial records maintained and the accounting methods applied by the
Company for federal income tax purposes, and the financial statements
included in the Company Financial Statements include all adjustments, which
consist of only normal recurring accruals, necessary for such fair
presentations. The statements of income included in the Company Financial
Statements do not contain any items of special or nonrecurring income except
as expressly specified therein, and the balance sheets included in the
Company Financial Statements do not reflect any write-up or revaluation
increasing the book value of any assets except as expressly stated therein.
The books and accounts of the Company are complete and correct in all
material respects and fairly reflect all of the transactions, items of income
and expense and all assets and liabilities of the businesses of the Company
consistent with prior practices of the Company.
- 8 -
<PAGE>
2.6 ABSENCE OF UNDISCLOSED LIABILITIES.
The Company does not have any material liability of any nature
whatsoever (whether known or unknown, due or to become due, accrued,
absolute, contingent or otherwise), including, without limitation, any
unfunded obligation under employee benefit plans or arrangements as described
in SECTION 2.17 AND 2.18 hereof or liabilities for Taxes (as defined in
SECTION 2.8 hereof), except for (i) liabilities reflected or reserved against
in the most recent Company Financial Statement, (ii) current liabilities
incurred in the ordinary course of business and consistent with past practice
after the date of the Company Balance Sheet which, individually and in the
aggregate, do not have, and cannot reasonably be expected to have, a Material
Adverse Effect, and (iii) liabilities disclosed on SCHEDULE 2.6 hereto. The
Company is not a party to any Company Agreement, or subject to any Charter or
bylaw provision, any other corporate limitation or any Legal Requirement
which has, or can reasonably be expected to have, a Material Adverse Effect.
2.7 ABSENCE OF MATERIAL ADVERSE EFFECT; CONDUCT OF BUSINESS.
(a) Since December 31, 1995, except as set forth on SCHEDULE 2.7(a)
hereto, the Company has operated in the ordinary course of business consistent
with past practice and there has not been:
(i) any material adverse change in the assets, properties,
business, operations, prospects, net income or financial condition of
the Company and no factor, event, condition, circumstance or
prospective development exists which threatens or may threaten to have
a Material Adverse Effect;
(ii) any material loss, damage, destruction or other casualty
to the property or other assets of the Company, whether or not covered
by insurance;
(iii) any change in any method of accounting or accounting
practice of the Company; or
(iv) any loss of the employment, services or benefits of any
key employee of the Company.
(b) Since December 31, 1995, except as set forth in SCHEDULE 2.7(b)
hereto, the Company has not:
(i) incurred any material obligation or liability (whether
absolute, accrued, contingent or otherwise), except in the ordinary
course of business consistent with past practice;
(ii) failed to disclose or satisfy any lien or pay or satisfy
any obligation or liability (whether absolute, accrued, contingent or
otherwise), other than liabilities being contested in good faith and
for which adequate reserves have been provided;
- 9 -
<PAGE>
(iii) mortgaged, pledged or subjected to any lien any of its
property or other assets except for mechanics' liens and liens for
taxes not yet due and payable;
(iv) sold or transferred any assets or cancelled any debts or
claims or waived any rights, except in the ordinary course of business
consistent with past practice;
(v) defaulted on any material obligation;
(vi) entered into any material transaction, except in the
ordinary course of business consistent with past practice;
(vii) written down the value of any inventory or written off as
uncollectible any accounts receivable or any portion thereof not
reflected in the Company Financial Statements;
(viii) granted any increase in the compensation or benefits of
employees other than increases in accordance with past practice not
exceeding 10% or entered into any employment or severance agreement or
arrangement with any of them;
(ix) made any individual capital expenditure in excess of
$75,000, or aggregate capital expenditures in excess of $200,000, or
additions to property, plant and equipment other than ordinary repairs
and maintenance;
(x) discontinued any franchise or the sale of any products or
product line;
(xi) incurred any obligation or liability to any employee 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, 1985, the Company and, for any period during all or
part of which the tax liability of any other corporation was determined on a
combined or consolidated basis with the Company any such other corporation,
have filed timely all federal, state, local and foreign tax returns, reports
and declarations required to be filed (or have obtained or timely applied for
an extension with respect to such filing) correctly reflecting the Taxes (as
defined below) and all other information required to be reported thereon and
have paid, or made adequate provision for the payment of, all Taxes which are
due pursuant to such returns or pursuant to any assessment received by the
Company or any such other corporation. As used herein, "Taxes" shall mean
all taxes, fees, levies or other assessments, including but not limited to
income, excise, property (including property taxes paid by the Company
pursuant
- 10 -
<PAGE>
to any lease), sales, franchise, withholding, social security and
unemployment taxes imposed by the United States, any state, county, local or
foreign government, or any subdivision or agency thereof or taxing authority
therein, and any interest, penalties or additions to tax relating to such
taxes, charges, fees, levies or other assessments. Copies of all tax returns
for each fiscal year since the formation of the Company have been furnished
or made available to UAG or its representatives and such copies are accurate
and complete as of the date hereof. The Company has also furnished or made
available to UAG correct and complete copies of all material notices and
correspondence sent or received since January 1, 1992 by the Company to or
from any federal, state or local tax authorities. The unpaid Taxes of the
Company with respect to periods ended on, prior to or through the date of the
Company Balance Sheet will not exceed by any material amount the reserve for
Taxes reflected on such financial statements. In the ordinary course, the
Company makes adequate provision on its books (on an annual basis) for the
payment of all Taxes (including for the current fiscal period) owed by the
Company. Except to the extent reserves therefor are reflected on the Company
Balance Sheet, the Company is not liable, or will not become liable, for any
Taxes for any period ending on, prior to or through the date of the Company
Balance Sheet. On the Closing Date Balance Sheet, the Company will have
adequately reserved for the payment of any Taxes for any period ending on,
prior to or through the date of the Closing Date Balance Sheet. Except as
set forth on SCHEDULE 2.8 hereto, the Company has not been subject to a
federal or state tax audit of any kind since January 1, 1985, and no
adjustment has been proposed by the Internal Revenue Service ("IRS") with
respect to any return for any year. With respect to the audits referred to on
SCHEDULE 2.8 hereto, no such audit has resulted in an adjustment in excess of
$50,000. Neither the Company nor the Stockholders knows of any basis for an
assertion of a deficiency for Taxes against the Company. The Stockholders
will cooperate with the Company in the filing of any returns and in any audit
or refund claim proceedings involving Taxes for which the Company may be
liable or with respect to which the Company may be entitled to a refund and
the Company shall reimburse the Stockholders for any reasonable out-of-pocket
expenses directly related to the Company's tax liability; PROVIDED, HOWEVER,
that the Company will not reimburse the Stockholders for any expenses
relating to Stockholders' tax liability.
2.9 LEGAL MATTERS.
(a) Except as set forth on SCHEDULE 2.9(a) hereto, (i) there is no
claim, action, suit, litigation, investigation, inquiry, review or proceeding
(collectively, "Claims") pending against, or, to the knowledge of the Company or
the Stockholders, threatened against or affecting, the Company, any ERISA Plan
(as defined in SECTION 2.18(a) hereof) or any of their respective assets,
properties or rights before or by any court, arbitrator, panel, agency or other
governmental, administrative or judicial entity, domestic or foreign, nor is any
basis known to the Stockholders or the Company for any such Claims, and (ii) the
Company is not subject to any judgment, decree, writ, injunction, ruling or
order (collectively, "Judgments") of any governmental, administrative or
judicial authority, domestic or foreign. SCHEDULE 2.9(a) hereto identifies each
Claim and Judgment disclosed thereon which is fully covered by an insurance
policy.
- 11 -
<PAGE>
(b) To the knowledge of the Stockholders or the Company, the
businesses of the Company are being conducted in compliance with all laws,
ordinances, codes, rules, regulations, standards, judgments and other
requirements of all governmental, administrative or judicial entities
(collectively, "Legal Requirements") applicable to the Company or any of its
respective businesses or properties, except where the failure to comply would
not have a material adverse effect upon the financial condition of the Company.
To the knowledge of the Stockholders or the Company, the Company holds, and is
in compliance with, all franchises, licenses, permits, registrations,
certificates, consents, approvals or authorizations (collectively, "Permits")
required by all applicable Legal Requirements, except where the failure to
comply would not have a material adverse effect upon the financial condition of
the Company. A list of all Permits is set forth on SCHEDULE 2.9(b) hereof.
(c) To the knowledge of the Stockholders or the Company, the Company
owns or holds all Permits material to the conduct of its business. To the
knowledge of the Company or the Stockholders, no event has occurred and is
continuing which permits, or after notice or lapse of time or both would permit,
any modification or termination of any Permit.
2.10 PROPERTY.
(a) The properties and assets owned by or leased to the Company
(including improvements to the Real Property (the "Improvements") and all
machinery, equipment and other tangible property are adequate for the conduct
of the respective businesses of the Company as presently conducted. Set
forth on SCHEDULE 2.10 hereto is a list of all interests in real property
owned by or leased to the Company (including all real property owned or
leased by the Stockholders (directly or indirectly) and used in the
businesses of the Company and of all options or other contracts to acquire
any such interest (collectively, the "Real Property "). To the knowledge of
the Stockholders or the Company, such tangible properties and all
Improvements owned or leased by the Company conform in all material respects
with all applicable laws, ordinances, rules and regulations and other Legal
Requirements and such Improvements do not encroach in any respect on property
of others. To the knowledge of the Stockholders or the Company, there are no
latent defects with respect to the Improvements. The Real Property is
currently zoned to permit the conduct of the respective businesses of the
Company as presently conducted. To the knowledge of the Stockholders or the
Company, no Certificate of Occupancy is required with respect to the
Improvements. To the knowledge of the Stockholders or the Company, all
utilities servicing the Real Property and the Improvements are provided by
publicly-dedicated utility lines and are located within public rights-of-way
and do not cross or encumber any private land. No notice of any pending,
threatened or contemplated action by any governmental authority or agency
having the power of eminent domain has been given to the Company or the
Stockholders with respect to the Real Property. Except as otherwise
represented herein, the machinery, equipment and other tangible property are
transferred "as is".
- 12 -
<PAGE>
2.11 ENVIRONMENTAL MATTERS.
(a) Except as set forth on SCHEDULE 2.11(a) hereto, (i) the Company,
the Real Property, the Improvements and any property formerly owned, occupied or
leased by the Company are in compliance with all Environmental Laws (as defined
below), (ii) the Company has obtained all Environmental Permits (as defined
below), (iii) such Environmental Permits are in full force and effect, and (iv)
the Company is in compliance with all terms and conditions of such Environmental
Permits. As used herein, "Environmental Laws" shall mean all applicable
requirements of environmental, public or employee health and safety, public or
community right-to-know, ecological or natural resource laws or regulations or
controls, including all applicable requirements imposed by any law (including
without limitation common law), rule, order, or regulations of any federal,
state, or local executive, legislative, judicial, regulatory, or administrative
agency, board, or authority, or any applicable private agreement (such as
covenants, conditions and restrictions), which relate to, (i) noise, (ii)
pollution or protection of the air, surface water, groundwater, or soil, (iii)
solid, gaseous, or liquid waste generation, treatment, storage, disposal or
transportation, (iv) exposure to Hazardous Materials (as defined below), or (v)
regulation of the manufacture, processing, distribution and commerce, use, or
storage of Hazardous Materials. As used herein, "Environmental Permits" shall
mean all permits, licenses, approvals, authorizations, consents or registrations
required under applicable Environmental Law in connection with the ownership,
use and/or operation of the Company's business or the Real Property or
Improvements.
