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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-12297
UNITED AUTO GROUP, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 22-3086739
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
375 PARK AVENUE, NEW YORK, NEW YORK 10152
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code (212) 223-3300
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S CLASSES OF
COMMON STOCK AS OF NOVEMBER 11, 1997:
VOTING COMMON STOCK, $0.0001 PAR VALUE 18,289,724
NON-VOTING COMMON STOCK, $0.0001 PAR VALUE 605,454
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TABLE OF CONTENTS
PART I
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PAGE
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1. Financial Statements and Supplementary Data
Consolidated Condensed Balance Sheets as of September 30, 1997 and
December 31, 1996 ............................................................... 1
Consolidated Condensed Statements of Income for the three months and nine
months ended September 30, 1997 and 1996 ........................................ 3
Consolidated Condensed Statements of Cash Flows for the nine months ended
September 30, 1997 and 1996 ..................................................... 4
Notes to Consolidated Condensed Financial Statements ............................. 5
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations ..................................................................... 8
PART II
1. Legal Proceedings ............................................................... 13
2. Changes in Securities ........................................................... 13
6. Exhibits and Reports on Form 8-K ................................................ 13
Signatures ...................................................................... 15
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UNITED AUTO GROUP, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
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SEPTEMBER 30, DECEMBER 31,
1997 1996
--------------- --------------
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ASSETS
AUTO DEALERSHIPS
Cash and cash equivalents .. $172,638 $ 66,875
Accounts receivable, net ... 80,370 52,018
Inventories ................. 248,555 168,855
Other current assets ........ 9,629 11,823
--------------- --------------
Total current assets ....... 511,192 299,571
Property and equipment, net . 34,478 22,341
Intangible assets, net ....... 297,016 177,194
Other assets ................. 15,927 6,587
--------------- --------------
TOTAL AUTO DEALERSHIP ASSETS 858,613 505,693
--------------- --------------
AUTO FINANCE
Cash and cash equivalents .. 3,793 2,688
Finance receivables, net ... 22,347 9,723
Other assets ................ 2,850 4,846
--------------- --------------
TOTAL AUTO FINANCE ASSETS ... 28,990 17,257
--------------- --------------
TOTAL ASSETS ................. $887,603 $522,950
=============== ==============
</TABLE>
See Notes to Consolidated Condensed Financial Statements
1
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UNITED AUTO GROUP, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
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SEPTEMBER 30, DECEMBER 31,
1997 1996
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LIABILITIES AND STOCKHOLDERS' EQUITY
AUTO DEALERSHIPS
Floor plan notes payable .................. $242,960 $170,170
Short-term debt ........................... 6,469 6,069
Accounts payable .......................... 31,757 22,187
Accrued expenses .......................... 25,795 17,585
Current portion of long-term debt ........ 7,472 5,444
--------------- --------------
Total current liabilities ................ 314,453 221,455
Long-term debt ............................. 237,356 11,121
Due to related party ....................... 517 1,334
Deferred income taxes ...................... 8,362 4,867
--------------- --------------
TOTAL AUTO DEALERSHIP LIABILITIES .......... 560,688 238,777
--------------- --------------
AUTO FINANCE
Short-term debt ........................... 321 1,001
Accounts payable and other liabilities ... 2,875 1,704
--------------- --------------
TOTAL AUTO FINANCE LIABILITIES ............. 3,196 2,705
--------------- --------------
Commitments and contingent liabilities ....
STOCKHOLDERS' EQUITY
Voting common stock ....................... 2 2
Additional paid-in capital ................ 310,159 284,502
Retained earnings (accumulated deficit) ... 13,558 (3,036)
--------------- --------------
TOTAL STOCKHOLDERS' EQUITY ................. 323,719 281,468
--------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $887,603 $522,950
=============== ==============
</TABLE>
See Notes to Consolidated Condensed Financial Statements
2
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UNITED AUTO GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
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THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- ------------------------
1997 1996 1997 1996
---------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
AUTO DEALERSHIPS
Vehicle sales............................... $549,395 $319,004 $1,353,609 $854,177
Finance and insurance....................... 20,768 12,944 52,280 35,283
Service and parts........................... 55,812 24,897 135,244 65,324
---------- ---------- ------------ ----------
Total revenues............................. 625,975 356,845 1,541,133 954,784
Cost of sales, including floor plan
interest................................... 545,834 316,919 1,344,730 848,479
---------- ---------- ------------ ----------
Gross profit............................... 80,141 39,926 196,403 106,305
Selling, general and administrative
expenses................................... 64,644 33,020 160,367 90,040
---------- ---------- ------------ ----------
Operating income............................ 15,497 6,906 36,036 16,265
Other interest expense ..................... (5,003) (1,614) (7,249) (3,619)
Other income (expense), net................. 0 672 297 2,295
---------- ---------- ------------ ----------
INCOME BEFORE INCOME TAXES--AUTO
DEALERSHIPS.................................. 10,494 5,964 29,084 14,941
---------- ---------- ------------ ----------
AUTO FINANCE
Revenues.................................... 387 575 2,472 1,604
Interest expense............................ (148) (100) (408) (276)
Operating and other expenses................ (1,414) (852) (3,438) (2,054)
---------- ---------- ------------ ----------
LOSS BEFORE INCOME TAXES--AUTO FINANCE ...... (1,175) (377) (1,374) (726)
---------- ---------- ------------ ----------
TOTAL COMPANY
Income before minority interests and
provision for income taxes ................ 9,319 5,587 27,710 14,215
Minority interests.......................... (21) (1,058) (118) (2,792)
Provision for income taxes.................. (3,728) (2,308) (11,106) (5,305)
---------- ---------- ------------ ----------
Net income .................................. $ 5,570 $ 2,221 $ 16,486 $ 6,118
========== ========== ============ ==========
Net income per common share ................. $ 0.29 $ 0.22 $ 0.89 $ 0.67
========== ========== ============ ==========
Shares used in computing net income per
common share................................ 19,210 10,283 18,481 9,087
========== ========== ============ ==========
</TABLE>
See Notes to Consolidated Condensed Financial Statements
3
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UNITED AUTO GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
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NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------------------------
1997 1996
------------------------- -------------------------
AUTO AUTO AUTO AUTO
DEALERSHIPS FINANCE DEALERSHIPS FINANCE
------------- ---------- ------------- ----------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) ............................. $ 17,310 $ (824) $ 6,844 $ (726)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Depreciation and amortization ................ 6,417 385 2,410 140
Deferred income tax expense .................. 5,130 4,362
Related party interest income ................ (2,322)
Gain on sales of finance receivables ........ (57) (486)
Finance receivables originated ............... (84,254) (61,041)
Collections on finance receivables ........... 75,481 60,237
Minority interests portion of income ......... 118 2,792
Changes in operating assets and liabilities:
Accounts receivable .......................... (12,638) (7,114)
Inventories .................................. 10,677 662
Floor plan notes payable ..................... (7,223) 2,796
Accounts payable and accrued expenses ....... 7,527 779 4,223 571
Other ........................................ (3,952) (1,827) 933 (1,418)
------------- ---------- ------------- ----------
Net cash provided by (used in) operating
activities:................................. 23,366 (10,317) 15,586 (2,723)
------------- ---------- ------------- ----------
INVESTING ACTIVITIES:
Purchase of equipment and improvements ...... (8,329) (49) (3,360) (235)
Dealership acquisitions ...................... (81,651) (32,879)
Investment in auto finance subsidiary ....... (12,300) 12,300 (9,750) 9,750
Funding for subsequent acquisition ........... (2,397)
Advances to related parties .................. (876)
Investment in and advances to
uncombined investee ......................... (290) (1,418)
Other......................................... 426
------------- ---------- ------------- ----------
Net cash provided by (used in)
investing activities ....................... (101,854) 12,251 (49,552) 8,097
------------- ---------- ------------- ----------
FINANCING ACTIVITIES:
Proceeds from issuance of stock .............. 4,634 24,564
Repurchase of common stock ................... (8,821)
Proceeds from borrowings of long-term debt .. 251,949 18,700
Deferred financing costs ..................... (9,540) (511)
Net borrowings (repayments) of
short-term debt ............................. (5,118)
Payments of long-term debt and
capitalized leases........................... (53,154) (1,502)
Advances (to) from affiliates ................ (817) 168
Distribution to stockholders and
minority interest............................ (600)
Borrowings from warehouse credit line ....... 40,760 44,716
Payments of warehouse credit line ............ (41,589) (49,099)
------------- ---------- ------------- ----------
Net cash provided by (used in)
financing activities ....................... 184,251 (829) 35,701 (4,383)
------------- ---------- ------------- ----------
Net increase in cash and cash equivalents ... 105,763 1,105 1,735 991
Cash and cash equivalents, beginning of
period........................................ 66,875 2,688 4,697 531
------------- ---------- ------------- ----------
Cash and cash equivalents, end of period ...... $ 172,638 $ 3,793 $ 6,432 $ 1,522
============= ========== ============= ==========
</TABLE>
See Notes to Consolidated Condensed Financial Statements
4
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UNITED AUTO GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
1. BASIS OF PRESENTATION
The information presented as of September 30, 1997 and 1996, and for the
three and nine month periods then ended, is unaudited, but includes all
adjustments (consisting only of normal recurring accruals) which the
management of United Auto Group, Inc. (the "Company" or "UAG") believes to be
necessary for the fair presentation of results for the periods presented. The
results for the interim periods are not necessarily indicative of results to
be expected for the year. These consolidated condensed financial statements
should be read in conjunction with the Company's audited financial statements
for the year ended December 31, 1996, which were included as part of the
Company's Annual Report on Form 10-K.
2. NET INCOME PER COMMON SHARE
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
("SFAS 128"). SFAS 128 establishes standards for computing and presenting
earnings per share for periods ending after December 15, 1997. Basic and
diluted earnings per share, calculated pursuant to SFAS 128, are not expected
to be materially different from net income per common share as reflected in
the accompanying Consolidated Condensed Statements of Income.
3. INVENTORIES
Inventories consisted of the following at the balance sheet dates:
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SEPTEMBER 30, 1997 DECEMBER 31, 1996
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New vehicles ................. $156,099 $109,414
Used vehicles ................ 77,168 50,060
Parts, accessories and other 15,288 9,381
------------------ -----------------
Total Inventories ........... $248,555 $168,855
================== =================
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4. SENIOR SUBORDINATED NOTES
On July 23, 1997, the Company completed the sale of $150,000 aggregate
principal amount of 11% Senior Subordinated Notes due 2007 (the "Series A
Notes"). On September 16, 1997, the Company completed the sale of an
additional $50,000 aggregate principal amount of 11% Senior Subordinated
Notes due 2007, Series B (together with the Series A Notes the "Notes"). The
sale of the Notes were exempt from registration under the Securities Act of
1933 pursuant to Rule 144A thereunder. Proceeds from the offering of the
Notes after issue discount, discount to initial purchasers and estimated
transaction costs amounted to approximately $189,469.
The Notes are fully and unconditionally guaranteed (subject to fraudulent
conveyence laws) on a joint and several basis by the Company's Auto Dealership
subsidiaries (the "Note Guarantors"). Separate financial information of the
Note Guarantors has been omitted because (i) the Company is a holding company
with no independent operations and (ii) separate financial information for the
Note Guarantors is presented on the face of the Company's consolidated
financial statements under the caption "Auto Dealerships." If required, the
Company will seek no-action relief from any additional reporting requirements
relating to the Note Guarantors that may be required pursuant to Regulation
S-X.
5. PRO FORMA RESULTS OF OPERATIONS
The Company made a number of acquisitions in 1996 and 1997. Each of these
acquisitions has been accounted for using the purchase method of accounting
and as a result, the Company's financial
5
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UNITED AUTO GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
5. PRO FORMA RESULTS OF OPERATIONS (Continued)
statements include the results of operations of the acquired dealerships only
from the date of acquisition. The following unaudited pro forma summary
presents the consolidated results of operations of the Company for the nine
months ended September 30, 1997 and 1996 after reflecting the pro forma
adjustments that would be necessary to present those results as if the
acquisitions made during 1996 and 1997 had been consummated as of January 1,
1996.
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PRO FORMA RESULTS OF
OPERATIONS
NINE MONTHS ENDED
SEPTEMBER 30,
1997 1996
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Revenues ...................................... $1,823,673 $1,854,339
Income before minority interests and provision
for income taxes ............................. $ 19,357 $ 20,520
Net income .................................... $ 11,474 $ 12,312
Net income per common share ................... $ 0.60 $ 0.64
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The foregoing pro forma results are not necessarily indicative of results
of operations that would have been reported had the acquisitions been
completed as of January 1, 1996. Additionally, the pro forma results do not
reflect a reduction of cost of sales related to reduced interest on floor
plan notes payable resulting from the application of unused proceeds from the
Company's initial public sale of common stock (the "IPO") and the sale of the
Notes. If the reduction of the floor plan interest expense were reflected,
pro forma net income (and net income per common share) would have been
$15,668 ($0.82 per share) and $19,660 ($1.02 per share) for the nine month
periods ended September 30, 1997 and 1996, respectively.
6. SUPPLEMENTAL CASH FLOW INFORMATION
The following table presents certain supplementary information to the
Consolidated Statements of Cash Flows:
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NINE MONTHS ENDED SEPTEMBER 30,
1997 1996
------------------------ ------------------------
AUTO AUTO AUTO AUTO
DEALERSHIPS FINANCE DEALERSHIPS FINANCE
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SUPPLEMENTAL INFORMATION:
Cash paid for interest .......................... $ 7,189 $173 $7,565 $203
Cash paid for income taxes ...................... 2,648 44 148 33
NON-CASH FINANCING AND INVESTING ACTIVITIES:
Dealership acquisition costs paid by issuance of
stock .......................................... 28,150 -- -- --
Dealership acquisition costs financed by
long-term debt ................................. 27,104 -- 4,000 --
Capitalized lease obligations.................... 274 148 301 --
Stock issuance costs amortized against proceeds
from issuance of common stock................... -- -- 775 --
Warrants issued.................................. -- -- 812 --
</TABLE>
6
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UNITED AUTO GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
7. LEGAL PROCEEDINGS
In May and June 1997, three complaints were filed in the United States
District Court for the Southern District of New York on behalf of a purported
class consisting of all persons who purchased UAG common stock issued in
connection with and/or traceable to the Company's IPO at any time up to and
including February 26, 1997 (the "Lawsuits"). The complaints name as
defendants the Company, Carl Spielvogel, Marshall S. Cogan, J.P. Morgan
Securities Inc., Montgomery Securities and Smith Barney, Inc. The plaintiffs
in the Lawsuits seek unspecified damages in connection with their allegations
that the Prospectus and Registration Statement disseminated in connection
with the IPO contained material misrepresentations and omissions in violation
of Sections 11, 12(a)(2) and 15 of the Securities Act. They also seek to have
their actions certified as class actions under the Federal Rules of Civil
Procedure. On August 5, 1997, the Lawsuits were ordered consolidated for all
purposes. The Company believes that the plaintiffs' claims are without merit
and intends to defend the Lawsuits vigorously.
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The Company retails new and used automobiles and light trucks, operates
service and parts departments and sells various aftermarket products,
including finance and insurance contracts. For the quarter ended September
30, 1997, UAG had revenues of approximately $626.0 million and retailed
15,424 new and 9,574 used vehicles. Vehicle sales represented 87.8% of the
Company's revenues for the quarter ended September 30, 1997; service and
parts accounted for 8.9% of revenues, with finance and insurance representing
the remaining 3.3%.
New vehicle revenues include sales to retail customers and to leasing
companies providing consumer automobile 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 are generated 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, and financing and lease contracts. UAG
dealerships market a complete line of aftermarket automotive products and
services through the Company's wholly-owned subsidiary, United AutoCare.
Service and parts revenues include amounts paid by consumers for repair and
maintenance service and the purchase of replacement parts.
Through its automobile finance subsidiary, Atlantic Auto Finance (to be
renamed UnitedAuto Finance), the Company derives revenues from the purchase,
sale and servicing of motor vehicle installment contracts originated by both
UAG and third-party dealerships.
The Company's selling expenses consist of advertising and compensation for
sales department personnel, including commissions and related bonuses.
General and administrative expenses include compensation for administration,
finance and general management personnel, depreciation, amortization, rent,
insurance, utilities and other outside services. 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 made a number of acquisitions in 1996 and 1997. Each of these
acquisitions has been accounted for using the purchase method of accounting
and as a result, the Company's financial statements include the results of
operations of the acquired dealerships only from the date of acquisition.
RESULTS OF OPERATIONS
The following discussion and analysis relates to the Company's
consolidated historical results of operation for the nine and three months
ended September 30, 1997 and 1996.
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1996
Auto Dealerships
Revenues. Revenues increased by $586.3 million, or 61.4%, from $954.8
million to $1.5 billion due principally to acquisitions. Revenues at
dealerships acquired during 1996 and 1997 amounted to $653.1 million. The
overall increase in revenues in the comparative periods is due principally to
the inclusion of revenues of each of the entities acquired during 1996 and
1997 since their respective acquisition dates, offset by a net decrease in
sales at dealerships owned prior to September 30, 1996 due primarily to (i) a
reduction in revenues at Atlanta Toyota, impacted by shortages of inventory
of certain models and a slowdown in the Atlanta economy, (ii) a reduction in
sales volume at the Company's DiFeo division resulting in part from the
closure of unprofitable dealerships and (iii) a decrease at Company Nissan
dealerships throughout the United States.
Sales of new and used vehicles increased by $499.4 million, or 58.5%, from
$854.2 million to $1.4 billion. Vehicle sales at dealerships acquired during
1996 and 1997 amounted to $567.0 million. The
8
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overall increase in vehicle sales in the comparative periods is due
principally to the inclusion of vehicle sales of each of
the entities acquired during 1996 and 1997 since their respective acquisition
dates, offset by the net decrease in new and used vehicle sales at
dealerships owned prior to September 30, 1996 noted above. Aggregate unit
retail sales of new and used vehicles increased by 37.0% and 74.7%,
respectively, due principally to acquisitions. For the nine months ended
September 30, 1997, the Company sold 38,181 new vehicles (61.9% of total
vehicle sales) and 23,517 used vehicles (38.1% of total vehicle sales). For
the nine months ended September 30, 1996, the Company sold 27,868 new
vehicles (67.4% of total vehicle sales) and 13,459 used vehicles (32.6% of
total vehicle sales). The increase in the relative proportion of used vehicle
sales to total vehicle sales was due principally to the expansion of used car
operations in response to the popularity of used cars. New vehicle selling
prices increased by an average of 13.9% due primarily to changes in the mix
of models sold and changes in manufacturer pricing. Used vehicle selling
prices increased by an average of 10.1% due to changes in market conditions
which resulted in a change in the mix of used vehicles sold and the increase
in sales of recent model year off-lease vehicles.
Finance and insurance revenues (aftermarket product sales) increased by
$17.0 million, or 48.2%, from $35.3 million to $52.3 million due primarily to
acquisitions and the establishment of United AutoCare, offset to a degree by
a net decrease at dealerships owned prior to September 30, 1996 due to the
decrease in new and used vehicle sales noted above.
Service and parts revenues increased by $69.9 million, or 107.0%, from
$65.3 million to $135.2 million due principally to acquisitions.
Gross Profit. Gross profit increased by $90.1 million, or 84.8%, from
$106.3 million to $196.4 million. Gross profit as a percentage of revenues
increased from 11.1% to 12.7%. The increase in gross profit and in gross
profit as a percentage of revenues is due to (i) acquisitions, (ii) increased
dealership finance and insurance and service and parts revenues, which yield
higher margins, as a percentage of total revenues, (iii) improved gross
profit margins on service and parts revenues and (iv) the establishment of
United AutoCare.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $70.3 million, or 78.1%, from $90.0
million to $160.4 million due principally to acquisitions and an increase in
the infrastructure required to manage the substantial increase in the
Company's operations and the planned expansion of its business in the future.
Such expenses as a percentage of revenue increased from 9.4% to 10.4%.
Other Interest Expense. Other interest expense increased by $3.6 million,
from $3.6 million to $7.2 million. The increase is due to an increase in
interest expense arising from borrowings under the Company's credit facility,
the issuance of the Company's Senior Subordinated Notes due 2007 in July and
September 1997 and the issuance of acquisition-related debt, offset by a
reduction in interest expense due to the retirement of the Company's Senior
Notes in October 1996.
Other Income (Expense), Net. Other income (expense), net decreased by $2.0
million, from $2.3 million to $0.3 million due principally to a reduction in
related party interest income resulting from the disposition of the minority
interests in certain dealerships in October 1996.
Auto Finance
Loss before income taxes. Atlantic Auto Finance's loss before income taxes
increased by $0.6 million, from $0.7 million to $1.4 million. The increase is
due principally to an increase in the infrastructure required to manage the
substantial increase in Atlantic Auto Finance's operations and the planned
expansion of its business in the future, as well as a charge relating to
revised loan loss estimates.
Total Company
Provision for Income Taxes. The 1997 provision for income taxes increased
$5.8 million from $5.3 million to $11.1 million. The increase is due to the
increase in taxable income and a change in the Company's estimated effective
tax rate.
9
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THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1996
Auto Dealerships
Revenues. Revenues increased by $269.1 million, or 75.4%, from $356.8
million to $626.0 million due principally to acquisitions. Revenues at
dealerships acquired subsequent to September 30, 1996 amounted to $286.8
million, offset slightly by a net decrease in sales at dealerships owned
prior to September 30, 1996 due primarily to (i) a reduction in revenues at
Atlanta Toyota, impacted by shortages of inventory of certain models and a
slowdown in the Atlanta economy, (ii) a reduction in sales volume at the
Company's DiFeo division resulting in part from the closure of unprofitable
dealerships and (iii) a decrease at Company Nissan dealerships in the United
States.
Sales of new and used vehicles increased by $230.4 million, or 72.2%, from
$319.0 million to $549.4 million. Vehicle sales at dealerships acquired
subsequent to September 30, 1996 amounted to $251.0 million, offset by the
net decrease in new and used vehicle sales at dealerships owned prior to
September 30, 1996 noted above. Unit retail sales of new and used vehicles
increased by 48.9% and 93.5%, respectively, due principally to acquisitions.
For the three months ended September 30, 1997, the Company sold 15,424 new
vehicles (61.7% of total vehicle sales) and 9,574 used vehicles (38.3% of
total vehicle sales). For the three months ended September 30, 1996, the
Company sold 10,359 new vehicles (67.7% of total vehicle sales) and 4,949
used vehicles (32.3% of total vehicle sales). The increase in the relative
proportion of used vehicle sales to total vehicle sales was due principally
to the expansion of used car operations in response to the popularity of used
cars. New vehicle selling prices increased by an average of 15.4% due
primarily to changes in the mix of models sold and changes in manufacturer
pricing. Used vehicle selling prices increased by an average of 10.7% due to
changes in market conditions which resulted in a change in the mix of used
vehicles sold.
Finance and insurance revenues (aftermarket product sales) increased by
$7.8 million, or 60.4%, from $12.9 million to $20.8 million due primarily to
acquisitions and the establishment of United AutoCare, offset to a degree by
a net decrease at dealerships owned prior to September 30, 1996 due to the
decrease in new and used vehicle sales noted above.
Service and parts revenues increased by $30.9 million, or 124.2%, from
$24.9 million to $55.8 million due principally to acquisitions.
Gross Profit. Gross profit increased by $40.2 million, or 100.7%, from
$39.9 million to $80.1 million. Gross profit as a percentage of revenues
increased from 11.2% to 12.8%. The increase in gross profit and in gross
profit as a percentage of revenues is due to (i) acquisitions, (ii) increased
dealership finance and insurance and service and parts revenues, which yield
higher margins, as a percentage of total revenues, (iii) improved gross
profit margins on service and parts revenues and (iv) the establishment of
United AutoCare.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $31.6 million, or 95.8%, from $33.0
million to $64.6 million due principally to acquisitions and an increase in
the infrastructure required to manage the substantial increase in the
Company's operations and the planned expansion of its business in the future.
Such expenses as a percentage of revenue increased from 9.3% to 10.3%.
Other Interest Expense. Other interest expense increased by $3.4 million,
from $1.6 million to $5.0 million. The increase is due to an increase in
interest expense arising from borrowings under the Company's credit facility,
the issuance of the Company's Senior Subordinated Notes due 2007 in July and
September 1997 and the issuance of acquisition-related debt, offset by a
reduction in interest expense due to the retirement of the Company's Senior
Notes in October 1996.
Other Income (Expense), Net. Other income (expense), net decreased by $0.7
million due principally to a reduction in related party interest income
resulting from the disposition of the minority interests in certain
dealerships in October 1996.
10
<PAGE>
Auto Finance
Loss before income taxes. The loss before income taxes at Atlantic Auto
Finance increased by $0.8 million, from $0.4 million to $1.2 million. The
increase is due principally to an increase in the infrastructure required to
manage the substantial increase in Atlantic Auto Finance's operations and the
planned expansion of its business in the future, as well as a charge relating
to revised loan loss estimates.
Total Company
Provision for Income Taxes. The 1997 provision for income taxes increased
$1.4 million from $2.3 million to $3.7 million. The increase is due to the
increase in taxable income and a change in the Company's estimated effective
tax rate.
LIQUIDITY AND CAPITAL RESOURCES
CASH AND LIQUIDITY REQUIREMENTS
The cash requirements of the Company are primarily for acquisitions of new
dealerships, working capital and the expansion of existing facilities.
Historically, these cash requirements have been met through issuances of
equity and debt instruments, borrowings under various credit agreements and
cash flow from operations. At September 30, 1997, the Company's dealership
operations had working capital of $196.7 million.
During the nine months ended September 30, 1997, dealership activities
resulted in net cash provided by operations of $23.4 million. Net cash used
by dealerships in investing activities during the nine months ended September
30, 1997 totaled $101.9 million, relating primarily to dealership
acquisitions, funding provided to Atlantic Auto Finance and capital
expenditures. Dealership financing activities provided $184.3 million of cash
during the nine months ended September 30, 1997 principally relating to net
proceeds of long-term debt.
The Company finances substantially all of its new and used vehicle
inventory under revolving floor plan financing arrangements with various
lenders. 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.
At September 30, 1997, the Company had approximately $176.4 million of
cash available to fund operations and future acquisitions. In addition, the
Company is party to a $50.0 million Senior Credit Facility, dated March 20,
1997 (as amended) (the "Senior Credit Facility"), with a group of banks which
is to be used principally for acquisitions. During July and September, the
Company issued $200.0 million aggregate principal amount of its 11% Senior
Subordinated Notes due 2007 (the "Notes"). Net proceeds from the sale of the
Notes amounted to $189.5 million, of which $50.0 million was used to repay in
full amounts then outstanding under the Senior Credit Facility. The balance
of the proceeds were deposited with the Company's floor plan lenders, which
deposits are earning interest at rates designated in the Company's floor plan
agreements with the various floor plan lenders. The Company has such deposits
to use for working capital and general corporate purposes, including
acquisitions. In connection with the sale of the second series of Notes, the
Company received the consent of the banks representing the majority of the
aggregate amount of the commitments under the Senior Credit Facility to amend
certain terms thereof, such as the debt incurrence covenant and various
financial ratios. Additionally, such banks waived any violations caused by
the sale of such Notes and agreed to commence the requisite internal
procedures to effect a formal amendment. Pending such amendment, the Company
is not permitted to borrow funds under the Senior Credit Facility. No
assurance can be given that such amendment will be effected.
The Company's principal source of growth has come, and is expected to
continue to come, from acquisitions of automobile dealerships. The Company
believes that its existing capital resources will be sufficient to fund its
current acquisition commitments. To the extent the Company pursues additional
11
<PAGE>
significant acquisitions, it may need to raise additional capital either
through the public or private issuance of equity or debt securities or
through additional bank borrowings. A public equity offering would require
the prior approval of certain automobile manufacturers.
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.
SEASONALITY
The Company's combined business is modestly seasonal overall. The greatest
seasonalities exist with the dealerships in the New York metropolitan area,
for which the second and third quarters are the strongest with respect to
vehicle related sales. The service and parts business at all dealerships
experiences relatively modest seasonal fluctuations.
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 that 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 placed at
a competitive disadvantage should interest rates increase due to increased
inflation since most other automobile dealers have similar floating rate
borrowing arrangements.
12
<PAGE>
PART II
ITEM 1 -- LEGAL PROCEEDINGS
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.
ITEM 2 -- CHANGES IN SECURITIES
RECENT SALES OF UNREGISTERED SECURITIES
On July 23, 1997, the Company issued $150,000,000 aggregate principal
amount of its 11% Senior Subordinated Notes due 2007 (the "Notes") in an
offering exempt from registration under the Securities Act pursuant to Rule
144A thereunder as a private sale to qualified institutional buyers or to
persons other than U.S. persons outside of the United States in reliance upon
Regulation S thereunder. The initial purchasers of the Notes were J.P. Morgan
Securities Inc., Salomon Brothers Inc, CIBC Wood Gundy Securities Corp.,
Montgomery Securities and Scotia Capital Markets (USA) Inc. (the "Initial
Purchasers"). The aggregate discount to the Initial Purchasers was
$4,500,000.
On September 16, 1997, the Company issued $50,000,000 aggregate principal
amount of its 11% Senior Subordinated Notes due 2007, Series B (the "Series B
Notes") in an offering exempt from registration under the Securities Act
pursuant to Rule 144A thereunder as a private sale to qualified institutional
buyers. The initial purchasers of the Series B Notes were J.P. Morgan
Securities Inc. and Scotia Capital Markets (USA) Inc. (the "Series B Initial
Purchasers"). The aggregate discount to the Series B Initial Purchasers was
$1,500,000.
ITEM 6 -- EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
<S> <C>
***3.1 Third Restated Certificate of Incorporation.
*3.2 Restated Bylaws.
*4.1 Specimen Common Stock certificate.
4.2 Indenture, dated as of July 23, 1997, among the Company, the Guarantors party thereto and The
Bank of New York, as Trustee, including form of Note and Guarantee.
4.3 Registration Rights Agreement, dated as of July 23, 1997, among the Company, the Guarantors
party thereto and J.P. Morgan Securities Inc., Salomon Brothers Inc, CIBC Wood Gundy
Securities Corp., Montgomery Securities and Scotia Capital Markets (USA) Inc.
4.4 Indenture, dated as of September 16, 1997, among the Company, the Guarantors party thereto
and The Bank of New York, as Trustee, including form of Series B Note and Guarantee.
4.5 Registration Rights Agreement, dated as of September 16, 1997, among the Company, the
Guarantors party thereto and J.P. Morgan Securities Inc. and Scotia Capital Markets (USA)
Inc.
10.17.1 Stock Purchase Agreement, dated July 25, 1997 among United Auto Group, Inc., UAG West Texas,
Inc., All American Chevrolet, Inc., Lynn Alexander, Inc., Jo-Vena Automotive, Inc., Lynn Rich
Management Company and R. Lynn Alexander.
13
<PAGE>
10.18.1 Stock Purchase Agreement, dated July 25, 1997 among United Auto Group, Inc., UAG Classic,
Inc., Classic Auto Group, Inc., Cherry Hill Classic Cars, Inc., Classic Enterprises Inc.,
Classic Buick, Inc., Classic Chevrolet, Inc., Classic Management, Inc., Classic Turnersville,
Inc., Classic Imports, Inc. and Thomas J. Hessert, Jr. (as amended).
10.19.1.1 Stock Purchase Agreement, dated as of September 25, 1997 among United Auto Group, Inc., UAG
Young, Inc., Dan Young Chevrolet, Inc., Dan Young, Inc., Parkway Chevrolet, Inc., Young
Management Group, Inc., Alan V. Young, William A. Young, Dan E. Young, Conway M. Anderson
III, Shirley J. Young Irrevocable GRAT Trust, Dan E. Young Irrevocable GRAT Trust,
Irrevocable Trust for Alan V. Young and Irrevocable Trust for William A. Young.
10.19.1.2 Agreement and Plan of Merger, dated as of September 25, 1997 among United Auto Group, Inc.,
UAG Kissimmee Motors, Inc., UAG Paramount Motors, Inc., UAG Century Motors, Inc., Paramount
Chevrolet-Geo, Inc., Century Chevrolet-Geo, Inc., Alan V. Young, William A. Young, Jennifer
Y. Taggart, Cathy Y. Dyer, Young/AVY II Irrevocable Trust fbo Lara A. Young, Young/AVY II
Irrevocable Trust fbo Courtney E. Young, Young/AVY II Irrevocable Trust fbo Daniel A. Young,
Young/Way II Irrevocable Trust, Young/Taggart II Irrevocable Trust fbo William E. Taggart,
Young/Taggart II Irrevocable Trust fbo Mary K. Taggart, Shirley J. Young Irrevocable GRAT
Trust and Dan E. Young Irrevocable GRAT Trust.
27.1 Financial Data Schedule.
</TABLE>
- ------------
* Incorporated herein by reference to the identically numbered exhibit
to the Company's Registration Statement on Form S-1, Registration No.
333-09429.
*** Incorporated herein by reference to the identically numbered exhibit
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1996, File No. 1-12297.
(b) Reports on Form 8-K.
The Company filed the following Current Reports on Form 8-K during the
quarter ended September 30, 1997:
(1) July 8, 1997, reporting under Items 5 and 7 (announcement of proposed
offering of $150.0 million aggregate principal amount of Senior
Subordinated Notes Due 2007).
(2) July 14, 1997, reporting under Item 7 (Staluppi Group financial
information).
(3) July 15, 1997, reporting under Items 5 and 7 (consummation of Reed
Group acquisition and termination of previously announced Mize Ford
acquisition agreement).
(4) August 7, 1997, reporting under Items 5 and 7 (announcement of Lynn
Alexander and Classic Auto acquisitions and management changes).
(5) September 24, 1997, reporting under Items 5 and 7 (announcement of
the private placement of $50.0 million aggregate principal amount of
Senior Subordinated Notes due 2007, Series B).
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNITED AUTO GROUP, INC.
By: /s/ Marshall S. Cogan
-------------------------------
Marshall S. Cogan
Chairman of the Board,
Chief Executive Officer and
President
Date: November 14, 1997
By: /s/ James R. Davidson
-------------------------------
James R. Davidson
Senior Vice President--Finance
and Treasurer
(Chief Accounting Officer)
Date: November 14, 1997
15
<PAGE>
===============================================================================
INDENTURE
Dated as of July 23, 1997
Between
UNITED AUTO GROUP, INC.,
THE GUARANTORS PARTY HERETO,
and
THE BANK OF NEW YORK, Trustee
-------------------
$150,000,000
11% Senior Subordinated Notes due 2007
===============================================================================
<PAGE>
CROSS-REFERENCE TABLE
Indenture
Trust Indenture Act Section Section
- --------------------------- -------
ss.310 (a)(1) 7.10
(a)(2) 7.10
(a)(3) N.A.
(a)(4) N.A.
(a)(5) 7.10
(a) 7.08; 7.10; 13.02
(c) N.A.
ss.311 (a) 7.11
(a) 7.11
(c) N.A.
ss.312 (a) 2.05
(a) 13.03
(c) 13.03
ss.313 (a) 7.06
(a)(1) N.A.
(a)(2) 7.06
(c) 7.06; 13.02
(d) 7.06
ss.314 (a) 4.11; 4.12; 13.02
(a) N.A.
(c)(1) 13.04
(c)(2) 13.04
(c)(3) N.A.
(d) N.A.
(e) 13.05
(f) N.A.
ss.315 (a) 7.01
(a) 7.05; 13.02
(c) 7.01(a)
(d) 7.01(c)
(e) 6.11
ss.316 (a)(last sentence) 2.09
(a)(1)(A) 6.05
(a)(1)(A) 6.04
(a)(2) N.A.
(a) 6.07
(c) 10.04
ss.317 (a)(1) 6.08
(a)(2) 6.09
(a) 2.04
ss.318 (a) 13.01
==============
N.A. means Not Applicable.
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of this Indenture.
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1. Definitions..................................................1
Section 1.2. Other Definitions...........................................19
Section 1.3. Incorporation by Reference of Trust Indenture Act...........19
Section 1.4. Rules of Construction.......................................20
ARTICLE 2
THE SECURITIES
Section 2.1. Form and Dating.............................................20
Section 2.2. Execution and Authentication................................22
Section 2.3. Registrar and Paying Agent..................................23
Section 2.4. Paying Agent To Hold Money in Trust.........................23
Section 2.5. Securityholder Lists........................................23
Section 2.6. Transfer and Exchange.......................................24
Section 2.7. Replacement Securities......................................33
Section 2.8. Outstanding Securities......................................33
Section 2.9. Treasury Securities.........................................33
Section 2.10. Temporary Securities........................................34
Section 2.11. Cancellation................................................34
Section 2.12. Defaulted Interest..........................................34
Section 2.13. CUSIP or CINS Number........................................35
Section 2.14. Payments of Interest........................................35
ARTICLE 3.
REDEMPTION
Section 3.1. Notices to Trustee..........................................36
Section 3.2. Selection of Securities To Be Redeemed......................36
Section 3.3. Notice of Redemption........................................36
Section 3.4. Effect of Notice of Redemption..............................37
Section 3.5. Deposit of Redemption Price.................................37
Section 3.6. Securities Redeemed in Part.................................38
ARTICLE 4.
COVENANTS
Section 4.1. Payment of Securities.......................................38
Section 4.2. Maintenance of Office or Agency.............................38
Section 4.3. Limitation on Transactions with Affiliates..................39
Section 4.4. Limitation on Incurrence of Indebtedness....................39
Section 4.5. Limitation on Certain Asset Dispositions....................41
Section 4.6. Limitation on Restricted Payments...........................42
Section 4.7. Corporate Existence.........................................46
Section 4.8. Payment of Taxes and Other Claims...........................46
Section 4.9. Notice of Defaults..........................................46
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<PAGE>
Section 4.10. Maintenance of Properties...................................46
Section 4.11. Compliance Certificate......................................47
Section 4.12. Provision of Financial Information..........................47
Section 4.13. Waiver of Stay, Extension or Usury Laws.....................48
Section 4.14. Change of Control...........................................48
Section 4.15. Limitation on Senior Subordinated Indebtedness..............49
Section 4.16. Limitation on Restrictions Affecting Restricted
Subsidiaries..............................................50
Section 4.17. Limitation on Liens.........................................50
Section 4.18. Subsidiary Guarantees.......................................52
ARTICLE 5.
MERGERS; SUCCESSOR CORPORATION
Section 5.1. Restriction on Mergers, Consolidations and Certain
Sales of Assets...........................................52
Section 5.2. Successor Corporation Substituted...........................53
ARTICLE 6
DEFAULT AND REMEDIES
Section 6.1. Events of Default...........................................53
Section 6.2. Acceleration................................................55
Section 6.3. Other Remedies..............................................56
Section 6.4. Waiver of Past Default......................................56
Section 6.5. Control by Majority.........................................57
Section 6.6. Limitation on Suits.........................................57
Section 6.7. Rights of Holders to Receive Payment........................58
Section 6.8. Collection Suit by Trustee..................................58
Section 6.9. Trustee May File Proofs of Claim............................58
Section 6.10. Priorities..................................................59
Section 6.11. Undertaking for Costs.......................................59
ARTICLE 7
TRUSTEE
Section 7.1. Duties of Trustee...........................................59
Section 7.2. Rights of Trustee...........................................61
Section 7.3. Individual Rights of Trustee................................62
Section 7.4. Trustee's Disclaimer........................................62
Section 7.5. Notice of Defaults..........................................62
Section 7.6. Reports by Trustee to Holders...............................62
Section 7.7. Compensation and Indemnity..................................63
Section 7.8. Replacement of Trustee......................................64
Section 7.9. Successor Trustee by Merger, etc............................65
Section 7.10. Eligibility; Disqualification...............................65
Section 7.11. Preferential Collection of Claims Against Company...........66
ARTICLE 8
SUBORDINATION OF SECURITIES
Section 8.1. Securities Subordinated to Senior Debt......................66
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<PAGE>
Section 8.2. No Payment on Securities in Certain Circumstances...........66
Section 8.3. Payment Over of Proceeds upon Dissolution, etc..............67
Section 8.4. Subrogation.................................................69
Section 8.5. Obligations of Company Unconditional........................69
Section 8.6. Notice to Trustee...........................................70
Section 8.7. Reliance on Judicial Order or Certificate of
Liquidating Agent.........................................71
Section 8.8. Trustee's Relation to Senior Debt...........................71
Section 8.9. Subordination Rights Not Impaired by Acts or Omissions
of the Company or Holders of Senior Debt..................71
Section 8.10. Securityholders Authorize Trustee To
Effectuate Subordination of Securities....................72
Section 8.11. This Article Not to Prevent Events of Default...............72
Section 8.12. Trustee's Compensation Not Prejudiced.......................72
Section 8.13. No Waiver of Subordination Provisions.......................72
Section 8.14. Subordination Provisions Not Applicable to Money Held
in Trust for Securityholders; Payments May Be Paid
Prior to Dissolution......................................73
ARTICLE 9
DISCHARGE OF INDENTURE
Section 9.1. Termination of Company's Obligations........................73
Section 9.2. Application of Trust Money..................................75
Section 9.3. Repayment to Company........................................75
Section 9.4. Reinstatement...............................................76
ARTICLE 10
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 10.1. Without Consent of Holders..................................76
Section 10.2. With Consent of Holders.....................................77
Section 10.3. Compliance with Trust Indenture Act.........................79
Section 10.4. Revocation and Effect of Consents...........................79
Section 10.5. Notation on or Exchange of Securities.......................79
Section 10.6. Trustee To Sign Amendments, etc.............................80
ARTICLE 11
GUARANTEE
Section 11.1. Unconditional Guarantee.....................................80
Section 11.2. Severability................................................81
Section 11.3. Release of a Guarantor......................................81
Section 11.4. Limitation of Guarantor's Liability.........................82
Section 11.5. Contribution................................................82
Section 11.6. Execution of Guarantee......................................82
Section 11.7. Subordination of Subrogation and Other Rights...............83
ARTICLE 12
SUBORDINATION OF GUARANTEE
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<PAGE>
Section 12.1. Guarantee Obligations Subordinated to Senior Debt
of Guarantor..............................................83
Section 12.2. No Payment on Guarantees in Certain Circumstances...........83
Section 12.3. Payment Over of Proceeds upon Dissolution, etc..............85
Section 12.4. Subrogation.................................................86
Section 12.5. Obligations of Guarantors Unconditional.....................86
Section 12.6. Notice to Trustee...........................................87
Section 12.7. Reliance on Judicial Order or Certificate of
Liquidating Agent.........................................88
Section 12.8. Trustee's Relation to Senior Debt of Guarantors.............88
Section 12.9. Subordination Rights Not Impaired by Acts
or Omissions of the Guarantors or Holders
of Senior Debt of Guarantors..............................89
Section 12.10. Securityholders Authorize Trustee to
Effectuate Subordination of Guarantee.....................89
Section 12.11. This Article Not to Prevent Events of Default...............89
Section 12.12. Trustee's Compensation Not Prejudiced.......................89
Section 12.13. No Waiver of Guarantee Subordination Provisions.............90
Section 12.14. Payments May Be Paid Prior to Dissolution...................90
ARTICLE 13
MISCELLANEOUS
Section 13.1. Trust Indenture Act Controls................................90
Section 13.2. Notices.....................................................91
Section 13.3. Communications by Holders with Other Holders................92
Section 13.4. Certificate and Opinion as to Conditions Precedent..........92
Section 13.5. Statements Required in Certificate or Opinion...............92
Section 13.6. Rules by Trustee, Paying Agent, Registrar...................93
Section 13.7. Governing Law...............................................93
Section 13.8. No Recourse Against Others..................................93
Section 13.9. Successors..................................................93
Section 13.10. Counterpart Originals.......................................94
Section 13.11. Severability................................................94
Section 13.12. No Adverse Interpretation of Other Agreements...............94
Section 13.13. Legal Holidays..............................................94
EXHIBIT A - Form of Security A-1
EXHIBIT B - Form of Certificate of Transfer B-1
EXHIBIT C - Form of Certificate of Exchange C-1
- --------------
NOTE: This Table of Contents shall not, for any purpose, be deemed to be a
part of this Indenture.
-5-
<PAGE>
INDENTURE dated as of July 23, 1997, between UNITED AUTO GROUP, INC.,
a Delaware corporation (the "Company"), the Guarantors party hereto and THE
BANK OF NEW YORK, a bank and trust company organized under the New York Banking
Law, as trustee (the "Trustee").
Each party hereto agrees as follows for the benefit of the other
parties and for the equal and ratable benefit of the Holders of the Company's
11% Senior Subordinated Notes due 2007:
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1. Definitions.
"Acquired Indebtedness" means Indebtedness of a Person (a) assumed in
connection with an Acquisition of such Person or (b) existing at the time such
Person becomes a Restricted Subsidiary or is merged or consolidated with or
into the Company or any Restricted Subsidiary; provided, however, that such
Indebtedness (x) was not Incurred in connection with, or in contemplation of,
such Acquisition, such Person becoming a Restricted Subsidiary or such merger
or consolidation and (y) is not recourse to any Person or assets other than
such Person or its assets (including its Subsidiaries and their assets).
"Acquisition" means (i) any capital contribution (by means of
transfers of cash or other property to others or payments for property or
services for the account or use of others, or otherwise) by the Company or any
Restricted Subsidiary to any other Person, or any acquisition or purchase of
Capital Stock of any other Person by the Company or any Restricted Subsidiary,
in either case pursuant to which such Person shall become a Restricted
Subsidiary or shall be consolidated or merged with or into the Company or any
Restricted Subsidiary or (ii) any acquisition by the Company or any Restricted
Subsidiary of the assets of any Person which constitute substantially all of an
operating unit or line of business of such Person or which is otherwise outside
of the ordinary course of business.
"Additional Interest" shall have the meaning set forth in the
Registration Rights Agreement.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
when used with respect to any Person means the power to direct the management
and policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
<PAGE>
"Agent" means any Registrar, Paying Agent or co-Registrar. See Section
2.03.
"Applicable Procedures" means with respect to any transfer or exchange
of interests in a Global Security, the rules and procedures of DTC, Euroclear
and Cedel that apply to such transfer or exchange.
"Asset Disposition" means any sale, transfer or other disposition
(including, without limitation, by merger, consolidation or sale-and-leaseback
transaction) of (i) shares of Capital Stock of any Restricted Subsidiary (other
than directors' qualifying shares) or (ii) property or assets (other than any
cash or Cash Equivalents) of the Company or any Restricted Subsidiary;
provided, however, that an Asset Disposition shall not include (a) any such
sale, transfer or other disposition to the Company or to any Restricted
Guarantor, (b) any sale, transfer or other disposition of defaulted receivables
for collection or any sale, transfer or other disposition of property or assets
in the ordinary course of business, (c) any sale, transfer or other disposition
that does not (together with all related sales, transfers or dispositions)
involve aggregate consideration in excess of $2.5 million, (d) the granting of
any Lien (or foreclosure thereon) to the extent that such Lien is granted in
compliance with Section 4.17, (e) any Restricted Payment permitted by Section
4.06, (f) the sale, assignment, lease, conveyance or disposition or other
transfer (however effected, including, without limitation, by merger or
consolidation) of all or substantially all of the assets of the Company and the
Restricted Subsidiaries, taken as a whole, in accordance with Section 5.01 or
(g) any disposition that constitutes a Change of Control.
"Atlantic Finance" means Atlantic Auto Finance Corporation
and its successors.
"Atlantic Finance Loan" means any loan by Atlantic Finance to
the Company which is due not later than the business day next following the day
such loan was made; provided, however, that (x) the proceeds of such loan are
deposited with a floor plan lender (including any bank holding Floor Plan
Notes) and (y) such loan bears interest at a rate not higher than that accruing
on such deposit.
"Average Life" means, as of the date of determination, with
respect to any Indebtedness for borrowed money or Preferred Stock, the quotient
obtained by dividing (i) the sum of the products of the number of years from
the date of determination to the dates of each successive scheduled principal
or liquidation value payments of such Indebtedness or Preferred Stock,
respectively, and the amount of such principal or liquidation value payments,
by (ii) the sum of all such principal or liquidation value payments.
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<PAGE>
"Basket" has the meaning set forth in Section 4.06.
"Board of Directors" means the Board of Directors of the
Company or any Guarantor, as the case may be, or any authorized committee of
that Board.
"Board Resolution" means, with respect to any Person, a duly
adopted resolution of the Board of Directors of such Person.
"Business Day" means each Monday, Tuesday, Wednesday,
Thursday and Friday which is not a day on which banking institutions in the
City of New York, New York are authorized or obligated by law or executive
order to close.
"Capital Lease Obligations" of any Person means the
obligations to pay rent or other amounts under a lease of (or other
Indebtedness arrangements conveying the right to use) real or personal property
of such Person which are required to be classified and accounted for as a
capital lease or liability on the face of a balance sheet of such Person in
accordance with GAAP. The amount of such obligations shall be the capitalized
amount thereof in accordance with GAAP and the stated maturity thereof shall be
the date of the last payment of rent or any other amount due under such lease
prior to the first date upon which such lease may be terminated by the lessee
without payment of a penalty.
"Capital Stock" of any Person means any and all shares,
interests, partnership interests, participations or other equivalents (however
designated) of ownership of such Person.
"Cash Equivalents" means (i) marketable direct obligations
issued or guaranteed by the United States of America, or any governmental
entity or agency or political subdivision thereof (provided, that the full
faith and credit of the United States of America is pledged in support
thereof), maturing within one year of the date of purchase; (ii) commercial
paper issued by corporations or financial institutions maturing within 180 days
from the date of the original issue thereof, and rated "P-1" or better by
Moody's Investors Service or "A-1" or better by Standard & Poor's Ratings Group
or an equivalent rating or better by any other nationally recognized securities
rating agency; (iii) certificates of deposit issued or acceptances accepted by
or guaranteed by any bank or trust company organized under the laws of the
United States of America or any state thereof or the District of Columbia, in
each case having capital, surplus and undivided profits totaling more than
$500,000,000, maturing within one year of the date of purchase; and (iv) money
market funds substantially all of whose assets comprise securities of the type
described in clauses (i) through (iii).
"Common Stock" of any Person means Capital Stock of such
Person that does not rank prior, as to the payment of dividends or as to the
distribution of assets upon any voluntary
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or involuntary liquidation, dissolution or winding up of such Person, to
shares of Capital Stock of any other class of such Person.
"Consolidated Cash Flow Available for Fixed Charges" means
for any period the Consolidated Net Income for such period (x) increased (to
the extent Consolidated Net Income for such period has been reduced thereby) by
the sum of (without duplication) (i) Consolidated Fixed Charges for such
period, plus (ii) Consolidated Income Tax Expense for such period, plus (iii)
the consolidated depreciation and amortization expense included in the income
statement of the Company prepared in accordance with GAAP for such period, plus
(iv) any other non-cash charges to the extent deducted from or reflected in
such Consolidated Net Income except for any non-cash charges that represent
accruals of, or reserves for, cash disbursements to be made in any future
accounting period and (y) decreased by interest income on deposits with floor
plan lenders (including any bank holding Floor Plan Notes) made with proceeds
of Atlantic Finance Loans.
"Consolidated Cash Flow Ratio" means for any period the ratio
of (i) Consolidated Cash Flow Available for Fixed Charges for such period to
(ii) Consolidated Fixed Charges for such period; provided, however, that all
Incurrences and repayments of Indebtedness (including the Incurrence giving
rise to such calculation and any repayments in connection therewith) and all
dispositions (including discontinued operations) or acquisitions of assets
(other than in the ordinary course of business) made during or after such
period and on or prior to the date of determination shall be given pro forma
effect as if they occurred on the first day of such four-quarter period, except
that Indebtedness under the Senior Credit Facility shall be deemed to be the
average daily balance of such Indebtedness during such four-quarter period.
Calculations of pro forma amounts in accordance with this definition may take
into account a reduction of cost of goods sold in the amount of interest earned
on financing proceeds deposited with any holder of Floor Plan Notes.
"Consolidated Fixed Charges" means for any period, without
duplication, (a) the consolidated interest expense included in a consolidated
income statement (without deduction of interest or finance charge income) of
the Company and the Restricted Subsidiaries for such period calculated on a
consolidated basis in accordance with GAAP (it being understood that the
foregoing does not include interest on Floor Plan Notes), but excluding (x) the
amortization of deferred financing costs and (y) interest on Atlantic Finance
Loans, and (b) dividend requirements of the Company and the Restricted
Subsidiaries with respect to Disqualified Stock and with respect to all other
Preferred Stock of Restricted Subsidiaries (in each case (i) whether in cash or
otherwise (except dividends payable solely in shares of Capital Stock (other
than any Disqualified Stock) of the Company or any Restricted Subsidiary) and
(ii) other than dividends with respect to Capital Stock held by the
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Company or any Restricted Guarantor) paid, declared, accrued or accumulated
during such period times, in the case of this clause (b), a fraction the
numerator of which is one and the denominator of which is one minus the then
effective consolidated federal, state and local income tax rate of the
Company, expressed as a decimal.
"Consolidated Income Tax Expense" means for any period the
consolidated provision for income taxes of the Company and the Restricted
Subsidiaries for such period calculated on a consolidated basis in accordance
with GAAP.
"Consolidated Net Income" means for any period the
consolidated net income (or loss) of the Company and the Restricted
Subsidiaries for such period determined on a consolidated basis in accordance
with GAAP; provided, however, that there shall be excluded therefrom (a) the
net income (or loss) of any Person acquired by the Company or any Restricted
Subsidiary in a pooling-of-interests transaction for any period prior to the
date of such transaction, (b) the net income (or loss) of any Restricted
Subsidiary (other than any Guarantor) which is then subject to restrictions
that prevent or limit the payment of dividends or the making of distributions
to such Person to the extent of such restrictions (regardless of any waiver
thereof), (c) non-cash gains and losses due solely to fluctuations in currency
values, (d) the net income (or loss) of any Person that is not a Restricted
Subsidiary, except to the extent of the amount of dividends or other
distributions representing the Company's proportionate share of such Person's
net income for such period actually paid in cash to the Company by such Person
during such period, (e) other than for calculating the Basket, gains or losses
on Asset Dispositions by the Company or any Restricted Subsidiary, (f) other
than for calculating the Basket, all extraordinary or non-recurring gains or
losses determined in accordance with GAAP, (g) the effect of FASB 52
(hyperinflationary accounting) and interpretations by the SEC thereof and (h)
in the case of a successor to the Company by consolidation or merger or as a
transferee of the Company's assets, any earnings (or losses) of the successor
corporation prior to such consolidation, merger or transfer of assets.
"Consolidated Net Worth" of any Person means the
consolidated stockholders' equity of such Person, determined on a consolidated
basis in accordance with GAAP, less (without duplication) amounts attributable
to Disqualified Stock of such Person or attributable to Unrestricted
Subsidiaries.
"Continuing Director" means a director who either was a
member of the Board of Directors of the Company on the Issue Date or who became
a director of the Company subsequent to the Issue Date and whose election, or
nomination for election by the Company's stockholders, was duly approved by a
majority of the Continuing Directors then on the Board of Directors of the
Company, either by a specific vote or by approval of the proxy
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statement issued by the Company on behalf of the entire Board of Directors of
the Company in which such individual is named as nominee for director.
"Currency Agreement" means, with respect to any Person, any
foreign exchange contract, currency swap agreement or other similar agreement
or arrangement, which may include the use of derivatives, designed to protect
such Person against, or to expose such Person to, fluctuations in currency
values.
"Default" means any event that is, or after notice or lapse
of time or both would become, an Event of Default.
"Designated Senior Debt" means (i) so long as the Senior
Credit Facility is in effect, the Senior Debt incurred thereunder and (ii) any
other Senior Debt which has at the time of initial issuance an aggregate
outstanding principal amount in excess of $25 million which has been so
designated as Designated Senior Debt by the Board of Directors of the Company
at the time of initial issuance in a resolution delivered to the Trustee.
"Disinterested Director" means a member of the Board of
Directors of the Company who does not have any material direct or indirect
financial interest in or with respect to the transaction being considered.
"Disqualified Stock" of any Person means any Capital Stock of
such Person which, by its terms (or by the terms of any security into which it
is convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the option of the holder thereof,
in whole or in part, on or prior to the final maturity of the Notes; provided,
however, that any such Capital Stock that so matures or is redeemable in part
shall be deemed Disqualified Stock only to the extent that it so matures or is
so redeemable.
"DTC" means The Depository Trust Company or its successors.
"Euroclear" means Morgan Guaranty Trust Company of New York
(Brussels Office) as operator of the Euroclear System.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated by the SEC thereunder.
"Exchange Registration Statement" has the meaning set forth
in the Registration Rights Agreement.
"Fair Market Value" means, with respect to any asset, the
price (after taking into account any liabilities relating to such asset) which
could be negotiated in an arm's-length transaction, for cash, between a willing
seller and a willing and
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able buyer, neither of which is under any compulsion to complete the
transaction; provided, however, that the Fair Market Value of any such asset
or assets shall be determined conclusively (i) for any determination pursuant
to the covenant described under Section 4.05 or 4.06 by the Board of Directors
of the Company acting in good faith, which determination shall be evidenced by
a resolution of such Board delivered to the Trustee, and (ii) for any other
determination by an officer of the Company acting in good faith.
"Floor Plan Notes" means Indebtedness of the Company or any
Restricted Subsidiary all of the proceeds of which are used to purchase
vehicles and/or vehicle parts and supplies to be sold in the ordinary course of
business of the Company and the Restricted Subsidiaries.
"GAAP" means generally accepted accounting principles,
consistently applied, as in effect on the Issue Date in the United States of
America, as set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as is approved by a significant
segment of the accounting profession in the United States.
"Guarantee" means a guarantee of the Notes by a Guarantor
under this Indenture.
"guarantee" means, as applied to any obligation, (i) a
guarantee (other than by endorsement of negotiable instruments for collection
in the ordinary course of business), direct or indirect, in any manner, of any
part or all of such obligation and (ii) an agreement, direct or indirect,
contingent or otherwise, the practical effect of which is to assure in any way
the payment or performance (or payment of damages in the event of
non-performance) of all or any part of such obligation, including, without
limiting the foregoing, the payment of amounts drawn down by letters of credit.
A guarantee shall include, without limitation, any agreement to maintain or
preserve any other Person's financial condition or to cause any other Person to
achieve certain levels of operating results. It is understood that the
obligations of the Company under the Support Agreement dated as of June 14,
1996 between the Company and Atlantic Auto Second Funding Corporation
constitute a guarantee for purposes of this Indenture only to the extent of the
accrued liability, if any, of the Company for any breach of the representations
and warranties of Atlantic Finance contained in Section 3.2 of the Purchase
Agreement dated as of June 14, 1996 between Atlantic Auto Second Funding
Corporation and Atlantic Finance, and that obligations of the Company under
similar agreements will constitute a guarantee for purposes of this Indenture
only to the extent of similar accrued liabilities.
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"Guarantor" means (i) each Subsidiary of the Company that, on
the Issue Date, is an obligor (including as guarantor) under, or in respect of,
the Senior Credit Facility and (ii) each Subsidiary of the Company that
pursuant to the terms of this Indenture executes a supplemental indenture to
this Indenture as a Guarantor, in each case, until such Subsidiary is released
from its Guarantee.
"Holder" or "Securityholder" means the Person in whose name a
Security is registered on the Registrar's books.
"Incur" means, with respect to any Indebtedness or other
obligation of any Person, to create, issue, incur (including by conversion,
exchange or otherwise), assume, guarantee or otherwise become liable in respect
of such Indebtedness or other obligation or the recording, as required pursuant
to GAAP or otherwise, of any such Indebtedness or other obligation on the
balance sheet of such Person (and "Incurrence," "Incurred" and "Incurring"
shall have meanings correlative to the foregoing). Indebtedness of any Person
or any of its Subsidiaries existing at the time such Person becomes a
Restricted Subsidiary (or is merged into or consolidates with the Company or
any Restricted Subsidiary), whether or not such Indebtedness was incurred in
connection with, or in contemplation of, such Person becoming a Restricted
Subsidiary (or being merged into or consolidated with the Company or any
Restricted Subsidiary), shall be deemed Incurred at the time any such Person
becomes a Restricted Subsidiary or merges into or consolidates with the Company
or any Restricted Subsidiary. Neither the accrual of interest, nor the
accretion of accreted value, shall be deemed to be an Incurrence.
"Indebtedness" means (without duplication), with respect to
any Person, whether recourse is to all or a portion of the assets of such
Person and whether or not contingent, (i) all indebtedness of such Person for
money borrowed, (ii) all indebtedness of such Person evidenced by bonds,
debentures, notes or other similar instruments, including obligations incurred
in connection with the acquisition of property, assets or businesses, (iii)
every reimbursement obligation of such Person with respect to letters of
credit, bankers' acceptances or similar facilities issued for the account of
such Person, (iv) all indebtedness of such Person issued or assumed as the
deferred purchase price of property or services (but excluding trade accounts
payable or accrued liabilities arising in the ordinary course of business), (v)
every Capital Lease Obligation of such Person, (vi) every net obligation under
interest rate swap or similar agreements or foreign currency hedge, exchange or
similar agreements of such Person and (vii) every obligation of the type
referred to in clauses (i) through (vi) of another Person and all dividends of
another Person the payment of which, in either case, such Person has guaranteed
or is responsible or liable for, directly or indirectly, as obligor, guarantor
or otherwise. Indebtedness (a) shall include (without duplication) the
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liquidation preference and any mandatory redemption payment obligations in
respect of any Disqualified Stock of the Company, and any Preferred Stock of a
Subsidiary of the Company, (b) shall never be calculated taking into account
any cash and cash equivalents held by such Person, (c) shall not include
obligations arising from agreements of the Company or a Subsidiary to provide
for indemnification, adjustment of purchase price, earn-out or other similar
obligations, in each case, Incurred in connection with the acquisition or
disposition of any business or assets of a Subsidiary, (d) which provides that
an amount less than the principal amount thereof shall be due upon any
declaration of acceleration thereof shall be deemed to be incurred or
outstanding in an amount equal to the accreted value thereof at the date of
determination determined in accordance with GAAP and (e) shall not be deemed to
be Incurred upon the issuance of a guarantee by the Company, in connection with
an Acquisition, of the price of its Common Stock, unless such guarantee is
evidenced by a bond, debenture, note or similar instrument.
"Indenture" means this Indenture as amended or supplemented
from time to time in accordance with its terms.
"Initial Global Securities" means the Regulation S Global
Security and the 144A Global Security, each of which contains a Securities Act
Legend.
"Initial Securities" means the Securities containing a
Securities Act Legend.
"Institutional Accredited Investor" means an institution that
is an "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3)
or (7) of Regulation D promulgated under the Securities Act.
"interest" means, with respect to the Notes, the sum of any
cash interest and any Additional Interest on the Notes.
"Interest Payment Date" has the meaning given to such term
in the Securities.
"Interest Rate Obligations" means, with respect to any
Person, the obligations of such Person under (i) interest rate swap agreements,
interest rate cap agreements and interest rate collar agreements, and (ii)
other agreements or arrangements designed to protect such Person against, or to
expose such Person to, fluctuations in interest rates.
"Investment" by any Person means any direct or indirect loan,
advance, guarantee or other extension of credit or capital contribution to (by
means of transfers of cash or other property to others or payments for property
or services for the account or use of others, or otherwise), or purchase or
acquisition of
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Capital Stock, bonds, notes, debentures or other securities or evidence of
Indebtedness issued by, any other Person.
"Issue Date" means July 23, 1997, the original issue date of
the Securities.
"Lien" means, with respect to any property or assets, any
mortgage or deed of trust, pledge, hypothecation, assignment, security
interest, lien, charge, easement (other than any easement not materially
impairing usefulness or marketability), encumbrance, preference, priority or
other security agreement with respect to such property or assets (including,
without limitation, any conditional sale or other title retention agreement
having substantially the same economic effect as any of the foregoing).
"Net Available Proceeds" from any Asset Disposition by any
Person means cash or Cash Equivalents received (including by way of sale or
discounting of a note, installment receivable or other receivable, but
excluding any other consideration received (x) in the form of assumption by the
acquiror of Indebtedness or other obligations relating to such properties or
assets or (y) in any other non-cash form) therefrom by such Person, including
any cash received by way of deferred payment or upon the monetization or other
disposition of any non-cash consideration (including notes or other securities)
received in connection with such Asset Disposition, net of (i) all legal, title
and recording tax expenses, commissions, any relocation expenses incurred as a
result thereof and other fees and expenses incurred and all federal, state,
foreign and local taxes required to be accrued as a liability as a consequence
of such Asset Disposition, (ii) all payments made by such Person or any of its
Restricted Subsidiaries on, or in respect of, any Indebtedness (A) which is
secured by such assets in accordance with the terms of any Lien upon or with
respect to such assets or (B) which must, by the terms of such Lien or
otherwise (including the obtaining of any necessary consent in respect thereof
to such Asset Disposition) or by applicable law, be repaid as a result of such
Asset Disposition, (iii) all payments made with respect to liabilities
associated with the assets which are the subject of the Asset Disposition,
including, without limitation, trade payables and other accrued liabilities,
(iv) appropriate amounts to be provided by such Person or any Restricted
Subsidiary thereof, as the case may be, as a reserve in accordance with GAAP
against any liabilities associated with such assets and retained by such Person
or any Restricted Subsidiary thereof, as the case may be, after such Asset
Disposition, including, without limitation, liabilities under any
indemnification obligations and severance and other employee termination costs
associated with such Asset Disposition, until such time as such amounts are no
longer reserved or such reserve is no longer necessary (at which time any
remaining amounts will become Net Available Proceeds to be allocated in
accordance with the provisions of the second and third sentences of Section
4.05) and (v) all distributions and
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other payments made to minority interest holders in Restricted Subsidiaries of
such Person or joint ventures as a result of such Asset Disposition.
"Net Investment" means, in respect of any Investment and the
issuer thereof (and its Subsidiaries), the excess of (i) the aggregate amount
of all Investments made therein by the Company or any Restricted Subsidiary on
or after the Issue Date (including the Fair Market Value of all such
Investments not made in cash or Cash Equivalents, valued at the time of each
such Investment) over (ii) the aggregate amount returned in cash or Cash
Equivalents on or with respect to Investments in such Person (whenever such
Investment was made) whether through the sale or other disposition of the
Investment in such Person (or portion thereof) or through interest payments,
principal payments, dividends or other distributions or payments; provided,
however, that such payments or distributions shall not be (and have not been)
included in Section 4.06(a)(3)(D).
"Offer to Purchase" means a written offer (the "Offer") sent
by the Company by first class mail, postage prepaid, to each Holder at his
address appearing in the register for the Securities on the date of the Offer
offering to purchase up to the principal amount of Securities specified in such
Offer at the purchase price specified in such Offer (as determined pursuant to
this Indenture). Unless otherwise required by applicable law, the Offer shall
specify an expiration date (the "Expiration Date") of the Offer to Purchase
which shall be not less than 30 days nor more than 60 days after the date of
such Offer and a settlement date (the "Purchase Date") for purchase of
Securities within five Business Days after the Expiration Date. The Company
shall notify the Trustee in writing at least 15 Business Days (or such shorter
period as is acceptable to the Trustee) prior to the mailing of the Offer of
the Company's obligation to make an Offer to Purchase, and the Offer shall be
mailed by the Company or, at the Company's written request, by the Trustee in
the name and at the expense of the Company. The Offer shall contain all the
information required by applicable law to be included therein. The Offer shall
contain all instructions and materials necessary to enable such holders to
tender Securities pursuant to the Offer to Purchase. The Offer shall also
state:
(i) the Section of this Indenture pursuant to which the Offer to
Purchase is being made;
(ii) the Expiration Date and the Purchase Date;
(iii) the aggregate principal amount of the outstanding Securities
offered to be purchased by the Company pursuant to the Offer to Purchase
(including, if less than 100%, the manner by which such amount has been
determined pursuant to the Section of this Indenture requiring the Offer to
Purchase) (the "Purchase Amount");
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(iv) the purchase price to be paid by the Company for each $1,000
aggregate principal amount of Securities accepted for payment (as specified
pursuant to this Indenture) (the "Purchase Price");
(v) that the Holder may tender all or any portion of the Securities
registered in the name of such Holder and that any portion of a Security
tendered must be tendered in an integral multiple of $1,000 principal amount;
(vi) the place or places where Securities are to be surrendered for
tender pursuant to the Offer to Purchase;
(vii) that interest on any Security not tendered or tendered but not
purchased by the Company pursuant to the Offer to Purchase will continue to
accrue;
(viii) that on the Purchase Date the Purchase Price will become due
and payable upon each Security being accepted for payment pursuant to the
Offer to Purchase and that interest thereon shall cease to accrue on and after
the Purchase Date;
(ix) that each Holder electing to tender all or any portion of a
Security pursuant to the Offer to Purchase will be required to surrender such
Security at the place or places specified in the Offer prior to the close of
business on the Expiration Date (such Security being duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing);
(x) that Holders will be entitled to withdraw all or any portion of
Securities tendered if the Company (or its Paying Agent) receives, not later
than the close of business on the fifth Business Day next preceding the
Expiration Date, a facsimile transmission or letter setting forth the name of
the Holder, the principal amount of the Securities the holder tendered, the
certificate number of the Securities the Holder tendered and a statement that
such Holder is withdrawing all or a portion of his tender;
(xi) that (a) if Securities in an aggregate principal amount less
than or equal to the Purchase Amount are duly tendered and not withdrawn
pursuant to the Offer to Purchase, the Company shall purchase all such
Securities and (b) if Securities in an aggregate principal amount in excess of
the Purchase Amount are tendered and not withdrawn pursuant to the Offer to
Purchase, the Company shall purchase Securities having an aggregate principal
amount equal to the Purchase Amount on a pro rata basis (with such adjustments
as may be deemed appropriate so that only Securities in denominations of $1,000
or integral multiples thereof shall be purchased); and
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(xii) that in the case of any Holder whose Security is purchased only
in part, the Company shall execute and the Trustee shall authenticate and
deliver to the holder of such Security without service charge, a new Security
or Securities, of any authorized denomination as requested by such holder in
writing, in an aggregate principal amount equal to and in exchange for the
unpurchased portion of the Security so tendered.
An Offer to Purchase shall be governed by and effected in
accordance with the provisions above pertaining to any Offer. An Offer to
Purchase may be conditioned on the consummation of the applicable Change of
Control events.
"Officer" means the Chairman of the Board, the Chief
Executive Officer, any Executive Vice President, any Senior Vice President, the
Chief Financial Officer, the Treasurer, or the Secretary of the Company.
"Officers' Certificate" means a certificate, signed by two
Officers (at least one of whom shall be the Chief Financial Officer or Senior
Vice President-Finance of the Company) or by an Officer and an Assistant
Treasurer or Assistant Secretary of the Company, complying with Sections 13.04
and 13.05.
"Opinion of Counsel" means a written opinion from legal
counsel who is reasonably acceptable to the Trustee. The counsel may be an
employee of or counsel to the Company or the Trustee.
"Participant" means any Person who has an account with DTC.
"Permitted Holder" means any of Trace, Harvard Private
Capital Group, Inc., Aeneas Venture Corporation and Apollo Advisors, L.P. and
their Affiliates.
"Permitted Investments" means (i) Investments in Cash
Equivalents; (ii) Investments representing Capital Stock or obligations issued
to the Company or any Restricted Subsidiary in the course of the good faith
settlement of claims against any other Person or by reason of a composition or
readjustment of debt or a reorganization of any debtor of the Company or any
Restricted Subsidiary; (iii) deposits, including interest-bearing deposits,
maintained in the ordinary course of business in banks or with floor plan
lenders; (iv) trade receivables and prepaid expenses, in each case arising in
the ordinary course of business; provided, however, that such receivables and
prepaid expenses would be recorded as assets of such Person in accordance with
GAAP; (v) endorsements for collection or deposit in the ordinary course of
business by such Person of bank drafts and similar negotiable instruments of
such other Person received as payment for ordinary course of business trade
receivables; (vi) any Interest Rate Obligations or Currency Agreements with an
unaffiliated Person permitted by Section 4.14; (vii) Investments received as
consideration for an Asset Disposition in compliance
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with Section 4.05; (viii) Investments in the Company or any Restricted
Subsidiary or any Person that after giving effect to such Investment will be a
Restricted Subsidiary; and (ix) prepaid expenses and loans or advances to
employees of the Company or any Restricted Subsidiary in the ordinary course
of business.
"Permitted Refinancing" means, with respect to any
Indebtedness, Indebtedness to the extent representing a Refinancing of such
Indebtedness; provided, however, that (a) such Indebtedness does not exceed the
amount of Indebtedness so Refinanced plus the amount of any premium required to
be paid in connection with such Refinancing pursuant to the terms of the
Indebtedness Refinanced or the amount of any premium reasonably determined by
the issuer of such Indebtedness as necessary to accomplish such Refinancing by
means of a tender offer, exchange offer or privately negotiated repurchase,
plus the expenses of such issuer reasonably incurred in connection therewith,
(b) in the case of any Refinancing of Indebtedness that is pari passu with the
Securities, such Refinancing Indebtedness is made pari passu with or
subordinate in right of payment to the Securities, and, in the case of any
Refinancing of Indebtedness that is subordinate in right of payment to the
Securities, such Refinancing Indebtedness is subordinate in right of payment to
the Securities on terms no less favorable to the Holders than those contained
in the Indebtedness being Refinanced, (c) the Refinancing Indebtedness by its
terms, or by the terms of any agreement or instrument pursuant to which such
Indebtedness is issued, does not have an Average Life that is less than the
remaining Average Life of the Indebtedness being Refinanced and does not permit
redemption or other retirement (including pursuant to any required offer to
purchase to be made by the Company or a Restricted Subsidiary) of such
Indebtedness at the option of the holder thereof prior to the final stated
maturity of the Indebtedness being Refinanced, other than a redemption or other
retirement at the option of the holder of such Indebtedness (including pursuant
to a required offer to purchase made by the Company or a Restricted Subsidiary)
which is conditioned upon a change of control of the Company pursuant to
provisions substantially similar to those contained in Section 4.14 or which is
otherwise on terms substantially similar to those in such Indebtedness being
Refinanced and (d) such Refinancing Indebtedness is Incurred by the obligor on
the Indebtedness being Refinanced or by the Company or any Restricted
Guarantor.