As used in this SECTION 2.11, "Hazardous Materials" shall mean,
collectively, (i) those substances included within the definitions of or
identified as "hazardous chemicals," "hazardous waste," "hazardous
substances," "hazardous materials," "toxic substances" or similar terms in or
pursuant to, without limitation, the Comprehensive Environmental Response
Compensation and Liability Act of 1980 (42 U.S.C. 9601 ET SEQ.) ("CERCLA"),
as amended by Superfund Amendments and Reauthorization Act of 1986 (Pub. L.
99-499, 100 State, 1613), the Resource Conservation and Recovery Act of 1976
(42 U.S.C. SECTION 6901 ET SEQ.) ("RCRA"), the Occupational Safety and Health
Act of 1970 (29 U.S.C. SECTION 651 ET SEQ.) ("OSHA"), and the Hazardous
Materials Transportation Act, 49 U.S.C. SECTION 1801 ET SEQ. ("HMTA"), and in
the regulations promulgated pursuant to such laws, all as amended, (ii) those
substances listed in the United States Department of Transportation Table (49
CFR 172.101 and amendments thereto) or by the Environmental Protection Agency
(or any successor agency) as hazardous substances (40 CFR part 302 and
amendments thereto), (iii) any material, waste or substance which is or
contains (A) petroleum, including crude oil or any fraction thereof, natural
gas, or synthetic gas usable for fuel or any mixture thereof, (B) asbestos,
(C) polychlorinated biphenyls, (D) designated as a "hazardous substance"
pursuant to Section 311 of the Clean Water Act, 33 U.S.C. SECTION 1251 ET
SEQ. (33 U.S.C. SECTION 1321) or listed pursuant to Section 307 of the Clean
Water Act (33 U.S.C. SECTION 1317), (E) flammable explosives, (F) radioactive
materials, and (iv) such other substances, materials and wastes which are or
become regulated or classified as hazardous, toxic or as "special wastes"
under any Environmental Laws.
- 13 -
<PAGE>
(b) To the knowledge of the Stockholders or the Company, the Company
and the Stockholders have not violated, done or suffered any act which could
give rise to liability under, and are not otherwise exposed to liability under,
any Environmental Law. To the knowledge of the Stockholders or the Company, no
event has occurred with respect to the Real Property, the Improvements or any
property formerly owned, occupied or leased by the Company, which, with the
passage of time or the giving of notice, or both, would constitute a violation
of or non-compliance with any applicable Environmental Law. To the knowledge of
the Stockholders or the Company, the Company has no contingent liability under
any Environmental Law. There are no liens under any Environmental Law on the
Real Property.
(c) Except as set forth on SCHEDULE 2.11(c) hereto, (i) neither the
Company, the Real Property or any portion thereof, the Improvements or any
property formerly owned, occupied or leased by the Company, nor, to the
knowledge of the Company or the Stockholders, any property adjacent to the Real
Property is being used or has been used for the treatment, generation,
transportation, processing, handling, production or disposal of any Hazardous
Materials or as a landfill or other waste disposal site 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 Company's business 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 Stockholders or the Company, none of the
Real Property or portion thereof, the Improvements or any property formerly
owned, occupied or leased by the Company has been subject to investigation by
any governmental authority evaluating the need to investigate or undertake
Remedial Action (as defined below) at such property, and (iii) to the knowledge
of the Stockholders or the Company, none of the Real Property, the Improvements
or any property formerly owned, occupied or leased by the Company or any site or
location where the Company sent waste of any kind, is identified on the current
or proposed (A) National Priorities List under 40 C.F.R. 300 Appendix B, (B)
Comprehensive Environmental Response Compensation and Liability Inventory System
list, or (C) any list arising from any statute analogous to CERCLA. As used
herein, "Remedial Action" shall mean any 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, to the knowledge
of the Stockholders or the Company, there have been and are no (i) aboveground
or underground storage tanks, subsurface disposal systems, or wastes, drums or
containers disposed of or buried on, in or under the ground or any surface
waters, (ii) asbestos or asbestos containing materials or radon gas, (iii)
polychlorinated biphenyls ("PCB") or PCB-containing equipment, including
transformers, or (iv) wetlands (as defined under any Environmental Law) located
within any portion of the Real Property, nor have any liens been placed upon any
- 14 -
<PAGE>
portion of the Real Property, the Improvements or any property formerly owned,
occupied or leased by the Company in connection with any actual or alleged
liability under any Environmental Law.
(e) Except as set forth on SCHEDULE 2.11(e) hereto, (i) there is no
pending or, to the knowledge of the Stockholders or the Company, threatened
claim, litigation, or administrative proceeding, or known prior claim,
litigation or administrative proceeding, arising under any Environmental Law
involving any of the Company, the Real Property, the Improvements, any property
formerly owned, leased or occupied by the Company, any offsite contamination
affecting the business of the Company or any operations conducted at the Real
Property, (ii) there are no ongoing negotiations with or agreements with any
governmental authority relating to any Remedial Action or other environmentally
related claim, (iii) the Company has not submitted notice pursuant to Section
103 of CERCLA or analogous statute or notice under any other applicable Environ-
mental Law reporting a release of a Hazardous Material into the environment, and
(iv) the Company has not received any notice, claim, demand, suit or request for
information from any governmental or private entity with respect to any
liability or alleged liability under any Environmental Law, nor to knowledge of
the Stockholders or the Company, has any other entity whose liability therefor,
in whole or in part, may be attributed to the Company, received such notice,
claim, demand, suit or request for information.
(f) The Stockholders and the Company have provided to UAG all
environmental studies and reports obtained by them or known to them pertaining
to the Real Property, the Improvements, the Company and any property formerly
owned, occupied or leased by the Company, and have permitted (or will have
permitted as of the Closing Date), the testing of the soil, groundwater,
building components, tanks, containers and equipment on the Real Property, the
Improvements, and any property formerly owned, occupied or leased by the
Company, by UAG or UAG's agents or experts as they have or shall have deemed
necessary or appropriate to confirm the condition of such properties.
2.12 INVENTORIES.
The values at which inventories are carried on the Company Balance Sheet
reflect the normal inventory valuation policies of the Company, and such values
are in conformity with GAAP consistently applied, except that no adjustment to
the LIFO reserves will be recorded on such financial statement. All inventories
reflected on the Company Balance Sheet and Company Factory Statement or arising
since the date thereof are currently marketable and can reasonably be
anticipated to be sold at normal mark-ups within 120 days after the date hereof
in the ordinary course of business (subject to the reserve for obsolete, off-
grade or slow-moving items that is reflected in the Company Balance Sheet),
except for spare parts inventory which inventory is good and usable.
- 15 -
<PAGE>
2.13 ACCOUNTS RECEIVABLE.
All accounts receivable reflected on the Company Balance Sheet are, and
all accounts receivable that will be or will have been reflected on the Closing
Date Balance Sheet will be, good and have been or will have been collected or
are collectible in accordance with their terms at their recorded amounts, and
are subject to no material defenses, setoffs or counterclaims other than normal
cash discounts accrued in the ordinary course of business, subject to the
reserve for bad debts set forth on the Company Balance Sheet, as adjusted for
operations and transactions through the Closing Date in the ordinary course of
business and consistent with past practices.
2.14 INSURANCE.
All material properties and assets of the Company which are of an
insurable character are insured against loss or damage by fire and other risks
to the extent and in the manner reasonable in light of the risks attendant to
the businesses and activities in which the Company is engaged and customary for
companies engaged in similar businesses or owning similar assets. Set forth on
SCHEDULE 2.14 hereto is a list and brief description (including the name of the
insurer, the type of coverage provided, the amount of the annual premium for the
current policy period, the amount of remaining coverage and deductibles and the
coverage period) of all policies for such insurance and the Company has made or
will make available to UAG true and complete copies of all such policies. All
such policies are in full force and effect sufficient for all applicable
requirements of law and will not in any way be effected by or terminated or
lapsed by reason of the consummation of the transactions contemplated by this
Agreement and the Lease. No notice of cancellation or non-renewal with respect
to, or disallowance of any claim under, any such policy has been received by the
Company.
2.15 CONTRACTS; ETC.
As used in this Agreement, the term "Company Agreements" shall mean all
mortgages, indenture notes, agreements, contracts, leases, licenses, franchises,
obligations, instruments or other commitments, arrangements or understandings of
any kind, whether written or oral, binding or non-binding, (including all leases
and other agreements referred to on SCHEDULE 2.10 hereto) to which the Company
is a party or by which the Company or any of its assets or properties (including
the Real Property and the Improvements) may be bound or affected, including all
amendments, modifications, extensions or renewals of any of the foregoing. Set
forth on SCHEDULE 2.15 hereto is a complete and accurate list of each Company
Agreement which is material to the businesses, operations, assets, condition
(financial or otherwise) or prospects of the Company. True and complete copies
of all written Company Agreements referred to on SCHEDULE 2.15 and SCHEDULE 2.10
hereto have been delivered or made available to UAG, and the Company has
provided UAG with accurate and complete written summaries of all such Company
Agreements which are unwritten. Except as set forth on SCHEDULE 2.15, to the
knowledge of the Stockholders or the Company, neither the Company nor any other
party thereto is in breach of or default in any
- 16 -
<PAGE>
material respect under any Company Agreement, and no event has occurred which
(after notice or lapse of time or both) would become a breach or default in
any material respect under, or would permit modification, cancellation,
acceleration or termination of, any Company Agreement or result in the
creation of any Lien upon, or any Person obtaining any right to acquire, any
properties, assets or rights of the Company. There are no material unresolved
disputes involving any Company under any Company Agreement.
2.16 LABOR RELATIONS.
(a) The Company has paid or made provision for the payment of all
salaries and accrued wages and has complied in all material respects with all
applicable laws, rules and regulations relating to the employment of labor,
including those relating to wages, hours, collective bargaining and the payment
and withholding of taxes, and has withheld and paid to the appropriate govern-
mental authority, or is holding for payment not yet due to such authority, all
amounts required by law or agreement to be withheld from the wages or salaries
of its employees.
(b) Except as set forth on SCHEDULE 2.16(b) hereto, the Company is not
a party to any (i) outstanding employment agreements or contracts with officers
or employees that are not terminable at will, or that provide for payment of any
bonus or commission, (ii) agreement, policy or practice that requires it to pay
termination or severance pay to salaried, non-exempt or hourly employees (other
than as required by law), (iii) collective bargaining agreement or other labor
union contract applicable to persons employed by the Company, nor do the
Stockholders or the Company know of any activities or proceedings of any labor
union to organize any such employees. The Company has furnished to UAG complete
and correct copies of all such agreements ("Employment and Labor Agreements").
The Company has not breached or otherwise failed to comply with any material
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'
or the Company's knowledge, threatened, against or affecting the Company, and
the Company has not experienced any strike, material slow down or material
work stoppage, lockout or other collective labor action by or with respect to
employees of the Company, (iii) there is no representation claim or petition
pending before the NLRB or any similar foreign agency and no question
concerning representation exists relating to the employees of the Company,
(iv) there are no charges with respect to or relating to the Company pending
before the Equal Employment Opportunity Commission or any state, local or
foreign agency responsible for the prevention of unlawful
employment-practices, (v) the Company has not received formal notice from any
federal, state, local or foreign agency responsible for the enforcement of
labor or employment laws of an intention to conduct an investigation of the
Company and, to the knowledge of the Company, no such investigation is in
progress and (vi) the consents of the unions that are parties to any
- 17 -
<PAGE>
Employment and Labor Agreements are not required to complete the transactions
contemplated by this Agreement and the Documents.