"Person" means any individual, corporation, limited or
general partnership, limited liability company, limited liability partnership,
joint venture, association, joint stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"Preferred Stock" means Capital Stock of any Person of any
class or classes (however designated) that ranks prior, as to the payment of
dividends or as to the distribution of assets upon any voluntary or involuntary
liquidation, dissolution or winding
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up of such Person, to Capital Stock of any other class of such Person.
"principal" of any Security means principal of, and premium,
if any, with respect to, such Security.
"Private Exchange Securities" has the meaning set forth in
the Registration Rights Agreement.
"Public Equity Offering" means an underwritten public
offering of Common Stock of the Company pursuant to an effective registration
statement filed under the Securities Act (excluding any registration statements
filed on Form S-8 or any successor form).
"Purchase Date" has the meaning set forth in the definition
of "Offer to Purchase."
"Purchase Money Debt" means Indebtedness of the Company or
any Restricted Subsidiary Incurred for the purpose of financing all or any part
of the purchase price, or the cost of construction or improvement, of any
property; provided, however, that the aggregate amount of such Indebtedness
shall not exceed the lesser of (x) the Fair Market Value of such property or
(y) such purchase price or cost.
"Qualified Institutional Buyer" or "QIB" shall have the
meaning specified under Rule 144A under the Securities Act.
"Qualified Stock" means any Capital Stock of the Company
other than Disqualified Stock.
"Refinance" means refinance, renew, extend, replace, defease
or refund; and "Refinancing" and "Refinanced" have correlative meanings.
"Registration Rights Agreement" means the Registration Rights
Agreement dated the date hereof among the Company, J.P. Morgan Securities Inc.,
Salomon Brothers Inc, CIBC Wood Gundy Securities Corp., Montgomery Securities
and Scotia Capital Markets (USA) Inc.
"Regulation S" means Regulation S under the Securities Act.
"Replacement Assets" means (x) properties and assets (other
than cash or any Capital Stock or other security) that will be used in a
business of the Company and the Restricted Subsidiaries conducted on the Issue
Date or in a business reasonably related thereto or (y) Capital Stock of any
Person that will become on the date of Acquisition thereof a Restricted
Subsidiary as a result of such Acquisition.
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"Restricted Guarantor" means, at any time of determination, a
Restricted Subsidiary that is a Guarantor at such time.
"Restricted Physical Security" means a Physical Security
containing, or required to contain, a Securities Act Legend.
"Restricted Subsidiary" means any Subsidiary of the Company
other than an Unrestricted Subsidiary.
"Rule 144" means Rule 144 under the Securities Act.
"Rule 144A" means Rule 144A under the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities" means the 11% Senior Subordinated Notes due 2007
issued under this Indenture.
"Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations promulgated by the SEC thereunder.
"Senior Credit Facility" means the Credit Agreement, dated as
of March 20, 1997, among the Company, as borrower, the guarantors party
thereto, The Bank of Nova Scotia, as administrative agent, Morgan Guaranty
Trust Company of New York, as documentation agent, and the lenders named
therein, including any deferrals or Refinancings thereof, or amendments,
modifications or supplements thereto (including, without limitation, any
amendment increasing the amount borrowed thereunder), and any agreement
providing therefor whether by or with the same or any other lender, creditors
or group of creditors and including related notes, guarantee agreements and
other instruments and agreements executed in connection therewith.
"Senior Debt" means, with respect to any Person at any date,
(i) in the case of the Company or any Guarantor, all Indebtedness under the
Senior Credit Facility, including principal, premium, if any, and interest on
such Indebtedness and all other amounts due on or in connection with such
Indebtedness, including all charges, fees and expenses, (ii) all other
Indebtedness of such Person for borrowed money, including principal, premium,
if any, and interest on such Indebtedness, unless the agreement or instrument
under which such Indebtedness for borrowed money is created, incurred, assumed
or guaranteed expressly provides that such Indebtedness for borrowed money is
not senior or superior in right of payment to the Securities, and all
Refinancings or amendments thereof and (iii) all interest on any Indebtedness
referred to in clauses (i) and (ii) accruing during the pendency of any
bankruptcy or insolvency proceeding, whether or not allowed or allowable as a
claim in such proceeding
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thereunder. Notwithstanding the foregoing, Senior Debt of any Person shall not
include (a) Indebtedness which is pursuant to its terms or any agreement or
instrument relating thereto subordinated or junior in right of payment or
otherwise to any other Indebtedness of such Person (including, without
limitation, Indebtedness represented by Disqualified Stock); provided,
however, that no Indebtedness shall be deemed to be subordinated or junior in
right of payment or otherwise to any other Indebtedness of a Person solely by
reason of such other Indebtedness being secured and such Indebtedness not
being secured, (b) the Securities or the Guarantees, (c) any Indebtedness of
such Person to any of its Subsidiaries, (d) Indebtedness Incurred in violation
of Section 4.04, (e) obligations for goods, materials or services purchased or
rendered in the ordinary course of business or obligations consisting of trade
payables, (f) any liability for federal, state, local or other taxes owed or
owing by such Person and (g) any Indebtedness which, when incurred and without
respect to any election under Section 1111(b) of the Bankruptcy Code, is
without recourse to such Person.
"Shelf Registration Statement" has the meaning set forth in
the Registration Rights Agreement.
"Subordinated Indebtedness" of the Company or any Guarantor
means any Indebtedness (whether outstanding on the date hereof or hereafter
Incurred) which is by its terms expressly subordinate or junior in right of
payment to the Securities or the Guarantee of such Guarantor, as the case may
be.
"Subsidiary" of any Person means (i) a corporation more than
50% of the outstanding Voting Stock of which is owned, directly or indirectly,
by such Person or by one or more other Subsidiaries of such Person or by such
Person and one or more other Subsidiaries thereof or (ii) any other Person
(other than a corporation) in which such Person, or one or more other
Subsidiaries of such Person or such Person and one or more other Subsidiaries
thereof, directly or indirectly, has at least a majority ownership and voting
power relating to the policies, management and affairs thereof.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code
ss.ss. 77aaa-77bbbb), as in effect on the date of this Indenture, except as
provided in Section 10.03.
"Trace" means Trace International Holdings, Inc. and its
successors.
"Trust Officer" means any officer within the corporate trust
department (or any successor group) of the Trustee including any vice
president, assistant vice president, assistant secretary or any other officer
or assistant officer of the Trustee customarily performing functions similar to
those performed by the persons who at that time shall be such officers,
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and also means, with respect to a particular corporate trust matter, any other
officer to whom such trust matter is referred because of his knowledge of and
familiarity with the particular subject.
"Trustee" means the party named as such in this Indenture
until a successor replaces it in accordance with the provisions of this
Indenture and thereafter means such successor.
"Unrestricted Global Securities" means one or more Global
Securities that do not and are not required to bear the Securities Act Legend.
"Unrestricted Physical Securities" means one or more Physical
Securities that do not and are not required to bear the Securities Act Legend.
"Unrestricted Securities" means the Securities that do not
and are not required to bear the Securities Act Legend.
"Unrestricted Subsidiary" means (i) any Subsidiary of the
Company that at the time of determination has been designated an Unrestricted
Subsidiary by the Board of Directors in the manner provided below, (ii) any
Subsidiary of an Unrestricted Subsidiary and (iii) until it is redesignated as
a Restricted Subsidiary in the manner provided below, Atlantic Finance. Any
such designation by the Board of Directors will be evidenced to the Trustee by
promptly filing with the Trustee a copy of the board resolution giving effect
to such designation and an officers' certificate certifying that such
designation complied with the foregoing provisions. The Company shall not, and
shall not permit any Restricted Subsidiary to, directly or indirectly, at any
time, (a) be liable for any Indebtedness of any Unrestricted Subsidiary (other
than in the form of an Investment therein in accordance with Section 4.06) or
(b) be liable for any Indebtedness that provides that the holder thereof may
(upon notice, lapse of time or both) declare a default thereon or cause the
payment thereof to be accelerated or payable prior to its stated final maturity
upon the occurrence of a default with respect to any Indebtedness of any
Unrestricted Subsidiary. The Board of Directors may redesignate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that
(i) no Default shall have occurred and be continuing and (ii) Indebtedness of
such Unrestricted Subsidiary and all Liens on any asset of such Unrestricted
Subsidiary outstanding immediately following such redesignation would, if
Incurred at such time, be permitted to be Incurred under this Indenture.
"Voting Stock" of any Person means the Capital Stock of such
Person which ordinarily has voting power for the election of directors (or
persons performing similar functions) of such Person, whether at all times or
only so long as no senior class of securities has such voting power by reason
of any contingency.
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"Wholly Owned Subsidiary" means a Restricted Subsidiary all
of the outstanding Capital Stock or other ownership interests of which (other
than directors' qualifying shares) shall at the time be owned by the Company
and/or by one or more Wholly Owned Subsidiaries.
Section 1.2. Other Definitions.
Term Defined in Section
------------------
"Bankruptcy Law" 6.01
"Change of Control" 4.14
"Custodian" 6.01
"Event of Default" 6.01
"Funding Guarantor" 11.05
"Global Security" 2.01(a)
"Guarantor Blockage Period" 12.02(a)
"Guarantor Payment Blockage Notice" 12.02(a)
"144A Global Security" 2.01(a)
"Paying Agent" 2.03
"Payment Blockage Notice" 8.02(a)
"Payment Blockage Period" 8.02(a)
"Physical Security" 2.01(b)
"Registrar" 2.03
"Regulation S Global Security" 2.01(a)
"Required Filing Date" 4.12
"Securities Act Legend" 2.06(f)
"United States Government Obligation" 9.01
Section 1.3. Incorporation by Reference of Trust Indenture Act
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"Commission" means the Securities and Exchange Commission.
"indenture securities" means the Securities.
"indenture security holder" means a Holder or Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Trustee.
"obligor" on the indenture securities means the Company or
any other obligor on the Securities.
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All other TIA terms used in this Indenture that are defined
by the TIA, defined by TIA reference to another statute or defined by
Commission rule and not otherwise defined herein have the meanings assigned to
them therein.
Section 1.4. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting principles in
effect from time to time, and any other reference in this Indenture to
"generally accepted accounting principles" refers to GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in
the plural include the singular;
(5) Section and Article references are to sections and
articles of this Indenture;
(6) provisions apply to successive events and transactions;
and
(7) "herein," "hereof" and other words of similar import
refer to this Indenture as a whole and not to any particular Article, Section
or other subdivision.
ARTICLE 2.
THE SECURITIES
Section 2.1. Form and Dating.
(a) Global Securities. Securities offered and sold to QIBs in
reliance on Rule 144A shall be issued initially substantially in the form of
Exhibit A hereto in the name of Cede & Co. as nominee of DTC, duly executed by
the Company and authenticated by the Trustee as hereinafter provided. Such
Security shall be referred to herein as the "144A Global Security." Securities
offered and sold in reliance on Regulation S shall be issued initially
substantially in the form of Exhibit A hereto in the name of Cede & Co. as
nominee of DTC, duly executed by the Company and authenticated by the Trustee
as hereinafter provided. Such Security shall be referred to herein as the
"Regulation S Global Security." Unrestricted Global Securities shall be issued
initially in accordance with Sections 2.06(b)(iv), 2.06(c)(ii) and 2.06(e) in
the name of Cede & Co. as nominee of DTC, duly executed by the Company and
authenticated by the Trustee as hereinafter provided. The 144A Global Security,
Regulation S Global Security and Unrestricted Global Security are
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collectively referred to herein as the "Global Securities." The aggregate
principal amount of each of the Global Securities may from time to time be
increased or decreased by adjustments made on the records of the Trustee as
hereinafter provided.
Each Global Security shall represent such of the outstanding
Securities as shall be specified therein and each shall provide that it shall
represent the aggregate principal amount of outstanding Securities from time to
time endorsed thereon and that the aggregate principal amount of outstanding
Securities represented thereby may from time to time be reduced or increased,
as appropriate, to reflect exchanges, redemptions and transfers of interests
therein in accordance with the terms of this Indenture. Any endorsement of a
Global Security to reflect the amount of any increase or decrease in the
principal amount of outstanding Securities represented thereby shall be made by
the Trustee in accordance with instructions given by the Holder thereof as
required by Section 2.06.
Upon the issuance of the Global Security to DTC, DTC shall
credit, on its internal book-entry registration and transfer system, its
Participants' accounts with the respective interests owned by such
Participants. Interests in the Global Securities shall be limited to
Participants, including Euroclear and Cedel, and indirect Participants.
The Participants shall not have any rights either under this
Indenture or under any Global Security with respect to such Global Security
held on their behalf by DTC, and DTC may be treated by the Company, the Trustee
and any agent of the Company or the Trustee as the absolute owner of such
Global Security for the purpose of receiving payment of or on account of the
principal of and, subject to the provisions of this Indenture, interest on the
Global Securities and for all other purposes. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Trustee or any agent of the
Company or the Trustee from giving effect to any written certification, proxy
or other authorization furnished by DTC or impair, as between DTC and its
Participants, the operation of customary practices of DTC governing the
exercise of the rights of an owner of a beneficial interest in any Global
Security.
The provisions of the "Operating Procedures of the Euroclear
System," "Terms and Conditions Governing Use of Euroclear," the "General Terms
and Conditions of Cedel Bank" and "Customer Handbook" of Cedel, and successors
provisions, shall be applicable to interests in the Regulation S Global
Security that are held by the Participants through Euroclear or Cedel.
(b) Physical Securities. Securities offered and sold to
Institutional Accredited Investors who are not also QIBs shall be issued
substantially in the form of Exhibit A hereto, in certificated form and issued
in the names of the purchasers thereof (or their nominees), duly executed by
the Company and
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authenticated by the Trustee as hereinafter provided. Securities in
certificated form shall be referred to herein as the "Physical Securities."
(c) Securities. The provisions of the form of Securities
contained in Exhibit A hereto are incorporated herein by reference. The
Securities and the Trustee's Certificates of Authentication shall be
substantially in the form of Exhibit A hereto. The Securities may have
notations, legends or endorsements required by law, stock exchange rule or
usage. The Company shall approve the form of the Securities and any notation,
legend or endorsement (including notations relating to the Guarantee) on them.
If required, the Securities shall bear the appropriate legend regarding
original issue discount for federal income tax purposes. Each Security shall be
dated the date of its authentication. The terms and provisions contained in the
Securities shall constitute, and are hereby expressly made, a part of this
Indenture.
Section 2.2. Execution and Authentication.
Two Officers of the Company shall sign the Securities for the
Company by manual or facsimile signature.
If an Officer whose signature is on a Security no longer
holds that office at the time the Trustee authenticates the Security, the
Security shall be valid nevertheless.
A Security shall not be valid until an authorized officer of
the Trustee manually signs the certificate of authentication on the Security.
The signature shall be conclusive evidence that the Security has been
authenticated under this Indenture.
The Trustee shall authenticate (i) Initial Securities for
original issue in the aggregate principal amount of up to $150,000,000 in one
or more series, (ii) Private Exchange Securities from time to time only in
exchange for a like principal amount of Initial Global Securities and (iii)
Unrestricted Securities from time to time only (x) in exchange for a like
principal amount of Initial Securities or (y) in an aggregate principal amount
of not more than the excess of $150,000,000 over the sum of the aggregate
principal amount of (A) Initial Securities then outstanding, (B) Private
Exchange Securities then outstanding and (C) Unrestricted Securities issued in
accordance with clause (iii)(x), in each case upon a written order signed by an
Officer of the Company. The order shall specify the amount of Securities to be
authenticated and the date on which the original issue of Securities is to be
authenticated. The order shall also provide instructions concerning
registration, amounts for each Holder and delivery. The aggregate principal
amount of Securities outstanding at any time may not exceed $150,000,000 except
as provided in Section 2.07. The Securities shall be issued only in registered
form,
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without coupons and only in denominations of $1,000 and any integral multiple
thereof.
Section 2.3. Registrar and Paying Agent.
The Company shall maintain an office or agency where
Securities may be presented for registration of transfer or for exchange
("Registrar") and an office or agency where Securities may be presented for
payment ("Paying Agent"). The Company may have one or more co-Registrars and
one or more additional paying agents. The term "Paying Agent" includes any
additional paying agent.
The Company shall enter into an appropriate agency agreement
with any Agent not a party to this Indenture. The agreement shall implement the
provisions of this Indenture that relate to such Agent and shall, if required,
incorporate the provisions of the TIA. The Company shall notify the Trustee in
writing of the name and address of any such Agent. If the Company fails to
maintain a Registrar or Paying Agent, the Trustee shall act as such and shall
be entitled to appropriate compensation in accordance with the provisions of
Section 7.07.
The Company initially appoints the Trustee as Registrar and
Paying Agent. The Company shall give written notice to the Trustee in the
event that the Company decides to act as Registrar. None of the Company, its
Subsidiaries or any of their Affiliates may act as Paying Agent.
Section 2.4. Paying Agent To Hold Money in Trust.
The Company shall require each Paying Agent to agree in
writing to hold in trust for the benefit of Securityholders or the Trustee all
money held by the Paying Agent for the payment of principal of or interest on
the Securities (whether such money has been paid to it by the Company or any
other obligor on the Securities), and the Company and the Paying Agent shall
each notify the Trustee in writing of any default by the Company (or any other
obligor on the Securities) in making any such payment. The Company at any time
may require a Paying Agent to pay all money held by it to the Trustee and
account for any funds disbursed and the Trustee may at any time during the
continuance of any payment default, upon written request to a Paying Agent,
require such Paying Agent to pay all money held by it to the Trustee and to
account for any funds disbursed. Upon making such payment the Paying Agent
shall have no further liability for the money delivered to the Trustee.
Section 2.5. Securityholder Lists.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of Securityholders. If the Trustee is not the Registrar, the Company
shall furnish to the Trustee at
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least five Business Days before each Interest Payment Date and at such other
times as the Trustee may request in writing a list in such form and as of such
date as the Trustee may reasonably require of the names and addresses of
Securityholders.
Section 2.6. Transfer and Exchange.
(a) Transfer and Exchange of Global Securities. Transfer of
the Global Securities shall be by delivery. Global Securities will be exchanged
by the Company for Physical Securities only (i) if DTC notifies the Company
that it is unwilling or unable to continue to act as depositary with respect to
the Global Securities or ceases to be a clearing agency registered under the
Exchange Act and, in either case, a successor depositary registered as a
clearing agency under the Exchange Act is not appointed by the Company within
120 days, (ii) at any time if the Company in its sole discretion determines
that the Global Securities (in whole but not in part) should be exchanged for
Physical Securities or (iii) if the owner of an interest in the Global
Securities requests such Physical Securities, following an Event of Default
under the Indenture, in a writing delivered through DTC to the Trustee.
Upon the occurrence of any of the events specified in the
previous paragraph, Physical Securities shall be issued in such names as DTC
shall instruct the Trustee in writing and the Trustee shall cause the aggregate
principal amount of the applicable Global Security to be reduced accordingly
and direct DTC to make a corresponding reduction in its book-entry system. The
Company shall execute and the Trustee shall authenticate and make available for
delivery to the Person designated in the instructions a Physical Security in
the appropriate principal amount. The Trustee shall make available for delivery
such Physical Securities to the Persons in whose names such Securities are so
registered. Physical Securities issued in exchange for an Initial Global
Security pursuant to this Section 2.06(a) shall bear the Securities Act Legend
and shall be subject to all restrictions on transfer contained therein. Global
Securities may also be exchanged or replaced, in whole or in part, as provided
in Sections 2.07 and 2.10. Every Security authenticated and made available for
delivery in exchange for, or in lieu of, a Global Security or any portion
thereof, pursuant to Section 2.07 or 2.10, shall be authenticated and made
available for delivery in the form of, and shall be, a Global Security. A
Global Security may not be exchanged for another Security other than as
provided in this Section 2.06(a).
(b) Transfer and Exchange of Interests in Global Securities.
The transfer and exchange of interests in Global Securities shall be effected
through DTC, in accordance with this Indenture and the procedures of DTC
therefor. Interests in Initial Global Securities shall be subject to
restrictions on transfer comparable to those set forth herein to the extent
required by the Securities Act. The Trustee shall have no
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obligation to ascertain DTC's compliance with any such restrictions on
transfer. Transfers of interests in Global Securities shall also require
compliance with subparagraph (i) below, as well as one or more of the other
following subparagraphs as applicable:
(i) All Transfers and Exchanges of Interests in Global Securities. In
connection with all transfers and exchanges of interests in Global Securities
(other than transfers of interests in a Global Security to Persons who take
delivery thereof in the form of an interest in the same Global Security), the
transferor of such interest must deliver to the Registrar (1) instructions
given in accordance with the Applicable Procedures from a Participant or an
indirect Participant directing DTC to credit or cause to be credited an
interest in the specified Global Security in an amount equal to the interest to
be transferred or exchanged, (2) a written order given in accordance with the
Applicable Procedures containing information regarding the Participant account
to be credited with such increase and (3) instructions given by the Holder of
the Global Security to effect the transfer referred to in (1) and (2) above.
(ii) Transfer of Interests in the Same Initial Global
Security. Interests in any Initial Global Security may be transferred to
Persons who take delivery thereof in the form of an interest in the same
Initial Global Security in accordance with the transfer restrictions set forth
in Section 2.06(f) hereof.
(iii) Transfer of Interests to Another Initial Global
Security. Interests in any Initial Global Security may be transferred to
Persons who take delivery thereof in the form of an interest in another
Initial Global Security if the Registrar receives the following:
(A) if the transferee will take delivery in the
form of an interest in the 144A Global Security, then the
transferor must deliver a certificate in the form of Exhibit
B hereto, including the certifications in item 1 thereof; or
(B) if the transferee will take delivery in the
form of an interest in the Regulation S Global Security,
then the transferor must deliver a certificate in the form
of Exhibit B hereto, including the certifications in item 2
thereof.
(iv) Transfer and Exchange of Interests in Initial
Global Security for Interests in an Unrestricted Global Security. Interests in
any Initial Global Security may be exchanged by the holder thereof for an
interest in the Unrestricted Global Security or transferred to a Person who
takes delivery thereof in the form of an interest in the Unrestricted Global
Security if:
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(A) such exchange or transfer is effected pursuant
to the Exchange Registration Statement in accordance with
the Registration Rights Agreement;
(B) any such transfer is effected pursuant to the
Shelf Registration Statement in accordance with the
Registration Rights Agreement; or
(C) the Registrar receives the following:
(1) if the holder of such an interest in
an Initial Global Security proposes to exchange it
for an interest in the Unrestricted Global
Security, a certificate from such Holder in the
form of Exhibit C hereto, including the
certifications in item 1(a) thereof;
(2) if the holder of such an interest in an
Initial Global Security proposes to transfer it to a
Person who shall take delivery thereof in the form
of an interest in an Unrestricted Global Security, a
certificate in the form of Exhibit B hereto,
including the certification in item 4 thereof; and
(3) in each such case set forth in this
paragraph (C), an Opinion of Counsel in form
reasonably acceptable to the Company, to the effect
that such exchange or transfer is in compliance with
the Securities Act and that the restrictions on
transfer contained herein and in Section 2.06(f)
hereof are not required in order to maintain
compliance with the Securities Act.
If any such transfer is effected pursuant to paragraph (B) above at a time when
an Unrestricted Global Security has not yet been issued, the Company shall
issue and, upon receipt of an authentication order in accordance with Section
2.02, the Trustee shall authenticate one or more Unrestricted Global Securities
in an aggregate principal amount equal to the principal amount of interests in
the Initial Global Security transferred pursuant to paragraph (B) above.
(v) Notation by the Trustee of Transfer of Interests Among
Global Securities. Upon satisfaction of the requirements for transfer of
interests in Global Securities pursuant to clauses (iii) or (iv) above, the
Trustee, as Registrar, shall reduce or cause to be reduced the aggregate
principal amount of the relevant Global Security from which the interests are
being transferred, and increase or cause to be increased the aggregate
principal amount of the Global Security to which the interests are being
transferred, in each case, by the principal amount so transferred and shall
direct DTC to make corresponding adjustments in its book-entry system. No
transfer of interests
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of a Global Security shall be effected until, and any transferee pursuant
thereto shall succeed to the rights of a holder of such interests only when,
the Registrar has made appropriate adjustments to the applicable Global
Security in accordance with this paragraph.
(c) Transfer or Exchange of Physical Securities for Interests in a
Global Security.
(i) If any Holder of Physical Securities required to contain the
Securities Act Legend proposes to exchange such Securities for an interest in a
Global Security or to transfer such Physical Securities to a Person who takes
delivery thereof in the form of an interest in a Global Security, then, upon
receipt by the Registrar of the following documentation (all of which may be
submitted by facsimile):
(A) if the Holder of such Physical Registered Securities
proposes to exchange such Securities for an interest in an Initial
Global Security, a certificate from such Holder in the form of
Exhibit C hereto, including the certifications in item 2 thereof;
(B) if such Physical Securities are being transferred to a
QIB in accordance with Rule 144A under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including
the certifications in item 1 thereof; or
(C) if such Physical Securities are being transferred to a
Non-U.S. Person (as defined in Regulation S) in an offshore
transaction in accordance with Rule 904 under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including
the certifications in item 2 thereof,
the Trustee shall cancel the Physical Securities, increase or cause to be
increased the aggregate principal amount of, in the case of clause (B) above,
the 144A Global Security, in the case of clause (C) above, the Regulation S
Global Security, and direct DTC to make a corresponding increase in its
book-entry system.
(ii) A Holder of Physical Securities required to contain the
Securities Act Legend may exchange such Securities for an interest in the
Unrestricted Global Security or transfer such Restricted Physical Securities to
a Person who takes delivery thereof in the form of an interest in the
Unrestricted Global Security only:
(A) if such exchange or transfer is effected pursuant to the
Exchange Registration Statement in accordance with the Registration
Rights Agreement;
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(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) upon receipt by the Registrar of the following
documentation (all of which may be submitted by facsimile):
(1) if the Holder of such Physical Securities
proposes to exchange such Securities for an interest in the
Unrestricted Global Security, a certificate from such Holder
in the form of Exhibit C hereto, including the
certifications in item 1(b) thereof;
(2) if the Holder of such Registered Securities
proposes to transfer such Securities to a Person who shall
take delivery thereof in the form of an interest in the
Unrestricted Global Security, a certificate in the form of
Exhibit B hereto, including the certifications in item 4
thereof; and
(3) in each such case set forth in this paragraph
(C), an Opinion of Counsel in form reasonably acceptable to
the Company, to the effect that such exchange or transfer is
in compliance with the Securities Act and that the
restrictions on transfer contained herein and in Section
2.06(f) hereof are not required in order to maintain
compliance with the Securities Act.
If any such transfer is effected pursuant to paragraph (B)
above at a time when an Unrestricted Global Security has not yet been
issued, the Company shall issue and, upon receipt of an
authentication order in accordance with Section 2.02, the Trustee
shall authenticate one or more Unrestricted Global Securities in an
aggregate principal amount equal to the principal amount of Physical
Securities transferred pursuant to paragraph (B) above.
(d) Transfer and Exchange of Physical Securities.
(i) Transfer of a Physical Security to Another Physical Security.
Following the occurrence of one or more of the events specified in Section
2.06(a), a Physical Security may be transferred to Persons who take delivery
thereof in the form of another Physical Security if the Registrar receives the
following:
(A) if the transfer is being effected pursuant to and in
accordance with Rule 144A, then the transferor must deliver a
certificate in the form of Exhibit B
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hereto, including the certifications in item 3(a) thereof; or
(B) if the transfer is being effected pursuant to and in
accordance with Regulation S, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the
certifications in item 3(b) thereof.
(ii) Transfer and Exchange of Restricted Physical Securities for
Unrestricted Physical Securities. Following the occurrence of one or more of
the events specified in Section 2.06(a), a Restricted Physical Security may be
exchanged by the Holder thereof for an Unrestricted Physical Security or
transferred to a Person who takes delivery thereof in the form of an
Unrestricted Physical Security if:
(A) such exchange or transfer is effected pursuant to the
Exchange Registration Statement in accordance with the Registration
Rights Agreement;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement; or
(C) the Registrar receives a certificate from such holder in
the form of Exhibit C hereto, including the certifications in item
1(c) thereof and an Opinion of Counsel in form reasonably acceptable
to the Company, to the effect that such exchange or transfer is in
compliance with the Securities Act and, that the restrictions on
transfer contained herein and in Section 2.06(f) hereof are not
required in order to maintain compliance with the Securities Act.
(iii) Exchange of Physical Securities. When Physical Securities are
presented by a Holder to the Registrar with a request to register the exchange
of such Physical Securities for an equal principal amount of Physical
Securities of other authorized denominations, the Registrar shall make the
exchange as requested only if the Physical Securities are endorsed or
accompanied by a written instrument of transfer in form satisfactory to the
Registrar duly executed by such Holder or by his attorney duly authorized in
writing and shall be issued only in the name of such Holder or its nominee. The
Physical Securities issued in exchange for Physical Securities shall bear the
Securities Act Legend and shall be subject to all restrictions on transfer
contained herein in each case to the same extent as the Physical Securities so
exchanged.
(iv) Return of Physical Securities. In the event of a transfer
pursuant to clauses (i) or (ii) above and the Holder thereof has delivered
certificates representing an aggregate principal amount of Securities in excess
of that to be
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transferred, the Company shall execute and the Trustee shall authenticate and
make available for delivery to the Holder of such Security, without service
charge, a new Physical Security or Securities of any authorized denomination
requested by the Holder, in an aggregate principal amount equal to the portion
of the Security not so transferred.
(e) Exchange Offer. Upon the occurrence of the Exchange Offer
(as defined in the Registration Rights Agreement) in accordance with the
Registration Rights Agreement, the Company shall issue and, upon receipt of an
authentication order in accordance with Section 2.02, the Trustee shall
authenticate one or more Unrestricted Global Securities in an aggregate
principal amount equal to the principal amount of the interests in the Initial
Global Securities tendered for acceptance (and not withdrawn) by persons
participating therein. Concurrently with the issuance of such Securities, the
Trustee shall cause the aggregate principal amount of the applicable Initial
Global Securities to be reduced accordingly and direct DTC to make a
corresponding reduction in its book-entry system. The Trustee shall cancel any
Restricted Physical Certificates in accordance with Section 2.11 hereof.
In the case that one or more of the events specified in
Section 2.06(a) have occurred, upon the occurrence of such Exchange Offer, the
Company shall issue and, upon receipt of an authentication order in accordance
with Section 2.02, the Trustee shall authenticate Unrestricted Physical
Securities in an aggregate principal amount equal to the principal amount of
the Restricted Physical Securities tendered for acceptance by persons
participating therein.
(f) Legends. Each Initial Global Security and each Restricted
Physical Security shall bear the legend (the "Securities Act Legend") in
substantially the following form:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE REOFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY
EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON
THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT
PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED
HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY
MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a) TO A
PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A,
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(b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT OR (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE
SECURITIES ACT, (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE
SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A)
ABOVE."
(g) Global Security Legend. Each Global Security shall bear
a legend in substantially the following form:
"UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES
IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A
WHOLE BY THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
TO A NOMINEE OF DTC, OR BY ANY SUCH NOMINEE OF DTC, OR BY DTC TO A
SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITORY. UNLESS
THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC,
TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE
& CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR
TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
"TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS
GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH
THE RESTRICTIONS SET FORTH IN SECTION 2.06 OF THE INDENTURE."
(h) Cancellation and/or Adjustment of Global Securities. At
such time as all interests in the Global Securities have been exchanged for
Physical Securities, all Global Securities shall be returned to or retained and
canceled by the Trustee in accordance with Section 2.11 hereof. At any time
prior to such cancellation, if any interest in a Global Security is exchanged
for an interest in another Global Security or for Physical Securities, the
principal amount of Securities represented by such Global Security shall be
reduced accordingly and an endorsement shall be made on such Global Security,
by the Trustee to reflect such reduction.
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(i) General Provisions Relating to All Transfers and
Exchanges.
(A) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Global
Securities and Physical Securities upon a written order signed by an
Officer of the Company or at the Registrar's request.
(B) No service charge shall be made to a Holder for any
registration of transfer or exchange, but the Company may require
payment of a sum sufficient to cover any stamp or transfer tax or
similar governmental charge payable in connection therewith (other
than any such stamp or transfer taxes or similar governmental charge
payable upon exchange or transfer pursuant to Sections 2.10, 3.06,
4.05, 4.14 and 10.05 hereof).
(C) All Global Securities and Physical Securities issued
upon any registration of transfer or exchange of Global Securities or
Physical Securities shall be the valid obligations of the Company,
evidencing the same debt, and entitled to the same benefits under
this Indenture, as the Global Securities or Physical Securities
surrendered upon such registration of transfer or exchange.
(D) The Company shall not be required (A) to issue, to
register the transfer of or to exchange Securities during a period
beginning at the opening of 15 Business Days before the day of any
mailing of notice of redemption of Securities under Section 3.02 and
ending at the close of business on the day of such mailing, (B) to
register the transfer of or to exchange any Security so selected for
redemption in whole or in part, except the unredeemed portion of any
Security being redeemed in part or (C) to register the transfer of or
to exchange a Security between a record date and the next succeeding
Interest Payment Date.
(E) Prior to due presentment for the registration of a
transfer of any Security, the Trustee, any Agent and the Company may
deem and treat the Person in whose name any Security is registered as
the absolute owner of such Security for the purpose of receiving
payment of principal of and interest on such Securities and for all
other purposes, and none of the Trustee, any Agent or the Company
shall be affected by notice to the contrary.
(F) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on
transfer imposed under this Indenture or under applicable law with
respect to any
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transfers of any interest in any Security (including any transfers
between or among Participants or beneficial owners of interests in
any Global Security) or Physical Security other than to require
delivery of such certificates and other documentation or evidence as
are expressly required by, and to do so if and when expressly
required by the terms of, this Indenture, and to examine the same to
determine substantial compliance as to form with the express
requirements hereof.
Section 2.7. Replacement Securities.
If a mutilated Security is surrendered to the Trustee or if
the Holder of a Security claims that the Security has been lost, destroyed or
wrongfully taken, the Company shall issue and the Trustee shall authenticate a
replacement Security if the Trustee's requirements are met. The Holder shall
provide an indemnity bond in an amount sufficient in the judgment of the
Company and the Trustee to protect the Company, the Trustee or any Agent from
any loss which any of them may suffer if a Security is replaced may be required
by the Trustee or the Company. The Company and the Trustee each may charge such
Holder for its expenses in replacing such Security.
Every replacement Security is an additional obligation of the
Company.
Section 2.8. Outstanding Securities.
Securities outstanding at any time are all Securities that
have been authenticated by the Trustee except for those canceled by it, those
delivered to it for cancellation and those described in this Section as not
outstanding. A Security does not cease to be outstanding because the Company
or one of its Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.07, it ceases
to be outstanding unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.
If the Paying Agent holds on a redemption date or Maturity
Date money sufficient to pay the principal of, and interest on Securities
payable on that date, then on and after that date such Securities cease to be
outstanding and interest on them ceases to accrue.
Section 2.9. Treasury Securities.
In determining whether the Holders of the required principal
amount of Securities have concurred in any direction, waiver or consent,
Securities owned by the Company, any Subsidiary or any of their respective
Affiliates shall be disregarded, except that for the purposes of determining
whether
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the Trustee shall be protected in relying on any such direction, waiver
or consent, only Securities that the Trustee actually knows are so owned shall
be so disregarded.
The Trustee may require an Officers' Certificate listing
securities owned by the Company, any Subsidiary or any of their respective
Affiliates.
Section 2.10. Temporary Securities.
Until definitive Securities are ready for delivery, the
Company may prepare and the Trustee shall authenticate temporary Securities.
Temporary Securities shall be substantially in the form of definitive
Securities but may have variations that the Company considers appropriate for
temporary Securities. Without unreasonable delay, the Company shall prepare and
the Trustee shall authenticate definitive Securities in exchange for temporary
Securities. Until such exchange, temporary Securities shall be entitled to the
same rights, benefits and privileges as definitive Securities.
Section 2.11. Cancellation.
The Company at any time may deliver Securities to the Trustee
for cancellation. The Registrar and the Paying Agent shall forward to the
Trustee any Securities surrendered to them for transfer, exchange or payment.
The Trustee and no one else shall cancel all Securities surrendered for
transfer, exchange, payment or cancellation. The Company may not issue new
Securities to replace, reissue or resell Securities which the Company has
redeemed, paid, purchased on the open market or otherwise, or otherwise
acquired or have been delivered to the Trustee for cancellation. The Trustee
(subject to the record-retention requirements of the Exchange Act) may, but
shall not be required to, destroy canceled Securities.
Section 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the
Securities, it shall pay the defaulted interest, plus any interest payable on
the defaulted interest pursuant to Section 4.01 hereof, to the persons who are
Securityholders on a subsequent special record date, and such term, as used in
this Section 2.12 with respect to the payment of any defaulted interest, shall
mean the fifteenth day next preceding the date fixed by the Company for the
payment of defaulted interest, whether or not such day is a Business Day. At
least 15 days before such special record date, the Company shall mail to each
Securityholder and to the Trustee a notice that states such special record
date, the payment date and the amount of defaulted interest to be paid.
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Section 2.13. CUSIP or CINS Number.
The Company in issuing the Securities may use a "CUSIP" or
"CINS" number, and if so, such CUSIP or CINS number shall be included in
notices of redemption or exchange as a convenience to Holders; provided,
however, that any such notice may state that no representation is made as to
the correctness or accuracy of the CUSIP or CINS number printed in the notice
or on the Securities, and that reliance may be placed only on the other
identification numbers printed on the Securities. The Company will promptly
notify the Trustee of any change in the CUSIP or CINS number.
Section 2.14. Payments of Interest.
(a) The Holder of a Physical Security at the close of
business on the regular record date with respect to any Interest Payment Date
shall be entitled to receive the interest payable on such Interest Payment Date
notwithstanding any transfer or exchange of such Physical Security subsequent
to the regular record date and prior to such Interest Payment Date, except if
and to the extent the Company shall default in the payment of the interest due
on such Interest Payment Date, in which case such defaulted interest shall be
paid in accordance with Section 2.12; and in the event of an exchange of a
Physical Security for a beneficial interest in any Global Security subsequent
to a regular record date or any special record date and prior to or on the
related Interest Payment Date or other payment date under Section 2.12, any
payment of the interest payable on such payment date with respect to any such
Physical Security shall be made to the Person in whose name such Physical
Security was registered on such record date. Payments of interest on the Global
Securities will be made on each Interest Payment Date to the Holder of the
Global Security on the record date with respect thereto; provided, however,
that, in the event of an exchange of all or a portion of a Global Security for
a Physical Security subsequent to the regular record date or any special record
date and prior to or on the related Interest Payment Date or other payment date
under Section 2.12, any payment of interest payable on such Interest Payment
Date or other payment date with respect to the Physical Security shall be made
to the Holder of the Global Security as of the applicable record date.
(b) Subject to Section 4.01, interest shall be paid to DTC,
with respect to any Global Security held by DTC, on the applicable Interest
Payment Date in accordance with instructions received from DTC at least five
Business Days before the applicable Interest Payment Date.
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ARTICLE 3.
REDEMPTION
Section 3.1. Notices to Trustee.
If the Company elects to redeem Securities pursuant to
paragraph 5 of the Securities at the applicable redemption price set forth
thereon, it shall notify the Trustee in writing of the redemption date and the
principal amount of Securities to be redeemed.
The Company shall give the notice provided for in this
Section 3.01 at least 30 days before the redemption date (unless a shorter
notice shall be agreed to by the Trustee in writing) but not more than 60 days
before the redemption date, together with an Officers' Certificate stating that
such redemption will comply with the conditions contained herein.
Section 3.2. Selection of Securities To Be Redeemed.
If less than all of the Securities are to be redeemed
pursuant to paragraph 5 thereof, the Trustee shall select the Securities to be
redeemed pro rata or by lot or in such other manner as the Trustee shall deem
appropriate and fair. The Trustee shall make the selection from the Securities
then outstanding, subject to redemption and not previously called for
redemption. The Trustee may select for redemption portions (equal to $1,000 or
any integral multiple thereof) of the principal of Securities that have
denominations larger than $1,000. Provisions of this Indenture that apply to
Securities called for redemption also apply to portions of Securities called
for redemption.
Section 3.3. Notice of Redemption.
At least 30 days but not more than 60 days before a
redemption date, the Company shall mail a notice of redemption by first class
mail to each Holder whose Securities are to be redeemed.
The notice shall identify the Securities to be redeemed and
shall state:
(1) the redemption date;
(2) the redemption price;
(3) the CUSIP number (subject to Section 2.13);
(4) the name and address of the Paying Agent to
which the Securities are to be surrendered for redemption;
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(5) that Securities called for redemption must be
surrendered to the Paying Agent to collect the redemption
price;
(6) that, unless the Company defaults in making the
redemption payment, interest on Securities called for
redemption ceases to accrue on and after the redemption date
and the only remaining right of the Holders is to receive
payment of the redemption price upon surrender to the Paying
Agent; and
(7) if any Security is being redeemed in part, the
portion of the principal amount of such Security to be
redeemed and that, after the redemption date, upon surrender
of such Security, a new Security or Securities in principal
amount equal to the unredeemed portion thereof will be
issued.
At the Company's request, the Trustee shall give the notice
of redemption on behalf of the Company, in the Company's name and at the
Company's expense.
Section 3.4. Effect of Notice of Redemption.
Once a notice of redemption is mailed, Securities called for
redemption become due and payable on the redemption date and at the redemption
price. Upon surrender to the Paying Agent, such Securities shall be paid at the
redemption price, plus accrued interest thereon to the redemption date, but
interest installments whose maturity is on or prior to such redemption date
shall be payable to the Holders of record at the close of business on the
relevant record dates referred to in the Securities. The Trustee shall not be
required to (i) issue, authenticate, register the transfer of or exchange any
Security during a period beginning 15 days before the date a notice of
redemption is mailed and ending at the close of business on the date the
redemption notice is mailed, or (ii) register the transfer or exchange of any
Security so selected for redemption in whole or in part, except the unredeemed
portion of any Security being redeemed in part.
Section 3.5. Deposit of Redemption Price.
On or prior to the redemption date, the Company shall deposit
with the Paying Agent money sufficient to pay the redemption price of and
accrued interest on all Securities to be redeemed on that date other than
Securities or portions thereof called for redemption on that date which have
been delivered by the Company to the Trustee for cancellation.
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Section 3.6. Securities Redeemed in Part.
Upon surrender of a Security that is redeemed in part, the
Trustee shall authenticate for the Holder a new Security equal in principal
amount to the unredeemed portion of the Security surrendered.
ARTICLE 4.
COVENANTS
Section 4.1. Payment of Securities.
The Company shall pay the principal of and interest on the
Securities in the manner provided in the Securities. An installment of
principal or interest shall be considered paid on the date due if the Trustee
or Paying Agent holds on that date money designated for and sufficient to pay
the installment in full and is not prohibited from paying such money to the
Holders of the Securities pursuant to the terms of this Indenture.
The Company shall pay interest on overdue principal at the
same rate per annum borne by the Securities. The Company shall pay interest on
overdue installments of interest at the same rate per annum borne by the
Securities, to the extent lawful.
Section 4.2. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, The
City of New York, an office or agency where Securities may be surrendered for
registration of transfer or exchange or for presentation for payment and where
notices and demands to or upon the Company in respect of the Securities and
this Indenture may be served. The Company shall give prompt written notice to
the Trustee of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at
the address of the Trustee set forth in Section 13.02.
The Company may also from time to time designate one or more
other offices or agencies where the Securities may be presented or surrendered
for any or all such purposes and may from time to time rescind such
designations; provided, however, that no such designation or rescission shall
in any manner relieve the Company of its obligation to maintain an office or
agency in the Borough of Manhattan, The City of New York, for such purposes.
The Company shall give prompt written notice to the Trustee of any such
designation or rescission and of any change in the location of any such other
office or agency.
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The Company hereby designates the Corporate Trust Office of
the Trustee as one such office or agency of the Company in accordance with
Section 2.03.
Section 4.3. Limitation on Transactions with Affiliates.
The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, enter into any transaction with any of
their respective Affiliates, including, without limitation, the purchase, sale,
lease or exchange of property, the rendering of any service, or the making of
any guarantee, loan, advance or Investment, unless the terms of such
transaction are at least as favorable as the terms that could be obtained at
such time by the Company or such Restricted Subsidiary, as the case may be, in
a comparable transaction made on an arms'-length basis with a Person that is
not such an Affiliate; provided, however, that (x) if the aggregate
consideration exceeds $1.0 million, the Company shall deliver an Officers'
Certificate to the Trustee stating that a majority of the Disinterested
Directors have determined, in their good faith judgment, that the terms of such
transaction are at least as favorable as the terms that could be obtained at
such time by the Company or such Restricted Subsidiary, as the case may be, in
a comparable transaction made on an arms'-length basis with a Person that is
not such an Affiliate and (y) if the aggregate consideration exceeds $5.0
million the Company shall also deliver to the Trustee, prior to the
consummation of the transaction, the favorable written opinion of a nationally
recognized accounting, appraisal or investment banking firm as to the fairness
of the transaction to the Company or such Restricted Subsidiary, from a
financial point of view; provided, however, that this clause (y) shall not
apply to (I) transactions relating to the assumption by Trace of liabilities of
the Company or any Restricted Subsidiary under extended service contracts (or
Trace's indemnification of the Company or any Restricted Subsidiary for
liabilities thereof) or (II) the writing of extended service contracts by Trace
to customers of the Company or any Restricted Subsidiary. The provisions of
this covenant shall not apply to (i) transactions permitted by Section 4.06,
(ii) reasonable fees and compensation paid to, and indemnity provided on behalf
of, officers, directors and employees of the Company or any Restricted
Subsidiary in the ordinary course of business and on ordinary business terms or
as determined in good faith by the Board of Directors of the Company and (iii)
transactions solely between or among the Company and/or one or more Restricted
Subsidiaries.
Section 4.4. Limitation on Incurrence of Indebtedness.
The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, Incur any Indebtedness, except:
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(i) Indebtedness of the Company or any Restricted Guarantor, if the
Consolidated Cash Flow Ratio for the four full fiscal quarters for which
quarterly or annual financial statements are available next preceding the
Incurrence of such Indebtedness would be greater than 2.0 to 1.0, and Permitted
Refinancings thereof;
(ii) Indebtedness of the Company Incurred under the Senior Credit
Facility in an aggregate amount not to exceed $100.0 million less any amount of
Indebtedness repaid from the proceeds of Asset Dispositions as provided under
Section 4.05, which repayment results in a permanent reduction of the
commitments under the Senior Credit Facility;
(iii) Indebtedness owed by the Company to any Restricted Guarantor or
Indebtedness owed by a Restricted Subsidiary to the Company or a Restricted
Guarantor; provided, however, upon either (x) the transfer or other disposition
by such Restricted Guarantor or the Company of any Indebtedness so permitted
under this clause (iii) to a Person other than the Company or another
Restricted Guarantor or (y) such Restricted Guarantor's ceasing to be a
Restricted Guarantor, the provisions of this clause (iii) shall no longer be
applicable to such Indebtedness and such Indebtedness shall be deemed to have
been Incurred at the time of any such issuance, sale, transfer or other
disposition, as the case may be;
(iv) Interest Rate Obligations of the Company or any Restricted
Subsidiary relating to Indebtedness of the Company or such Restricted
Subsidiary permitted to be Incurred under this Indenture; provided, however,
that the notional amount of such Interest Rate Obligations does not exceed the
amount of the Indebtedness to which such Interest Rate Obligations relate;
(v) Indebtedness of the Company or any Restricted Subsidiary under
Currency Agreements to the extent relating to (x) Indebtedness of the Company
or any Restricted Subsidiary permitted to be Incurred under this Indenture
and/or (y) obligations to purchase assets, properties or services incurred in
the ordinary course of business of the Company or any Restricted Subsidiary;
provided, however, that such Currency Agreements do not increase the
Indebtedness or other obligations of the Company and the Restricted
Subsidiaries outstanding other than as a result of fluctuations in foreign
currency exchange rates or by reason of fees, indemnities or compensation
payable thereunder;
(vi) Permitted Refinancings of any Indebtedness to the extent
outstanding on the Issue Date;
(vii) Indebtedness of the Company under the Securities (including
Unrestricted Securities), and Permitted Refinancings thereof;
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(viii) Floor Plan Notes;
(ix) Acquired Indebtedness and Permitted Refinancings thereof;
(x) guarantees by the Company or any Restricted Guarantor of
Indebtedness of the Company or any Restricted Subsidiary otherwise permitted
to be Incurred under this Indenture;
(xi) Purchase Money Debt, and Permitted Refinancings thereof, in an
aggregate amount not to exceed $35.0 million at any time outstanding;
(xii) Atlantic Finance Loans; and
(xiii) Indebtedness of the Company or any Restricted Guarantor not
otherwise permitted to be Incurred pursuant to clauses (i) through (xii) above
which, together with any other outstanding Indebtedness Incurred pursuant to
this clause (xiii), does not exceed $20.0 million in the aggregate at any time
outstanding.
Section 4.5. Limitation on Certain Asset Dispositions.
The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, make one or more Asset Dispositions
unless: (i) the Company or such Restricted Subsidiary, as the case may be,
receives consideration for such Asset Disposition at least equal to the Fair
Market Value of the assets sold or disposed of; and (ii) not less than 80% of
the consideration for the disposition consists of (A) cash or Cash Equivalents
(including any held in escrow); (B) the assumption of Indebtedness (other than
non-recourse Indebtedness or any Subordinated Indebtedness) of the Company or
such Restricted Subsidiary or other obligations relating to such assets
(provided, however, that the Company and the Restricted Subsidiaries are
released from any liability for such Indebtedness); (C) Replacement Assets; or
(D) any combination of the foregoing clauses (A), (B) and (C). All Net
Available Proceeds of an Asset Disposition shall be applied within 360 days of
such Asset Disposition (i) to capital investments in properties or assets that
will be used in a business of the Company and the Restricted Subsidiaries
conducted on the Issue Date or in a business reasonably related thereto and/or
(ii) to the permanent reduction and prepayment of any Senior Debt of the
Company then outstanding (including a permanent reduction of commitments in
respect thereof). Any Net Available Proceeds from any Asset Disposition that
are not applied as provided in the immediately preceding sentence shall be used
not later than the 361st day after such Asset Disposition to make an Offer to
Purchase outstanding Securities at a purchase price in cash equal to 100% of
their principal amount, plus accrued and unpaid
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interest to the Purchase Date. Notwithstanding the foregoing, the Company may
defer making any Offer to Purchase outstanding Securities until there are
aggregate unutilized Net Available Proceeds from Asset Dispositions otherwise
subject to the two immediately preceding sentences equal to or in excess of
$10.0 million (at which time, the entire unutilized Net Available Proceeds
from Asset Dispositions otherwise subject to the two immediately preceding
sentences, and not just the amount in excess of $10.0 million, shall be
applied as required pursuant to this paragraph). Any remaining Net Available
Proceeds following the completion of the required Offer to Purchase may be
used by the Company for any other purpose (subject to the other provisions of
this Indenture) and the amount of Net Available Proceeds then required to be
otherwise applied in accordance with this Section 4.05 shall be reset to zero,
subject to any subsequent Asset Disposition. These provisions will not apply
to a transaction consummated in compliance with Section 5.01.
In the event that the Company makes an Offer to Purchase the
Securities, the Company shall comply with any applicable securities laws and
regulations, including any applicable requirements of Section 14(e) of, and
Rule 14e-1 under, the Exchange Act.
Section 4.6. Limitation on Restricted Payments.
(a) The Company shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly,
(i) declare or pay any dividend, or make any distribution of any kind
or character (whether in cash, property or securities), in respect of any class
of Capital Stock of the Company or any Restricted Subsidiary (excluding any (x)
dividends or distributions payable solely in shares of Qualified Stock or in
options, warrants or other rights to acquire such shares, or (y) in the case of
any Restricted Subsidiary, dividends or distributions payable to the Company or
a Restricted Subsidiary),
(ii) purchase, redeem or otherwise acquire or retire for value any
shares of Capital Stock of the Company or any Restricted Subsidiary, any
options, warrants or rights to purchase or acquire such shares or any
securities convertible or exchangeable into such shares (excluding any such
shares, options, warrants, rights or securities that are owned by the Company
or a Restricted Subsidiary),
(iii) make any Investment (other than a Permitted Investment), or
make any payment on a guarantee of any obligation of any Person other than the
Company or a Restricted Subsidiary, or
(iv) redeem, defease, repurchase, retire or otherwise acquire or
retire for value, prior to any scheduled maturity, repayment or sinking fund
payment, Subordinated Indebtedness
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(each of the transactions described in clauses (i) through (iv) (other than
any exception to any such clause) being a "Restricted Payment") if, at the
time thereof:
(1) a Default shall have occurred and be continuing, or
(2) upon giving effect to such Restricted Payment, the
Company could not Incur at least $1.00 of additional Indebtedness
pursuant to Section 4.04(i), or
(3) upon giving effect to such Restricted Payment, the
aggregate amount of all Restricted Payments (other than any
Restricted Payment described in clause (ii), (iii), (iv), (v), (vi),
(vii) or (viii) of the next paragraph) (including the Fair Market
Value of all Restricted Payments not made in cash or Cash
Equivalents, valued at the time of each such Restricted Payment)
declared or made on or after the Issue Date exceeds the sum of the
following (the "Basket"):
(A) 50% of cumulative Consolidated Net Income of
the Company (or, in the case cumulative Consolidated Net
Income of the Company shall be negative, less 100% of such
deficit) for the period (treated as one accounting period)
from the beginning of the fiscal quarter in which the Issue
Date occurs through the last day of the fiscal quarter for
which financial statements are available; plus
(B) the aggregate net cash proceeds received (other
than from a Subsidiary of the Company) after the Issue Date
from the issuance of, or equity contribution with respect
to, shares of Qualified Stock and warrants, rights or
options to purchase or acquire such shares; plus
(C) the amount by which Indebtedness of the Company
or any Restricted Subsidiary (other than Subordinated
Indebtedness) is reduced on the Company's balance sheet upon
the conversion or exchange (other than by a Subsidiary of
the Company) subsequent to the Issue Date into Qualified
Stock (less the amount of any cash, or the Fair Market Value
of any other property, distributed by the Company or any
Restricted Subsidiary upon such conversion or exchange to
the extent such cash or other property reduces the amount of
such Indebtedness); plus
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(D) the aggregate after-tax net proceeds
(consisting of cash and Cash Equivalents) from the sale or
other disposition of, or any distribution in respect of, any
Investment (other than any such proceeds that the Company
elects to be applied toward the calculation of Net
Investment under clause (vii) or (viii) of the next
paragraph) constituting a Restricted Payment made after the
Issue Date; provided, however, that any gain (or loss) on
such sale or disposition or any such distribution included
in such after-tax net proceeds shall not be included in
determining Consolidated Net Income for purposes of clause
(a) above; provided, further, that amounts included in this
clause (d) shall not exceed the Net Investment by the
Company in the Person (or its Subsidiaries) in respect of
which such Investment was made; plus
(E) $10.0 million.
(b) The foregoing provisions will not prohibit any of the following:
(i) any dividend on any class of Capital Stock of the Company or any
Restricted Subsidiary paid within 60 days after the declaration thereof if, on
the date when the dividend was declared, the Company or such Restricted
Subsidiary, as the case may be, could have paid such dividend in accordance
with the provisions of this Indenture;
(ii) the Refinancing of any Subordinated Indebtedness otherwise
permitted pursuant to Section 4.04(v);
(iii) the exchange or conversion of any Indebtedness of the Company
or any Restricted Subsidiary for or into Qualified Stock;
(iv) any Restricted Payment made with the proceeds of a substantially
concurrent sale (other than to a Subsidiary of the Company) for cash of
Qualified Stock;
(v) any Investment to the extent that the consideration therefor
consists of Qualified Stock;
(vi) required or ratable payments to holders of minority interests in
any Restricted Subsidiary;
(vii) any Investments in Atlantic Finance or any of its Subsidiaries;
provided, however, that the Net Investment in respect of Investments made
pursuant to this clause (vii) shall not exceed $25.0 million in the aggregate
at any time outstanding; and
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(viii) Investments not otherwise permitted pursuant to clauses (i)
through (vii) above; provided, however, that the Net Investment in respect of
Investments made pursuant to this clause (viii) shall not exceed $20.0 million
in the aggregate at any time outstanding;
provided, however, that (I) with respect to each of clauses (iv), (v), (vi),
(vii) and (viii) no Default shall have occurred and be continuing and (II) no
issuance of Qualified Stock pursuant to clause (ii), (iii), (iv), (v), (vi),
(vii) or (viii) shall increase the Basket.
(c) For purposes of this Section 4.06, (i) an "Investment"
shall be deemed to be made at the time any Restricted Subsidiary is designated
as an Unrestricted Subsidiary in an amount (proportionate to the Company's
equity interest in such Restricted Subsidiary) equal to the Fair Market Value
of such Restricted Subsidiary at such time; provided, however, that in the
event that any Subsidiary acquired after the Issue Date is designated an
Unrestricted Subsidiary, the amount of Investment deemed made at such time
shall be equal to the Net Investment of the Company and the Restricted
Subsidiaries in such Restricted Subsidiary at such time; (ii) upon the
redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary, the
Basket shall be increased by the amount (proportionate to the Company's equity
interest in such Unrestricted Subsidiary) equal to the lesser of (x) the Fair
Market Value of such Unrestricted Subsidiary at the time of such redesignation
and (y) the Net Investment of the Company and the Restricted Subsidiaries in
such Unrestricted Subsidiary; provided, however, that in the event that any
Subsidiary acquired after the Issue Date is redesignated a Restricted
Subsidiary, the amount of such increase shall be equal to the Net Investment of
the Company and the Restricted Subsidiaries in such Unrestricted Subsidiary at
such time; and (iii) an "Investment" shall be deemed to be made at the time
that the ownership or voting power of the Company and the Restricted
Subsidiaries in any Restricted Subsidiary is reduced to below majority (but
greater than zero) in an amount equal to the Fair Market Value of such former
Restricted Subsidiary at such time multiplied by the percentage ownership or
voting power (whichever is less) of the Company and the Restricted Subsidiaries
in such former Restricted Subsidiary; provided, however, that in the event that
the ownership or voting power of any Subsidiary acquired after the Issue Date
is so reduced, the amount of Investment deemed made at such time shall be equal
to the Net Investment of the Company and the Restricted Subsidiaries in such
former Restricted Subsidiary at such time. Notwithstanding the foregoing,
Atlantic Finance and its Subsidiaries shall be designated Unrestricted
Subsidiaries as of the Issue Date and such designation shall not be deemed an
Investment.
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Section 4.7. Corporate Existence.
Subject to Article Five, the Company shall do or shall cause
to be done all things necessary to preserve and keep in full force and effect
its corporate existence and the corporate, partnership or other existence of
each of its Subsidiaries in accordance with the respective organizational
documents of each such Subsidiary and the rights (charter and statutory) and
material franchises of the Company and its Subsidiaries; provided, however,
that the Company shall not be required to preserve any such right or franchise,
or the corporate existence of any Subsidiary, if the Board of Directors of the
Company shall determine that the preservation thereof is no longer desirable in
the conduct of the business of the Company and its Subsidiaries, taken as a
whole, and that the loss thereof is not, and will not be, adverse in any
material respect to the Holders; provided, further, however, that a
determination of the Board of Directors of the Company shall not be required in
the event of a merger of one or more Wholly Owned Subsidiaries with or into
another Wholly Owned Subsidiary or another Person, if the surviving Person is a
Wholly Owned Subsidiary organized under the laws of the United States or a
State thereof or of the District of Columbia.
Section 4.8. Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, all material taxes,
assessments and governmental charges levied or imposed upon the Company or any
of its Subsidiaries or upon the income, profits or property of the Company or
any of its Subsidiaries; provided, however, that the Company shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings or where the failure to
effect such payment is not adverse in any material respect to the Holders.
Section 4.9. Notice of Defaults.
Within five days after becoming aware of any Default, if such
Default is then continuing, the Company shall promptly deliver an Officers'
Certificate to the Trustee specifying the details of such Default and the
action which the Company proposes to take with respect thereto.
Section 4.10. Maintenance of Properties.
The Company shall cause all material properties owned by or
leased to it or any of its Subsidiaries and used or useful in the conduct of
its business or the business of any of its Subsidiaries to be maintained and
kept in normal condition, repair and working order and supplied with all
necessary equipment and shall cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all
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as in the judgment of the Company may be necessary, so that the business
carried on in connection therewith may be properly and advantageously
conducted at all times; provided, however, that nothing in this Section 4.10
shall prevent the Company or any of its Subsidiaries from discontinuing the
use, operation or maintenance of any of such properties, or disposing of any
of them, if such discontinuance or disposal is, in the judgment of the Board
of Directors or of the board of directors of the Subsidiary concerned, or of
an officer (or other agent employed by the Company or of any of its
Subsidiaries) of the Company or such Subsidiary having managerial
responsibility for any such property, desirable in the conduct of the business
of the Company or any of its Subsidiaries, and if such discontinuance or
disposal is not adverse in any material respect to the Holders.
Section 4.11. Compliance Certificate.
The Company shall deliver to the Trustee within 45 days after
the end of each of the first three fiscal quarters of the Company and within 90
days after the close of each fiscal year a certificate signed by the principal
executive officer, principal financial officer or principal accounting officer
stating that a review of the activities of the Company has been made under the
supervision of the signing officers with a view to determining whether a
Default has occurred and whether or not the signers know of any Default by the
Company that occurred during such fiscal quarter or fiscal year. If they do
know of such a Default, the certificate shall describe all such Defaults, their
status and the action the Company is taking or proposes to take with respect
thereto. The first certificate to be delivered by the Company pursuant to this
Section 4.11 shall be for the fiscal quarter ending September 30, 1997.
Section 4.12. Provision of Financial Information.
Whether or not the Company is subject to Section 13(a) or
15(d) of the Exchange Act, or any successor provision thereto, the Company
shall file with the Commission the annual reports, quarterly reports and other
documents which the Company would have been required to file with the
Commission pursuant to such Section 13(a) or 15(d) or any successor provision
thereto if the Company were so required, such documents to be filed with the
Commission on or prior to the respective dates (the "Required Filing Dates") by
which the Company would have been required so to file such documents if the
Company were so required. The Company shall also in any event (a) within 15
days of each Required Filing Date (i) transmit by mail to all Holders of
Securities as their names and addresses appear in the Security Register,
without cost to such Holders, and (ii) file with the Trustee, copies of such
annual reports, quarterly reports and other documents which the Company is
required to file with the Commission pursuant to the foregoing sentence, and
(b) if, notwithstanding the preceding sentence, filing such documents by the
Company with the Commission is not permitted under the
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Exchange Act, promptly upon written request supply copies of such documents to
any prospective holder of Securities.
Delivery of such reports, information and documents to the
Trustee is for informational purposes only and the Trustee's receipt of such
shall not constitute constructive notice of any information contained therein
or determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
Section 4.13. Waiver of Stay, Extension or Usury Laws.
The Company covenants (to the extent that it may lawfully do
so) that it shall not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension law
or any usury law or other law, which would prohibit or forgive the Company from
paying all or any portion of the principal of and/or interest on the Securities
as contemplated herein, wherever enacted, now or at any time hereafter in
force, or which may affect the covenants or the performance of this Indenture;
and (to the extent that it may lawfully do so) the Company hereby expressly
waives all benefit or advantage of any such law, and covenants that it shall
not hinder, delay or impede the execution of any power herein granted to the
Trustee, but shall suffer and permit the execution of every such power as
though no such law had been enacted.
Section 4.14. Change of Control.
Within 30 days following a Change of Control, the Company
will commence an Offer to Purchase all outstanding Securities at a purchase
price in cash equal to 101% of their principal amount, plus accrued and unpaid
interest to the Purchase Date. Such Offer to Purchase will be consummated not
earlier than 30 days and not later than 60 days after the commencement thereof.
Each Holder shall be entitled to tender all or any portion of the Securities
owned by such Holder pursuant to the Offer to Purchase, subject to the
requirement that any portion of a Security tendered must bear an integral
multiple of $1,000 principal amount.
A "Change of Control" will be deemed to have occurred in the
event that (whether or not otherwise permitted by this Indenture) after the
Issue Date (a) any transaction (including, without limitation, any merger or
consolidation) shall be consummated after which any Person or any Persons
acting together that would constitute a group (for purposes of Section 13(d) of
the Exchange Act, or any successor provision thereto) (a "Group"), together
with any Affiliates, other than Permitted Holders, shall "beneficially own" (as
defined in Rule 13d-3 under the Exchange Act, or any successor provision
thereto) at least (x) 50% of the voting power of the outstanding Voting Stock
of the Company or (y) 40% of the voting power of the Voting Stock of
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the Company, and the Permitted Holders own in the aggregate less than such
Person or Group (in doing the "own less than" comparison in this clause (ii),
the holdings of the Permitted Holders who are members of the new Group shall
not be counted in the voting power of such new Group); (b) (x) the Company or
any Restricted Subsidiary sells, leases or otherwise transfers all or
substantially all of the assets of the Company and the Restricted
Subsidiaries, taken as a whole, to any Person other than a Wholly Owned
Subsidiary, or (y) the Company consolidates with or merges with or into
another Person or any Person consolidates with, or merges with or into, the
Company, in either case under this clause (b), in one transaction or series of
related transactions in which immediately after the consummation thereof
Persons owning a majority of the voting power of the Voting Stock of the
Company immediately prior to such consummation shall cease to own a majority
of the voting power of the Voting Stock of the Company or the surviving or
transferee entity if other than the Company; (c) Continuing Directors cease to
constitute at least a majority of the Board of Directors of the Company; or
(d) the stockholders of the Company approve any plan or proposal for the
liquidation or dissolution of the Company.
In the event that the Company makes an Offer to Purchase the
Securities, the Company shall comply with any applicable securities laws and
regulations, including any applicable requirements of Section 14(e) of, and
Rule 14e-1 under, the Exchange Act. The Company will not be required to make an
Offer to Purchase upon a Change of Control if a third party makes the Offer to
Purchase in the manner, at the times and otherwise in compliance with the
requirements set forth in this Indenture applicable to an Offer to Purchase
made by the Company and purchases all Securities validly tendered and not
withdrawn under such Offer to Purchase.
Section 4.15. Limitation on Senior Subordinated Indebtedness.
The Company (i) shall not Incur any Indebtedness that by its
terms (or by the terms of the agreement or instrument governing such
Indebtedness) is subordinate in right of payment to any other Indebtedness of
the Company unless such Indebtedness is also by its terms (or by the terms of
the agreement or instrument governing such Indebtedness) made expressly either
(x) pari passu in right of payment with the Securities or (y) subordinate in
right of payment to the Securities in the same manner and at least to the same
extent as the Securities are subordinate to Senior Debt of the Company, or (ii)
shall not permit any Guarantor to Incur any Indebtedness that by its terms (or
by the terms of the agreement or instrument governing such Indebtedness) is
subordinate in right of payment to any other Indebtedness of such Guarantor
unless such Indebtedness is also by its terms (or by the terms of the agreement
governing such Indebtedness) made expressly either (x) pari passu in right of
payment with the Guarantee of such Guarantor or (y) subordinate
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in right of payment to the Guarantee of such Guarantor in the same manner and
at least to the same extent as the Guarantee of such Guarantor is subordinate
to Senior Debt of such Guarantor.
Section 4.16. Limitation on Restrictions Affecting Restricted
Subsidiaries
The Company shall not, and shall not permit any Restricted
Subsidiary (other than a Restricted Guarantor) to, directly or indirectly,
create or otherwise cause or suffer to exist any consensual encumbrance or
restriction on the ability of any Restricted Subsidiary to (i) pay dividends or
make any other distributions in respect of its Capital Stock or pay any
Indebtedness or other obligation owed to the Company or any Restricted
Subsidiary, (ii) make loans or advances to, or guarantee any Indebtedness of,
the Company or any Restricted Subsidiary or (iii) transfer any of its property
or assets to the Company or any Restricted Subsidiary, except for (a) any
encumbrance or restriction existing under or by reason of any agreement in
effect on the Issue Date (including the Senior Credit Facility) as any such
agreement is in effect on such date or as such agreement is amended thereafter
but only if such encumbrance or restriction is no more restrictive than in the
agreement being amended, (b) any encumbrance or restriction under any agreement
of or relating to such Restricted Subsidiary prior to the date on which such
Restricted Subsidiary was acquired by the Company and outstanding on such date
and not Incurred in anticipation or contemplation of becoming a Restricted
Subsidiary and provided such encumbrance or restriction shall not apply to any
assets of the Company or any Restricted Subsidiary other than the Restricted
Subsidiary so acquired or its assets, (c) customary provisions contained in an
agreement that has been entered into for the sale or disposition of all or
substantially all of the Capital Stock or assets of a Restricted Subsidiary;
provided, however, that such encumbrance or restriction is applicable only to
such Restricted Subsidiary or assets, (d) any encumbrance or restriction
existing under or by reason of applicable law, (e) customary provisions
restricting subletting or assignment of any lease governing any leasehold
interest of any Restricted Subsidiary, (f) covenants in franchise agreements
with car manufacturers customary for franchise agreements in the automobile
retailing industry, (g) covenants in purchase money obligations for property
restricting transfer of such property, (h) covenants in security agreements
securing Indebtedness of a Restricted Subsidiary (to the extent that such Liens
were otherwise incurred in accordance with Section 4.17) that restrict the
transfer of property subject to such agreements and (i) customary covenants in
Floor Plan Notes.
Section 4.17. Limitation on Liens.
The Company shall not, and shall not permit any Restricted
Subsidiary to, incur or suffer to exist any Lien on or with respect to any
property or assets of the Company or any
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Restricted Subsidiary owned on the Issue Date or thereafter acquired or on the
income or profits thereof to secure Indebtedness, without making, or causing
such Restricted Subsidiary to make, effective provision for securing the
Securities or the Guarantee of such Restricted Subsidiary (and, if the Company
shall so determine, any other Indebtedness of the Company or such Restricted
Subsidiary, including Subordinated Indebtedness; provided, however, that Liens
securing the Securities and any Indebtedness pari passu with the Securities
are senior to such Liens securing such Subordinated Indebtedness) equally and
ratably with such Indebtedness or, in the event such Indebtedness is
subordinate in right of payment to the Securities or the Guarantee, prior to
such Indebtedness, as to such property or assets for so long as such
Indebtedness shall be so secured.
The foregoing restrictions shall not apply to (i) Liens
existing on the Issue Date securing Indebtedness existing on the Issue Date;
(ii) Liens securing Senior Debt (including Liens securing Floor Plan Notes and
Indebtedness under the Senior Credit Facility) and any guarantees thereof to
the extent that the Indebtedness secured thereby is permitted to be incurred
pursuant to Section 4.04; (iii) Liens securing only the Securities and the
Guarantees, if any; (iv) Liens in favor of the Company or a Guarantor, if any;
(v) Liens to secure Indebtedness Incurred for the purpose of financing all or
any part of the purchase price or the cost of construction or improvement of
the property (or any other capital expenditure financing) subject to such
Liens; provided, however, that (a) the aggregate principal amount of any
Indebtedness secured by such a Lien does not exceed 100% of such purchase price
or cost, (b) such Lien does not extend to or cover any other property other
than such item of property and any improvements on such item, (c) the
Indebtedness secured by such Lien is Incurred by the Company within 180 days of
the acquisition, construction or improvement of such property and (d) the
Incurrence of such Indebtedness is permitted pursuant to Section 4.04; (vi)
Liens on property existing immediately prior to the time of acquisition thereof
(and not created in anticipation or contemplation of the financing of such
acquisition); (vii) Liens on property of a Person existing at the time such
Person is acquired or merged with or into or consolidated with the Company or
any such Restricted Subsidiary (and not created in anticipation or
contemplation thereof); (viii) Liens to secure Indebtedness Incurred to
Refinance, in whole or in part, any Indebtedness secured by Liens referred to
in the foregoing clauses (i)-(vii) so long as such Liens do not extend to any
property other than the property securing the Indebtedness being Refinanced and
the principal amount of Indebtedness so secured is not increased except for the
amount of any premium required to be paid in connection with such Refinancing
pursuant to the terms of the Indebtedness Refinanced or the amount of any
premium reasonably determined by the Company as necessary to accomplish such
Refinancing by means of a tender offer, exchange offer or privately negotiated
repurchase, plus the expenses of the issuer of such Indebtedness reasonably
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incurred in connection with such Refinancing; and (viii) Liens in favor of the
Trustee as provided for in this Indenture on money or property held or
collected by the Trustee in its capacity as Trustee.
Section 4.18. Subsidiary Guarantees.
The Company shall not permit any Subsidiary to become an
obligor (including as guarantor) under, or in respect of, the Senior Credit
Facility without causing such Subsidiary to become a Guarantor. Any such
Subsidiary shall (a) execute and deliver a supplemental indenture in form
reasonably satisfactory to the Trustee pursuant to which such Subsidiary shall
unconditionally guarantee all of the Company's obligations under the Securities
and this Indenture on the terms set forth in Articles Eleven and Twelve and (b)
deliver to the Trustee an Opinion of Counsel that such supplemental indenture
has been duly authorized, executed and delivered by such Subsidiary and
constitutes a valid and legally binding and enforceable obligation of such
Subsidiary (subject, in the case of enforceability, to customary bankruptcy,
insolvency, fraudulent conveyance and similar exceptions).
Any Subsidiary of the Company that ceases to be an obligor
(including as guarantor) under, or in respect of, the Senior Credit Facility
shall be released from its Guarantee upon delivery of an Officers' Certificate
to the Trustee certifying to such effect.
The Company may, at its option, cause any of its Subsidiaries
to be a Guarantor.
ARTICLE 5.