(d) The Company has never caused any "plant closing" or "mass layoff"
as such actions are defined in the Worker Adjustment and Retraining
Notification Act, as codified at 29 U.S.C. SECTIONS 2101-2109, and the
regulations promulgated therein.
2.17 EMPLOYEE BENEFIT PLANS.
(a) Set forth on SCHEDULE 2.17(a) hereto is a true and complete list
of:
(i) each employee pension benefit plan, as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974 ("ERISA"),
maintained by the Company or to which the Company is required to make
contributions ("Pension Benefit Plan"); and
(ii) each employee welfare benefit plan, as defined in Section
3(i) of ERISA, maintained by the Company or to which the Company is
required to make contributions ("Welfare Benefit Plan").
True and complete copies of all Pension Benefit Plans and Welfare
Benefit Plans (collectively, "ERISA Plans") have been delivered to or made
available to UAG together with, as applicable with respect to each such ERISA
Plan, trust agreements, summary plan descriptions, all IRS determination
letters or applications therefor with respect to any Pension Benefit Plan
intended to be qualified pursuant to Section 401 (a) of the Internal Revenue
Code of 1986, as amended (the "Code"), and valuation or actuarial reports,
accountant's opinions, financial statements, IRS Form 5500s (or 5500-C or
5500-R) and summary annual reports for the last three years.
(b) With respect to the ERISA Plans, except as set forth on SCHEDULE
2.17(b):
(i) there is no ERISA Plan which is a "multiemployer" plan as
that term is defined in Section 3(37) of ERISA ("Multiemployer Plan");
(ii) no event has occurred or (to the knowledge of the Company
or the Stockholders) is threatened or about to occur which would
constitute a prohibited transaction under Section 406 of ERISA or
under Section 4975 of the Code;
(iii) each ERISA Plan has operated since its inception in
accordance in all material respects with the reporting and disclosure
requirements imposed under ERISA and the Code and has timely filed
Form 5500e (or 5500-C or 5500-R) and predecessors thereof; and
(iv) no ERISA Plan is liable for any federal, state, local or
foreign Taxes.
- 18 -
<PAGE>
(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 all material
respects in accordance with its terms and there exists no fact which
would adversely affect its qualified status; and
(iii) is not currently under investigation, audit or review by
the IRS or (to the knowledge of the Company or the Stockholders) no
such action is contemplated or under consideration and the IRS has not
asserted that any Pension Benefit Plan is not qualified under Section
401(a) of the Code or that any trust established under a Pension
Benefit Plan is not exempt under Section 501(a) of the Code.
(d) With respect to each Pension Benefit Plan which is a defined
benefit plan under Section 414(j) and, for the purpose solely of SECTION
2.17(d)(iv) hereof, each defined contribution plan under Section 414(i) of
the Code:
(i) no liability to the Pension Benefit Guaranty Corporation
("PBGC") under Sections 4062-4064 of ERISA has been incurred by the
Company since the effective date of ERISA and all premiums due and
owing to the PBGC have been timely paid;
(ii) the PBGC has not notified the Company or any Pension
Benefit Plan of the commencement of proceedings under Section 4042 of
ERISA to terminate any such plan;
(iii) to the knowledge of the Stockholders or the Company, no
event has occurred since the inception of any Pension Benefit Plan or
(to the knowledge of the Company or the Stockholders) is threatened or
about to occur which would constitute a reportable event within the
meaning of Section 4043(b) of ERISA;
(iv) no Pension Benefit Plan ever has incurred any "accumulated
funding deficiency" (as defined in Section 302 of ERISA and Section
412 of the Code); and
(v) if any of such Pension Benefit Plans were to be terminated
on the Closing Date (A) no liability under Title IV of ERISA would be
incurred by the Company and (B) all benefits accrued to the day prior
to the Closing Date (whether or not vested) would be fully funded in
accordance with the actuarial assumptions and method utilized by such
plan for valuation purposes.
- 19 -
<PAGE>
(e) With respect to each Pension Benefit Plan, SCHEDULE 2.17(e)
contains a list of all Pension Benefit Plans to which ERISA has applied which
have been or are being terminated, or for which a termination is
contemplated, and a description of the actions taken by the PBGC and the IRS
with respect thereto.
(f) The aggregate of the amounts of contributions by the Company to
be paid or accrued under ERISA Plans for the current fiscal year is not
expected to exceed approximately one hundred and ten percent of the amounts
of such contributions for the past fiscal year. To the extent required in
accordance with GAAP, the Company Balance Sheet reflects in the aggregate an
accrual of all amounts of employer contributions accrued but unpaid by the
Company under the ERISA Plans as of the date of the Company Balance Sheet.
(g) With respect to any Multiemployer Plan (1) the Company has not,
since its formation, made or suffered a "complete withdrawal" or "partial
withdrawal" as such terms are respectively defined in Sections 4203 and 4205
of ERISA; (2) there is no withdrawal liability of the Company under any
Multiemployer Plan, computed as if a "complete withdrawal" by the Company had
occurred under each such Plan as of December 31, 1995; and (3) the Company
has not received notice to the effect that any Multiemployer Plan is either
in reorganization (as defined in Section 4241 of ERISA) or insolvent (as
defined in Section 4245 of ERISA).
(h) With respect to the Welfare Benefit Plans:
(i) There are no liabilities of the Company under Welfare Benefit
Plans with respect to any condition which relates to a claim filed on or
before the Closing Date.
(ii) No claims for benefits are in dispute or litigation.
2.18 OTHER BENEFIT AND COMPENSATION PLANS OR ARRANGEMENTS.
(a) Set forth on SCHEDULE 2.18(a) hereto is a true and complete list of:
(i) each employee stock purchase, employee stock option,
employee stock ownership, deferred compensation, performance, bonus,
incentive, vacation pay, holiday pay, insurance, severance,
retirement, excess benefit or other plan, trust or arrangement which
is not an ERISA Plan whether written or oral, which the Company
maintains or is required to make contributions to;
(ii) each other agreement, arrangement, commitment and
understanding of any kind, whether written or oral, with any current
or former officer, director or consultant of the Company pursuant to
which payments may be required to be made at any time following the
date hereof (including, without limitation, any employment, deferred
- 20 -
<PAGE>
compensation, severance, supplemental pension, termination or
consulting agreement or arrangement); and
(iii) each employee of the Company whose aggregate
compensation for the fiscal year ended December 31, 1995 exceeded, and
whose aggregate compensation for the fiscal year ended December 31,
1996 is likely to exceed, $50,000. True and complete copies of all of
the written plans, arrangements and agreements referred to on SCHEDULE
2.18(a) ("Compensation Commitments") have been provided to UAG
together with, where prepared by or for the Company, any valuation,
actuarial or accountant's opinion or other financial reports with
respect to each Compensation Commitment for the last three years. An
accurate and complete written summary has been provided to UAG with
respect to any Compensation Commitment which is unwritten.
(b) Each Compensation Commitment:
(i) since its inception, has been operated in all material
respects in accordance with its terms;
(ii) is not currently under investigation, audit or review by
the IRS or any other federal or state agency and (to the knowledge of
the Company or the Stockholders) no such action is contemplated or
under consideration;
(iii) has no liability for any federal, state, local or
foreign Taxes;
(iv) has no claims subject to dispute or litigation;
(v) has met all applicable requirements, if any, of the Code;
and
(vi) has operated since its inception in material compliance
with the reporting and disclosure requirements imposed under ERISA and
the Code.
2.19 TRANSACTIONS WITH INSIDERS.
Set forth on SCHEDULE 2.19 hereto is a complete and accurate
description of all material transactions between the Company or any ERISA
Plan, on the one hand, and any Insider, on the other hand, that have occurred
since January 1, 1995. For purposes of this Agreement:
(i) the term "Insider" shall mean the Stockholders, any
director or officer of the Company, and any Affiliate, Associate or
Relative of any of the foregoing persons;
(ii) the term "Associate" used to indicate a relationship with
any person means (A) any corporation, partnership, joint venture or
other entity of which such person is an officer or partner or is,
directly or indirectly, through one or more
- 21 -
<PAGE>
intermediaries, the beneficial owner of 30% or more of (1) any class
or type of equity securities or other profits interest or (2) the
combined voting power of interests ordinarily entitled to vote for
management or otherwise, and (B) any trust or other estate in which
such person has a substantial beneficial interest or as to which such
person serves as trustee or in a similar fiduciary capacity; and
(iii) a "Relative" of a person shall mean such person's
spouse, such person's parents, sisters, brothers, children and the
spouses of the foregoing, and any member of the immediate household of
such person.
2.20 PROPRIETY OF PAST PAYMENTS.
Except as set forth in SCHEDULE 2.20 hereto, to the knowledge of the
Stockholders or the Company, no funds or assets of the Company have been used
for illegal purposes; no unrecorded funds or assets of the Company have been
established for any purpose; no accumulation or use of the Company's
corporate funds or assets has been made without being properly accounted for
in the respective books and records of the Company; all payments by or on
behalf of the Company have been duly and properly recorded and accounted for
in their respective books and records; no false or artificial entry has been
made in the books and records of the Company for any reason; no payment has
been made by or on behalf of the Company with the understanding that any part
of such payment is to be used for any purpose other than that described in
the documents supporting such payment; and the Company has not made, directly
or indirectly, any illegal contributions to any political party or candidate,
either domestic or foreign. Neither the IRS nor any other federal, state,
local or foreign government agency or entity has initiated or threatened any
investigation of any payment made by the Company of, or alleged to be of, the
type described in this SECTION 2.20.
2.21 INTEREST IN COMPETITORS.
Except as set forth on SCHEDULE 2.21, neither the Company nor the
Stockholders, nor any of their Affiliates, have any interest, either by way
of contract or by way of investment (other than as holder of not more than 2%
of the outstanding capital stock of a publicly traded Person, so long as such
holder has no other connection or relationship with such Person) or
otherwise, directly or indirectly, in any Person other than the Company that
is engaged in the retail sale of automobiles in Tennessee.
2.22 BROKERS.
Neither the Company, nor any director, officer or employee thereof, nor
the Stockholders or any representative of the Stockholders, has employed any
broker or finder or has incurred or will incur any broker's, finder's or
similar fees, commissions or expenses, in each case in connection with the
transactions contemplated by this Agreement or the Lease.
- 22 -
<PAGE>
2.23 ACCOUNTS.
SCHEDULE 2.23 hereof correctly identifies each bank account maintained
by or on behalf or for the benefit of the Company and the name of each person
with any power or authority to act with respect thereto.
2.24 DISCLOSURE.
Neither the Company nor any Stockholder has made any material
misrepresentation to UAG relating to the Company or the Shares and neither
the Company nor any Stockholder has omitted to state to UAG any material fact
relating to the Company or the Shares which is necessary in order to make the
information given by or on behalf of the Company or the Stockholders to UAG
not misleading or which if disclosed would reasonably affect the decision of
a person considering an acquisition of the Shares. No fact, event, condition
or contingency exists or has occurred which has, or in the future can
reasonably be expected to have, a Material Adverse Effect, which has not been
disclosed in the Company's Financial Statements or the schedules to this
Agreement.
2.25 NET WORTH.
On the Closing Date, the Net Worth of the Company, as determined in
accordance with the Accounting Principles, will be no less than Five Million
Ninety Thousand Dollars ($5,090,000).
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
Subject to the parties' agreement and acknowledgement that certain of
the Schedules referred to in this ARTICLE 3 are to be delivered by the
Company and the Stockholders no later than September 6, 1996, each
Stockholder hereby jointly and severally represents and warrants to UAG and
Sub as follows:
3.1 OWNERSHIP OF SHARES; TITLE.
Each Stockholder is the owner of record and beneficially of the Shares
set forth on SCHEDULE 3.1 hereof and has, and shall transfer to Sub at the
Closing, good and marketable title to the Shares owned by him, free and clear
of any and all Liens, claims and encumbrances and free and clear of any
restrictions on transfer (other than restrictions on transfer imposed by
applicable federal and state securities laws), proxies and voting or other
agreements.
- 23 -
<PAGE>
3.2 AUTHORITY.
Each Stockholder has all requisite power and authority and has full
legal capacity and is competent to execute, deliver and perform this
Agreement and to consummate the transactions contemplated hereby (including
the disposition of the Shares to Sub as contemplated by this Agreement).
This Agreement has been duly executed and delivered by each Stockholder and
constitutes a valid and binding obligation of each Stockholder, enforceable
against each Stockholder in accordance with its terms. Except as set forth
on SCHEDULE 3.2, the execution, delivery and performance of this Agreement by
each Stockholder and the consummation of the transactions contemplated
hereby do not and will not:
(i) (after notice or lapse of time or both) conflict with,
result in a breach of any provision of, constitute a default under,
result in the modification or cancellation of, or give rise to any
right of termination or acceleration in respect of, any material
contract, agreement, commitment, understanding, arrangement or
restriction to which any Stockholders is a party or to which any
Stockholders or any of such Stockholders's property is subject;
(ii) violate or conflict with any Legal Requirements applicable
to any Stockholder or any of such Stockholder's businesses or
properties; or
(iii) require any authorization, consent, order, permit or
approval of, or notice to, or filing, registration or qualification
with, any governmental, administrative or judicial authority, except
in connection with or in compliance with the provisions of the H-S-R
Act.
3.3 REAL PROPERTY AND IMPROVEMENTS.
Landlord owns the Real Property and Improvements in fee simple, free
and clear of all Liens, claims and encumbrances, except those disclosed in
SCHEDULE 3.3(a), none of which currently or, to each Stockholder's knowledge,
in the future will affect the use of the Real Property or the Improvements
for the conduct of the respective businesses of the Company as presently
conducted. No assessments have been made against any portion of the Real
Property which are unpaid (except ad valorem taxes for the current year that
are not yet due and payable), whether or not they have become Liens. There
are no disputes concerning the location of the lines and corners of the Real
Property. No one has been granted any right to purchase or lease the Real
Property or Improvements other than the existing lease in favor of the
Company, which is to be terminated at Closing. Attached as SCHEDULE 3.3 are
all surveys, title binders, title policies and copies of any exceptions to
title.
- 24 -
<PAGE>
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF UAG AND SUB
UAG and Sub hereby represent and warrant to the Company and the
Stockholders as follows:
4.1 ORGANIZATION AND GOOD STANDING.
Each of UAG and each of its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the state
of its incorporation and has the corporate power and authority to own, lease
and operate the properties used in its business and to carry on its business
as now being conducted. Each of UAG and each of its subsidiaries is duly
qualified to do business and is in good standing as a foreign corporation in
each state and jurisdiction where qualification as a foreign corporation is
required, except for such failures to be qualified and in good standing, if
any, which when taken together with all other such failures of UAG and its
subsidiaries would not, or could not reasonably be expected to, in the
aggregate have a material adverse effect on UAG and its subsidiaries, taken
as a whole.
4.2 AUTHORITY; APPROVALS AND CONSENTS.
UAG and Sub have the corporate power and authority to enter into this
Agreement and to perform their respective obligations hereunder. This
Agreement has been duly executed and delivered by, and constitutes valid and
binding obligation of, UAG and Sub, enforceable against UAG and Sub in
accordance with its terms. Except as set forth on SCHEDULE 4.2 hereto, the
execution, delivery and performance by UAG and Sub of this Agreement and the
consummation of the transactions contemplated hereby do not and will not:
(i) contravene any provisions of the certificate of
incorporation or bylaws of UAG or Sub;
(ii) (after notice or lapse of time or both) conflict with,
result in a breach of any provision of, constitute a default under,
result in the modification or cancellation of, or give rise to any
right of termination or acceleration in respect of, any UAG Agreement
(as defined below) or, require any consent or waiver of any party to
any UAG Agreement other than agreements the breach or violation of
which could not reasonably be expected to have a material adverse
effect on UAG and its subsidiaries, taken as a whole;
(iii) violate or conflict with any Legal Requirements
applicable to UAG or any of its subsidiaries or any of their
respective businesses or properties; or
(iv) require any authorization, consent, order, permit or
approval of, or notice to, or filing, registration or qualification
with, any governmental, administrative
- 25 -
<PAGE>
or judicial authority, except in connection with or in compliance with
the provisions of the H-S-R Act.
4.3 BROKERS.
Neither UAG, Sub nor any of their directors, officers or employees has
employed any broker or finder or has incurred or will incur any broker's,
finder's or similar fees, commissions or expenses, in each case in connection
with the transactions contemplated by this Agreement or the Lease. UAG shall
indemnify the Company and the Stockholder for any claim by Jappie Dickinson
for a broker's, finder's or similar fee, commission or expense arising out of
this transaction.
4.4 DISCLOSURE.
Neither UAG nor Sub has made any material misrepresentation to the
Stockholders and neither UAG nor Sub has omitted to state to the Stockholders
any material fact relating to UAG or Sub which is necessary in order to make
the information given by UAG or Sub not misleading or which if disclosed
would reasonably affect the decision of a person considering the sale of the
Shares.
ARTICLE 5
COVENANTS AND ADDITIONAL AGREEMENTS
5.1 ACCESS; CONFIDENTIALITY.
Between the date hereof and the Closing Date, the Stockholders and the
Company will (i) provide to the officers and other authorized representatives
of UAG and Sub full access, during normal business hours, to any and all
premises, properties, files, books, records, documents, and other information
of the Company and will cause the Company's officers to furnish to UAG and
its authorized representatives any and all financial, technical and operating
data and other information pertaining to the businesses and properties of the
Company (including the Real Property and the Improvements), and (ii) make
available for inspection and copying by UAG and Sub true and complete copies
of any documents relating to the foregoing. UAG and Sub will hold, and will
cause their representatives to hold, in confidence (unless and to the extent
compelled to disclose by judicial or administrative process or, in the
opinion of its counsel, by other requirements of law) all Confidential
Information (as defined below) and will not disclose the same to any third
party except in connection with obtaining financing and otherwise as may
reasonably be necessary to carry out this Agreement and the transactions
contemplated hereby, including any due diligence review by or on behalf of
UAG and Sub. If this Agreement is terminated, UAG and Sub will, and will
cause their representatives to, promptly return to the Company, upon the
reasonable request of the Company, all Confidential Information furnished by
the Company, including all copies and summaries thereof. As used herein,
"Confidential Information" shall mean all information concerning the Company
obtained by UAG, Sub and their representa-
- 26 -
<PAGE>
tives from the Company in connection with the transactions contemplated by
this Agreement, except information (x) ascertainable or obtained from public
information, (y) received from a third party not employed by or otherwise
affiliated with the Company or (z) which is or becomes known to the public,
other than through a breach by UAG or Sub or any of their representatives of
this Agreement.
5.2 FURNISHING INFORMATION; ANNOUNCEMENTS.
The Stockholders and the Company, on the one hand, and UAG and Sub, on
the other hand, will, as soon as practicable after reasonable request
therefor, furnish to the other all the information concerning the
Stockholders and the Company or UAG and Sub, respectively, required for
inclusion in any statement or application made by UAG or Sub or the Company
or the Stockholders to any governmental or regulatory body or to any
manufacturer or distributor or in connection with obtaining any third party
consent in connection with the transactions contemplated by this Agreement.
Neither the Stockholders or the Company, on the one hand, nor UAG or Sub, on
the other hand, nor any representative thereof, shall issue any press
releases or otherwise make any public statement with respect to the
transactions contemplated hereby without the prior consent of the other,
except as may be required by law. UAG shall reimburse the Company and the
Stockholders for reasonable expenses incurred by the Company and the
Stockholder in connection with this Section.
5.3 CERTAIN CHANGES AND CONDUCT OF BUSINESS.
(a) Except as set forth on SCHEDULE 5.3(a), from and after the date
of this Agreement and until the Closing Date, the Company shall, and the
Stockholders shall cause the Company to, conduct its businesses solely in the
ordinary course consistent with past practices and, without the prior written
consent of UAG, neither the Stockholders nor the Company will, except as
required or permitted pursuant to the terms hereof, permit the Company to:
(i) make any material change in the conduct of its businesses
and operations or enter into any transaction other than in the
ordinary course of business consistent with past practices;
(ii) make any change in its Charter or Bylaws, issue any
additional shares of capital stock or equity securities or grant any
option, warrant or right to acquire any capital stock or equity
securities or issue any security convertible into or exchangeable for
its capital stock or alter any material term of any of its outstanding
securities or make any change in its outstanding shares of capital
stock or other ownership interests or its capitalization, whether by
reason of a reclassification, recapitalization, stock split or
combination, exchange or readjustment of shares, stock dividend or
otherwise;
- 27 -
<PAGE>
(iii) (A) incur, assume or guarantee any indebtedness for
borrowed money, issue any notes, bonds, debentures or other corporate
securities or grant any option, warrant or right to purchase any
thereof, except pursuant to transactions in the ordinary course of
business consistent with past practices, (B) issue any securities
convertible or exchangeable for debt securities of the Company, or (C)
issue any options or other rights to acquire from the Company,
directly or indirectly, debt securities of the Company or any security
convertible into or exchangeable for such debt securities;
(iv) make any sale, assignment, transfer, abandonment or other
conveyance of any of its assets or any part thereof, except
transactions pursuant to existing contracts (which will be set forth
in SCHEDULE 2.15 hereto) and dispositions in the ordinary course of
business consistent with past practices;
(v) subject any of its assets, or any part thereof, to any
lien or suffer such to be imposed other than such liens as may arise
in the ordinary course of business consistent with past practices;
(vi) declare, set aside or pay any dividends or other
distribution (whether in cash, stock, property or any combination
thereof) in respect of any shares of its capital stock which would
decrease the Net Worth of the Company below Five Million Ninety
Thousand Dollars ($5,090,000) or redeem, retire, purchase or otherwise
acquire, directly or indirectly, any shares of its capital stock which
would decrease the Net Worth of the Company below Five Million Ninety
Thousand ($5,090,000) Dollars;
(vii) acquire any assets, raw materials or properties, or enter
into any other transaction, other than in the ordinary course of
business consistent with past practices;
(viii) enter into any new (or amend any existing) employee
benefit plan, program or arrangement or any new (or amend any
existing) employment, severance or consulting agreement, grant any
general increase in the compensation of officers or employees
(including any such increase pursuant to any bonus, pension,
profit-sharing or other plan or commitment) or grant any increase in
the compensation payable or to become payable to any employee, except
in accordance with pre-existing contractual provisions or consistent
with past practices;
(ix) make or commit to make any individual material capital
expenditure in excess of $50,000, or aggregate capital expenditures in
excess of $150,000, except in the ordinary course of business and
except for the purchase of a computer system for approximately
$125,000;
(x) pay, loan or advance any amount to, or sell, transfer or
lease any properties or assets to, or enter into any agreement or
arrangement with, any of its Affiliates, except in the ordinary course
of business;
- 28 -
<PAGE>
(xi) guarantee any indebtedness for borrowed money or any other
obligation of any other Person, other than in the ordinary course of
business consistent with past practice;
(xii) fail to keep in full force and effect insurance comparable
in amount and scope to coverage maintained by it (or on behalf of it)
on the date hereof;
(xiii) make any loan, advance or capital contribution to or
investment in any Person, except in the ordinary course of business;
(xiv) make any change in any method of accounting or accounting
principle, method, estimate or practice except for any such change
required by reason of a concurrent change in GAAP or write-down the
value of any inventory or write-off as uncollectible any accounts
receivable except in the ordinary course of business consistent with
past practices;
(xv) settle, release or forgive any material claim or
litigation or waive any material right;
(xvi) make, enter into, modify, amend in any material respect or
terminate any material commitment, bid or expenditure, other than in
the ordinary course of business consistent with past practice; or
(xvii) commit itself to do any of the foregoing.