MERGERS; SUCCESSOR CORPORATION
Section 5.1. Restriction on Mergers, Consolidations and
Certain Sales of Assets
The Company will not consolidate or merge with or into any
Person, or sell, assign, lease, convey or otherwise dispose of (or cause or
permit any Restricted Subsidiary to sell, assign, lease, convey or otherwise
dispose of (however effected, including, without limitation, by merger or
consolidation)) all or substantially all of the Company's assets (determined on
a consolidated basis for the Company and the Restricted Subsidiaries), whether
as an entirety or substantially an entirety in one transaction or a series of
related transactions, including by way of liquidation or dissolution, to any
Person unless, in each such case: (i) the entity formed by or surviving any
such consolidation or merger (if other than the Company or such Restricted
Subsidiary, as the case may be), or to which such sale, assignment, lease,
conveyance or other disposition shall have been made (the "Surviving Entity"),
is a corporation organized and existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the Surviving
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Entity assumes by supplemental indenture all of the obligations of the Company
on the Securities and under the Indenture and the Registration Rights
Agreement (upon which assumption the Company will be discharged of any and all
obligations on the Securities and under this Indenture and the Registration
Rights Agreement); (iii) immediately after giving effect to such transaction
and the use of any net proceeds therefrom on a pro forma basis, the Company or
the Surviving Entity, as the case may be, (A) shall have a Consolidated Net
Worth equal to or greater than the Consolidated Net Worth of the Company
immediately prior to such transaction and (B) could Incur at least $1.00 of
additional Indebtedness pursuant to Section 4.04(i); (iv) immediately before
and after giving effect to such transaction and treating any Indebtedness that
becomes an obligation of the Company or any Restricted Subsidiary as a result
of such transaction as having been Incurred by the Company or such Restricted
Subsidiary, as the case may be, at the time of the transaction, no Default
shall have occurred and be continuing; and (v) if, as a result of any such
transaction, property or assets of the Company or a Restricted Subsidiary
would become subject to a Lien not excepted from Section 4.17, the Company,
Restricted Subsidiary or the Surviving Entity, as the case may be, shall have
secured the Securities or its Guarantee, as applicable, as required by Section
4.17. The provisions of this Section 5.01 shall not apply to any merger of a
Restricted Subsidiary with or into the Company or a Wholly Owned Subsidiary or
any transaction pursuant to which a Guarantor is to be released in accordance
with the terms of its Guarantee and this Indenture in connection with any
transaction complying with Section 4.05.
Section 5.2. Successor Corporation Substituted.
Upon the execution of a supplemental indenture by the
Surviving Person in form and substance satisfactory to the Trustee (as
evidenced by the Trustee's execution thereof) in accordance with Section 5.01,
the Surviving Person shall succeed to, and be substituted for, and may exercise
every right and power of and shall assume all obligations of, the Company or
such Subsidiary, as the case may be, under this Indenture, the Registration
Rights Agreement and the Securities or the Guarantees, as the case may be, with
the same effect as if such Surviving Person had been named as the Company or
such Subsidiary, as the case may be, herein and therein, and thereafter, except
in the case of a lease, the predecessor Person shall be relieved of all
obligations and covenants under this Indenture, the Registration Rights
Agreement and the Securities or the Guarantees, as the case may be.
ARTICLE 6.
DEFAULT AND REMEDIES
Section 6.1. Events of Default.
An "Event of Default" occurs if:
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(a) the Company fails to pay principal of any Security when
due (whether or not prohibited by Article Eight or Twelve);
(b) the Company fails to pay any interest on any Security
when due, continued for 30 days (whether or not prohibited by Article Eight or
Twelve);
(c) the Company defaults in the payment of principal of and
interest on Securities required to be purchased pursuant to an Offer to
Purchase under Sections 4.05 or 4.14 hereof when due and payable (whether or
not prohibited by Article Eight or Twelve);
(d) the Company fails to perform or comply with any of the
provisions of Section 5.01;
(e) the Company fails to perform any other covenant or
agreement of the Company under the Indenture or the Securities continued for
60 days after written notice to the Company by the Trustee or holders of at
least 25% in aggregate principal amount of outstanding Securities;
(f) the Company defaults under the terms of one or more
instruments evidencing or securing Indebtedness of the Company or any
Restricted Subsidiary having an outstanding principal amount of $10.0 million
or more individually or in the aggregate that has resulted in the acceleration
of the payment of such Indebtedness or failure to pay principal when due at the
stated final maturity of any such Indebtedness;
(g) the rendering of a final judgment or judgments (not
subject to appeal) against the Company or any Restricted Subsidiary in an
amount of $10.0 million or more which remains undischarged or unstayed for a
period of 60 days after the date on which the right to appeal has expired;
(h) the Company or any Restricted Subsidiary pursuant to or
within the meaning of any Bankruptcy Law:
(1) commences a voluntary case or proceeding,
(2) consents to the entry of an order for relief
against it in an involuntary case or proceeding,
(3) consents to the appointment of a Custodian of
it or for all or substantially all of its property, or
(4) makes a general assignment for the benefit of
its creditors;
(i) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
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(l) is for relief against the Company or any
Restricted Subsidiary in an involuntary case or proceeding,
(2) appoints a Custodian of the Company or any
Restricted Subsidiary or for all or substantially all of its
property, or
(3) orders the liquidation of the Company or any
Restricted Subsidiary, and in each case the order or decree
remains unstayed and in effect for 60 days; provided,
however, that if the entry of such order or decree is
appealed and dismissed on appeal then the Event of Default
hereunder by reason of the entry of such order or decree
shall be deemed to have been cured; or
(j) any Guarantee, ceases to be in full force and effect or
is declared null and void and unenforceable or is found to be invalid or any
Guarantor denies its liability under its Guarantee (other than by reason of a
release of such Guarantor from its Guarantee in accordance with the terms of
this Indenture and such Guarantee).
The term "Bankruptcy Law" means Title 11, U.S. Code or any
similar Federal, state or foreign law for the relief of debtors. The term
"Custodian" means any receiver, trustee, assignee, liquidator, sequestrator or
similar official under any Bankruptcy Law.
Section 6.2. Acceleration.
If an Event of Default (other than an Event of Default with
respect to the Company specified in Section 6.01(h) or (i)) shall occur and be
continuing, either the Trustee or the Holders of at least 25% in aggregate
principal amount of the outstanding Securities may accelerate the maturity of
all Securities; provided, however, that after such acceleration, but before a
judgment or decree based on acceleration, the Holders of a majority in
aggregate principal amount of outstanding Securities may rescind and annul such
acceleration if all Defaults, other than the non-payment of accelerated
principal, have been cured or waived as provided in this Indenture; provided,
however, that so long as the Senior Credit Facility shall be in full force and
effect, if an Event of Default shall have occurred and be continuing (other
than an Event of Default with respect to the Company specified in Section
6.01(h) or (i)), the Securities shall not become due and payable until the
earlier to occur of (x) five Business Days following delivery of a written
notice of such acceleration of the Securities to the agent under the Senior
Credit Facility and (y) the acceleration of any Indebtedness under the Senior
Credit Facility. If an Event of Default with respect to the Company specified
in Section 6.01(h) or (i) occurs, the outstanding Securities will ipso facto
become
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immediately due and payable without any declaration or other act on the
part of the Trustee or any Holder.
Section 6.3. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy by proceeding at law or in equity to collect
the payment of principal of or interest on the Securities or to enforce the
performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Securities or does not produce any of them in the
proceeding. A delay or omission by the Trustee or any Securityholder in
exercising any right or remedy maturing upon an Event of Default shall not
impair the right or remedy or constitute a waiver of or acquiescence in the
Event of Default. No remedy is exclusive of any other remedy. All available
remedies are cumulative to the extent permitted by law.
Section 6.4. Waiver of Past Default.
Subject to Sections 2.09, 6.07 and 10.02, prior to the
declaration of acceleration of the Securities, (i) the Holders of not less than
a majority in aggregate principal amount of the outstanding Securities by
written notice to the Trustee may waive an existing Default and its
consequences, except a Default in the payment of principal of or interest on
any Security as specified in Section 6.01(a) or (b), a default arising from
failure to effect an Offer to Purchase required under Section 4.14 or a Default
in respect of any term or provision of this Indenture that may not be amended
or modified without the consent of each Holder affected as provided in Section
10.02 and (ii) the Holders of three-fourths of the aggregate principal amount
of Notes affected thereby, on behalf of all Holders, may waive a default
arising from failure to effect an Offer to Purchase required under Section
4.14. The Company shall deliver to the Trustee an Officers' Certificate stating
that the requisite percentage of Holders have consented to such waiver and
attaching copies of such consents. In case of any such waiver, the Company, the
Trustee and the Holders shall be restored to their former positions and rights
hereunder and under the Securities, respectively. This paragraph of this
Section 6.04 shall be in lieu of ss. 316(a)(1)(B) of the TIA and such ss.
316(a)(1)(B) of the TIA is hereby expressly excluded from this Indenture and
the Securities, as permitted by the TIA.
Upon any such waiver, such Default shall cease to exist and
be deemed to have been cured and not to have occurred, and any Event of Default
arising therefrom shall be deemed to have been cured and not to have occurred
for every purpose of this Indenture and the Securities, but no such waiver
shall extend to any subsequent or other Default or impair any right consequent
thereon.
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Section 6.5. Control by Majority.
Subject to Section 2.09, the Holders of a majority in
principal amount of the outstanding Securities may direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on it. However, the Trustee may refuse
to follow any direction that conflicts with law or this Indenture, that the
Trustee determines may be unduly prejudicial to the rights of another
Securityholder, or that may involve the Trustee in personal liability;
provided, however, that the Trustee may take any other action deemed proper by
the Trustee which is not inconsistent with such direction. In the event the
Trustee takes any action or follows any direction pursuant to this Indenture,
the Trustee shall be entitled to indemnification satisfactory to it in its sole
discretion against any loss or expense caused by taking such action or
following such direction. This Section 6.05 shall be in lieu of ss.
316(a)(1)(A) of the TIA, and such ss. 316(a)(1)(A) of the TIA is hereby
expressly excluded from this Indenture and the Securities, as permitted by the
TIA.
Section 6.6. Limitation on Suits.
A Securityholder may not pursue any remedy with respect to
this Indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice
of a continuing Event of Default;
(2) the Holders of at least 25% in aggregate
principal amount of the outstanding Securities make a
written request to the Trustee to pursue a remedy;
(3) such Holder or Holders offer and, if requested,
provide to the Trustee indemnity satisfactory to the Trustee
against any loss, liability or expense;
(4) the Trustee does not comply with the request
within 60 days after receipt of the request and the offer
and, if requested, the provision of indemnity; and
(5) during such 60-day period the Holders of a
majority in principal amount of the outstanding Securities
(excluding Affiliates of the Company) do not give the
Trustee a direction which, in the opinion of the Trustee, is
inconsistent with the request.
A Securityholder may not use this Indenture to prejudice the
rights of another Securityholder or to obtain a preference or priority over
such other Securityholder.
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Section 6.06 limitations do not apply to a suit instituted by
a Holder of a Note for enforcement of payment of the principal or of interest
on such Security on or after the respective due dates therefor.
Section 6.7. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the
right of any Holder to receive payment of principal of and interest on the
Securities, on or after the respective due dates therefor, or to bring suit for
the enforcement of any such payment on or after such respective dates, shall
not be impaired or affected without the consent of such Holder.
Section 6.8. Collection Suit by Trustee.
If an Event of Default in payment of interest or principal
specified in Section 6.01(a) or (b) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company or any other obligor on the Securities for the whole amount of
principal and accrued interest remaining unpaid, together with interest overdue
on principal and to the extent that payment of such interest is lawful,
interest on overdue installments of interest, in each case at the rate per
annum borne by the Securities and such further amount as shall be sufficient to
cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.
Section 6.9. Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Securityholders allowed in any judicial proceedings relative to the Company (or
any other obligor upon the Securities), its creditors or its property and shall
be entitled and empowered to collect and receive any monies or other property
payable or deliverable on any such claims and to distribute the same, and any
Custodian in any such judicial proceedings is hereby authorized by each
Securityholder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the
Securityholders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agent
and counsel, and any other amounts due the Trustee under Section 7.07. Nothing
herein contained shall be deemed to authorize the Trustee to authorize or
consent to or accept or adopt on behalf of any Securityholder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
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respect of the claim of any Securityholder in any such proceeding.
Section 6.10. Priorities.
If the Trustee collects any money or property pursuant to
this Article Six, it shall pay out the money or property in the following
order:
First: to the Trustee for amounts due under Section 7.07;
Second: subject to Articles Eight and Twelve, to Holders for
amounts due and unpaid on the Securities for principal and interest,
ratably, without preference or priority of any kind, according to the
amounts due and payable on the Securities for principal and interest,
respectively; and
Third: to the Company.
The Trustee, upon prior written notice to the Company, may
fix a record date and payment date for any payment to Securityholders pursuant
to this Section 6.10.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees and expenses, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section 6.11 shall not apply to a suit by the
Trustee, a suit by a Holder or group of Holders of more than 10% in aggregate
principal amount of the outstanding Securities, or to any suit instituted by
any Holder for the enforcement or the payment of the principal or interest on
any Securities on or after the respective due dates therefor.
ARTICLE 7.
TRUSTEE
Section 7.1. Duties of Trustee.
(a) If a Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture and
use the same degree of care and skill in their exercise as a prudent person
would exercise or use under the circumstances in the conduct of such person's
own affairs.
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(b) Except during the continuance of a Default:
(l) The Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture, and no
implied covenants or obligations shall be read into this Indenture
against the Trustee; and
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions conforming to the requirements of this Indenture; provided,
however, the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Indenture (but need not confirm or investigate the accuracy of
mathematical calculations or other facts stated therein).
(c) The Trustee shall not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph
(b) of this Section 7.01;
(2) The Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer, unless it is proved
that the Trustee was negligent in ascertaining the pertinent facts;
and
(3) The Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.05.
(d) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or to take or omit to take any
action under this Indenture or take any action at the request or direction of
Holders if it shall have reasonable grounds for believing that repayment of
such funds is not assured to it or it does not receive an indemnity
satisfactory to it in its sole discretion against such risk, liability, loss,
fee or expense which might be incurred by it in compliance with such request or
direction.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.01.
(f) The Trustee shall not be liable for interest on any money or
assets received by it except as the Trustee may
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agree in writing with the Company. Money or assets held in trust by the
Trustee need not be segregated from other funds or assets except to the extent
required by law.
Section 7.2. Rights of Trustee.
Subject to Section 7.01:
(a) The Trustee may rely and shall be protected in acting or
refraining from acting on any document believed by it to be genuine and to
have been signed or presented by the proper Person. The Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
consult with counsel of its selection and may require an Officers' Certificate
and an Opinion of Counsel, which shall conform to the provisions of Section
13.05. The Trustee shall not be liable for any action it takes, suffers or
omits to take in good faith in reliance on such certificate or opinion.
(c) The Trustee may act through attorneys and agents of its
selection and shall not be responsible for the misconduct or negligence of any
agent or attorney (other than an agent who is an employee of the Trustee)
appointed with due care.
(d) The Trustee shall not be liable for any action it takes
or omits to take in good faith which it reasonably believes to be authorized
or within its rights or powers conferred upon it by this Indenture.
(e) The Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request or
direction of any of the Securityholders pursuant to this Indenture, unless such
Securityholders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be incurred
by it in compliance with such request or direction.
(f) Provided the Trustee acts in good faith, the Trustee
shall not be bound to make any investigation into the facts or matters stated
in any resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Trustee, in its discretion,
may make such further inquiry or investigation into such facts or matters as it
may see fit, and, if the Trustee shall determine to make such further inquiry
or investigation, it shall be entitled to examine the books, records and
premises of the Company, personally or by agent or attorney at the sole cost of
the Company and shall incur no liability or additional liability of any kind by
reason of such inquiry or investigation.
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(g) The Trustee shall not be deemed to have notice of any
Default unless a Trust Officer of the Trustee has actual knowledge thereof or
unless written notice of any event which is in fact such a default is received
by the Trustee at the Corporate Trust Office of the Trustee, and such notice
references the Securities and this Indenture.
Section 7.3. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may
become the owner or pledgee of Securities and may otherwise deal with the
Company or its Affiliates with the same rights it would have if it were not
Trustee. Any Agent may do the same with like rights. However, the Trustee is
subject to Sections 7.10 and 7.11.
Section 7.4. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture or the
Securities, it shall not be accountable for the Company's use of the proceeds
from the Securities, and it shall not be responsible for any statement of the
Company in this Indenture or any document issued in connection with the sale of
Securities or any statement in the Securities other than the Trustee's
certificate of authentication.
Section 7.5. Notice of Defaults.
The Trustee shall, within 90 days after the occurrence of any
Default with respect to the Securities, give the Holders notice of all uncured
Defaults known to it; provided, however, that, except in the case of an Event
of Default or a Default in payment with respect to the Securities or a Default
in complying with Section 5.01, the Trustee shall be protected in withholding
such notice if and so long as the Board of Directors of the Trustee, the
executive committee or a trust committee of directors or responsible officers
of the Trustee in good faith determine that the withholding of such notice is
in the interest of the Holders.
Section 7.6. Reports by Trustee to Holders.
If required by TIA ss313(a), within 60 days after each July 1
beginning with the July 1 following the date of this Indenture, the Trustee
shall mail to each Securityholder a report dated as of such July 1 that
complies with TIA ss313(a). The Trustee also shall comply with TIA ss313(b),
(c) and (d).
A copy of each such report at the time of its mailing to
Securityholders shall be filed with the Commission, the Company and each stock
exchange, if any, on which the Securities are listed in accordance with TIA ss.
313(d).
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The Company shall promptly notify the Trustee in writing if
the Securities become listed on any securities exchange or of any delisting
therefrom.
Section 7.7. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time such
compensation as the Company and the Trustee shall from time to time agree in
writing for its services. The Trustee's compensation shall not be limited by
any law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee upon request for all reasonable disbursements, expenses
and advances (including reasonable fees, disbursements and expenses of its
agents and counsel) incurred or made by it in addition to the compensation for
its services except any such disbursements, expenses and advances as may be
attributable to the Trustee's negligence or bad faith. Such expenses shall
include the reasonable compensation, disbursements and expenses of the
Trustee's agents, accountants, experts and counsel and any taxes or other
expenses incurred by a trust created pursuant to Section 9.01 hereof.
The Company shall indemnify the Trustee or any predecessor
Trustee and their agents for, and hold them harmless against any and all loss,
damage, claims, liability or expense, including taxes (other than franchise
taxes imposed on the Trustee and taxes based upon, measured by or determined by
the income of the Trustee), arising out of or in connection with the acceptance
or administration of the trust or trusts hereunder, including the costs and
expenses of enforcing this Indenture against the Company (including Section
7.07) and of defending itself against any claim (whether asserted by any
Securityholder or the Company or any other person) or liability in connection
with the exercise or performance of any of their powers or duties hereunder,
except to the extent that such loss, damage, claim, liability or expense is due
to their own negligence or bad faith. The Trustee shall notify the Company
promptly of any claim asserted against the Trustee for which it may seek
indemnity. However, the failure by the Trustee to so notify the Company shall
not relieve the Company of its obligations hereunder (unless and only to the
extent that such failure results in the loss or compromise of any rights or
defenses). The Company shall defend the claim and the Trustee shall cooperate
in the defense (and may employ its own counsel) at the Company's expense;
provided, however, that the Company's reimbursement obligation with respect to
counsel employed by the Trustee will be limited to the reasonable fees and
expenses of such counsel. The Company need not pay for any settlement made
without its written consent, which consent shall not be unreasonably withheld.
The Company need not reimburse any expense or indemnify against any loss or
liability incurred by the Trustee as a result of the violation of this
Indenture by the Trustee.
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To the extent permitted by the Senior Credit Facility, to
secure the Company's payment obligations in this Section 7.07, the Trustee
shall have a Lien prior to the Securities against all money or property held or
collected by the Trustee or any predecessor Trustee, in their capacity as
Trustee, except money or property held in trust to pay principal of or interest
on particular Securities.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(h) or (i) occurs, the expenses
(including the reasonable fees and expenses of its agents and counsel) and the
compensation for the services shall be preferred over the status of the Holders
in a proceeding under any Bankruptcy Law and are intended to constitute
expenses of administration under any Bankruptcy Law. The Company's obligations
under this Section 7.07 and any claim arising hereunder shall survive the
resignation or removal of any Trustee, the discharge of the Company's
obligations pursuant to Article Nine and any rejection or termination under any
Bankruptcy Law.
The provisions of this Section 7.07 shall survive the
termination of this Indenture.
Section 7.8. Replacement of Trustee.
The Trustee may resign at any time by so notifying the
Company in writing. The Holders of a majority in aggregate principal amount of
the outstanding Securities may remove the Trustee by so notifying the Trustee
and the Company in writing and may appoint a successor Trustee with the
Company's consent. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an
insolvent under any Bankruptcy Law;
(3) a custodian or other public officer takes
charge of the Trustee or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists
in the office of Trustee for any reason (the Trustee in such event being
referred to herein as the retiring Trustee), the Company shall promptly appoint
a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. As promptly as
practicable after that, the retiring Trustee shall transfer, after payment of
all sums then owing to the Trustee pursuant to Section 7.07, all property held
by it as Trustee to
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the successor Trustee, subject to the Lien provided in Section 7.07, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have the rights, powers and duties of the Trustee
under this Indenture. A successor Trustee shall mail notice of its succession
to each Securityholder.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company or the Holders of at least 10% in aggregate principal amount of the
outstanding Securities may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any
Securityholder may petition any court of competent jurisdiction for the removal
of the Trustee and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this
Section 7.08, the Company's obligations under Section 7.07 shall continue for
the benefit of the retiring Trustee.
Section 7.9. Successor Trustee by Merger, etc.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation or banking corporation, the resulting, surviving or transferee
corporation or banking corporation without any further act shall be the
successor Trustee.
Section 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee which shall be
eligible to act as Trustee under TIA ss.ss. 310(a)(1) and 310(a)(5). The
Trustee (or in the case of a corporation included in a bank holding company,
the related bank holding company) shall have a combined capital and surplus of
at least $50,000,000 as set forth in its most recent published annual report of
condition. If the Trustee has or shall acquire any "conflicting interest"
within the meaning of TIA ss. 310(b), the Trustee and the Company shall comply
with the provisions of TIA ss. 310(b); provided, however, that there shall be
excluded from the operation of TIA ss. 310(b)(1) any indenture or indentures
under which other securities, or certificates of interest or participation in
other securities, of the Company are outstanding, if the requirements for such
exclusion set forth in TIA ss. 310(b)(1) are met. If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this Section,
the Trustee shall resign immediately in the manner and with the effect
hereinbefore specified in this Article Seven.
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Section 7.11. Preferential Collection of Claims Against
Company
The Trustee shall comply with TIAss. 311(a), excluding any
creditor relationship listed in TIAss. 311(b). A Trustee who has resigned or
been removed shall be subject to TIAss. 311(a) to the extent indicated
therein.
ARTICLE 8.
SUBORDINATION OF SECURITIES
Section 8.1. Securities Subordinated to Senior Debt.
The Company covenants and agrees, and the Trustee and each
Holder by acceptance of the Securities likewise covenant and agree, that all
Securities shall be issued subject to the provisions of this Article; and each
person holding any Security, whether upon original issue or upon transfer,
assignment or exchange thereof, accepts and agrees that all payments of the
principal of and interest on the Securities by the Company shall, to the extent
and in the manner set forth in this Article, be subordinated and junior in
right of payment to the prior payment in full of all Senior Debt of the
Company.
Section 8.2. No Payment on Securities in Certain
Circumstances
(a) No direct or indirect payment by or on behalf of the
Company of principal of or interest on the Securities (other than payments to
Holders from funds held in trust for the benefit of Holders pursuant to Section
9.01), whether pursuant to the terms of the Securities or upon acceleration or
otherwise, will be made if, at the time of such payment, there exists a default
in the payment of all or any portion of the obligations on any Designated
Senior Debt, whether at maturity, on account of mandatory redemption or
prepayment, acceleration or otherwise, and such default shall not have been
cured or waived. In addition, during the continuance of any non-payment default
or non-payment event of default with respect to any Designated Senior Debt
pursuant to which the maturity thereof may be accelerated, and upon receipt by
the Trustee of written notice (a " Payment Blockage Notice") from a holder or
holders of such Designated Senior Debt or the trustee or agent acting on behalf
of such Designated Senior Debt, then, unless and until such default or event of
default has been cured or waived or has ceased to exist or such Designated
Senior Debt has been discharged or repaid in full, or the requisite holders of
such Designated Senior Debt have otherwise agreed in writing, no payment or
distribution will be made by or on behalf of the Company on account of or with
respect to the Securities (except payments to Holders from funds held in trust
for the benefit of Holders pursuant to Section 9.01), during a period (a
"Payment Blockage Period") commencing on the date of receipt of such
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Payment Blockage Notice by the Trustee and ending 179 days thereafter.
Notwithstanding anything herein to the contrary, (x) in no
event will a Payment Blockage Period extend beyond 179 days from the date the
Payment Blockage Notice in respect thereof was given and (y) there must be 180
days in any 365 day period during which no Payment Blockage Period is in
effect. Not more than one Payment Blockage Period may be commenced with respect
to the Securities during any period of 365 consecutive days. No default or
event of default that existed or was continuing on the date of commencement of
any Payment Blockage Period with respect to the Designated Senior Debt
initiating such Payment Blockage Period may be, or be made, the basis for the
commencement of any other Payment Blockage Period by the holder or holders of
such Designated Senior Debt or the trustee or agent acting on behalf of such
Designated Senior Debt, whether or not within a period of 365 consecutive days,
unless such default or event of default has been cured or waived for a period
of not less than 90 consecutive days.
(b) In the event that, notwithstanding the foregoing, any
payment shall be received by the Trustee or any Holder when such payment is
prohibited by Section 8.02(a), such payment shall be held in trust for the
benefit of, and shall be paid over or delivered to, the holders of Designated
Senior Debt or their respective representatives, or to the trustee or trustees
under any indenture pursuant to which any of such Designated Senior Debt may
have been issued, as their respective interests may appear, but only to the
extent that, upon notice from the Trustee to the holders of Designated Senior
Debt that such prohibited payment has been made, the holders of the Designated
Senior Debt (or their representative or representatives or a trustee) notify
the Trustee in writing of the amounts then due and owing on the Designated
Senior Debt, if any, and only the amounts specified in such notice to the
Trustee shall be paid to the holders of Designated Senior Debt.
Section 8.3. Payment Over of Proceeds upon Dissolution, etc.
(a) Upon any payment or distribution of assets or securities
of the Company of any kind or character (whether in cash, property or
securities) upon any dissolution or winding up or total or partial liquidation
or reorganization of the Company, whether voluntary or involuntary or in
bankruptcy, insolvency, receivership or other proceedings, all amounts due or
to become due with respect to Senior Debt of the Company (including any
interest accruing subsequent to an event of bankruptcy or insolvency, whether
or not allowed or allowable thereunder) shall first be paid in full, or payment
provided for, before the Holders or the Trustee on their behalf shall be
entitled to receive any payment by the Company of the principal of or interest
on the Securities, or any payment to acquire any of the
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Securities for cash, property or securities, or any distribution with respect
to the Securities of any cash, property or securities. Before any payment may
be made by, or on behalf of, the Company of the principal of or interest on
the Securities upon any such dissolution or winding up or liquidation or
reorganization, any payment or distribution of assets or securities of the
Company of any kind or character, whether in cash, property or securities, to
which the Holders of the Securities or the Trustee on their behalf would be
entitled, but for the subordination provisions of this Indenture, shall be
made by the Company or by any receiver, trustee in bankruptcy, liquidating
trustee, agent or other person making such payment or distribution, directly
to the holders of Senior Debt of the Company (pro rata to such holders on the
basis of the respective amounts of Senior Debt held by such holders) or their
representative(s) or to the trustee(s) under any indenture pursuant to which
any such Senior Debt may have been issued as their respective interests may
appear, to the extent necessary to pay all such Senior Debt in full after
giving effect to any concurrent payment, distribution or provision therefor to
or for the holders of such Senior Debt.
(b) In the event that, notwithstanding the foregoing
provision prohibiting such payment or distribution, any payment or distribution
of assets or securities of the Company of any kind or character, whether in
cash, property or securities, shall be received by the Trustee or any Holder at
a time when such payment or distribution is prohibited by Section 8.03(a) and
before all obligations in respect of Senior Debt are paid in full, or payment
provided for, such payment or distribution shall be received and held in trust
for the benefit of, and shall be paid over or delivered to, the holders of
Senior Debt or their respective representative(s), or to the trustee(s) under
any indenture pursuant to which any of such Senior Debt may have been issued,
as their respective interests may appear, for application to the payment of
Senior Debt remaining unpaid until all such Senior Debt has been paid in full
after giving effect to any concurrent payment, distribution or provision
therefor to or for the holders of such Senior Debt.
(c) The consolidation of the Company with, or the merger of
the Company with or into, another corporation or the liquidation or dissolution
of the Company following the conveyance or transfer of its property as an
entirety, or substantially as an entirety, to another corporation upon the
terms and conditions provided in Article Five shall not be deemed a
dissolution, winding-up, liquidation or reorganization for the purposes of this
Section if such other corporation shall, as a part of such consolidation,
merger, conveyance or transfer, comply with the conditions stated in Article
Five.
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Section 8.4. Subrogation.
Upon the payment in full of all Senior Debt, or provision for
payment, the Holders shall be subrogated (equally and ratably with all pari
passu Indebtedness) to the rights of the holders of Senior Debt to receive
payments or distributions of cash, property or securities of the Company made
on such Senior Debt until the principal of and interest on the Securities shall
be paid in full; and, for the purposes of such subrogation, no payments or
distributions to the holders of the Senior Debt of any cash, property or
securities to which the Holders or the Trustee on their behalf would be
entitled except for the provisions of this Article, and no payment over
pursuant to the provisions of this Article to the holders of Senior Debt by
Holders or the Trustee on their behalf shall, as between the Company, its
creditors other than holders of Senior Debt, and the Holders, be deemed to be a
payment by the Company to or on account of the Senior Debt. It is understood
that the provisions of this Article are and are intended solely for the purpose
of defining the relative rights of the Holders, on the one hand, and the
holders of the Senior Debt, on the other hand.
If any payment or distribution to which the Holders would
otherwise have been entitled but for the provisions of this Article shall have
been applied, pursuant to the provisions of this Article, to the payment of all
amounts payable under Senior Debt, then and in such case, the Holders shall be
entitled to receive from the holders of such Senior Debt any payments or
distributions received by such holders of Senior Debt in excess of the amount
required to make payment in full, or provision for payment, of such Senior
Debt.
Section 8.5. Obligations of Company Unconditional.
Nothing contained in this Article or elsewhere in this
Indenture or in the Securities is intended to or shall impair, as among the
Company and the Holders, the obligation of the Company, which is absolute and
unconditional, to pay to the Holders the principal of and interest on the
Securities as and when the same shall become due and payable in accordance with
their terms, or is intended to or shall affect the relative rights of the
Holders and creditors of the Company other than the holders of the Senior Debt,
nor shall anything herein or therein prevent any Holder or the Trustee on their
behalf from exercising all remedies otherwise permitted by applicable law upon
default under this Indenture, subject to the rights, if any, under this Article
of the holders of the Senior Debt in respect of cash, property or securities of
the Company received upon the exercise of any such remedy.
Without limiting the generality of the foregoing, nothing
contained in this Article shall restrict the right of the Trustee or the
Holders to take any action to declare the Securities to be due and payable
prior to their stated maturity
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pursuant to Section 6.01 or to pursue any rights or remedies hereunder;
provided, however, that all Senior Debt then due and payable shall first be
paid in full before the Holders or the Trustee are entitled to receive any
direct or indirect payment from the Company of principal of or interest on the
Securities.
Section 8.6. Notice to Trustee.
The Company shall give prompt written notice to the Trustee
of any fact known to the Company which would prohibit the making of any payment
to or by the Trustee in respect of the Securities pursuant to the provisions of
this Article. Failure to give such notice to the Trustee shall not affect the
subordination of the Securities to Senior Debt. The Trustee shall not be
charged with knowledge of the existence of any default or event of default with
respect to any Senior Debt or of any other facts which would prohibit the
making of any payment to or by the Trustee unless and until the Trustee shall
have received notice in writing to that effect signed by an Officer of the
Company, or by a holder of Senior Debt or trustee or agent therefor; and prior
to the receipt of any such written notice, the Trustee shall, subject to
Article Seven, be entitled to assume that no such facts exist; provided,
however, that if the Trustee shall not have received the notice provided for in
this Section 8.06 at least three Business Days prior to the date upon which by
the terms of this Indenture any moneys shall become payable for any purpose
(including, without limitation, the payment of the principal of or interest on
any Security), then, regardless of anything herein to the contrary, the Trustee
shall have full power and authority to receive any moneys from the Company and
to apply the same to the purpose for which they were received, and shall not be
affected by any notice to the contrary which may be received by it on or after
such prior date. Nothing contained in this Section 8.06 shall limit the right
of the holders of Senior Debt to recover payments as contemplated by Section
8.02 or 8.03. The Trustee shall be entitled to rely on the delivery to it of a
written notice by a Person representing himself or itself to be a holder of any
Senior Debt (or a trustee on behalf of, or other representative of, such
holder) to establish that such notice has been given by a holder of such Senior
Debt or a trustee or representative on behalf of any such holder.
In the event that the Trustee determines in good faith that
any evidence is required with respect to the right of any Person as a holder of
Senior Debt to participate in any payment or distribution pursuant to this
Article, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Debt held by
such Person, the extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
Person under this Article, and if such evidence is not furnished, the Trustee
may defer any payment to such Person
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pending judicial determination as to the right of such Person to receive such
payment.
Section 8.7. Reliance on Judicial Order or Certificate of
Liquidating Agent
Upon any payment or distribution of assets or securities
referred to in this Article, the Trustee and the Holders of the Securities
shall be entitled to rely upon any order or decree made by any court of
competent jurisdiction in which bankruptcy, dissolution, winding-up,
liquidation or reorganization proceedings are pending, or upon a certificate of
the receiver, trustee in bankruptcy, liquidating trustee, agent or other person
making such payment or distribution, delivered to the Trustee or to the Holders
for the purpose of ascertaining the persons entitled to participate in such
distribution, the holders of the Senior Debt and other indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article.
Section 8.8. Trustee's Relation to Senior Debt.
The Trustee and any Paying Agent shall be entitled to all the
rights set forth in this Article with respect to any Senior Debt which may at
any time be held by it in its individual or any other capacity to the same
extent as any other holder of Senior Debt, and nothing in this Indenture shall
deprive the Trustee or any Paying Agent of any of its rights as such holder.
With respect to the holders of Senior Debt, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article, and no implied covenants or
obligations with respect to the holders of Senior Debt shall be read into this
Indenture against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Debt (except as provided in Section
8.03(b)). The Trustee shall not be charged with knowledge of the existence of
Senior Debt or of any facts that would prohibit any payment hereunder unless
the Trustee shall have received notice to that effect at the address of the
Trustee set forth in Section 13.02.
Section 8.9. Subordination Rights Not Impaired by Acts or
Omissions of the Company or Holders of
Senior Debt.
No right of any present or future holders of any Senior Debt
to enforce subordination as provided herein shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms of this Indenture, regardless of
any knowledge thereof which any such holder may have or otherwise
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be charged with. The provisions of this Article are intended to be for the
benefit of, and shall be enforceable directly by, the holders of Senior Debt.
Section 8.10. Securityholders Authorize Trustee To
Effectuate Subordination of Securities
Each Holder of Securities by his acceptance of such
Securities authorizes and expressly directs the Trustee on his behalf to take
such action as may be necessary or appropriate to effectuate the subordination
provided in this Article, and appoints the Trustee his attorney-in-fact for
such purposes, including, in the event of any dissolution, winding up,
liquidation or reorganization of the Company (whether in bankruptcy,
insolvency, receivership, reorganization or similar proceedings or upon an
assignment for the benefit of creditors or otherwise) tending towards
liquidation of the business and assets of the Company, the filing of a claim
for the unpaid balance of its or his Securities in the form required in those
proceedings.
Section 8.11. This Article Not to Prevent Events of
Default.
The failure to make a payment on account of principal of or
interest on the Securities by reason of any provision of this Article shall not
be construed as preventing the occurrence of an Event of Default specified in
Section 6.01(a), (b) or (c).
Section 8.12. Trustee's Compensation Not Prejudiced.
Nothing in this Article shall apply to amounts due to the
Trustee pursuant to other sections in this Indenture.
Section 8.13. No Waiver of Subordination Provisions.
Without in any way limiting the generality of Section 8.09,
the holders of Senior Debt may, at any time and from time to time, without the
consent of or notice to the Trustee or the Holders of the Securities, without
incurring responsibility to the Holders of the Securities and without impairing
or releasing the subordination provided in this Article or the obligations
hereunder of the Holders of the Securities to the holders of Senior Debt, do
any one or more of the following: (a) change the manner, place or terms of
payment or extend the time of payment of, or renew or alter, Senior Debt or any
instrument evidencing the same or any agreement under which Senior Debt is
outstanding or secured; (b) sell, exchange, release or otherwise deal with any
property pledged, mortgaged or otherwise securing Senior Debt; (c) release any
Person liable in any manner for the collection of Senior Debt; and (d) exercise
or refrain from exercising any rights against the Company and any other Person.
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Section 8.14. Subordination Provisions Not Applicable to
Money Held in Trust for Securityholders;
Payments May Be Paid Prior to Dissolution
All money and United States Government Obligations deposited
in trust with the Trustee pursuant to and in accordance with Article Nine shall
be for the sole benefit of the Holders and shall not be subject to this Article
Eight.
Nothing contained in this Article or elsewhere in this
Indenture shall prevent (i) the Company, except under the conditions described
in Section 8.02, from making payments of principal of and interest on the
Securities, or from depositing with the Trustee any moneys for such payments or
from effecting a termination of the Company's and the Guarantors' obligations
under the Securities and this Indenture as provided in Article Nine, or (ii)
the application by the Trustee of any moneys deposited with it for the purpose
of making such payments of principal of and interest on the Securities, to the
holders entitled thereto unless at least three Business Days prior to the date
upon which such payment becomes due and payable, the Trustee shall have
received the written notice provided for in Section 8.02(b) or in Section 8.06.
ARTICLE 9.
DISCHARGE OF INDENTURE
Section 9.1. Termination of Company's Obligations.
(a) Discharge. Subject to the provisions of Article Eight,
the Company may terminate its substantive obligations and the substantive
obligations of the Guarantors, if any, in respect of the Securities and the
Guarantees by delivering all outstanding Securities to the Trustee for
cancellation and paying all sums payable by the Company on account of principal
of and interest on all Securities or otherwise.
(b) Covenant Defeasance. In addition to the provisions of
Section 9.01(a), the Company may, provided that no Default has occurred and is
continuing or would arise therefrom (or, with respect to a Default specified in
Section 6.01(h) or (i), any time on or prior to the 91st calendar day after the
date of such deposit (it being understood that this condition shall not be
deemed satisfied until after such 91st day)) and provided that no default under
any Senior Debt would result therefrom, terminate its substantive obligations
and the substantive obligations of the Guarantors, if any, in respect of the
Securities and the Guarantees (except for the Company's obligation to pay the
principal of and the interest on the Securities and such Guarantors' guarantee
thereof) by (i) depositing with the Trustee, under the terms of an irrevocable
trust agreement, money or direct non-callable obligations of the United States
of America for the payment of which its full faith
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and credit is pledged ("United States Government Obligations") sufficient
(without reinvestment) to pay all remaining indebtedness on the Securities to
maturity or to redemption, (ii) delivering to the Trustee either an Opinion of
Counsel or a ruling directed to the Trustee from the Internal Revenue Service
to the effect that the Holders will not recognize income, gain or loss for
federal income tax purposes as a result of such deposit and termination of
obligations, (iii) delivering to the Trustee an Opinion of Counsel to the
effect that the Company's exercise of its option under this paragraph will not
result in the Company, the Trustee or the trust created by the Company's
deposit of funds pursuant to this provision becoming or being deemed to be an
"investment company" under the Investment Company Act of 1940, as amended, and
(iv) delivering to the Trustee an Officers' Certificate and an Opinion of
Counsel each stating that there has been compliance with all conditions
precedent provided for herein.
(c) Legal Defeasance. In addition to the provisions of
Section 9.01(a) and (b), the Company may, provided that no Default has occurred
and is continuing or would arise therefrom (or, with respect to a Default
specified in Section 6.01(h) or (i), any time on or prior to the 91st calendar
day after the date of such deposit (it being understood that this condition
shall not be deemed satisfied until after such 91st day)) and provided that no
default under any Senior Debt would result therefrom, terminate all of its
substantive obligations and all of the substantive obligations of the
Guarantors, if any, in respect of the Securities and the Guarantees (including
the Company's obligation to pay the principal of and interest on the Securities
and such Guarantors' guarantee thereof) by (i) depositing with the Trustee,
under the terms of an irrevocable trust agreement, money or United States
Government Obligations sufficient (without reinvestment) to pay all remaining
indebtedness on the Securities to maturity or to redemption, (ii) delivering to
the Trustee either a ruling directed to the Trustee from the Internal Revenue
Service to the effect that the Holders will not recognize income, gain or loss
for federal income tax purposes as a result of such deposit and termination of
obligations or an Opinion of Counsel based upon such a ruling addressed to the
Trustee or a change in the applicable Federal tax law since the date of this
Indenture, to such effect, (iii) delivering to the Trustee an Opinion of
Counsel to the effect that the Company's exercise of its option under this
paragraph will not result in the Company, the Trustee or the trust created by
the Company's deposit of funds pursuant to this provision becoming or being
deemed to be an "investment company" under the Investment Company Act of 1940,
as amended, and (iv) delivering to the Trustee an Officers' Certificate and an
Opinion of Counsel each stating that there has been compliance with all
conditions precedent provided for herein.
(d) Notwithstanding the foregoing paragraphs 9.01(b) and (c)
above, the Company's obligations contained in Sections 2.03, 2.05, 2.06, 2.07,
4.02, 7.07, 7.08, 9.03 and 9.04
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shall survive until the Securities are no longer outstanding. In addition,
notwithstanding the foregoing paragraph 9.01(b), in that instance the
Company's obligations contained in Section 4.01 shall also survive until the
Securities are no longer outstanding. Thereafter the Company's obligations in
Section 7.07, 9.03 and 9.04 shall survive. The Company may make an irrevocable
deposit pursuant to this Section 9.01 only if at such time it is not
prohibited from doing so under the subordination provisions of this Indenture
and the Company has delivered to the Trustee and any Paying Agent an Officers'
Certificate to that effect. After such delivery or irrevocable deposit and
delivery of an Officers' Certificate and Opinion of Counsel, the Trustee upon
request of the Company shall acknowledge in writing the discharge of the
Company's and the Guarantors' (if any) obligations under the Securities, the
Guarantees and this Indenture other than those surviving obligations specified
in this paragraph (d).
Section 9.2. Application of Trust Money.
The Trustee shall hold in trust money or United States
Government Obligations deposited with it pursuant to Section 9.01, and shall
apply the deposited money and the money from United States Government
Obligations in accordance with this Indenture solely to the payment of
principal of and interest on the Securities. The Company shall indemnify the
Trustee against any tax, fee or other charge imposed on or assessed against the
United States Government Obligations deposited pursuant to Section 9.01 or the
principal and interest received in respect thereof other than any such tax, fee
or other charge which by law is for the account of the Holders of outstanding
Securities.
Section 9.3. Repayment to Company.
Subject to Sections 7.07 and 9.01, the Trustee shall promptly
pay to the Company upon receipt by the Trustee of the Company's written request
accompanied by an Officers' Certificate any excess money held by it at any
time. The Trustee shall pay to the Company upon such request any money held by
it for the payment of principal or interest that remains unclaimed for two
years; provided, however, that the Trustee before being required to make any
payment may at the expense of the Company cause to be published once in a
newspaper of general circulation in The City of New York or mail to each Holder
entitled to such money notice that such money remains unclaimed and that, after
a date specified therein which shall be at least 30 days from the date of such
publication or mailing, any unclaimed balance of such money then remaining
shall be repaid to the Company. After payment to the Company, Securityholders
entitled to money must look to the Company for payment as general creditors
unless an applicable abandoned property law designates another person, and all
liability of the Trustee or Paying Agent with respect to such money shall
thereupon cease.
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Section 9.4. Reinstatement.
If the Trustee is unable to apply any money or United States
Government Obligations in accordance with Section 9.01 by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, the
Company's and the Guarantors'(if any) obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to Section 9.01 until such time as the Trustee is permitted to apply
all such money or United States Government Obligations in accordance with
Section 9.01; provided, however, that if the Company has made any payment of
interest on or principal of any Securities because of the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Securities to receive such payment from the money or United States
Government Obligations held by the Trustee.
ARTICLE 10.
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 10.1. Without Consent of Holders.
The Company and the Guarantors, if any, when authorized by a
resolution of their respective Boards of Directors, and the Trustee may amend
or supplement this Indenture or the Securities without notice to or consent of
any Securityholder:
(i) to cure any ambiguity, defect or inconsistency;
provided, however, that such amendment or supplement does not adversely affect
the rights of any Holder;
(ii) to effect the assumption by a successor Person of all
obligations of the Company under the Securities and this Indenture in
connection with any transaction complying with Article Five of this Indenture;
(iii) to provide for uncertificated Securities in addition
to or in place of certificated Securities;
(iv) to comply with any requirements of the Commission in
order to effect or maintain the qualification of this Indenture under the TIA;
(v) to make any change that would provide any additional
benefit or rights to the Holders;
(vi) to make any other change that does not adversely affect
the rights of any Holder under this Indenture;
(vii) to evidence the succession of another Person to any
Guarantor and the assumption by any such successor of the covenants of such
Guarantor herein and in the Guarantee;
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(viii) to add to the covenants of the Company or the
Guarantors for the benefit of the Holders, or to surrender any right or power
herein conferred upon the Company or any Guarantor;
(ix) to secure the Securities pursuant to the requirements
of Section 4.17 or otherwise; or
(x) to reflect the release of a Guarantor from its
obligations with respect to its Guarantee in accordance with the provisions of
Section 11.03 and to add a Guarantor pursuant to the requirements of Section
4.18;
provided, however, that the Company has delivered to the Trustee an Opinion of
Counsel and an Officers' Certificate each stating that such amendment or
supplement complies with the provisions of this Section 10.01.
Section 10.2. With Consent of Holders.
The Company, the Guarantors, if any, and the Trustee may
amend or supplement this Indenture or the Securities with the written consent
of the Holders of at least a majority in principal amount of the outstanding
Securities. However, without the consent of each Holder affected, an
amendment, supplement or waiver may not:
(1) change the Stated Maturity of the principal of any
Security;
(2) alter the optional redemption or repurchase provisions
of any Security or this Indenture in a manner adverse to the holders of the
Securities (other than the provisions of this Indenture relating to any Offer
to Purchase required under Section 4.05 or 4.14);
(3) reduce the principal amount of any Security;
(4) reduce the rate of or extend the time for payment of
interest on any Security;
(5) change the place or currency of payment of the principal
of or interest on any Security;
(6) modify any provisions of this Indenture relating to the
waiver of past defaults (other than to add sections of this Indenture subject
thereto) or the right of the Holders to institute suit for the enforcement of
any payment on or with respect to any Security or the Guarantees, or the
modification and amendment of this Indenture and the Securities (other than to
add sections of this Indenture or the Securities which may not be amended,
supplemented or waived without the consent of each Holder affected);
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(7) reduce the percentage of the principal amount of
outstanding Securities necessary for amendment to or waiver of compliance with
any provision of this Indenture or the Securities or for waiver of any
Default;
(8) waive a default in the payment of principal of, interest
on, or redemption payment with respect to, any Security (except a rescission
of acceleration of the Securities by the Holders as provided in this Indenture
and a waiver of the payment default that resulted from such acceleration);
(9) modify the ranking or priority of the Securities or the
Guarantee, if any, or modify the definition of Senior Debt or Designated
Senior Debt or amend or modify the subordination provisions of this Indenture
in any manner adverse to the Holders; or
(10) release any Guarantor from its Guarantee or this
Indenture otherwise than in accordance with this Indenture (it being
understood that nothing in this clause (10) requires the consent of Holders of
more than a majority in aggregate principal amount of outstanding Securities
to amend or modify Section 4.05).
In addition, no such modification or amendment may, without
the consent of the Holders of three-fourths of the aggregate principal amount
of Securities affected thereby, modify any of the provisions (including the
definitions relating thereto) relating to any Offer to Purchase required under
Section 4.14 in a manner materially adverse to the Holders.
The Holders of a majority in aggregate principal amount of
the outstanding Securities, on behalf of all holders of Securities, may waive
compliance by the Company with certain restrictive provisions of this
Indenture. Subject to certain rights of the Trustee, as provided in this
Indenture, (i) the Holders of a majority in aggregate principal amount of the
outstanding Securities, on behalf of all Holders of Securities, may waive any
past default under this Indenture, except a default in the payment of principal
or interest or a default arising from failure to purchase any Security tendered
pursuant to an Offer to Purchase required pursuant to Section 4.14, or a
default in respect of a provision that under this Indenture cannot be modified
or amended without the consent of the Holder of each outstanding Security
affected and (ii) the Holders of three-fourths of the aggregate principal
amount of Securities affected thereby, on behalf of all Holders, may waive a
default arising from failure to effect an Offer to Purchase required under
Section 4.14.
It shall not be necessary for the consent of the Holders
under this Section 10.02 to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent approves the
substance thereof.
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Section 10.3. Compliance with Trust Indenture Act.
Every amendment to or supplement of this Indenture or the
Securities shall comply with the TIA as then in effect.
Section 10.4. Revocation and Effect of Consents.
Until an amendment or waiver becomes effective, a consent to
it by a Holder is a continuing consent by the Holder and every subsequent
Holder of that Security or portion of that Security that evidences the same
debt as the consenting Holder's Security, even if notation of the consent is
not made on any Security. Subject to the following paragraph, any such Holder
or subsequent Holder may revoke the consent as to such Holder's Security or
portion of such Security by written notice to the Trustee or the Company
received before the date on which the Trustee receives an Officers' Certificate
certifying that the Holders of the requisite principal amount of Securities
have consented (and not theretofore revoked such consent) to the amendment,
supplement or waiver.
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Holders entitled to consent to any
amendment, supplement or waiver. If a record date is fixed, then,
notwithstanding the last sentence of the immediately preceding paragraph, those
Persons who were Holders at such record date (or their duly designated
proxies), and only those Persons, shall be entitled to consent to such
amendment, supplement or waiver or to revoke any consent previously given,
whether or not such Persons continue to be Holders after such record date.
No such consent shall be valid or effective for more than 90 days after such
record date.
After an amendment, supplement or waiver becomes effective,
it shall bind every Securityholder, unless it makes a change described in the
second sentence of Section 10.02. In that case the amendment, supplement or
waiver shall bind each Holder of a Security who has consented to it and every
subsequent Holder of a Security or portion of a Security that evidences the
same debt as the consenting Holder's Security.
Section 10.5. Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a
Security, the Trustee may require the Holder of the Security to deliver it to
the Trustee. The Trustee may place an appropriate notation on the Security
about the changed terms and return it to the Holder. Alternatively, if the
Company or the Trustee so determines, the Company in exchange for the Security
shall issue and the Trustee shall authenticate a new Security that reflects the
changed terms. Failure to make the appropriate notation or issue a new Security
shall not affect the validity and effect of such amendment, supplement or
waiver.
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Section 10.6. Trustee To Sign Amendments, etc.
The Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel and an Officers' Certificate
each stating that the execution of any amendment, supplement or waiver
authorized pursuant to this Article Ten is authorized or permitted by this
Indenture and that such amendment, supplement or waiver constitutes the legal,
valid and binding obligation of the Company and the Guarantors, enforceable in
accordance with its terms (subject to customary exceptions). The Trustee shall
execute any amendment, supplement or waiver authorized pursuant to this Article
Ten, provided, however, that the Trustee may, but shall not be obligated to,
execute any such amendment, supplement or waiver which affects the Trustee's
own rights, duties or immunities under this Indenture or otherwise. In signing
any amendment, supplement or waiver, the Trustee shall be entitled to receive
an indemnity reasonably satisfactory to it.
ARTICLE 11.
GUARANTEE
Section 11.1. Unconditional Guarantee.
Each Guarantor who becomes a party to this Indenture hereby
unconditionally, jointly and severally, guarantees to each Holder of a Security
authenticated and delivered by the Trustee and to the Trustee and its
successors and assigns that: the principal of and interest on the Securities
will be promptly paid in full when due, subject to any applicable grace period,
whether at maturity, by acceleration or otherwise, and interest on the overdue
principal and interest on any overdue interest on the Securities and all other
obligations of the Company to the Holders or the Trustee hereunder or under the
Securities will be promptly paid in full or performed, all in accordance with
the terms hereof and thereof; subject, however, to the limitations set forth in
Section 11.04. Each such Guarantor hereby agrees that its obligations hereunder
shall be unconditional, irrespective of the validity, regularity or
enforceability of the Securities or this Indenture, the absence of any action
to enforce the same, any waiver or consent by any Holder of the Securities with
respect to any provisions hereof or thereof, the recovery of any judgment
against the Company, any action to enforce the same or any other circumstance
which might otherwise constitute a legal or equitable discharge or defense of a
guarantor. Each such Guarantor hereby waives diligence, presentment, demand of
payment, filing of claims with a court in the event of insolvency or bankruptcy
of the Company, any right to require a proceeding first against the Company,
protest, notice and all demands whatsoever and covenants that the Guarantee
will not be discharged except by complete performance of the obligations
contained in the Securities, this Indenture, and this Guarantee. If any Holder
or the Trustee is required by any court or otherwise to return to the Company,
any Guarantor,
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or any custodian, trustee, liquidator or other similar official acting in
relation to the Company or any Guarantor, any amount paid by the Company or
any Guarantor to the Trustee or such Holder, this Guarantee, to the extent
theretofore discharged, shall be reinstated in full force and effect. Each
Guarantor further agrees that, as between each Guarantor, on the one hand, and
the Holders and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article Six
for the purpose of this Guarantee, notwithstanding any stay, injunction or
other prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (y) in the event of any acceleration of such
obligations as provided in Article Six, such obligations (whether or not due
and payable) shall forthwith become due and payable by each Guarantor for the
purpose of this Guarantee.
Section 11.2. Severability.
In case any provision of this Guarantee shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
Section 11.3. Release of a Guarantor.
If the Securities are defeased in accordance with Section
9.01(c), or if all of the Capital Stock of any Guarantor is sold (including by
issuance or otherwise) by the Company or any of its Subsidiaries in a
transaction constituting an Asset Disposition (or which, but for the provisions
of clause (c) of the definition of such term, would constitute an Asset
Disposition), and, if required by this Indenture, (x) the Net Available
Proceeds from such Asset Disposition are used in accordance with Section 4.05
or (y) the Company delivers to the Trustee an Officers' Certificate covenanting
that the Net Available Proceeds from such Asset Disposition will be used in
accordance with Section 4.05 and within the time limits specified by such
Section 4.05, then such Guarantor shall be released and discharged from all
obligations under this Article Eleven upon such use in the case of clause (x)
or upon such delivery in the case of clause (y). The Trustee shall, at the sole
cost and expense of the Company and upon receipt at the reasonable request of
the Trustee of an Opinion of Counsel that the provisions of this Section 11.03
have been complied with, deliver an appropriate instrument evidencing such
release upon receipt of a request by the Company accompanied by an Officers'
Certificate certifying as to the compliance with this Section. Any Guarantor
not so released remains liable for the full amount of principal of and interest
on the Securities and the other obligations of the Company hereunder as
provided in this Article Eleven.
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Section 11.4. Limitation of Guarantor's Liability.
Each Guarantor, and by its acceptance hereof each Holder and
the Trustee, hereby confirms that it is the intention of all such parties that
the guarantee by such Guarantor pursuant to its Guarantee not constitute a
fraudulent transfer or conveyance for purposes of title 11 of the United States
Code, as amended, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent
Transfer Act or any similar U.S. Federal or state or other applicable law. To
effectuate the foregoing intention, the Holders and such Guarantor hereby
irrevocably agree that the obligations of such Guarantor under the Guarantee
shall be limited to the maximum amount as will, after giving effect to all
other contingent and fixed liabilities of such Guarantor and after giving
effect to any collections from or payments made by or on behalf of any other
Guarantor in respect of the obligations of such other Guarantor under its
Guarantee or pursuant to Section 11.05, result in the obligations of such
Guarantor under the Guarantee not constituting such fraudulent transfer or
conveyance.
Section 11.5. Contribution.
In order to provide for just and equitable contribution among
the Guarantors, the Guarantors agree, inter se, that in the event any payment
or distribution is made by any Guarantor (a "Funding Guarantor") under the
Guarantee, such Funding Guarantor shall be entitled to a contribution from all
other Guarantors in a pro rata amount, based on the net assets of each
Guarantor (including the Funding Guarantor), determined in accordance with
GAAP, subject to Section 11.04, for all payments, damages and expenses incurred
by that Funding Guarantor in discharging the Company's obligations with respect
to the Securities or any other Guarantor's obligations with respect to the
Guarantee.
Section 11.6. Execution of Guarantee.
To further evidence their Guarantee to the Holders, any
Guarantor required to Guarantee the Securities pursuant to Section 4.18 shall
execute the endorsement of Guarantee in substantially the form set forth in
Exhibit A hereto, which endorsement shall be delivered to each Holder to be
attached to each Security. Each such Guarantor hereby agrees that its Guarantee
set forth in Section 11.01 shall remain in full force and effect
notwithstanding any failure to endorse on each Security a notation of such
Guarantee. Each such Guarantee shall be signed on behalf of each Guarantor by
its Chairman of the Board, its President or one of its Vice Presidents prior to
the authentication of the Security on which it is endorsed, and the delivery of
such Security by the Trustee, after the authentication thereof hereunder, shall
constitute due delivery of such Guarantee on behalf of such Guarantor. Such
signature upon the Guarantee may be manual or facsimile signature of such
officer and may be imprinted or otherwise reproduced on the
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Guarantee, and in case such officer who shall have signed the Guarantee shall
cease to be such officer before the Security on which such Guarantee is
endorsed shall have been authenticated and delivered by the Trustee or
disposed of by the Company, such Security nevertheless may be authenticated
and delivered or disposed of as though the Person who signed the Guarantee had
not ceased to be such officer of the Guarantor.
Section 11.7. Subordination of Subrogation and Other Rights.
Each Guarantor hereby agrees that any claim against the
Company that arises from the payment, performance or enforcement of such
Guarantor's obligations under its Guarantee or this Indenture, including,
without limitation, any right of subrogation, shall be subject and subordinate
to, and no payment with respect to any such claim of such Guarantor shall be
made before, the payment in full in cash of all outstanding Securities in
accordance with the provisions provided therefor in this Indenture.
ARTICLE 12.
SUBORDINATION OF GUARANTEE
Section 12.1. Guarantee Obligations Subordinated to Senior
Debt of Guarantor
Each Guarantor covenants and agrees, and the Trustee and each
Holder of the Securities by his acceptance thereof likewise covenant and agree,
that the Guarantees shall be issued subject to the provisions of this Article;
and each person holding any Security, whether upon original issue or upon
transfer, assignment or exchange thereof, accepts and agrees that all payments
of the principal of and interest on the Securities pursuant to the Guarantee
made by or on behalf of any Guarantor shall, to the extent and in the manner
set forth in this Article, be subordinated and junior in right of payment to
the prior payment in full of all Senior Debt of such Guarantor.
Section 12.2 No Payment on Guarantees in Certain
Circumstances
(a) No direct or indirect payment by or on behalf of any
Guarantor of principal of or interest on the Securities (other than payments to
Holders from funds held in trust for the benefit of Holders pursuant to Section
9.01) pursuant to such Guarantor's Guarantee, whether pursuant to the terms of
the Securities, upon acceleration or otherwise, will be made if, at the time of
such payment, there exists a default in the payment of all or any portion of
the obligations on any Designated Senior Debt of such Guarantor whether at
maturity, on account of mandatory redemption or prepayment, acceleration or
otherwise, and such default shall not have been cured or waived. In addition,
during the continuance of any non-payment default or
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non-payment event of default with respect to any Designated Senior Debt
pursuant to which the maturity thereof may be accelerated, and upon receipt by
the Trustee of written notice (the "Guarantor Payment Blockage Notice") from a
holder or holders of such Designated Senior Debt or the trustee or agent
acting on behalf of such Designated Senior Debt, then, unless and until such
default or event of default has been cured or waived or has ceased to exist or
such Designated Senior Debt has been discharged or repaid in full, or the
requisite holders of such Designated Senior Debt have otherwise agreed in
writing, no payment or distribution will be made by or on behalf of such
Guarantor on account of or with respect to the Securities (other than payments
to Holders from funds held in trust for the benefit of Holders pursuant to
Section 9.01), during a period (a "Guarantor Blockage Period") commencing on
the date of receipt of such Guarantor Payment Blockage Notice by the Trustee
and ending 179 days thereafter.
Notwithstanding anything herein or in the Securities to the
contrary, (x) in no event shall a Guarantor Blockage Period extend beyond 179
days from the date the Guarantor Payment Blockage Notice was given and (y)
there must be 180 days in any 365 day period during which no Guarantor Payment
Blockage Period is in effect with respect to such Guarantor. Not more than one
Guarantor Blockage Period may be commenced with respect to each Guarantor
during any period of 365 consecutive days. No default or event of default that
existed or was continuing on the date of commencement of any Guarantor Blockage
Period with respect to the Designated Senior Debt initiating such Guarantor
Payment Blockage Period may be, or be made, the basis for the commencement of
any Guarantor Blockage Period by the holder or holders of such Designated
Senior Debt or the trustee or agent acting on behalf of such Designated Senior
Debt, whether or not within a period of 365 consecutive days, unless such
default or event of default has been cured or waived for a period of not less
than 90 consecutive days.
(b) In the event that, notwithstanding the foregoing, any
payment shall be received by the Trustee or any Holder when such payment is
prohibited by Section 12.02(a), such payment shall be held in trust for the
benefit of, and shall be paid over or delivered to, the holders of such
Designated Senior Debt or their respective representatives, or to the trustee
or trustees under any indenture pursuant to which any of such Designated Senior
Debt may have been issued, as their respective interests may appear, but only
to the extent that, upon notice from the Trustee to the holders of such
Designated Senior Debt that such prohibited payment has been made, the holders
of such Designated Senior Debt (or their representative or representatives or a
trustee) notify the Trustee in writing of the amounts then due and owing on
such Designated Senior Debt, if any, and only the amounts specified in such
notice to the Trustee shall be paid to the holders of such Designated Senior
Debt.
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Section 12.3. Payment Over of Proceeds upon Dissolution, etc.
(a) Upon any payment or distribution of assets or securities
of any Guarantor of any kind or character (whether in cash, property or
securities) upon any dissolution or winding-up or total or partial liquidation
or reorganization of such Guarantor, whether voluntary or involuntary or in
bankruptcy, insolvency, receivership or other proceedings, all amounts due or
to become due with respect to all Senior Debt of such Guarantor shall first be
paid in full, or payment provided for, before the Holders or the Trustee on
their behalf shall be entitled to receive any payment by such Guarantor of the
principal of or interest on the Securities pursuant to such Guarantor's
Guarantee, or any payment to acquire any of the Securities for cash, property
or securities, or any distribution with respect to the Securities of any cash,
property or securities. Before any payment may be made by, or on behalf of, any
Guarantor of the principal of or interest on the Securities upon any such
dissolution or winding-up or liquidation or reorganization, any payment or
distribution of assets or securities of such Guarantor of any kind or
character, whether in cash, property or securities, to which the Holders of the
Securities or the Trustee on their behalf would be entitled, but for the
subordination provisions of this Indenture, shall be made by such Guarantor or
by any receiver, trustee in bankruptcy, liquidating trustee, agent or other
Person making such payment or distribution, directly to the holders of the
Senior Debt of such Guarantor or their representative(s) or to the trustee(s)
under any indenture pursuant to which any of such Senior Debt may have been
issued, as their respective interests may appear, to the extent necessary to
pay all such Senior Debt in full after giving effect to any concurrent payment,
distribution or provision therefor to or for the holders of such Senior Debt.
(b) In the event that, notwithstanding the foregoing
provision prohibiting such payment or distribution, any payment or distribution
of assets or securities of any kind or character, whether in cash, property or
securities, shall be received by the Trustee or any Holder at a time when such
payment or distribution is prohibited by Section 12.03(a) and before all
obligations in respect of the Senior Debt of such Guarantor are paid in full,
or payment provided for, such payment or distribution shall be received and
held in trust for the benefit of, and shall be paid over or delivered to, the
holders of such Senior Debt or their respective representative(s), or to the
trustee(s) under any indenture pursuant to which any of such Senior Debt may
have been issued, as their respective interests may appear, for application to
the payment of such Senior Debt remaining unpaid until all such Senior Debt has
been paid in full after giving effect to any concurrent payment, distribution
or provision therefor to or for the holders of such Senior Debt.
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(c) The consolidation of any Guarantor with, or the merger of
any Guarantor with or into, another corporation or the liquidation or
dissolution of any Guarantor following the conveyance or transfer of its
property as an entirety, or substantially as an entirety, to another
corporation upon the terms and conditions provided in Article Five or Section
11.03 shall not be deemed a dissolution, winding-up, liquidation or
reorganization for the purposes of this Section if such other corporation
shall, as a part of such consolidation, merger, conveyance or transfer, comply
with the conditions stated in Article Five or such Guarantor or successor
entity shall be released from the Guarantee pursuant to the terms of Section
11.03.
Section 12.4. Subrogation.
Upon the payment in full of all Senior Debt of a Guarantor,
or provision for payment, the Holders shall be subrogated (equally and ratably
with all pari passu Indebtedness) to the rights of the holders of such Senior
Debt to receive payments or distributions of cash, property or securities of
such Guarantor made on such Senior Debt until the principal of and interest on
the Securities shall be paid in full; and, for the purposes of such
subrogation, no payments or distributions to the holders of such Senior Debt of
any cash, property or securities to which the Holders or the Trustee on their
behalf would be entitled except for the provisions of this Article, and no
payment over pursuant to the provisions of this Article to the holders of such
Senior Debt by Holders or the Trustee on their behalf shall, as between such
Guarantor, its creditors other than holders of such Senior Debt, and the
Holders, be deemed to be a payment by such Guarantor to or on account of such
Senior Debt. It is understood that the provisions of this Article are and are
intended solely for the purpose of defining the relative rights of the Holders,
on the one hand, and the holders of Senior Debt of the Guarantors, on the other
hand.
If any payment or distribution to which the Holders would
otherwise have been entitled but for the provisions of this Article shall have
been applied, pursuant to the provisions of this Article, to the payment of all
amounts payable under Senior Debt, then and in such case, the Holders shall be
entitled to receive from the holders of such Senior Debt any payments or
distributions received by such holders of Senior Debt in excess of the amount
required to make payment in full, or provision for payment, of such Senior
Debt.
Section 12.5. Obligations of Guarantors Unconditional.
Nothing contained in this Article or elsewhere in this
Indenture or in the Securities or the Guarantee is intended to or shall impair,
as among the Guarantors and the Holders, the obligation of each Guarantor,
which is absolute and unconditional, to pay to the Holders the principal of and
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interest on the Securities as and when the same shall become due and payable in
accordance with the terms of the Guarantee, or is intended to or shall affect
the relative rights of the Holders and creditors of any Guarantor other than
the holders of Senior Debt, nor shall anything herein or therein prevent any
Holder or the Trustee on their behalf from exercising all remedies otherwise
permitted by applicable law upon default under this Indenture, subject to the
rights, if any, under this Article of the holders of Senior Debt in respect of
cash, property or securities of any Guarantor received upon the exercise of any
such remedy.
Without limiting the generality of the foregoing, nothing
contained in this Article shall restrict the right of the Trustee or the
Holders to take any action to declare the Securities to be due and payable
prior to their stated maturity pursuant to Section 6.01 or to pursue any rights
or remedies hereunder; provided, however, that all Senior Debt of any Guarantor
then due and payable shall first be paid in full before the Holders or the
Trustee are entitled to receive any direct or indirect payment from such
Guarantor of principal of or interest on the Securities pursuant to such
Guarantor's Guarantee.
Section 12.6. Notice to Trustee.
The Company shall give prompt written notice to the Trustee
of any fact known to the Company or such Guarantor which would prohibit the
making of any payment to or by the Trustee in respect of the Securities
pursuant to the provisions of this Article. Failure to give such notice to the
Trustee shall not affect the subordination of the Securities to Senior Debt of
Guarantors. The Trustee shall not be charged with knowledge of the existence of
any default or event of default with respect to any Senior Debt or of any other
facts which would prohibit the making of any payment to or by the Trustee
unless and until the Trustee shall have received notice in writing to that
effect signed by an Officer of the Company, or by a holder of Senior Debt or
trustee or agent therefor; and prior to the receipt of any such written notice,
the Trustee shall, subject to Article Seven, be entitled to assume that no such
facts exist; provided, however, that if the Trustee shall not have received the
notice provided for in this Section 12.06 at least three Business Days prior to
the date upon which by the terms of this Indenture any moneys shall become
payable for any purpose (including, without limitation, the payment of the
principal of or interest on any Security), then, regardless of anything herein
to the contrary, the Trustee shall have full power and authority to receive any
moneys from any Guarantor and to apply the same to the purpose for which they
were received, and shall not be affected by any notice to the contrary which
may be received by it on or after such prior date. Nothing contained in this
Section 12.06 shall limit the right of the holders of Senior Debt of a
Guarantor to recover payments as contemplated by Section 12.02 or 12.03. The
Trustee shall be entitled to rely on the delivery to it of a
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written notice by a Person representing himself or itself to be a holder of
any Senior Debt of a Guarantor (or a trustee on behalf of, or other
representative of, such holder) to establish that such notice has been given
by a holder of such Senior Debt of a Guarantor or a trustee or representative
on behalf of any such holder.
In the event that the Trustee determines in good faith that
any evidence is required with respect to the right of any Person as a holder of
Senior Debt of a Guarantor to participate in any payment or distribution
pursuant to this Article, the Trustee may request such Person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of such
Senior Debt held by such Person, the extent to which such Person is entitled to
participate in such payment or distribution and any other facts pertinent to
the rights of such Person under this Article, and if such evidence is not
furnished, the Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment.
Section 12.7. Reliance on Judicial Order or Certificate
of Liquidating Agent.
Upon any payment or distribution of assets or securities of a
Guarantor referred to in this Article, the Trustee and the Holders of the
Securities shall be entitled to rely upon any order or decree made by any court
of competent jurisdiction in which bankruptcy, dissolution, winding-up,
liquidation or reorganization proceedings are pending, or upon a certificate of
the receiver, trustee in bankruptcy, liquidating trustee, agent or other person
making such payment or distribution, delivered to the Trustee or to the Holders
for the purpose of ascertaining the persons entitled to participate in such
distribution, the holders of Senior Debt of such Guarantor and other
indebtedness of such Guarantor, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article.
Section 12.8. Trustee's Relation to Senior Debt of
Guarantors.
The Trustee and any Paying Agent shall be entitled to all the
rights set forth in this Article with respect to any Senior Debt of Guarantors
which may at any time be held by it in its individual or any other capacity to
the same extent as any other holder of such Senior Debt, and nothing in this
Indenture shall deprive the Trustee or any Paying Agent of any of its rights as
such holder.
With respect to the holders of a Guarantor's Senior Debt, the
Trustee undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article, and no implied
covenants or obligations with respect to the holders of such Senior Debt shall
be read into
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this Indenture against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Debt of Guarantors (except as provided
in Section 12.03(b)). The Trustee shall not be charged with knowledge of the
existence of Senior Debt or of any facts that would prohibit any payment
hereunder unless the Trustee shall have received notice to that effect at the
address of the Trustee set forth in Section 13.02.
Section 12.9. Subordination Rights Not Impaired by
Acts or Omissions of the Guarantors or
Holders of Senior Debt of Guarantors.
No right of any present or future holders of any Senior Debt
of Guarantors to enforce subordination as provided herein shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
any Guarantor or by any act or failure to act, in good faith, by any such
holder, or by any noncompliance by any Guarantor with the terms of this
Indenture, regardless of any knowledge thereof which any such holder may have
or otherwise be charged with. The provisions of this Article are intended to be
for the benefit of, and shall be enforceable directly by, the holders of Senior
Debt of Guarantors.
Section 12.10. Securityholders Authorize Trustee to
Effectuate Subordination of Guarantee.
Each Holder of Securities by his acceptance of such
Securities authorizes and expressly directs the Trustee on his behalf to take
such action as may be necessary or appropriate to effectuate the subordination
provided in this Article, and appoints the Trustee his attorney-in-fact for
such purposes, including, in the event of any dissolution, winding up,
liquidation or reorganization of any Guarantor (whether in bankruptcy,
insolvency, receivership, reorganization or similar proceedings or upon an
assignment for the benefit of creditors or otherwise) tending towards
liquidation of the business and assets of such Guarantor, the filing of a claim
for the unpaid balance of its or his Securities in the form required in those
proceedings.
Section 12.11. This Article Not to Prevent Events of
Default.
The failure to make a payment on account of principal of or
interest on the Securities by reason of any provision of this Article shall not
be construed as preventing the occurrence of an Event of Default specified in
Section 6.01(a), (b) or (c).
Section 12.12. Trustee's Compensation Not Prejudiced.
Nothing in this Article shall apply to amounts due to the
Trustee pursuant to other sections in this Indenture.
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Section 12.13. No Waiver of Guarantee Subordination
Provisions.
Without in any way limiting the generality of Section 12.09,
the holders of Senior Debt of Guarantors may, at any time and from time to
time, without the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to the Holders of the Securities
and without impairing or releasing the subordination provided in this Article
or the obligations hereunder of the Holders of the Securities to the holders of
Senior Debt of Guarantors, do any one or more of the following: (a) change the
manner, place or terms of payment or extend the time of payment of, or renew or
alter, Senior Debt of Guarantors or any instrument evidencing the same or any
agreement under which such Senior Debt is outstanding or secured; (b) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing such Senior Debt; (c) release any Person liable in any
manner for the collection of such Senior Debt; and (d) exercise or refrain from
exercising any rights against any Guarantor and any other Person.
Section 12.14. Payments May Be Paid Prior to
Dissolution.
Nothing contained in this Article or elsewhere in this
Indenture shall prevent (i) a Guarantor, except under the conditions described
in Section 12.02, from making payments of principal of and interest on the
Securities, or from depositing with the Trustee any moneys for such payments,
or (ii) the application by the Trustee of any moneys deposited with it for the
purpose of making such payments of principal of and interest on the Securities,
to the holders entitled thereto unless at least three Business Days prior to
the date upon which such payment becomes due and payable, the Trustee shall
have received the written notice provided for in Section 12.02(b) or in Section
12.06.