(b) Except as set forth on SCHEDULE 5.3(b), from and after the date
hereof and until the Closing Date, the Stockholders and the Company will use
their reasonable best efforts to cause the Company to:
(i) continue to maintain, in all material respects, the
Company's properties, the Real Property and the Improvements in
accordance with present practices in a condition suitable for their
current use;
(ii) comply with all applicable Environmental Laws, and, in
the event it shall receive notice that there exists a violation of any
Environmental Law with respect to its operations, the Improvements or
any Real Property, promptly (and in any event within the time period
permitted by the applicable governmental authority) remove or remedy
such violation in accordance with all applicable Environmental Laws;
(iii) file, when due or required, federal, state, foreign and
other tax returns and other reports required to be filed and pay when
due all taxes, assessments, fees and other charges lawfully levied or
assessed against it unless the validity thereof is contested in good
faith and by appropriate proceedings diligently conducted;
- 29 -
<PAGE>
(iv) keep its books of account, records and files in the
ordinary course and in accordance with existing practices;
(v) preserve its business organization intact and continue to
maintain existing business relationships with suppliers, customers and
others with whom business relationships exist other than relationships
that are, at the same time, not economically beneficial to it; and
(vi) continue to conduct its business in the ordinary course
consistent with past practices.
5.4 NO INTERCOMPANY PAYABLES OR RECEIVABLES.
At the Closing there will be no intercompany payables or intercompany
receivables due and/or owing between the Stockholders and any of their
Affiliates, on the one hand, and the Company, on the other hand, except for
the Standefer Loan as set forth in SECTION 5.13 hereof, which shall be paid
in full on or before the Closing Date.
5.5 NEGOTIATIONS.
Until the earlier of 180 days from the date hereof and the termination
of this Agreement pursuant to SECTION 8.1 hereof, no Stockholder, nor the
Company, nor the Company's officers, directors, employees, advisors, agents,
representatives, Affiliates or anyone acting on behalf of the Stockholders,
the Company or such persons, shall, directly or indirectly, encourage,
solicit, initiate or engage in discussions or negotiations with, or provide
any information to, any person (other than UAG or its representatives)
concerning any merger, sale of assets (other than in the ordinary course of
business), purchase or sale of shares of capital stock or similar transaction
involving the Company. The Stockholders shall promptly communicate to UAG
any inquiries or communications concerning any such transaction (including
the identity of any person making such inquiry or communication) which the
Stockholders may receive or of which the Stockholders may become aware.
5.6 CONSENTS; COOPERATION.
Subject to the terms and conditions hereof, the Stockholders and the
Company and UAG and Sub will use their respective best efforts at their own
expense:
(i) to obtain prior to the earlier of the date required (if
so required) or the Closing Date, all waivers, permits, licenses,
approvals, authorizations, qualifications, orders and consents of all
third parties and governmental authorities, and make all filings and
registrations with governmental authorities which are required on
their respective parts for (A) the consummation of the transactions
contemplated by this Agreement, (B) the ownership or leasing and
operating after the Closing by the Company of all its material
properties and (C) the conduct after the Closing by the Company of its
businesses as conducted by it on the date hereof.
- 30 -
<PAGE>
(ii) to defend, consistent with applicable principles and
requirements of law, any lawsuit or other legal proceedings, whether
judicial or administrative, whether brought derivatively or on behalf
of third persons (including governmental authorities) challenging this
Agreement or the transactions contemplated hereby; and
(iii) to furnish each other such information and assistance as
may reasonably be requested in connection with the foregoing.
5.7 ADDITIONAL AGREEMENTS.
Subject to the terms and conditions of this Agreement, each of the
parties hereto agrees to use its best efforts at its own expense to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this
Agreement. In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, the
proper officers of the Company shall take all such necessary action.
5.8 INTERIM FINANCIAL STATEMENTS.
If requested by UAG and at UAG's expense, within thirty (30) days after
the end of each calendar month after June 30, 1996 the Company will deliver
to UAG unaudited consolidated balance sheets of the Company at the end of
such calendar month and at the end of the corresponding calendar month of the
preceding fiscal year, together with the related unaudited consolidated
statements of income and cash flow for the fiscal months then ended. The
Company will also deliver to UAG copies of the Company Factory Statements
provided to Nissan after the date hereof within five days of their delivery
to Nissan. All such financial statements shall fairly present the financial
position and results of operations of the Company as of the date or for the
periods indicated. All unaudited financial statements delivered pursuant to
this SECTION 5.8 shall be prepared on a basis consistent with the Company
Financial Statements.
5.9 NOTIFICATION OF CERTAIN MATTERS.
Between the date hereof and the Closing, each party to this Agreement
will give prompt notice in writing to the other party hereto of: (i) any
information that indicates that any representation and warranty of such party
contained herein was not true and correct as of the date made or will not be
true and correct as of the Closing, (ii) the occurrence of any event which
could result in the failure to satisfy a condition specified in ARTICLE 6 or
ARTICLE 7 hereof, as applicable, (iii) any notice or other communication from
any third person alleging that the consent of such third person is or may be
required in connection with the transactions contemplated by this Agreement,
and (iv) in the case of the Stockholders and the Company, any notice of, or
other communication relating to, any default or event which, with notice or
lapse of time or both, would become a default under any Company Agreement set
forth on SCHEDULE 2.15. The Company and the Stockholders will (x) promptly
advise
- 31 -
<PAGE>
UAG of any event that has, or could reasonably be expected in the future to
have, a Material Adverse Effect on the Company, (y) confer on a regular and
frequent basis with one or more designated representatives of UAG to report
operational matters and to report the general status of ongoing operations,
and (z) notify UAG of any emergency or other change in the normal course of
business or relating to the Real Property or Improvements of the Company and
of any governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated) or adjudicatory proceedings
involving the Company, the Real Property or the Improvements and will keep
UAG fully informed of such events and permit UAG's representatives access to
all materials prepared in connection therewith. Each Stockholder shall give
prompt notice to UAG of any notice or other communication from any third
person asserting any right, title or interest in any of the Shares held by
such Stockholder (including, without limitation, any threat to commence, or
notice of the commencement of any action or other proceeding with respect to
the Shares) or the occurrence of any other event of which such Stockholder
has knowledge which could result in any failure to consummate the sale of the
Shares as contemplated hereby.
5.10 ASSURANCE BY THE STOCKHOLDERS.
Each Stockholder shall use its best efforts to cause the Company to
comply with its respective covenants set forth in this Agreement.
5.11 ANTITRUST IMPROVEMENTS ACT COMPLIANCE.
UAG, the Stockholders and the Company, as applicable, shall each file
or cause to be filed with the Federal Trade Commission and the United States
Department of Justice any notifications required to be filed by the
respective "ultimate parent" entities under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "H-S-R Act"), and the rules and
regulations promulgated thereunder, with respect to the transactions
contemplated herein. UAG shall pay the H-S-R filing fee relating to such
filings. The parties shall use their best efforts to make such filings
promptly, to respond to any requests for additional information made by
either of such agencies, to cause the waiting periods under the H-S-R Act to
terminate or expire at the earliest possible date and to resist vigorously,
at UAG's 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 shall determine that continuing such resistance is not
in its best interests, UAG may, by written notice to the other party,
terminate this Agreement with the effect set forth in SECTION 8.2 hereof.
5.12 USE OF "STANDEFER" NAME.
After the Closing Date, UAG and the Company shall not use the name
"Standefer" in connection with the business of the Company; PROVIDED,
HOWEVER, that the Company may continue to use the "Standefer" name in a
manner consistent with its use prior to the Closing for a period of sixty
(60) days after the Closing. After the Closing, neither Standefer nor
- 32 -
<PAGE>
any of his Affiliates (other than adult children) shall use the name
"Standefer" in connection with the sale or servicing of new or used
automobiles or light duty trucks prior to the fifth year anniversary of the
Closing Date; PROVIDED, HOWEVER, that relatives of Standefer may use the
Standefer name in connection with the sale of new or used automobiles or
light duty trucks (other than the sale of Nissans in Hamilton County,
Tennessee) so long as Standefer does not have a direct or indirect ownership
interest in any such business and does not directly or indirectly assist in
the management or operation of such business (except that nothing herein
shall prevent Standefer from making loans to or leasing property (at fair
market value) to an entity engaged in the sale of new or used automobiles or
light duty trucks).
5.13 STANDEFER LOAN.
On or before the Closing Date, the Stockholders shall cause the Company
to pay the outstanding principal and all accrued but unpaid interest on the
Standefer Loan. For purposes of this Section, the Standefer Loan shall mean
the loan to the Company from Standefer and his Affiliates as set forth on the
Company Balance Sheet in the approximate amount of $1,865,000.
5.14 DISTRIBUTION OF SUBSIDIARY'S STOCK.
The parties acknowledge and agree that the interest in Scenic City,
Ltd., a Nevada limited partnership, owned by the Company shall be distributed
to the Stockholders or an Affiliate of the Stockholders (at book value) prior
to the Closing Date.
5.15 CONTRIBUTION OF EQUIPMENT.
The parties acknowledge and agree that the equipment owned by the
Landlord and used in the business of the Company will be contributed to the
Company on or before the Closing Date, subject to the existing liabilities
set forth on SCHEDULE 5.15 hereof.
5.16 STOCK RESTRICTION AGREEMENT.
Prior to the Closing Date, the Stock Restriction Agreement shall be
terminated in accordance with its terms and the parties thereto shall have
released any and all claims arising under or relating to the Stock
Restriction Agreement and its termination.
5.17 SPLIT-DOLLAR AGREEMENT.
Prior to the Closing Date, the Split-Dollar Agreement between the
Charles B. Standefer Irrevocable Insurance Trust and the Company shall be
terminated and the Closing Date Balance Sheet shall not include as an asset
of the Company the amount owed for premium advances relating to such
Split-Dollar Agreement.
- 33 -
<PAGE>
5.18 PERSONAL ITEMS.
The parties acknowledge and agree that the Stockholders may retain
certain personal items (which items are not reflected as assets on the
Company Balance Sheet and will not be reflected as assets on the Closing Date
Balance Sheet). These items will include personal pictures, awards and
mementos.
5.19 S CORPORATION TAX RETURNS.
The S corporation federal income tax returns (Form 1120S) of the
Company for the tax year beginning on January 1, 1996, shall be prepared by
the regular accounting firm of the Company, at the sole cost and expense of
the Company, with the Stockholders having a right to review and make comments
on such return prior to its being filed with the Internal Revenue Service.