ARTICLE 13.
MISCELLANEOUS
Section 13.1. Trust Indenture Act Controls.
This Indenture is subject to the provisions of the TIA that
are required to be a part of this Indenture, and shall, to the extent
applicable, be governed by such provisions. If any provision of this Indenture
modifies any TIA provision that may be so modified, such TIA provision shall be
deemed to apply to this Indenture as so modified. If any provision of this
Indenture excludes any TIA provision that may be so excluded, such TIA
provision shall be excluded from this Indenture.
The provisions of TIA ss.ss. 310 through 317 that impose
duties on any Person (including the provisions automatically deemed included
unless expressly excluded by this Indenture) are
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a part of and govern this Indenture, whether or not physically contained
herein.
Section 13.2. Notices.
Any notice or communication shall be sufficiently given if in
writing and delivered in person, by facsimile, by overnight courier, or mailed
by first-class mail addressed as follows:
if to the Company:
United Auto Group, Inc.
375 Park Avenue, 11th Floor
New York, NY 10152
Attention: Chairman and Chief Executive Officer
Facsimile: (212) 593-1363
Telephone: (212) 230-0400
with a copy to:
Jack H. Nusbaum, Esq.
Willkie Farr & Gallagher
153 East 53rd Street
New York, New York 10022
Facsimile: (212) 821-8111
Telephone: (212) 821-8000
if to the Trustee:
The Bank of New York
101 Barclay Street, 21W
New York, New York 10007
Attention: Corporate Trust Trustee Administration
Facsimile: (212) 815-5915
Telephone: (212) 815-5783
The Company or the Trustee by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to
Holders) shall be deemed to have been duly given: at the time delivered by
hand, if personally delivered; five Business Days after being deposited in the
mail, postage prepaid, if mailed; when telephonic acknowledgment of receipt is
obtained, if telecopied; and the next Business Day after timely delivery to the
courier, if sent by overnight courier promising next Business Day delivery.
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Any notice or communication to a Holder shall be mailed, by
first class mail, postage prepaid, or by overnight air courier promising next
Business Day delivery, including any notice delivered in connection with TIA
ss.ss. 310(b), 313(c), 314(a) and 315(b), to him at his address as set forth on
the registration books of the Registrar and shall be sufficiently given to him
if so mailed within the time prescribed. To the extent required by the TIA, any
notice or communication shall also be mailed to any Person described in TIA ss.
313(c).
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is given in the manner provided
above, it is duly given, whether or not the addressee receives it.
Section 13.3. Communications by Holders with Other
Holders.
Securityholders may communicate pursuant to TIAss. 312(b)
with other Securityholders with respect to their rights under this Indenture
or the Securities. The Company, the Trustee, the Registrar and any other
person shall have the protection of TIAss. 312(c).
Section 13.4. Certificate and Opinion as to Conditions
Precedent.
Upon any request or application by the Company to the Trustee
to take or refrain from taking any action under this Indenture, the Company
shall furnish to the Trustee at the request of the Trustee:
(1) an Officers' Certificate in form and substance
satisfactory to the Trustee stating that, in the opinion of the signers, all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with;
(2) an Opinion of Counsel in form and substance satisfactory
to the Trustee stating that, in the opinion of such counsel, all such
conditions precedent have been complied with; and
(3) where applicable, a certificate or opinion by an
independent certified public accountant satisfactory to the Trustee that
complies with TIA ss. 314(c).
Section 13.5. Statements Required in Certificate or
Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
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<PAGE>
(1) a statement that the person making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether or not, in the opinion of such person,
such condition or covenant has been complied with; provided, however, that
with respect to matters of fact an Opinion of Counsel may rely on an Officers'
Certificate or certificates of public officials.
Section 13.6. Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules for action by or at a meeting
of Securityholders. The Paying Agent or Registrar may make reasonable rules
for its functions.
Section 13.7. Governing Law.
The laws of the State of New York shall govern this
Indenture, the Securities and the Guarantee without regard to principles of
conflicts of law.
Section 13.8. No Recourse Against Others.
No director, officer, employee or stockholder, as such, of the
Company or any of its Subsidiaries shall have any liability for any
obligations of the Company or any Guarantor under the Securities, the
Guarantees or this Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. Each Securityholder by accepting
Security waives and releases all such liability. The waiver and release are
part of the consideration for issuance of the Securities.
Section 13.9. Successors.
All agreements of the Company in this Indenture and the Securities
shall bind its successor. All agreements of each Guarantor in this Indenture
and the Guarantee of such Guarantor shall bind its successor. All agreements
of the Trustee in this Indenture shall bind its successor.
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<PAGE>
Section 13.10. Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
Section 13.11. Severability.
In case any provision in this Indenture, in the Securities or in the
Guarantee shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby, and a Holder shall have no claim therefor
against any party hereto.
Section 13.12. No Adverse Interpretation of Other Agreements .
This Indenture may not be used to interpret another indenture, loan
or debt agreement of the Company or a Subsidiary. Any such indenture, loan or
debt agreement may not be used to interpret this Indenture.
Section 13.13. Legal Holidays.
If a payment date is not a Business Day at a place of payment,
payment may be made at that place on the next succeeding Business Day, and no
interest shall accrue for the intervening period.
[Signature Page Follows]
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<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed as of the date first written above.
UNITED AUTO GROUP, INC.
By:
--------------------------
Name:
Title:
GUARANTORS:
DIFEO PARTNERSHIP, INC.
DIFEO PARTNERSHIP RCT, INC.
DIFEO PARTNERSHIP RCM, INC.
DIFEO PARTNERSHIP HCT, INC.
DIFEO PARTNERSHIP SCT, INC.
DIFEO PARTNERSHIP VIII, INC.
DIFEO PARTNERSHIP IX, INC.
DIFEO PARTNERSHIP X, INC.
UAG NORTHEAST, INC.
UAG NORTHEAST (NY), INC.
HUDSON TOYOTA, INC.
SOMERSET MOTORS, INC.
UAG WEST, INC.
SA AUTOMOTIVE, LTD.
SL AUTOMOTIVE, LTD.
SPA AUTOMOTIVE, LTD.
LRP, LTD.
SUN BMW, LTD.
6725 DEALERSHIP, LTD.
SCOTTSDALE MANAGEMENT GROUP, LTD.
SK MOTORS, LTD.
SCOTTSDALE AUDI, LTD.
UNITED LANDERS, INC.
LANDERS AUTO SALES, INC.
LANDERS UNITED AUTO GROUP, INC.
LANDERS UNITED AUTO GROUP NO. 2,
INC.
LANDERS UNITED AUTO GROUP NO. 3,
INC.
LANDERS UNITED AUTO GROUP NO. 4,
INC.
LANDERS BUICK-PONTIAC, INC.
UAG ATLANTA, INC.
ATLANTA TOYOTA, INC.
UAG ATLANTA II, INC.
UNITED NISSAN, INC.,
a Georgia corporation
UAG ATLANTA III, INC.
PEACHTREE NISSAN, INC.
UAG ATLANTA IV, INC.
UAG ATLANTA IV MOTORS, INC.
<PAGE>
UAG ATLANTA V, INC.
CONYERS NISSAN, INC.
UAG TENNESSEE, INC.
UNITED NISSAN, INC.,
a Tennessee corporation
UAG TEXAS, INC.
UAG TEXAS II, INC.
UAG EAST, INC.
AMITY AUTO PLAZA, LTD.
AMITY NISSAN OF MASSAPEQUA, LTD.
AUTO MALL PAYROLL SERVICES, INC.
AUTOMALL STORAGE, INC.
FLORIDA CHRYSLER PLYMOUTH, INC.
J&S AUTO REFINISHING, LTD.
NORTHLAKE AUTO FINISH, INC.
PALM AUTO PLAZA, INC.
WEST PALM AUTO MALL, INC.
WEST PALM INFINITI, INC.
WEST PALM NISSAN, INC.
WESTBURY NISSAN, LTD.
WESTBURY SUPERSTORE, LTD.
UAG CAROLINA, INC.
GENE REED CHEVROLET, INC.
MICHAEL CHEVROLET-OLDSMOBILE, INC.
REED LALLIER CHEVROLET, INC.
UAG NEVADA, INC.
UNITED NISSAN, INC.,
a Nevada corporation
UNITED AUTOCARE, INC.
UNITED AUTOCARE PRODUCTS, INC.
UAG CAPITAL MANAGEMENT, INC.
UAG FINANCE COMPANY, INC.
By:
Name:
Title:
FAIR HYUNDAI PARTNERSHIP
FAIR CHEVROLET-GEO PARTNERSHIP
DANBURY AUTO PARTNERSHIP
DANBURY CHRYSLER PLYMOUTH
PARTNERSHIP
J&F OLDSMOBILE PARTNERSHIP
DIFEO HYUNDAI PARTNERSHIP
DIFEO LEASING PARTNERSHIP
DIFEO NISSAN PARTNERSHIP
DIFEO CHEVROLET-GEO PARTNERSHIP
DIFEO CHRYSLER PLYMOUTH JEEP
EAGLE PARTNERSHIP
DIFEO BMW PARTNERSHIP
By: DIFEO PARTNERSHIP, INC.,
a general partner
<PAGE>
By:
------------------------------
Name:
Title:
HUDSON MOTORS PARTNERSHIP
By: DIFEO PARTNERSHIP HTC, INC.,
a general partner
By:
------------------------------
Name:
Title:
OCT PARTNERSHIP
By: DIFEO PARTNERSHIP VIII, INC.,
a general partner
By:
------------------------------
Name:
Title:
<PAGE>
OCM PARTNERSHIP
By: DIFEO PARTNERSHIP IX, INC.,
a general partner
By:
------------------------------
Name:
Title:
SOMERSET MOTORS PARTNERSHIP
By: DIFEO PARTNERSHIP SCT, INC.,
a general partner
By:
------------------------------
Name:
Title:
COUNTY AUTO GROUP PARTNERSHIP
By: DIFEO PARTNERSHIP RCT, INC.,
a general partner
By:
------------------------------
Name:
Title:
ROCKLAND MOTORS PARTNERSHIP
By: DIFEO PARTNERSHIP RCM, INC.,
a general partner
By:
------------------------------
Name:
Title:
6725 AGENT PARTNERSHIP
By: SCOTTSDALE AUDI, LTD.,
a general partner
By:
------------------------------
Name:
Title:
SHANNON AUTOMOTIVE, LTD.
By: UAG TEXAS II, INC.,
its general partner
By:
------------------------------
Name:
Title:
<PAGE>
THE BANK OF NEW YORK,
as Trustee
By:
------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
UNITED AUTO GROUP, INC.
CUSIP No.
No. $
11% SENIOR SUBORDINATED NOTE DUE 2007
UNITED AUTO GROUP, INC. promises to pay to ___________
or registered assigns the principal sum of _____________________ Dollars on
July 15, 2007.
Interest Payment Dates: January 15 and July 15, beginning
January 15, 1998.
Record Dates: January 1 and July 1, beginning
January 1, 1998.
IN WITNESS WHEREOF, UNITED AUTO GROUP, INC. has caused this
instrument to be executed by duly authorized officers.
UNITED AUTO GROUP, INC.
By:
-----------------------------
Name:
Title:
Dated: By:
-----------------------------
Name:
Title:
Certificate of Authentication:
This is one of the 11% Senior Subordinated Notes due 2007
referred to in the within-mentioned Indenture.
THE BANK OF NEW YORK
a Trustee
By Date:
--------------------
Authorized Signatory
<PAGE>
(REVERSE OF SECURITY)
UNITED AUTO GROUP, INC.
11% Senior Subordinated Note due 2007
1. Interest.
United Auto Group, Inc., a Delaware corporation (the
"Company"), promises to pay interest at the rate of 11% per annum on the
principal amount of this Security semiannually commencing on January 15, 1998,
until the principal hereof is paid or made available for payment. Interest on
the Securities will accrue from and including the most recent date to which
interest has been paid or, if no interest has been paid, from and including
July 23, 1997, through but excluding the date on which interest is paid. If an
Interest Payment Date falls on a day that is not a Business Day, the interest
payment to be made on such Interest Payment Date will be made on the next
succeeding Business Day with the same force and effect as if made on such
Interest Payment Date, and no additional interest will accrue as a result of
such delayed payment. Interest will be computed on the basis of a 360-day year
of twelve 30-day months.
2. Method of Payment.
The interest payable on the Securities, and punctually paid
or duly provided for, on any Interest Payment Date will, as provided in the
Indenture (as defined below), be paid to the Person in whose name this Security
is registered at the close of business on the regular record date, which shall
be the January 1 or July 1 (whether or not a Business Day) next preceding such
Interest Payment Date. Any such interest not so punctually paid or duly
provided for, and any interest payable on such defaulted interest (to the
extent lawful), will forthwith cease to be payable to the Holder on such
regular record date and shall be paid to the person in whose name this Security
is registered at the close of business on a special record date for the payment
of such defaulted interest to be fixed by the Company, notice of which shall be
given to Holders not less than 15 days prior to such special record date.
Payment of the principal of and interest on this Security will be made at the
agency of the Company maintained for that purpose in New York, New York and at
any other office or agency maintained by the Company for such purpose, in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts; provided, however, that
at the option of the Company payment of interest may be made by check mailed to
the address of the Person entitled thereto as such address shall appear in the
Security register.
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<PAGE>
3. Paying Agent and Registrar.
Initially, The Bank of New York (the "Trustee") will act as
Paying Agent and Registrar. The Company may change any Paying Agent, Registrar
or co-Registrar without notice to the Holders of Securities. The Company or
any of its Subsidiaries may act as Registrar or co-Registrar but may not act
as Paying Agent.
4. Indenture.
This Security is one of a duly authorized issue of Securities
of the Company, designated as its 11% Senior Subordinated Notes due 2007 (the
"Securities"), limited in aggregate principal amount to $150,000,000 (except
for Securities issued in substitution for destroyed, lost or stolen Securities)
issuable under an indenture dated as of July 23, 1997 (the "Indenture"), among
the Company, the guarantors party thereto (the "Guarantors") and the Trustee.
The terms of the Securities include those stated in the Indenture and those
made part of the Indenture by the Trust Indenture Act of 1939 (the "Act") (15
U.S. Code ss.ss. 77aaa-77bbbb) as in effect on the date of the Indenture. The
Securities are subject to all such terms, and Holders of Securities are
referred to the Indenture and the Act for a statement of them. Each
Securityholder, by accepting a Security, agrees to be bound to all of the terms
and provisions of the Indenture, as the same may be amended from time to time.
Payment on each Security is guaranteed on a senior subordinated basis, jointly
and severally, by the Guarantors pursuant to Article Eleven of the Indenture.
The Securities are subordinated in right of payment to all
Senior Debt of the Company to the extent and in the manner provided in the
Indenture. Each Holder of a Security, by accepting a Security, agrees to such
subordination, authorizes the Trustee to give effect to such subordination and
appoints the Trustee as attorney-in-fact for such purpose.
Capitalized terms contained in this Security to the extent
not defined herein shall have the meanings assigned to them in the Indenture.
5. Optional Redemption.
The Securities will be subject to redemption, at the option
of the Company, in whole or in part, at any time on or after July 15, 2002 and
prior to maturity, upon not less than 30 nor more than 60 days' notice mailed
to each Holder of Securities to be redeemed, in amounts of $1,000 or an
integral multiple of $1,000, at the following redemption prices (expressed as
percentages of principal amount), plus accrued interest to but excluding the
date fixed for redemption (subject to the right of Holders on the relevant
Record Date to receive interest due on an
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<PAGE>
Interest Payment Date that is on or prior to the date fixed for redemption),
if redeemed during the 12-month period beginning July 15 of the years
indicated:
Year Percentage
2002 105.500%
2003 103.667
2004 101.833
2005 and thereafter 100.000
In addition, prior to July 15, 2000, the Company may redeem
Securities with the net cash proceeds received by the Company from one or more
Public Equity Offerings at a redemption price equal to 111% of the principal
amount thereof, plus accrued and unpaid interest to (but excluding) the date
fixed for redemption; provided, however, that at least $100.0 million in
aggregate principal amount of the Securities remains outstanding immediately
after any such redemption (excluding any Securities owned by the Company or any
of its Affiliates). Notice of redemption pursuant to this paragraph must be
mailed to Holders of Securities to be redeemed not later than 60 days following
the consummation of the relevant Public Equity Offering.
Selection of Securities for any partial redemption shall be
made by the Trustee, in accordance with the rules of any national securities
exchange on which the Securities may be listed or, if the Securities are not so
listed, pro rata or by lot or in such other manner as the Trustee shall deem
appropriate and fair. Securities in denominations larger than $1,000 may be
redeemed in part but only in integral multiples of $1,000. Notice of redemption
will be mailed before the date fixed for redemption to each Holder of
Securities to be redeemed at his or her registered address. On and after the
date fixed for redemption, interest will cease to accrue on Securities or
portions thereof called for redemption.
The Securities will not have the benefit of any sinking fund.
6. Offer to Purchase upon Occurrence of a Change of
Control.
Within 30 days following a Change of Control, the Company
will offer to purchase the Securities at a purchase price equal to 101% of the
principal amount thereof plus any accrued and unpaid interest thereon.
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<PAGE>
7. Notice of Redemption.
Notice of redemption will be mailed by first class mail at
least 30 days but not more than 60 days before the redemption date to each
Holder of Securities to be redeemed at his registered address. Securities in
denominations larger than $1,000 may be redeemed in part. On and after the
redemption date, interest ceases to accrue on those Securities or portion of
them called for redemption.
8. Denominations; Transfer; Exchange.
The Securities are in registered form without coupons in
denominations of $1,000 and integral multiples of $1,000. A Holder may transfer
or exchange Securities in accordance with the Indenture. The Registrar may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and to pay any taxes and fees required by law or permitted
by the Indenture. The Registrar need not transfer or exchange any Securities
selected for redemption.
9. Persons Deemed Owners.
The registered Holder of a Security may be treated as the
owner of it for all purposes.
10. Unclaimed Funds.
If funds for the payment of principal or interest remain
unclaimed for two years, the Trustee or Paying Agent will repay the funds to
the Company at its request. After such repayment Holders of Securities
entitled to such funds must look to the Company for payment unless an
abandoned property law designates another person.
11. Discharge Prior to Redemption or Maturity.
The Indenture will be discharged and canceled except for
certain Sections thereof, subject to the terms of the Indenture, upon the
payment of all the Securities or upon the irrevocable deposit with the Trustee
of funds or United States Government Obligations sufficient for such payment or
redemption.
12. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the
Securities may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the outstanding Securities, and any
past default or compliance with any provision may be waived with the consent of
the Holders of a majority in principal amount of the outstanding Securities.
Without notice to or the consent of any Holder, the Company, the Guarantors and
the Trustee may amend or supplement the Indenture
A-5
<PAGE>
or the Securities to cure any ambiguity, defect or inconsistency, or to make
any change that does not adversely affect the rights of any Holder of
Securities.
13. Restrictive Covenants.
The Indenture restricts, among other things, the ability of
the Company or any Restricted Subsidiary to permit any Liens to be imposed on
their assets, to make certain Restricted Payments and Investments, limits the
Indebtedness which the Company or any Restricted Subsidiary may incur and
limits the terms on which the Company may engage in certain Asset Dispositions.
The Company is also obligated under certain circumstances to make an offer to
purchase Securities with the net cash proceeds of certain Asset Dispositions.
The Company must report quarterly to the Trustee on compliance with the
covenants in the Indenture.
14. Successor Corporation.
Pursuant to the Indenture, the ability of the Company to
consolidate with, merge with or into or transfer its assets to another person
is conditioned upon certain requirements, including certain financial
requirements applicable to the surviving Person.
15. Defaults and Remedies.
If an Event of Default shall occur and be continuing, the
principal of all of the outstanding Securities, plus all accrued and unpaid
interest, if any, to the date the Securities become due and payable, may be
declared due and payable in the manner and with the effect provided in the
Indenture.
16. Trustee Dealings with Company.
The Trustee in its individual or any other capacity, may
become the owner or pledgee of Securities and make loans to, accept deposits
from, and perform services for the Company or its Affiliates, and may otherwise
deal with the Company or its Affiliates, as if it were not Trustee.
17. No Recourse Against Others.
No director, officer, employee or stockholder, as such, of
the Company or any of its Subsidiaries shall have any liability for any
obligations of the Company or any Guarantor under the Securities, the Guarantee
or the Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. Each Holder of a Security by accepting a
Security waives and releases all such liability. The waiver and release are
part of the consideration for the issue of the Securities.
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<PAGE>
18. Authentication.
This Security shall not be valid until the Trustee signs the
certificate of authentication on the other side of this Security.
19. Abbreviations.
Customary abbreviations may be used in the name of
Securityholder or an assignee, such as TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
20. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Company has caused CUSIP
numbers to be printed on the Securities and has directed the Trustee to use
CUSIP numbers in notices of redemption as a convenience to Securityholders. No
representation is made as to the accuracy of such numbers either as printed on
the Securities or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.
21. Governing Law.
The laws of the State of New York shall govern the Indenture,
this Security and the Guarantee without regard to principles of conflicts of
law.
The Company will furnish to any Holder of record of
Securities upon written request and without charge a copy of the Indenture.
A-7
<PAGE>
[FORM OF NOTATION ON SECURITY RELATING TO GUARANTEE]
SENIOR SUBORDINATED GUARANTEE
The Guarantor(s) (as defined in the Indenture referred to in
the Security upon which this notation is endorsed) hereby, jointly and
severally, unconditionally guarantee on a senior subordinated basis (such
guarantee by each Guarantor being referred to herein as the "Guarantee") the
due and punctual payment of the principal of, premium, if any, and interest on
the Securities, whether at maturity, by acceleration or otherwise, the due and
punctual payment of interest on the overdue principal, premium and interest, if
any, on the Securities, and the due and punctual performance of all other
obligations of the Company to the Holders or the Trustee, all in accordance
with the terms set forth in Article Eleven of the Indenture.
The obligations of each Guarantor to the Holders of
Securities and to the Trustee pursuant to the Guarantee and the Indenture are
expressly set forth, and are expressly subordinated and subject in right of
payment to the prior payment in full of all Senior Debt of such Guarantor, to
the extent and in the manner provided, in Article Twelve of the Indenture, and
reference is hereby made to such Indenture for the precise terms of the
Guarantee therein made.
The Guarantee shall not be valid or obligatory for any
purpose until the certificate of authentication on the Securities upon which
the Guarantee is noted shall have been executed by the Trustee under the
Indenture by the manual signature of one of its authorized officers.
This Guarantee shall be governed by and construed in
accordance with the laws of the State of New York without regard to principles
of conflicts of law.
This Guarantee is subject to release upon the terms set forth
in the Indenture.
[GUARANTORS]
By:
----------------------
Name:
Title:
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<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Security, fill in the
form below and have your signature guaranteed:
I or we assign and transfer this Security to:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint , agent to
transfer this Security on the books of the Company. The agent may substitute
another to act for him.
Dated: _________________ Signed: ________________________
(Sign exactly as name
appears on the other
side of this Security)
Signature Guarantee: ___________________________________________
SIGNATURE GUARANTEE
Signatures must be guaranteed by an "eligible guarantor institution" meeting
the requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
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<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you the Holder want to elect to have this Security purchased by the Company,
check the box: [ ]
If you want to elect to have only part of this Security purchased by the
Company, state the amount: $_________________
Dated: _________________ Signed: ________________________
(Sign exactly as name
appears on the other
side of this Security)
Signature Guarantee: ___________________________________________
SIGNATURE GUARANTEE
Signatures must be guaranteed by an "eligible guarantor institution" meeting
the requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
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<PAGE>
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
UNITED AUTO GROUP, INC.
375 Park Avenue
New York, NY 10152
Attention:
[Name and Address of Registrar]
Re: 11% Senior Subordinated Notes due 2007
Reference is hereby made to the Indenture, dated as of July
23, 1997 (the "Indenture"), between United Auto Group, Inc. (the "Company"),
and The Bank of New York, as trustee. Capitalized terms used but not defined
herein shall have the meanings given to them in the Indenture.
________________, (the "Transferor") owns and proposes to
transfer the Security[s] specified in Annex A hereto in the principal amount of
$___ in such Security[s] (the "Transfer"), to ________ (the "Transferee"), as
further specified in Annex A hereto. In the event that Transferor holds
Physical Securities, this Certificate is accompanied by one or more
certificates aggregating at least the principal amount of Securities proposed
to be Transferred. In connection with the Transfer, the Transferor hereby
certifies that:
1. [ ] CHECK IF TRANSFEREE WILL TAKE AN INTEREST IN THE 144A GLOBAL SECURITY.
The Transfer is being effected pursuant to and in accordance with Rule 144A
under the United States Securities Act of 1933, as amended (the "Securities
Act"), and, accordingly, the Transferor hereby further certifies that the
Securities are being transferred to a Person that the Transferor reasonably
believes is purchasing the Securities for its own account, or for one or more
accounts with respect to which such Person exercises sole investment
discretion, and such Person and each such account is a "qualified
institutional buyer" within the meaning of Rule 144A in a transaction meeting
the requirements of Rule 144A and such Transfer is in compliance with any
applicable blue sky securities laws of any state of the United States. Upon
consummation of the proposed Transfer in accordance with the terms of the
Indenture, the transferred Security will be subject to the restrictions on
transfer enumerated in the Securities Act Legend and in the Indenture and the
Securities Act.
2. [ ] CHECK IF TRANSFEREE WILL TAKE AN INTEREST IN THE REGULATION S GLOBAL
SECURITY PURSUANT TO REGULATION S. The Transfer is being effected pursuant to
and in accordance with Rule 904 under the Securities Act and, accordingly, the
Transferor hereby further certifies that (i) the Transfer is not being made to
a person in the United States and (x) at the time
B-1
<PAGE>
the buy order was originated, the Transferee was outside the United States or
such Transferor and any Person acting on its behalf reasonably believed and
believes that the Transferee was outside the United States or (y) the
transaction was executed in, on or through the facilities of a designated
offshore securities market and neither such Transferor nor any Person acting
on its behalf knows that the transaction was prearranged with a buyer in the
United States, (ii) no directed selling efforts have been made in
contravention of the requirements of Rule 904(b) of Regulation S under the
Securities Act and (iii) the transaction is not part of a plan or scheme to
evade the registration requirements of the Securities Act. Upon consummation
of the proposed transfer in accordance with the terms of the Indenture, the
Security will be subject to the restrictions on Transfer enumerated in the
Securities Act Legend printed on the Regulation S Global Security and in the
Indenture and the Securities Act.
3. [ ] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A RESTRICTED
PHYSICAL SECURITY PURSUANT TO RULE 144A OR REGULATION S. One or more of the
events specified in Section 2.06(a) of the Indenture have occurred and the
Transfer is being effected in compliance with the transfer restrictions
applicable to Securities bearing the Securities Act Legend and pursuant to and
in accordance with the Securities Act, and accordingly the Transferor hereby
further certifies that (check one):
(a) [ ] such Transfer is being effected pursuant to and in accordance
with Rule 144A under the Securities Act and the Transferor certifies to the
effect set forth in paragraph 1 above; or
(b) [ ] such Transfer is being effected pursuant to and in accordance
with Rule 904 under the Securities Act and the Transferor certifies to the
effect set forth in paragraph 2 above.
4. [ ] CHECK IF TRANSFEREE WILL TAKE AN INTEREST IN THE UNRESTRICTED GLOBAL
SECURITY The Transfer is being effected pursuant to and in accordance with
Rule 144 under the Securities Act and in compliance with the transfer
restrictions contained in the Indenture, and the restrictions on transfer
contained in the Indenture and the Securities Act Legend are not required in
order to maintain compliance with the Securities Act. Upon consummation of the
proposed Transfer in accordance with the terms of the Indenture, the
transferred Securities will no longer be subject to the restrictions on
transfer enumerated in the Securities Act Legend and in the Indenture and the
Securities Act.
5. [ ] CHECK IF TRANSFEREE WILL TAKE AN INTEREST IN THE PHYSICAL GLOBAL
SECURITY THAT DOES NOT BEAR THE SECURITIES ACT LEGEND One or more of the
events specified in Section 2.06(a) of the Indenture have occurred and the
Transfer is being effected
B-2
<PAGE>
pursuant to and in accordance with Rule 144 under the Securities Act and in
compliance with the transfer restrictions contained in the Indenture, and the
restrictions on transfer contained in the Indenture and the Securities Act
Legend are not required in order to maintain compliance with the Securities
Act. Upon consummation of the proposed Transfer in accordance with the terms
of the Indenture, the transferred Securities will no longer be subject to the
restrictions on transfer enumerated in the Securities Act Legend and in the
Indenture and the Securities Act.
B-3
<PAGE>
This certificate and the statements contained herein are made
for your benefit and the benefit of the Issuers.
----------------------------------
[Insert Name of Transferor]
By:
-----------------------------
Name:
Title:
Dated:_________________
B-4
<PAGE>
FORM OF ANNEX A TO CERTIFICATE
OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) [ ] Interests in the
(i) [ ] 144A Global Security (CUSIP _____), or
(ii) [ ] Regulation S Global Security (CINS _____).
(b) [ ] Physical Security.
2. That the Transferee will hold:
[CHECK ONE]
(a) [ ] Interests in the:
(i) [ ] 144A Global Security (CUSIP _____), or
(ii) [ ] Regulation S Global Security (CINS _____), or
(iii) [ ] Unrestricted Global Security (CUSIP _____); or
(b) [ ] Physical Securities that bear the Securities Act
Legend;
(c) [ ] Physical Securities that do not bear the Securities
Act Legend;
in accordance with the terms of the Indenture.
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
UNITED AUTO GROUP, INC.
375 Park Avenue
New York, NY 10152
Attention:
[Name and Address of Registrar]
Re: 11% Senior Subordinated Notes due 2007
(CUSIP _______________)
Reference is hereby made to the Indenture, dated as of July
23, 1997 (the "Indenture"), between United Auto Group, Inc. (the "Company")
and The Bank of New York, as trustee. Capitalized terms used but not defined
herein shall have the meanings given to them in the Indenture.
__________, (the "Holder") owns and proposes to exchange the
Security[s] specified herein, in the principal amount of $___ in such
Security[s] (the "Exchange"). In the event Holder holds Physical Securities,
this Certificate is accompanied by one or more certificates aggregating at
least the principal amount of Securities proposed to be Exchanged. In
connection with the Exchange, the Holder hereby certifies that:
1. EXCHANGE OF RESTRICTED PHYSICAL SECURITIES OR INTERESTS IN THE INITIAL
GLOBAL SECURITY FOR PHYSICAL SECURITIES THAT DO NOT BEAR THE SECURITIES ACT
LEGEND OR UNRESTRICTED GLOBAL SECURITIES
(A) [ ] CHECK IF EXCHANGE IS FROM INITIAL GLOBAL SECURITIES TO THE
UNRESTRICTED GLOBAL SECURITY. In connection with the Exchange of the Holder's
Initial Global Security to the Unrestricted Global Security in an equal
principal amount, the Holder hereby certifies (i) the Unrestricted Global
Securities are being acquired for the Holder's own account without transfer,
(ii) such Exchange has been effected in compliance with the transfer
restrictions applicable to the Initial Global Securities and pursuant to and in
accordance with the Securities Act of 1933, as amended (the "Securities Act")
and (iii) the restrictions on transfer contained in the Indenture and the
Securities Act Legend are not required in order to maintain compliance with the
Securities Act.
(B) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED PHYSICAL SECURITIES TO AN
INTEREST IN THE UNRESTRICTED GLOBAL SECURITY. In connection with the Holder's
Exchange of Restricted Physical Securities for Interest in the Unrestricted
Global Security, (i) the Interest in the Unrestricted Global Security are being
acquired for the Holder's own account without transfer, (ii) such
C-1
<PAGE>
Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Physical Securities and pursuant to and in accordance
with the Securities Act and (iii) the restrictions on transfer contained in
the Indenture and the Securities Act Legend are not required in order to
maintain compliance with the Securities Act.
(c) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED PHYSICAL SECURITIES TO
PHYSICAL SECURITIES THAT DO NOT BEAR THE SECURITIES ACT LEGEND. In connection
with the Holder's Exchange of a Restricted Physical Security for Physical
Securities that do not bear the Securities Act Legend, the Holder hereby
certifies (i) the Physical Securities that do not bear the Securities Act
Legend are being acquired for the Holder's own account without transfer, (ii)
such Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Physical Securities and pursuant to and in accordance
with the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Securities Act Legend are not required in order to maintain
compliance with the Securities Act and (iv) one or more of the events
specified in Section 2.06(a) of the Indenture have occurred.
2. [ ] CHECK IF EXCHANGE IS FROM RESTRICTED PHYSICAL SECURITIES TO INTERESTS
IN AN INITIAL GLOBAL SECURITY . In connection with the Exchange of the
Holder's Restricted Physical Security for interests in an Initial Global
Security [[CHECK ONE] 144A Global Security, Regulation S Global Security],
with an equal principal amount, (i) the interests in the Initial Global
Security are being acquired for the Holder's own account without transfer and
(ii) such Exchange has been effected in compliance with the transfer
restrictions applicable to the Restricted Physical Security and pursuant to
and in accordance with the Securities Act. Upon consummation of the proposed
Exchange in accordance with the terms of the Indenture, the Initial Global
Security issued will be subject to the restrictions on transfer enumerated in
the Securities Act Legend printed on the Initial Global Securities and in the
Indenture and the Securities Act.
C-2
<PAGE>
This certificate and the statements contained herein are made
for your benefit and the benefit of the Issuers.
----------------------------------
[Insert Name of Transferor]
By:
------------------------------
Name:
Title:
Dated:_________________
C-3
<PAGE>
REGISTRATION RIGHTS AGREEMENT
Dated as of July 23, 1997
among
UNITED AUTO GROUP, INC.,
THE GUARANTORS SIGNATORY HERETO
and
J.P. MORGAN SECURITIES INC.,
SALOMON BROTHERS INC,
CIBC WOOD GUNDY SECURITIES CORP.,
MONTGOMERY SECURITIES,
and
SCOTIA CAPITAL MARKETS (USA) INC.
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is dated
as of July 23, 1997, by and among UNITED AUTO GROUP, INC., a Delaware
corporation (the "Company"), the guarantors signatory hereto (the "Guarantors,"
and together with the Company, the "Issuers"), and J.P. MORGAN SECURITIES INC.,
SALOMON BROTHERS INC, CIBC WOOD GUNDY SECURITIES CORP., MONTGOMERY SECURITIES
and SCOTIA CAPITAL MARKETS (USA) INC. (collectively, the "Initial Purchasers").
This Agreement is entered into in connection with the
Purchase Agreement, dated as of July 18, 1997, between the Issuers and the
Initial Purchasers (the "Purchase Agreement") relating to the sale by the
Company to the Initial Purchasers, severally, of $150,000,000 aggregate
principal amount of its 11% Senior Subordinated Notes due 2007 (the "Notes").
In order to induce the Initial Purchasers to enter into the Purchase Agreement,
the Issuers have agreed to provide the registration rights set forth in this
Agreement for the equal benefit of the Initial Purchasers and their direct and
indirect transferees. The execution and delivery of this Agreement is a
condition to the Initial Purchasers' obligation to purchase the Notes under the
Purchase Agreement.
The parties hereby agree as follows:
1. Definitions
As used in this Agreement, the following terms shall have the
following meanings:
Additional Interest: See Section 4.
Advice: See Section 5.
Applicable Period: See Section 2(b).
Company: See the introductory paragraph to this Agreement.
Consummation Date: The 165th day after the Issue Date.
Effectiveness Date: The 135th day after the Issue Date.
Effectiveness Period: See Section 3(a).
Event Date: See Section 4(b).
Exchange Act: The Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder.
<PAGE>
Exchange Offer: See Section 2(a).
Exchange Registration Statement: See Section 2(a).
Exchange Securities: See Section 2(a).
Filing Date: The 60th day after the Issue Date.
Guarantor: Each Person who has executed this Agreement as a
guarantor or becomes a guarantor of the Notes.
Holder: Any record holder of Registrable Securities.
Indemnified Person: See Section 7.
Indemnifying Person: See Section 7.
Indenture: The Indenture, dated as of July 23, 1997, among
the Company, the Guarantors and The Bank of New York, as trustee, pursuant to
which the Notes are being issued, as amended or supplemented from time to time
in accordance with the terms thereof.
Initial Purchasers: See the introductory paragraph to this
Agreement.
Initial Shelf Registration: See Section 3(a).
Inspectors: See Section 5(p).
Issue Date: The date of original issuance of the Notes.
Issuers: See the introductory paragraph to this Agreement.
NASD: See Section 5(t).
Notes: See the preamble to this Agreement.
Participant: See Section 7.
Participating Broker-Dealer: See Section 2(b).
Person: An individual, corporation, limited or general
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
Private Exchange: See Section 2(b).
Private Exchange Securities: See Section 2(b).
2
<PAGE>
Prospectus: The prospectus included in any Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
Records: See Section 5(p).