5.20 AUDITS.
Sub shall (i) grant to each Stockholder access at all reasonable times
to all of the Company's books and records (including tax workpapers and
returns and correspondence with tax authorities), including the right to take
extracts therefrom and make copies thereof, to the extent that such books and
records relate to taxable periods ending on or prior to or that include the
Closing Date, and (ii) otherwise cooperate with the Stockholders in
connection with any audit of taxes that relate to the business of the Company
prior to the Closing. Sub will allow the Stockholders and their counsel to
participate at their own expense in any audits of the Company's federal
income tax returns to the extent that such returns could affect the
Stockholders. Sub will not allow the Company to settle any such audit in a
manner which would or could adversely affect the Stockholders after the
Closing Date without the prior written consent of the Stockholders, which
consent shall not unreasonably be withheld.
5.21 NO LIABILITY; SECTION 338 ELECTION.
The Stockholders shall under no circumstances be liable for any federal
income tax liability of the Company arising from or occasioned by any
election by Sub with respect to the Company (whether actual or deemed) under
Section 338 of the Internal Revenue Code.
ARTICLE 6
CONDITIONS TO THE OBLIGATIONS
OF UAG AND SUB TO EFFECT THE CLOSING
The obligations of UAG and Sub required to be performed by them at the
Closing shall be subject to the satisfaction, at or prior to the Closing, of
each of the following conditions, each of which may be waived by UAG and Sub
as provided herein except as otherwise required by applicable law:
- 34 -
<PAGE>
6.1 REPRESENTATIONS AND WARRANTIES; AGREEMENTS; COVENANTS.
Each of the representations and warranties of the Company and the
Stockholders contained in this Agreement shall be true and correct on the
date made and shall be true and correct in all material respects as of the
Closing. Each of the obligations of the Company and the Stockholders required
by this Agreement to be performed by them at or prior to the Closing shall
have been duly performed and complied with in all material respects as of the
Closing. At the Closing, Sub shall have received a certificate, dated the
Closing Date and duly executed by the Stockholders to the effect that the
conditions set forth in the two preceding sentences have been satisfied.
6.2 AUTHORIZATION; CONSENTS.
(a) All corporate action necessary to authorize the execution,
delivery and performance of this Agreement and the Lease, and the
consummation of the transactions contemplated hereby shall have been duly and
validly taken by the Company. All filings required to be made under the
H-S-R Act in connection with the transactions contemplated hereby shall have
been made and all applicable waiting periods with respect to each such
filing, including extensions thereof, shall have expired or been terminated.
(b) All notices to, and declarations, filings and registrations with,
and consents, authorizations, approvals and waivers from, governmental and
regulatory bodies and third persons (including, but not limited to, all
automobile manufacturers with whom the Company has a franchise agreement (or
comparable instrument)) required to consummate the transactions contemplated
hereby and all consents or waivers shall have been made or obtained.
6.3 OPINIONS OF THE COMPANY'S AND THE STOCKHOLDERS' COUNSEL.
UAG and Sub shall have been furnished with the opinion of the Company's
and the Stockholders' counsel, dated the Closing Date, in form and substance
satisfactory to UAG and Sub and their counsel, which opinion shall have been
rendered with respect to those matters contained in SECTIONS 2.1, 2.2, 2.3,
2.4, 2.9, 3.1 AND 3.2 hereof. In rendering the foregoing opinion, such
counsel may rely as to factual matters upon certificates or other documents
furnished by officers and directors of the Company and by government
officials and upon such other documents and data as such counsel deem
appropriate as a basis for their opinions. Such opinions may be limited to
Tennessee and federal laws.
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 Sub effectively to
exercise full rights of ownership of the Shares. No action, suit or
proceeding before any court or any governmental or regulatory entity shall be
pending (or
- 35 -
<PAGE>
threatened by any governmental or regulatory entity), and no investigation by
any governmental or regulatory entity shall have been commenced (and be
pending), seeking to restrain or prohibit (or questioning the validity or
legality of) the consummation of the transactions contemplated by this
Agreement or seeking damages in connection therewith which UAG or Sub, in
good faith and with the advice of counsel, believes makes it undesirable to
proceed with the consummation of the transactions contemplated hereby.
6.5 NO MATERIAL ADVERSE EFFECT.
During the period from December 31, 1995 to the Closing Date, there
shall not have been any material adverse change in the assets, properties,
business, operations, prospects, net income or financial condition of the
Company, other than payments to Stockholders in accordance with the terms of
this Agreement.
6.6 NET WORTH.
On the Closing Date, the Stockholders shall deliver to Sub a balance
sheet of the Company dated as of the most recent practicable date preceding
the Closing Date, prepared in accordance with the Accounting Principles (the
"Estimated Closing Date Balance Sheet"). The Estimated Closing Date Balance
Sheet shall show as of the date thereof, after taking into account the
payment of any of the fees, costs and expenses by the Company incurred in
connection with this Agreement, Net Worth no less than Five Million Ninety
Thousand Dollars ($5,090,000).
6.7 COMPLETION OF DUE DILIGENCE.
UAG and Sub shall have completed their due diligence examination of the
Company, the Real Property and the Improvements and the results of such
examination, including any Phase I or Phase II environmental audits of the
Company, shall be satisfactory to UAG and Sub. UAG will pay the costs for a
Phase I environmental audit. If, after obtaining the results of the Phase I
environmental audit, UAG determines that a Phase II environmental audit is
required, the expenses of the Phase II environmental audit shall be paid
one-half by UAG and one-half by the Stockholders; PROVIDED, HOWEVER, that the
Stockholders may elect not to pay any costs of the Phase II audit but, if the
Stockholders elect not to pay one-half of the costs of the Phase II audit and
the results of the Phase II audit conclude that remediation is necessary, the
Stockholders shall pay the entire costs of the Phase II audit. If UAG
determines that a Phase II is necessary, the Phase II audit shall be
performed by an environmental, engineering or consulting company mutually
agreeable to the Stockholders and UAG.
6.8 LEASE.
The Landlord and the Company shall have entered into the Lease in a
form and substance satisfactory to UAG.
- 36 -
<PAGE>
6.9 BOARD APPROVAL.
The Board of Directors of UAG and Sub shall have approved the
consummation of all of the transactions contemplated by this Agreement;
PROVIDED, HOWEVER, that the UAG Board shall consider the transactions
contemplated by this Agreement on or before the date that is fifteen days
after Standefer and UAG formally seek the approval of Nissan as set forth in
SECTION 6.12 hereof.
6.10 CERTIFICATES.
The Stockholders and the Company shall have furnished UAG and Sub with
a certificate, dated as of the Closing Date, executed by the Stockholders
certifying to the fulfillment of the conditions set forth in Section 6.5, 6.6
and 6.14 hereof and shall have furnished UAG and Sub with such any other
certificates of its officers and others as UAG and Sub may reasonably request
to evidence compliance with the conditions set forth in this ARTICLE 6.
6.11 LEGAL MATTERS.
All certificates, instruments, opinions and other documents required to
be executed or delivered by or on behalf of the Stockholders and the Company
under the provisions of this Agreement, and all other actions and proceedings
required to be taken by or on behalf of the Stockholders and the Company in
furtherance of the transactions contemplated hereby, shall be reasonably
satisfactory in form and substance to counsel for UAG and Sub.
6.12 APPROVAL OF MANUFACTURER AND DISTRIBUTOR.
Nissan shall have consented to, authorized and approved the
transactions contemplated by this Agreement on terms no less favorable to
those granted to the Company immediately prior to the execution of this
Agreement.
6.13 EMPLOYMENT AGREEMENT.
Sub, the Company and Nicely shall have entered into the Employment
Agreement.
6.14 ENVIRONMENTAL LAWS.
The Company shall be in material compliance with all applicable
Environmental Laws.
6.15 NONDISTURBANCE AGREEMENT.
Standefer shall have obtained a nondisturbance agreement in form and
substance satisfactory to the Company and UAG.
- 37 -
<PAGE>
6.16 TITLE INSURANCE.
The Company shall have obtained title insurance with respect to the
leasehold estate in form and substance satisfactory to UAG. UAG shall be
responsible for the cost of such title insurance.
6.17 LEASE TERMINATION AGREEMENT/MEMORANDUM OF LEASE.
The appropriate parties shall have executed a Lease Termination
Agreement and a Memorandum of Lease in form and substance satisfactory to UAG
and the Company.
6.18 RESIGNATION OF THE COMPANY'S DIRECTORS.
Each of the persons who is a director of the Company on the Closing
Date shall have tendered to Sub in writing his or her resignation as such in
form and substance satisfactory to UAG.
6.19 SCHEDULES.
The Company and the Stockholders shall have delivered to UAG and Sub
all Schedules referred to in ARTICLES 2 AND 3 and such Schedules shall be
acceptable in form and substance to UAG and Sub.
ARTICLE 7
CONDITIONS TO THE OBLIGATIONS OF
THE STOCKHOLDERS TO EFFECT THE CLOSING
The obligations of the Stockholders and the Company required to be
performed by them at the Closing shall be subject to the satisfaction, at or
prior to the Closing, of each of the following conditions, each of which may
be waived by the Company and the Stockholders as provided herein except as
otherwise required by applicable law:
7.1 REPRESENTATIONS AND WARRANTIES; AGREEMENTS.
Each of the representations and warranties of UAG and Sub contained in
this Agreement shall be true and correct on the date made and shall be true
and correct in all material respects as of the Closing. Each of the
obligations of UAG and Sub required by this Agreement to be performed by them
at or prior to the Closing shall have been duly performed and complied with
in all material respects as of the Closing. At the Closing, the Stockholders
shall have received a certificate, dated the Closing Date and duly executed
by an officer of UAG and of Sub to the effect that the conditions set forth
in the preceding two sentences have been satisfied.
- 38 -
<PAGE>
7.2 AUTHORIZATION OF THE AGREEMENT, CONSENTS.
(a) All corporate action necessary to authorize the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby shall have been duly and validly taken by
UAG and Sub. All filings required to be made under the H-S-R Act in
connection with the transactions contemplated hereby shall have been made
and all applicable waiting periods with respect to each such filing,
including extensions thereof, shall have expired or been terminated.
(b) All notices to, and declarations, filings and registrations
with, and consents, authorizations, approvals and waivers from, governmental
and regulatory bodies and third persons (including, but not limited to, all
automobile manufacturers with whom the Company has entered into a franchise
agreement (or comparable instrument)) required to consummate the transactions
contemplated hereby and all consents or waivers shall have been made or
obtained.
7.3 OPINIONS OF UAG'S AND SUB'S COUNSEL.
The Stockholders shall have been furnished with the opinion of Rogers &
Hardin, counsel to UAG and Sub, dated the Closing Date, in form and substance
satisfactory to the Stockholders and their counsel, which opinions, when
taken together, shall have been rendered with respect to those matters
contained in SECTIONS 4.1 AND 4.2 hereof. In rendering the foregoing
opinions, such counsel may rely as to factual matters upon certificates or
other documents furnished by officers and directors of UAG and Sub and by
government officials, and upon such other documents and data as such counsel
deems appropriate as a basis for its opinion. Such opinions may be limited
to federal laws and the General Corporation Law of the State of Delaware.
7.4 ABSENCE OF LITIGATION.
No order, stay, judgment or decree shall have been issued by any court
and be in effect restraining or prohibiting the consummation of the
transactions contemplated hereby.
7.5 LEASE.
The Company shall have entered into the Lease in form and substance
satisfactory to the Landlord.
7.6 CERTIFICATES.
UAG and Sub shall have furnished the Stockholders with such
certificates of its officers and others to evidence compliance with the
conditions set forth in this ARTICLE 7 as may be reasonably requested by the
Stockholders.
- 39 -
<PAGE>
7.7 LEGAL MATTERS.
All certificates, instruments, opinions and other documents required to
be executed or delivered by or on behalf of UAG or Sub under the provisions
of this Agreement, and all other actions and proceedings required to be taken
by or on behalf of UAG or Sub in furtherance of the transactions contemplated
hereby, shall be reasonably satisfactory in form and substance to counsel for
the Stockholders.
ARTICLE 8
TERMINATION
8.1 TERMINATION.
This Agreement may be terminated at any time prior to Closing:
(i) by mutual consent of UAG, Sub and the Stockholders;
(ii) by either UAG, Sub, or the Stockholders if the Closing
shall not have taken place on or prior to December 31, 1996, or such
later date as shall have been approved by UAG, Sub and the
Stockholders (provided that the terminating party is not otherwise in
material breach of its representations, warranties, covenants or
agreements under this Agreement);
(iii) by UAG, Sub, or the Stockholders if any court of
competent jurisdiction in the United States or other United States
governmental body shall have issued an order, decree or ruling or
taken any other action restraining, enjoining or otherwise prohibiting
the transactions contemplated by this Agreement, and such order,
decree, ruling or other action shall have become final and
non-appealable;
(iv) by UAG or Sub if any of the conditions specified in
ARTICLE 6 hereof have not been met or waived by UAG and Sub at such
time as such condition is no longer capable of satisfaction (provided
that neither UAG nor Sub is otherwise in material breach of its
representations, warranties, covenants or agreements under this
Agreement);
(v) by the Stockholders if any of the conditions specified in
ARTICLE 7 hereof have not been met or waived by the Stockholders at
such time as such condition is no longer capable of satisfaction
(provided that neither the Stockholders nor the Company is otherwise
in material breach of his or its representations, warranties covenants
or agreements under this Agreement); or
(vi) by either UAG, Sub or the Stockholders if there has been
a material breach on the part of the other of any representation,
warranty, covenant or agreement
- 40 -
<PAGE>
set forth in this Agreement, which breach has not been cured within
ten (10) Business Days following receipt by the breaching party of
written notice of such breach.
If UAG, Sub or the Stockholders shall terminate this Agreement pursuant
to the provisions hereof, such termination shall be effected by notice to the
other parties specifying the provision hereof pursuant to which such
termination is made.
8.2 EFFECT OF TERMINATION.
Except (i) for any breach of this Agreement prior to its termination,
and (ii) for the obligations contained in SECTIONS 5.1 AND 10.2 hereof, and
(iii) as set forth in SECTION 9.1 and SECTION 9.2 hereof, upon the
termination of this Agreement pursuant to SECTION 8.1 hereof, this Agreement
shall forthwith become null and void and none of the parties hereto or any of
their respective officers, directors, employees, agents, 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
Stockholders indemnify and agree to fully defend, save and hold harmless on
an after-tax basis UAG, Sub, the Company (after the Closing), and any of
their respective officers, directors, employees, stockholders, advisors,
representatives, agents and Affiliates (other than the Stockholders) (each a
"UAG Indemnified Party"), if a UAG Indemnified Party (including the Company
after the Closing Date) shall at any time or from time to time suffer any
Costs (as defined in SECTION 9.7 below) arising, directly or indirectly, out
of or resulting from, or shall pay or become obligated to pay any sum on
account of, (i) any and all Stockholders Events of Breach (as defined below)
or (ii) any Claim before or by any court, arbitrator, panel, agency or other
governmental, administrative or judicial entity, which Claim involves,
affects or relates to any assets, properties or operations of the Company or
the conduct of the business of the Company prior to the Closing Date (a
"Stockholders Third Party Claim"). As used herein, "Stockholders Event of
Breach" shall be and mean any one or more of the following: (i) any untruth
or inaccuracy in any representation of any Stockholder or the Company or the
breach of any warranty of any Stockholder or the Company contained in this
Agreement, including, without limitation, any misrepresentation in, or
omission from, any statement, certificate, schedule, exhibit, annex or other
document furnished pursuant to this Agreement by any Stockholder or the
Company (or any representative of any Stockholder or the Company) to UAG or
Sub (or any representative of UAG or Sub) and any misrepresentation in or
omission from any document furnished to UAG or Sub in connection with the
Closing, and (ii) any failure of any Stockholder or the Company duly to
perform or observe any term, provision, covenant, agreement or condition on
the part of such Stockholder or the Company to be performed or observed.
- 41 -
<PAGE>
9.2 INDEMNIFICATION BY UAG.
Notwithstanding the Closing, UAG indemnifies and agrees to fully
defend, save and hold harmless on an after-tax basis the Stockholders, the
Company (prior to the Closing), and any of their respective officers,
directors, employees, stockholders, advisors, representatives, agents and
Affiliates (each a "Stockholder Indemnified Party"), if a Stockholder
Indemnified Party (including the Company prior to Closing) shall at any time
or from time to time suffer any Costs arising, directly or indirectly, out of
or resulting from, or shall pay or become obligated to pay any sum on account
of, (i) any and all UAG Events of Breach (as defined below) or (ii) any Claim
before or by any court, arbitrator, panel, agency or other governmental,
administrative or judicial entity, which Claim involves, affects or relates
to any assets, properties or operations of UAG or Sub or the conduct of the
business of UAG prior to the Closing Date (a "UAG Third Party Claim"). As
used herein, "UAG Event of Breach" shall be and mean any one or more of the
following: (i) any untruth or inaccuracy in any representation of UAG or Sub
or the breach of any warranty of UAG or Sub contained in this Agreement,
including, without limitation, any misrepresentation in, or omission from,
any statement, certificate, schedule, exhibit, annex or other document
furnished pursuant to this Agreement by UAG or Sub (or any representative of
UAG or Sub) to the Stockholders (or any representative of the Stockholders)
and any misrepresentation in or omission from any document furnished to the
Stockholders in connection with the Closing, and (ii) any failure of UAG or
Sub duly to perform or observe any term, provision, covenant, agreement or
condition on the part of UAG or Sub to be performed or observed.
9.3 PROCEDURES.
If (i) any Stockholders Event of Breach occurs or is alleged and a UAG
Indemnified Party asserts that the Stockholders have become obligated to a
UAG Indemnified Party pursuant to SECTION 9.1, or if any Stockholder's Third
Party Claim is begun, made or instituted as a result of which the
Stockholders may become obligated to a UAG Indemnified Party hereunder, or
(ii) a UAG Event of Breach occurs or is alleged and a Stockholder Indemnified
Party asserts that UAG has become obligated to a Stockholder Indemnified
Party pursuant to SECTION 9.2, or if any UAG Third Party Claim is begun, made
or instituted as a result of which UAG may become obligated to a Stockholder
Indemnified Party hereunder (for purposes of this ARTICLE 9, any UAG
Indemnified Party and any Stockholder Indemnified Party is sometimes referred
to as an "Indemnified Party" and UAG and the Stockholders are sometimes
referred to as an "Indemnifying Party," and any UAG Third Party Claim and any
Stockholders Third Party Claim is sometimes referred to as a "Third Party
Claim," in each case as the context so requires), such Indemnified Party
shall give written notice to the Indemnifying Party of its or his obligation
to provide indemnification hereunder, provided that any failure to so notify
the Indemnifying Party shall not relieve them from any liability that it or
he may have to the Indemnified Party under this ARTICLE 9. If such notice
relates to a Third Party Claim, each Indemnifying Party, jointly and
severally, agrees to defend, contest or otherwise protect such Indemnified
Party against any 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
- 42 -
<PAGE>
such Indemnified Party's choice and shall in any event cooperate with and
assist the Indemnifying Party to the extent reasonably possible. If the
Indemnifying Party fails timely to defend, contest or otherwise protect
against such Third Party Claim, such Indemnified Party shall have the right
to do so, including, without limitation, the right to make any compromise or
settlement thereof, and such Indemnified Party shall be entitled to recover
the entire Cost thereof from the Indemnifying Party, including, without
limitation, attorneys' fees, disbursements and amounts paid (or of which
such Indemnified Party has become obligated to pay) as the result of such
Third Party Claim. Failure by the Indemnifying Party to notify such
Indemnified Party of its or their election to defend any such Third Party
Claim within fifteen (15) days after notice thereof shall have been given to
the Indemnifying Party shall be deemed a waiver by the Indemnifying Party of
its or their right to defend such Third Party Claim. If the Indemnifying
Party assumes the defense of the particular Third Party Claim, the
Indemnifying Party shall not, in the defense of such Third Party Claim,
consent to entry of any judgment or enter into any settlement, except with
the written consent of such Indemnified Party. In addition, the Indemnifying
Party shall not enter into any settlement of any Third Party Claim (except
with the written consent of such Indemnified Party) which does not include as
an unconditional term thereof the giving by the claimant or the plaintiff to
such Indemnified Party a full release from all liability in respect of such
Third Party Claim. Notwithstanding the foregoing, the Indemnifying Party
shall not be entitled to control (but shall be entitled to participate at
their own expense in the defense of), and the Indemnified Party shall be
entitled to have sole control over, the defense or settlement of any Third
Party Claim to the extent the Third Party Claim seeks an order, injunction or
other equitable relief against the Indemnified Party which, if successful,
could materially interfere with the business, operations, assets, condition
(financial or otherwise) or prospects of the Indemnified Party.
9.4 OFFSET.
In addition to and not in limitation of all rights of offset that an
Indemnified Party may have under applicable law, the parties agree that, at
any Indemnified Party's option, any or all amounts owing to such Indemnified
Party under this ARTICLE 9 or any other provision of this Agreement or any
other liability (other than the Lease) of the other parties (or any Affiliate
(excluding the Landlord) of the other parties) to such Indemnified Party in
connection with this Agreement or the transactions contemplated hereby, may
be recovered by the Indemnified Party by an offset against any or all amounts
due to such other parties pursuant to this Agreement or the transactions
contemplated hereby.
9.5 REMEDIES.
The rights of an Indemnified Party under this ARTICLE 9 are in addition
to such other rights and remedies which such Indemnified Party may have under
this Agreement, applicable law or otherwise.
- 43 -
<PAGE>
9.6 LIMITATION ON INDEMNIFICATION.
No Indemnified Party shall be entitled to indemnification for any Costs
hereunder unless the aggregate amount of Costs incurred by such party exceeds
$200,000, in which event such party shall be entitled to indemnification for
all such Costs in excess of $200,000; PROVIDED, HOWEVER, that this limitation
shall not apply to any amounts owed by the parties pursuant to SECTION 1.2
hereof.
9.7 DEFINITIONS.
For purposes of this ARTICLE 9, "Costs" shall mean all liabilities,
losses, costs and actual damages (not including consequential damages) and
reasonable expenses, reasonable attorneys' fees, reasonable experts' fees,
reasonable consultants' fees, and reasonable 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.
9.8 TAX SAVINGS.
Costs arising or resulting from Stockholders Events of Breach or UAG
Events of Breach 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 reasonably be expected to be realized in
future years) by the Indemnified Party.
ARTICLE 10
MISCELLANEOUS
10.1 SURVIVAL OF PROVISIONS.
(a) The respective representations, covenants and agreements of each
of the parties to this Agreement (except covenants and agreements which are
expressly required to be performed and are performed in full on or before the
Closing Date) shall survive the Closing Date and the consummation of the
transactions contemplated by this Agreement, subject to SECTION 10.1(b)
below. In the event of a breach of any such representations, or covenants,
the party to whom such representations or covenants have been made shall have
all rights and remedies for such breach available to it under the provisions
of this Agreement, regardless of any disclosures to, or investigation made by
or on behalf of, such party on or before the Closing Date.
(b) Each of the representations 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
- 44 -
<PAGE>
shall survive, and not be affected in any respect by the Closing, for a
period terminating on the later of (i) the date that is three (3) years after
the Closing Date, and (ii) with respect to any claim asserted with respect to
any breach of such representations and warranties 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.
10.2 FEES AND EXPENSES.
Except as otherwise expressly provided in this Agreement, all legal and
other fees, costs and expenses incurred in connection with this Agreement and
the transactions contemplated hereby through the Closing Date shall be paid
by the party incurring such fees, costs or expenses; PROVIDED, HOWEVER, that
if the Closing does not occur and SECTION 5.5 hereof is breached, then the
Stockholders or the Company shall pay to UAG, within five (5) Business Days
after receipt of a request therefor, an amount equal to all of the legal and
other fees, costs and expenses incurred by UAG in connection with this
Agreement and the transactions contemplated hereby.
10.3 HEADINGS.
The section headings herein are for convenience of reference only, do
not constitute part of this Agreement and shall not be deemed to limit or
otherwise affect any of the provisions hereof.
10.4 NOTICES.
All notices or other communications required or permitted hereunder
shall be given in writing and shall be deemed sufficient if delivered by
hand, recognized overnight delivery service or facsimile transmission or
mailed by registered or certified mail, postage prepaid (return receipt
requested), as follows:
If to the Company before the Closing date:
Charles A. Standefer
3715 Kings Road
Chattanooga, Tennessee 37416
with a copy to:
Mr. James D. Hutcherson, CPA
Henderson, Hutcherson, Walker & McCullough
1000 Riverfront Parkway
Chattanooga, Tennessee 37402-2103
- 45 -
<PAGE>
Gearhiser, Peters, Lockaby & Tallant
320 McCallie Avenue
Chattanooga, Tennessee 37402
Attn: R. Wayne Peters, Esq.
If to the Company after the Closing Date:
United Auto Group, Inc.
375 Park Avenue
New York, New York 10022
Attn: George G. Lowrance
Executive Vice President
with a copy to:
Rogers & Hardin
2700 Cain Tower, Peachtree Center
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attn: Michael Rosenzweig
If to the Stockholders:
Charles A. Standefer
3715 Kings Road
Chattanooga, Tennessee 37416
with a copy to:
Mr. James D. Hutcherson, CPA
Henderson, Hutcherson, Walker & McCullough
1000 Riverfront Parkway
Chattanooga, Tennessee 37402-2103
Gearhiser, Peters, Lockaby & Tallant
320 McCallie Avenue
Chattanooga, Tennessee 37402
Attn: R. Wayne Peters, Esq.
- 46 -
<PAGE>
If to UAG or Sub:
United Auto Group, Inc.
375 Park Avenue
New York, New York 10022
Attn: George G. Lowrance
Executive Vice President
with a copy to:
Rogers & Hardin
2700 Cain Tower, Peachtree Center
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attn: Michael Rosenzweig
or such other address as shall be furnished in writing by such party, and any
such notice or communication shall be effective and be deemed to have been
given as of the date so delivered or three (3) days after the date so mailed;
PROVIDED, HOWEVER, that any notice or communication changing any of the
addresses set forth above shall be effective and deemed given only upon its
receipt.
10.5 ASSIGNMENT.
This Agreement and all of the provisions hereof shall be binding upon
and inure to the benefit of the parties hereto (and with respect to the
Stockholders, the personal representatives and heirs of the Stockholders) and
their respective successors and permitted assigns, and the provisions of
ARTICLE 9 hereof shall inure to the benefit of the Indemnified Parties
referred to therein; PROVIDED, HOWEVER, that neither this Agreement nor any
of the rights, interests, or obligations hereunder may be assigned by any of
the parties hereto without the prior written consent of the other parties.
Notwithstanding the foregoing, UAG and Sub shall have the unrestricted right
to assign this Agreement and to delegate all or any part of their
obligations hereunder to any Affiliate of UAG, but in such event UAG shall
remain fully liable for the performance of all of such obligations in the
manner prescribed in this Agreement.
10.6 ENTIRE AGREEMENT.
This Agreement (including the Schedules hereto) and the Lease embody
the entire agreement and understanding of the parties with respect to the
transactions contemplated hereby and supersede all prior written or oral
commitments, arrangements or understandings between the parties with respect
thereto and all prior drafts of this Agreement. There are no restrictions,
agreements, promises, warranties, covenants or undertakings with respect to
the transactions contemplated hereby other than those expressly set forth
herein or in the Lease. Prior drafts of this Agreement shall not be used as
a basis for interpreting this Agreement.
- 47 -
<PAGE>
10.7 WAIVER AND AMENDMENTS.
Each of the Stockholders, the Company, UAG and Sub may by written
notice to the other parties (i) extend the time for the performance of any of
the obligations or other actions of the other parties, (ii) waive any
inaccuracies in the representations or warranties of the other parties
contained in this Agreement, (iii) waive compliance with any of the covenants
of the other parties contained in this Agreement, (iv) waive performance of
any of the obligations of the other parties created under this Agreement, or
(v) waive fulfillment of any of the conditions to its own obligations under
this Agreement. The waiver by any party hereto of a breach of any provision
of this Agreement shall not operate or be construed as a waiver of any
subsequent breach, whether or not similar. This Agreement may be amended,
modified or supplemented only by a written instrument executed by the parties
hereto.
10.8 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, all of
which shall be considered one and the same agreement and each of which shall
be deemed an original.
10.9 GOVERNING LAW.
This Agreement shall be governed by and construed in accordance the
laws of the State of Tennessee without giving effect to any choice or
conflict of law provision or rule that would cause the laws of any other
jurisdiction to apply.
10.10 ACCOUNTING TERMS.
All accounting terms used herein which are not expressly defined in
this Agreement shall have the respective meanings given to them in accordance
with GAAP.
10.11 CERTAIN DEFINITIONS.
For purposes of this Agreement:
(a) "Affiliate" of a specified Person shall mean a Person that
directly or indirectly, through one or more intermediaries, controls, or is
controlled by, or is under common control with, the Person specified, and in
the case of a specified Person who is a natural person, his spouse, his
issue, his parents, his estate and any trust entirely for the benefit of his
spouse and/or issue.
(b) "best efforts" shall be deemed to not include any obligation on
the part of any Person to undertake any liabilities, expend any funds or
perform acts (except liabilities, expenditures or performance, other than any
best efforts obligations, expressly required to be undertaken by the terms of
this Agreement) which are materially burdensome to such Person; PROVIDED,
HOWEVER, that notwithstanding the foregoing, the term "best efforts" shall
include
- 48 -
<PAGE>
an obligation to take such actions which are normally incident to or
reasonably foreseeable in connection with such obligation or the transactions
contemplated hereby.
(c) "Business Day" shall mean any day excluding Saturday, Sunday and
any day which is a legal holiday under Federal law.
(d) "GAAP" shall mean generally accepted accounting principles which
are in effect in the United States on the Closing Date.
(e) "Liens" shall mean any mortgages, pledges, title defects or
objections, liens, claims, security interests, conditional and installment
sale agreements, encumbrances or charges of any kind.
(h) "Knowledge" means, with respect to the Stockholders, that the
Stockholders knew, or in the exercise of reasonable diligence, would or
should have known of the particular matter referred to; with respect to the
Company, that the President or the Executive Manager knew, or in the exercise
of reasonable diligence, would or should have known of the particular matter
referred to; and, with respect to UAG, that the President of UAG knew or, in
the exercise of reasonable diligence, would or should have known of the
particular matter referred to.
(f) "Material Adverse Effect" shall mean any change in, or effect on,
the Company (including the business thereof) which is, or could reasonably be
expected to be, materially adverse to the business, operations, assets,
condition (financial or otherwise) or prospects of the Company.
(g) "Person" shall mean and include an individual, corporation,
limited liability company, partnership, joint venture, association, trust,
any other incorporated or unincorporated organization or entity and a
governmental entity or any department or agency thereto.
(h) "UAG Public Offering Date" shall mean the date of the
consummation of an underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, covering
the offering and sale of shares of common stock, par value $.0001 per share
of UAG on a firm commitment basis.
10.12 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.
- 49 -
<PAGE>
10.13 SEVERABILITY.
If any one or more of the provisions of this Agreement shall be held to
be invalid, illegal or unenforceable, the validity, legality or
enforceability of the remaining provisions of this Agreement shall not be
affected thereby. To the extent permitted by applicable law, each party
waives any provision of law which renders any provision of this Agreement
invalid, illegal or unenforceable in any respect.
10.14 REMEDIES.
None of the remedies provided for in this Agreement, including
termination of this Agreement as set forth in ARTICLE 8, indemnification as
set forth in ARTICLE 9, the payment of certain fees, costs and expenses as
set forth in SECTION 10.2 or specific performance as set forth in this
SECTION 10.14, shall be the exclusive remedy of either party for a breach of
this Agreement, the parties hereto having the right to seek any other remedy
in law or equity in lieu of or in addition to any remedies provided in this
Agreement, including an action for damages for breach of contract.
10.15 TIME IS OF THE ESSENCE.
Time is of the essence for purposes of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
UNITED AUTO GROUP, INC.
By: /s/ George Lowrance
-------------------------------------
Name: George G. Lowrance
Title: Executive Vice-President
UAG TENNESSEE, INC.
By: /s/ George Lowrance
-------------------------------------
Name: George G. Lowrance
Title: Vice-President
- 50 -
<PAGE>
STANDEFER MOTOR SALES, INC. d/b/a
STANDEFER NISSAN
By: /s/ Charles A. Standefer
-------------------------------------
Name:
Title:
/s/ Charles A. Standefer
----------------------------------------
CHARLES A. STANDEFER, INDIVIDUALLY
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
By: /s/ Charles A. Standefer, Trustee
-------------------------------------
CHARLES A. STANDEFER, TRUSTEE
By: /s/ Karen S. Nicely, Trustee
-------------------------------------
KAREN S. NICELY, TRUSTEE
- 51 -
<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........... 556,000 556,000 556,000 556,000 556,000
----------- ------------ ------------ ------------ -----------
Shares used in computing pro forma net
income (loss) per common share............ 1,873,000 3,852,000 5,461,000 4,661,000 8,479,000
----------- ------------ ------------ ------------ -----------
Pro forma 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 Division 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
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.)
Finance Division
- ----------------
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 3, 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 3, 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 3, 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 3, 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 3, 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 3, 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 3, 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 3, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 JUN-30-1996
<CASH> 4,697 9,301
<SECURITIES> 0 0
<RECEIVABLES> 27,349 48,209
<ALLOWANCES> 0 0
<INVENTORY> 101,556 121,289
<CURRENT-ASSETS> 141,649 186,980
<PP&E> 15,924 19,313
<DEPRECIATION> 3,778 4,704
<TOTAL-ASSETS> 236,027 311,104
<CURRENT-LIABILITIES> 139,447 181,317
<BONDS> 24,073 38,694
0 0
1 1
<COMMON> 1 1
<OTHER-SE> 49,238 66,707
<TOTAL-LIABILITY-AND-EQUITY> 236,027 311,104
<SALES> 805,621 597,939
<TOTAL-REVENUES> 806,151 598,968
<CGS> 720,344 531,560
<TOTAL-COSTS> 720,344 531,560
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,612 2,225
<INCOME-PRETAX> (5,921) 8,629
<INCOME-TAX> 2,089 (2,997)
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (3,446) 3,898
<EPS-PRIMARY> (.70) .49
<EPS-DILUTED> 0 0
</TABLE>