Registrable Securities: The Notes upon original issuance of
the Notes and at all times subsequent thereto, each Exchange Security as to
which Section 2(c)(1)(i) hereof is applicable upon original issuance and at all
times subsequent thereto and, if issued, the Private Exchange Securities, until
in the case of any such Notes, Exchange Securities or Private Exchange
Securities, as the case may be, (i) a Registration Statement (other than, with
respect to any Exchange Security as to which Section 2(c)(1)(i) hereof is
applicable, the Exchange Registration Statement) covering such Notes, Exchange
Securities or Private Exchange Securities has been declared effective by the
SEC and such Notes, Exchange Securities or Private Exchange Securities, as the
case may be, have been disposed of in accordance with such effective
Registration Statement, (ii) such Notes, Exchange Securities or Private
Exchange Securities, as the case may be, are sold in compliance with Rule 144
or would be permitted to be sold pursuant to Rule 144(k), or (iii) such Notes,
Exchange Securities or Private Exchange Securities, as the case may be, cease
to be outstanding.
Registration Statement: Any registration statement of the
Issuers, including, but not limited to, the Exchange Registration Statement,
that covers any of the Registrable Securities pursuant to the provisions of
this Agreement, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits, and
all material incorporated by reference or deemed to be incorporated by
reference in such registration statement.
Rule 144: Rule 144 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than
Rule 144A) or regulation hereafter adopted by the SEC providing for offers and
sales of securities made in compliance therewith resulting in offers and sales
by subsequent holders that are not affiliates of an issuer of such securities
being free of the registration and prospectus delivery requirements of the
Securities Act.
Rule 144A: Rule 144A promulgated under the Securities Act,
as such Rule may be amended from time to time, or any simi-
3
<PAGE>
lar rule (other than Rule 144) or regulation hereafter adopted by the SEC.
Rule 415: Rule 415 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and
the rules and regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2(c).
Shelf Registration: See Section 3(b).
Subsequent Shelf Registration: See Section 3(b).
TIA: The Trust Indenture Act of 1939, as amended.
Trustee: The trustee as defined in the Indenture and, if
existent, the trustee under any indenture governing the Exchange Securities
and Private Exchange Securities (if any).
Underwritten registration or underwritten offering: A
registration in which securities of the Issuers are sold to an underwriter for
reoffering to the public.
2. Exchange Offer
(a) The Issuers agree to file with the SEC as soon as
practicable after the Issue Date, but in no event later than the
Filing Date, an offer to exchange (the "Exchange Offer") any and all
of the Registrable Securities for a like aggregate principal amount of
debt securities of the Issuers which are identical in all material
respects to the Notes (the "Exchange Securities") (and which are
entitled to the benefits of the Indenture or a trust indenture which
is identical in all material respects to the Indenture (other than
such changes as are necessary to comply with any requirements of the
SEC to effect or maintain the qualification of such trust indenture
under the TIA) and which has been qualified under the TIA), except
that the Exchange Securities shall have been registered pursuant to an
effective Registration Statement under the Securities Act and shall
contain no legend thereon with respect to restrictions on transfer
pursuant to the Securities Act. The Issuers agree to use their
reasonable best efforts to keep the Exchange Offer open for at least
20 business days (or longer if required by applicable law) after the
date notice of the Exchange Offer is mailed to Holders and to
consummate the Exchange Offer on or prior to the Consummation Date.
The Exchange Offer will be registered under the Securities Act on
4
<PAGE>
the appropriate form (the "Exchange Registration Statement") and will
comply with all applicable tender offer rules and regulations under
the Exchange Act. If after such Exchange Registration Statement is
initially declared effective by the SEC and prior to the consummation
of the Exchange Offer, the Exchange Offer or the issuance of the
Exchange Securities thereunder is interfered with by any stop order,
injunction or other order or requirement of the SEC or any other
governmental agency or court such Exchange Registration Statement
shall be deemed not to have become effective for purposes of this
Agreement. Each Holder who participates in the Exchange Offer will be
deemed to represent that any Exchange Securities received by it will
be acquired in the ordinary course of its business, that at the time
of the consummation of the Exchange Offer such Holder will have no
arrangement with any person to participate in the distribution of the
Exchange Securities in violation of the provisions of the Securities
Act, and that such Holder is not an affiliate of the Issuers within
the meaning of the Securities Act. Upon consummation of the Exchange
Offer in accordance with this Section 2, the provisions of this
Agreement (other than the first four sentences of this Section 2(a))
shall continue to apply, mutatis mutandis, solely with respect to
Registrable Securities that are Private Exchange Securities and
Exchange Securities held by Participating Broker-Dealers, and the
Issuers shall have no further obligation to register Registrable
Securities (other than Private Exchange Securities and other than
Exchange Securities as to which clause (c)(1)(i) hereof applies)
pursuant to Section 3 of this Agreement. No securities other than the
Exchange Securities shall be included in the Exchange Registration
Statement, except to the extent required by contractual obligations
in effect on the Issue Date.
(b) The Issuers shall include within the Prospectus contained
in the Exchange Registration Statement one or more section(s)
reasonably acceptable to the Initial Purchasers, which shall contain a
summary statement of the publicly disseminated positions of the Staff
of the SEC with respect to the potential "underwriter" status of any
broker-dealer that is the beneficial owner (as defined in Rule 13d-3
under the Exchange Act) of Exchange Securities received by such
broker-dealer in the Exchange Offer (a "Participating Broker-Dealer").
Such section(s) shall also allow the use of the prospectus by all
persons subject to the prospectus delivery requirements of the
Securities Act (other than a Participating Broker Dealer (an "Excluded
Participating Broker Dealer") who either (x) acquired Notes other than
for its own account as a result of market-making activities or other
trading activities or (y) has entered into any arrangement or
understanding with any Issuer or any affiliate of any Issuer to
distribute the Exchange Securities) and include a statement describing
the means by which Participating Broker-Dealers may resell the
Exchange Securities.
5
<PAGE>
The Issuers shall use their reasonable best efforts to keep
the Exchange Registration Statement effective and to amend and supplement the
Prospectus contained therein in order to permit such Prospectus to be lawfully
delivered by all persons subject to the prospectus delivery requirements of the
Securities Act for such period of time as such persons must comply with such
requirements in order to resell the Exchange Securities; provided, however,
that such period shall not exceed 120 days (or such longer period if extended
pursuant to the last paragraph of Section 5) (the "Applicable Period");
provided, further, however, that, if requested by the Company in the letter of
transmittal for the Exchange Offer, such persons shall have expressed that they
may be subject to such requirements and have undertaken to use their reasonable
best efforts to notify the Company when they are no longer subject to such
requirements (if they are no longer subject to such requirements at any time
prior to the expiration of the Applicable Period).
If, prior to consummation of the Exchange Offer, an Initial
Purchaser holds any Notes acquired by it and having the status of an unsold
allotment in the initial distribution, the Issuers upon the request of such
Initial Purchaser shall, simultaneously with the delivery of the Exchange
Securities in the Exchange Offer, issue and deliver to each such Initial
Purchaser, in exchange (the "Private Exchange") for the Notes held by such
Initial Purchaser, a like principal amount of debt securities of the Issuers
that are identical in all material respects to the Exchange Securities (the
"Private Exchange Securities") (and which are issued pursuant to the same
indenture as the Exchange Securities) except for the placement of a restrictive
legend on such Private Exchange Securities. If practicable, the Private
Exchange Securities shall bear the same CUSIP number as the Exchange
Securities. Interest on the Exchange Securities and Private Exchange Securities
will accrue from the last interest payment date on which interest was paid on
the Notes surrendered in exchange therefor or, if no interest has been paid on
the Notes, from the Issue Date.
Any indenture under which the Exchange Securities or the
Private Exchange Securities will be issued shall provide that the holders of
any of the Exchange Securities and the Private Exchange Securities will vote
and consent together on all matters (to which such holders are entitled to vote
or consent) as one class and that none of the holders of the Exchange
Securities and the Private Exchange Securities will have the right to vote or
consent as a separate class on any matter (to which such holders are entitled
to vote or consent).
(c) If (1) prior to the consummation of the Exchange Offer,
the Issuers reasonably determine in good faith or Holders of a
majority in aggregate principal amount of the Registrable Securities
notify the Issuers that they have reasonably determined in good faith
that (i) in the opinion of counsel, the Exchange Securities would not,
upon receipt,
6
<PAGE>
be tradeable by such Holders who are not affiliates of the Issuers or
Excluded participating Broker Dealers without registration under the
Securities Act and without registration under applicable blue sky or
state securities laws or (ii) in the opinion of counsel, the SEC is
unlikely to permit the consummation of the Exchange Offer and/or (2)
subsequent to the consummation of the Private Exchange, any holder of
Private Exchange Securities so requests with respect to the Private
Exchange Securities and/or (3) the Exchange Offer is commenced and
not consummated prior to the 60th day following the Consummation Date
for any reason, then the Issuers shall promptly deliver to the
Holders and the Trustee notice thereof (the "Shelf Notice") and shall
thereafter file an Initial Shelf Reg istration as set forth in
Section 3 (which only in the circumstances contemplated by clause (2)
of this sentence will relate solely to the Private Exchange
Securities) pursuant to Section 3. The parties hereto agree that,
following the delivery of a Shelf Notice to the Holders of
Registrable Securities (only in the circumstances contemplated by
clauses (1) and/or (3) of the preceding sentence), the Issuers shall
not have any further obligation to conduct the Exchange Offer or the
Private Exchange under this Section 2.
3. Shelf Registration
If a Shelf Notice is delivered as contemplated by Section
2(c), then:
(a) Initial Shelf Registration. The Issuers shall as promptly
as reasonably practicable prepare and file with the SEC a Registration
Statement for an offering to be made on a continuous basis pursuant to
Rule 415 covering all of the Registrable Securities (the "Initial
Shelf Registration"). If the Issuers shall have not yet filed an
Exchange Offer and the Shelf Notice was delivered at least 45 days
prior to the Filing Date, the Issuers shall file with the SEC the
Initial Shelf Registration on or prior to the Filing Date. Otherwise,
the Issuers shall file with the SEC the Initial Shelf Registration
within 60 days of the delivery of the Shelf Notice. The Initial Shelf
Registration shall be on Form S-1 or another appropriate form
permitting registration of such Registrable Securities for resale by
such holders in the manner or manners designated by them (including,
without limitation, one or more underwritten offerings). The Issuers
may permit securities other than the Registrable Securities to be
included in the Initial Shelf Registration or any Subsequent Shelf
Registration to the extent required by contractual obligations of the
Company in effect on the Issue Date. The Issuers shall use their
reasonable best efforts to cause the Initial Shelf Registration to be
declared effective under the Securities Act on or prior to the 135th
day after the filing thereof with the SEC and to keep the Initial
Shelf Registration continuously effective under the
7
<PAGE>
Securities Act until the date which is 24 months from the Issue Date
(subject to extension pursuant to the last paragraph of Section 5
hereof) (the "Effectiveness Period"), or such shorter period ending
when (i) all Registrable Securities covered by the Initial Shelf
Registration have been sold in the manner set forth and as
contemplated in the Initial Shelf Registration or (ii) a Subsequent
Shelf Registration covering all of the Registrable Securities has
been declared effective under the Securities Act.
Notwithstanding any other provision of this Agreement, the
Issuers may postpone or suspend the filing or effectiveness of a
Registration Statement (or any amendments or supplements thereto) if
(i) such action is required by applicable law or (ii) such action is
taken by the Issuers in good faith and for valid business reasons (not
including the avoidance of the Issuers' obligations hereunder),
including the acquisition or divestiture of assets, other pending
corporate developments, public filings with the SEC or other similar
events, so long as the Issuers promptly thereafter comply with the
requirements of Section 5(b) hereof, if applicable. Notwithstanding
the occurrence of any event referred to in the immediately preceding
sentence, such event shall not suspend, postpone or in any other
manner affect the running of any time periods for the purpose of
determining the entitlement of the Holders to Additional Interest
under Section 4 hereof.
(b) Subsequent Shelf Registrations. If the Initial Shelf
Registration or any Subsequent Shelf Registration ceases to be
effective for any reason at any time during the Effectiveness Period
(other than because of the sale of all of the securities registered
thereunder), the Issuers shall use their reasonable best efforts to
obtain the prompt withdrawal of any order suspending the effectiveness
thereof, and in any event shall within 45 days of such cessation of
effectiveness amend the Shelf Registration in a manner reasonably
expected to obtain the withdrawal of the order suspending the
effectiveness thereof, or file an additional "shelf" Registration
Statement pursuant to Rule 415 covering all of the Registrable
Securities (a "Subsequent Shelf Registration"). If a Subsequent Shelf
Registration is filed, the Issuers shall use their reasonable best
efforts to cause the Subsequent Shelf Registration to be declared
effective as soon as practicable after such filing and to keep such
Registration Statement continuously effective for a period equal to
the number of days in the Effectiveness Period less the aggregate
number of days during which the Initial Shelf Registration or any
Subsequent Shelf Registration was previously continuously effective.
As used herein the term "Shelf Registration" means the Initial Shelf
Registration and any Subsequent Shelf Registration.
8
<PAGE>
(c) Supplements and Amendments. The Issuers shall promptly
supplement and amend the Shelf Registration if required by the rules,
regulations or instructions applicable to the registration form used
for such Shelf Registration or if required by applicable law.
4. Additional Interest
(a) The Issuers and the Initial Purchasers agree that the
Holders of Registrable Securities will suffer damages if the Issuers
fail to fulfill their obligations under Section 2 or Section 3 hereof
and that it would not be feasible to ascertain the extent of such
damages with precision. Accordingly, the Issuers agree to pay, as
liquidated damages, additional interest on the Registrable Securities
("Additional Interest") under the circumstances and to the extent set
forth below (each of which shall be given independent effect and shall
not be duplicative):
(i) if the Exchange Registration Statement has not been filed
on or prior to the Filing Date or the Initial Shelf Registration has
not been filed on or prior to the date by which it is required to be
filed pursuant to Section 3(a) hereof, Additional Interest shall
accrue on the Registrable Securities over and above the stated
interest at a rate of 25 basis points per annum for the first 90 days
immediately following the Filing Date or such required date, as the
case may be, such Additional Interest rate increasing by an additional
25 basis points per annum at the beginning of each subsequent 90-day
period;
(ii) if Additional Interest is not then accruing pursuant to
Section 4(a)(i) and the Exchange Registration Statement is not
declared effective by the SEC on or prior to the Effectiveness Date or
the Initial Shelf Registration is not declared effective on or prior
to the 135th day after filing thereof, Additional Interest shall
accrue on the Registrable Securities included or which should have
been included in such Registration Statement over and above the stated
interest at a rate of 25 basis points per annum for the first 90 days
immediately following the day after the Effectiveness Date, such
Additional Interest rate increasing by an additional 25 basis points
per annum at the beginning of each subsequent 90-day period; and
(iii) if Additional Interest is not then accruing pursuant to
Section 4(a)(i) and 4(a)(ii) and (A) the Issuers have not exchanged
Exchange Securities for all Notes validly tendered in accordance with
the terms of the Exchange Offer on or prior to the Consummation Date
(including by reason of the Exchange Registration Statement ceasing to
be effective) or (B) if applicable, the Shelf Registration has been
declared effective and such Shelf Registration ceases to be effective
at any time during the Effectiveness Period, then
9
<PAGE>
Additional Interest shall be accrued on the Registrable Securities
(over and above any interest otherwise payable on the Registrable
Securities) at a rate of 25 basis points per annum for the first 90
days commencing on the (x) 165th day after the Issue Date, in the
case of (A) above, or (y) the day such Shelf Registration ceases to
be effective in the case of (B) above, such Additional Interest rate
increasing by an additional 25 basis points per annum at the
beginning of each such subsequent 90-day period;
provided, however, that the Additional Interest rate on the Registrable
Securities may not exceed at any one time in the aggregate 100 basis points per
annum; and provided, further, that (1) upon the filing of the Exchange
Registration Statement or a Shelf Registration as required hereunder (in the
case of clause (a)(i) of this Section 4), (2) upon the effectiveness of the
Exchange Registration Statement or the Shelf Registration as required hereunder
(in the case of clause (a)(ii) of this Section 4), or (3) upon the exchange of
Exchange Securities for all Notes tendered (in the case of clause (a)(iii)(A)
of this Section 4), or upon the effectiveness of the Shelf Registration which
had ceased to remain effective (in the case of clause (a)(iii)(B) of this
Section 4), Additional Interest on the Registrable Securities as a result of
such clause (or the relevant subclause thereof), as the case may be, shall
cease to accrue. It is understood and agreed that, notwithstanding any
provision to the contrary, so long as any Registrable Security is then covered
by an effective Shelf Registration Statement, no Additional Interest shall
accrue on such Registrable Security. Payment of any Additional Interest shall
be subject to Section 9 and the penultimate paragraph of Section 5.
(b) The Issuers shall notify the Trustee within five business
days after each and every date on which an event occurs in respect of
which Additional Interest is required to be paid (an "Event Date").
The Issuers shall pay the Additional Interest due on the Registrable
Securities by depositing with the Trustee, in trust, for the benefit
of the Holders thereof, on or before the applicable semi-annual
interest payment date, immediately available funds in sums sufficient
to pay the Additional Interest then due to Holders of Registrable
Securities. The Additional Interest amount due shall be payable on
each interest payment date to the record Holder of Registrable
Securities entitled to receive the interest payment to be made on such
date as set forth in the Indenture. The amount of Additional Interest
will be determined by applying the applicable Additional Interest rate
to the principal amount of the affected Registrable Securities of such
Holders, (determined on the basis of a 360-day year comprised of
twelve 30-day months and, in the case of a partial month, the actual
number of days elapsed). Each obligation to pay Additional Interest
shall be deemed to accrue immediately following the occurrence of the
applicable Event Date. The parties hereto agree that
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the Additional Interest provided for in this Section 4 constitutes
the sole and exclusive remedy for a breach of Section 2 or 3 and is a
reasonable estimate of the damages that may be incurred by Holders of
Registrable Securities by reason of the failure of a Shelf
Registration or Exchange Registration Statement to be filed or
declared effective, an Exchange Offer to be consummated or a Shelf
Registration to remain effective, as the case may be, in accordance
with this Section 4.
5. Registration Procedures
In connection with the registration of any Registrable
Securities pursuant to Sections 2 or 3 hereof, the Issuers shall effect such
registrations to permit the sale of such Registrable Securities in accordance
with the intended method or methods of disposition thereof, and pursuant
thereto the Issuers shall:
(a) Use their reasonable best efforts to prepare and file
with the SEC a Registration Statement or Registration Statements, as
soon as practicable after the date hereof but in any event prior to
the applicable date prescribed by Section 2 or 3, and to use their
reasonable best efforts to cause each such Registration Statement to
become effective and remain effective as provided herein; provided,
however, that, if (1) such filing is pursuant to Section 3, or (2) a
Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange
Securities during the Applicable Period, before filing any
Registration Statement or Prospectus or any amendments or supplements
thereto, the Issuers shall upon written request furnish to and afford
the Holders of the Registrable Securities (which in the case of
Registrable Securities in the form of global certificates shall be The
Depository Trust Company ("DTC")) and each such Participating
Broker-Dealer, as the case may be, covered by such Registration
Statement, their counsel and the managing underwriters, if any, a
reasonable opportunity to review copies of all such documents
(including copies of any documents to be incorporated by reference
therein and all exhibits thereto) proposed to be filed.
(b) Prepare and file with the SEC such amendments and
post-effective amendments to each Shelf Registration or Exchange
Registration Statement, as the case may be, as may be necessary to
keep such Registration Statement continuously effective for the
Effectiveness Period or the Applicable Period, as the case may be;
cause the related Prospectus to be supplemented by any required
Prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 (or any similar provisions then in force) under the
Securities Act; and comply with the provisions of the Securities Act
and the Exchange Act with respect to the disposition of all securi-
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ties covered by such Registration Statement as so amended or in such
Prospectus as so supplemented and with respect to the subsequent
resale of any securities being sold by a Participating Broker-Dealer
covered by any such Prospectus; the Issuers shall not be deemed to
have used their reasonable best efforts to keep a Registration
Statement effective during the Applicable Period if the Issuers
voluntarily take any action that would result in selling Holders of
the Registrable Securities covered thereby or Participating
Broker-Dealers seeking to sell Exchange Securities not being able to
sell such Registrable Securities or such Exchange Securities during
that period unless such action is required by applicable law or
unless the Issuers comply with this Agreement, including without
limitation, the provisions of paragraph 5(k) hereof and the last
paragraph of this Section 5.
(c) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Securities during the Applicable Period, notify the selling
Holders of Registrable Securities, or each such Participating
Broker-Dealer, as the case may be, their counsel and the managing
underwriters, if any, who have provided the Issuers with their names
and addresses promptly (but in any event within two business days),
and confirm such notice in writing, (i) when a Prospectus or any
Prospectus supplement or post-effective amendment has been filed, and,
with respect to a Registration Statement or any post-effective
amendment, when the same has become effective under the Securities Act
(including in such notice a written statement that any Holder may,
upon request, obtain, without charge, one conformed copy of such
Registration Statement or post-effective amendment including financial
statements and schedules, documents incorporated or deemed to be
incorporated by reference and exhibits), (ii) of the issuance by the
SEC of any stop order suspending the effectiveness of a Registration
Statement or of any order preventing or suspending the use of any
preliminary prospectus or the initiation of any proceedings for that
purpose, (iii) of the receipt by the Issuers of any notification with
respect to the suspension of the qualification or exemption from
qualification of a Registration Statement or any of the Registrable
Securities or the Exchange Securities to be sold by any Participating
Broker-Dealer for offer or sale in any jurisdiction, or the initiation
or threatening of any proceeding for such purpose, (iv) of the
happening of any event or any information becoming known that makes
any statement made in such Registration Statement or related
Prospectus or any document incorporated or deemed to be incorporated
therein by reference untrue in any material respect or that requires
the making of any changes in such Registration Statement, Pro-
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<PAGE>
spectus or documents so that, in the case of the Registration
Statement, it will not 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 that
in the case of the Prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or neces sary to make the statements
therein, in the light of the circumstances under which they were
made, not misleading, and (v) of the Issuers' reasonable
determination that a post-effective amendment to a Registration
Statement would be appropriate.
(d) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Securities during the Applicable Period, use its reasonable
best efforts to oppose the issuance of any order suspending the
effectiveness of a Registration Statement or of any order preventing
or suspending the use of a Prospectus or suspending the qualification
(or exemption from qualification) of any of the Registrable Securities
or the Exchange Securities to be sold by any Participating
Broker-Dealer, for sale in any jurisdiction, and, if any such order is
issued, to use its reasonable best efforts to obtain the withdrawal of
any such order at the earliest possible moment.
(e) If a Shelf Registration is required pursuant to Section
3, before filing any Registration Statement or prospectus or any
amendment or supplement thereto (including any document that would be
incorporated by reference therein) furnish counsel for the Holders of
Registrable Securities covered by such Shelf Registration a reasonable
opportunity to review copies of all such documents proposed to be
filed.
(f) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Securities during the Applicable Period, furnish to each
selling Holder of Registrable Securities and to each such
Participating Broker-Dealer who so requests and to counsel and each
managing underwriter, if any, without charge, one conformed copy of
the Registration Statement or Statements and each post-effective
amendment thereto, including financial statements and schedules, and
if requested, all documents incorporated or deemed to be incorporated
therein by reference and all exhibits.
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<PAGE>
(g) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Securities during the Applicable Period, deliver to each
selling Holder of Registrable Securities, or each such Participating
Broker-Dealer, as the case may be, their counsel, and the
underwriters, if any, without charge, as many copies of the Prospectus
or Prospectuses (including each form of preliminary prospectus) and
each amendment or supplement thereto and any documents incorporated by
reference therein as such Persons may reasonably request; and, subject
to the last paragraph of this Section 5, the Issuers hereby consent to
the use of such Prospectus and each amendment or supplement thereto by
each of the selling holders of Registrable Securities or each such
Participating Broker-Dealer, as the case may be, and the underwriters
or agents, if any, and dealers (if any), in connection with the
offering and sale of the Registrable Securities covered by or the sale
by Participating Broker-Dealers of the Exchange Securities pursuant to
such Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities or
any delivery of a Prospectus contained in the Exchange Registration
Statement by any Participating Broker-Dealer who seeks to sell
Exchange Securities during the Applicable Period, to use its
reasonable best efforts to register or qualify, and to cooperate with
the selling Holders of Registrable Securities or each such
Participating Broker-Dealer, as the case may be, the underwriters, if
any, and their respective counsel in connection with the registration
or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under
the securities or Blue Sky laws of such jurisdictions within the
United States as any selling Holder, Participating Broker-Dealer, or
the managing underwriters reasonably request in writing; provided,
however, that where Exchange Securities held by Participating
Broker-Dealers or Registrable Securities are offered other than
through an underwritten offering, the Issuers agree to cause their
counsel to perform Blue Sky investigations and file registrations and
qualifications required to be filed pursuant to this Section 5(h);
keep each such registration or qualification (or exemption therefrom)
effective during the period such Registration Statement is required to
be kept effective and do any and all other reasonable acts or things
necessary or advisable to enable the disposition in such jurisdictions
of the Exchange Securities held by Participating Broker-Dealers or the
Registrable Securities covered by the applicable Registration
Statement; provided, however, that no Issuer shall be required to (A)
qualify generally to do business in any jurisdiction where it is not
then so qualified, (B) take any action that would subject it to
general
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<PAGE>
service of process in any such jurisdiction where it is not then so
subject or (C) subject itself to taxation in excess of a nominal
dollar amount in any such jurisdiction.
(i) If a Shelf Registration is filed pursuant to Section 3,
reasonably cooperate with the selling Holders of Registrable
Securities and the managing underwriters, if any, to facilitate the
timely preparation and delivery of certificates representing
Registrable Securities to be sold, which certificates shall not bear
any legends with respect to restrictions on transfer pursuant to the
Securities Act and shall be in a form eligible for deposit with DTC;
and enable such Registrable Securities to be registered in such names
as the managing underwriter or under writers, if any, or Holders may
request.
(j) Use its reasonable best efforts to cause the Registrable
Securities covered by the Registration Statement to be registered with
or approved by such other United States governmental agencies or
authorities of the United States as may be necessary to enable the
seller or sellers thereof or the underwriters, if any, to consummate
the disposition of such Registrable Securities, except as may be
required solely as a consequence of the nature of such selling
Holder's business, in which case the Issuers will cooperate in all
reasonable respects with the filing of such Registration Statement and
the granting of such approvals.
(k) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Securities during the Applicable Period, upon the occurrence
of any event contemplated by paragraph 5(c)(iv) or 5(c)(v) above, as
promptly as practicable prepare and (subject to Section 5(a) and the
second paragraph of Section 3(a) above) file with the SEC, solely at
the expense of the Issuers, a supplement or post-effective amendment
to the Registration Statement or a supplement to the related
Prospectus or any document incorporated or deemed to be incorporated
therein by reference, or file any other required document so that, as
thereafter delivered to the purchasers of the Registrable Securities
being sold thereunder or to the purchasers of the Exchange Securities
to whom such Prospectus will be delivered by a Participating
Broker-Dealer, any such Prospectus will not contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not
misleading.
(l) Use its reasonable best efforts to cause the Registrable
Securities covered by a Registration Statement or
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<PAGE>
the Exchange Securities, as the case may be, to be rated with the
appropriate rating agencies, if so requested by the Holders of a
majority in aggregate principal amount of Registrable Securities
covered by such Registration Statement or the Exchange Securities, as
the case may be, or the managing underwriters, if any.
(m) Prior to the effective date of the first Registration
Statement relating to the Registrable Securities, (i) provide the
Trustee with certificates for the Registrable Securities in a form
eligible for deposit with DTC and (ii) provide a CUSIP number for the
Registrable Securities.
(n) Use its reasonable best efforts to cause all Registrable
Securities covered by such Registration Statement or the Exchange
Securities, as the case may be, to be (i) listed on each securities
exchange, if any, on which similar securities issued by the Issuers
are then listed, or (ii) authorized to be quoted on the National
Association of Securities Dealers Automated Quotation System
("NASDAQ") or the National Market System of NASDAQ if similar
securities of the Issuers are so authorized.
(o) In connection with an underwritten offering of
Registrable Securities pursuant to a Shelf Registration, enter into an
underwriting agreement as is customary in underwritten offerings and
take all such other actions as are reasonably requested by the
managing underwriters in order to expedite or facilitate the
registration or the disposition of such Registrable Securities, and in
such connection, (i) make such representations and warranties to the
underwriters, with respect to the business of the Company and its
subsidiaries, if any, and the Registration Statement, Prospectus and
documents, if any, incorporated or deemed to be incorporated by
reference therein, in each case, as are customarily made by issuers to
underwriters in underwritten offerings, and confirm the same if and
when requested; (ii) obtain an opinion of counsel to the Issuers and
updates thereof in form and substance reasonably satisfactory to the
managing underwriters, addressed to the underwriters covering the
matters customarily covered in opinions requested in underwritten
offerings and such other matters as may be reasonably requested by
underwriters; (iii) obtain "cold comfort" letters and updates thereof
in form and substance reasonably satisfactory to the managing
underwriters from the independent certified public accountant(s) of
the Company (and, if necessary, any other independent certified public
accountants of any subsidiary of the Company or of any business
acquired by the Company for which financial statements and financial
data are, or are required to be, included in the Registration
Statement), addressed to each of the underwriters, such letters to be
in customary form and covering matters of the type customarily covered
in "cold comfort" letters in connection with underwritten offerings
and such
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<PAGE>
other matters as may be reasonably requested by underwriters; and
(iv) if an underwriting agreement is entered into, the same shall
contain indemnification provisions and procedures no less favorable
than those set forth in Section 7 hereof (or such other provisions
and procedures acceptable to Holders of a majority in aggregate
principal amount of Registrable Securities covered by such
Registration Statement and the managing underwriters or agents) with
respect to all parties to be indemnified pursuant to said Section.
The above shall be done at each closing under such underwriting
agreement, or as and to the extent required thereunder.
(p) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Securities during the Applicable Period, make available for
inspection by any selling Holder of such Registrable Securities being
sold, or each such Participating Broker-Dealer, as the case may be,
any underwriter participating in any such disposition of Registrable
Securities, if any, and any attorney, accountant or other agent
retained by any such selling holder or each such Participating
Broker-Dealer, as the case may be, or underwriter (collectively, the
"Inspectors"), at the offices where normally kept, during reasonable
business hours, all financial and other records, pertinent corporate
documents and properties of the Issuers (collectively, the "Records"),
as shall be reasonably necessary to enable them to exercise any
applicable due diligence responsibilities, and cause the officers,
directors and employees of the Issuers to supply all information in
each case reasonably requested by any such Inspector in connection
with such Registration Statement. Records determined in good faith by
the Issuers to be confidential shall not be disclosed by any Inspector
notified of such determination unless (i) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in
such Registration Statement, (ii) the release of such Records is
ordered pursuant to a subpoena or other order from a court of
competent jurisdiction or (iii) the information in such Records has
been made generally available to the public by the Company. Each
selling Holder of such Registrable Securities and each such
Participating Broker-Dealer will be required to agree that information
obtained by it as a result of such inspections shall be deemed
confidential and shall not be used by it as the basis for any market
transactions in the securities of the Issuers unless and until such is
made generally available to the public by the Company. Each selling
Holder of such Registrable Securities and each such Participating
Broker-Dealer will be required to further agree that it will, upon
learning that disclosure of such Records is sought in a court of
competent jurisdiction, give notice to the Issu-
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<PAGE>
ers and allow them at their own expense to undertake appropriate
action to prevent disclosure of the Records deemed confidential.
(q) Provide an indenture trustee for the Registrable
Securities or the Exchange Securities, as the case may be, and cause
the Indenture or the trust indenture provided for in Section 2(a), as
the case may be, to be qualified under the TIA not later than the
effective date of the Exchange Offer or the first Registration
Statement relating to the Registrable Securities; and in connection
therewith, cooperate with the trustee under any such indenture and the
holders of the Registrable Securities, to effect such changes to such
indenture as may be required for such indenture to be so qualified in
accordance with the terms of the TIA; and execute, and use its
reasonable best efforts to cause such trustee to execute, all
documents as may be required to effect such changes, and all other
forms and documents required to be filed with the SEC to enable such
indenture to be so qualified in a timely manner.
(r) Comply in all material respects with all applicable rules
and regulations of the SEC and make generally available to its
securityholders earning statements satisfying the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder (or any
similar rule promul gated under the Securities Act) no later than 90
days after the end of any 12-month period (i) commencing at the end of
any fiscal quarter in which Registrable Securities are sold to
underwriters in a firm commitment or best efforts underwritten
offering and (ii) if not sold to underwriters in such an offering,
commencing on the first day of the first fiscal quarter of the Issuers
after the effective date of a Shelf Registration Statement, which
statements shall cover said 12-month periods.
(s) If an Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Registrable Securities by Holders to
the Issuers (or to such other Person as directed by the Issuers) in
exchange for the Exchange Securities or the Private Exchange
Securities, as the case may be, the Issuers shall mark, or caused to
be marked, on such Registrable Securities that such Registrable
Securities are being cancelled in exchange for the Exchange Securities
or the Private Exchange Securities, as the case may be; in no event
shall such Registrable Securities be marked as paid or otherwise
satisfied.
(t) Reasonably cooperate with each seller of Registrable
Securities covered by any Registration Statement and each underwriter,
if any, participating in the disposition of such Registrable
Securities and their respective counsel in connection with any filings
required to be made with the
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<PAGE>
National Association of Securities Dealers, Inc. (the "NASD").
(u) Use its reasonable best efforts to take all other steps
necessary to effect the registration of the Registrable Securities
covered by a Registration Statement contemplated hereby.
The Issuers may require each seller of Registrable Securities
or Participating Broker-Dealer as to which any registration is being effected
to furnish to the Issuers such information regarding such seller or
Participating Broker-Dealer and the distribution of such Registrable Securities
or Exchange Securities to be sold by such Participating Broker-Dealer, as the
case may be, as the Issuers may, from time to time, reasonably request. The
Issuers may exclude from such registration the Registrable Securities of any
seller or Participating Broker-Dealer who fails to furnish such information
within a reasonable time after receiving such request and, notwithstanding
anything to the contrary in this Agreement, such Seller or Participating Broker
Dealer shall not be entitled to receive any Additional Interest pursuant to
Section 4. Each seller as to which any Shelf Registration is being effected is
deemed to agree to furnish promptly to the Issuers all information required to
be disclosed in order to make the information previously furnished to the
Issuers by such seller not materially misleading.
Each Holder of Registrable Securities and each Participating
Broker-Dealer agrees by acquisition of such Registrable Securities or Exchange
Securities to be sold by such Participating Broker-Dealer, as the case may be,
that, upon receipt of any notice from the Issuers of the happening of any event
of the kind described in Section 5(c)(ii), 5(c)(iii), 5(c)(iv), or 5(c)(v),
such Holder shall forthwith discontinue disposition of such Registrable
Securities covered by such Registration Statement or Prospectus or Exchange
Securities to be sold by such Participating Broker-Dealer, as the case may be,
until such holder's receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 5(k), or until it is advised in writing (the
"Advice") by the Issuers that the use of the applicable Prospectus may be
resumed, and has received copies of any amendments or supplements thereto. In
the event the Issuers shall give any such notice, each of the Effectiveness
Period and the Applicable Period shall be extended by the number of days during
such periods from and including the date of the giving of such notice to and
including the date when each seller of Registrable Securities covered by such
Registration Statement or Exchange Securities to be sold by such Participating
Broker-Dealer, as the case may be, shall have received (x) the copies of the
supplemented or amended Prospectus contemplated by Section 5(k) or (y) the
Advice.
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<PAGE>
6. Registration Expenses
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Issuers shall be borne by the
Issuers whether or not the Exchange Offer or a Shelf Registration is
filed or becomes effective, including, without limitation, (i) all
registration and filing fees (including, without limitation, (A) fees
with respect to filings required to be made with the NASD in
connection with an underwritten offering and (B) fees and expenses of
compliance with state securities or Blue Sky laws (including, without
limitation, reasonable fees and disbursements of counsel in connection
with Blue Sky qualifications of the Registrable Securities or Exchange
Securities and determination of the eligibility of the Registrable
Securities or Exchange Securities for investment under the laws of
such jurisdictions in the United States (x) where the holders of
Registrable Securities are located, in the case of the Exchange
Securities, or (y) as provided in Section 5(h), in the case of
Registrable Securities or Exchange Securities to be sold by a
Participating Broker-Dealer during the Applicable Period)), (ii)
printing expenses (including, without limitation, expenses of printing
certificates for Registrable Securities or Exchange Securities in a
form eligible for deposit with DTC and of printing prospectuses if the
printing of prospectuses is requested by the managing underwriters, if
any, or, in respect of Registrable Securities or Exchange Securities
to be sold by any Participating Broker-Dealer during the Applicable
Period, by the Holders of a majority in aggregate principal amount of
the Registrable Securities included in any Registration Statement or
of such Exchange Securities, as the case may be), (iii) messenger,
telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Issuers and fees and disbursements of special counsel
for the sellers of Registrable Securities (subject to the provisions
of Section 6(b)), (v) fees and disbursements of all independent
certified public accountants referred to in Section 5(o)(iii)
(including, without limitation, the expenses of any special audit and
"cold comfort" letters required by or incidental to such performance),
(vi) rating agency fees, (vii) Securities Act liability insurance, if
the Issuers desires such insurance, (viii) fees and expenses of all
other Persons retained by the Issuers, (ix) internal expenses of the
Issuers (including, without limitation, all salaries and expenses of
officers and employees of the Issuers performing legal or accounting
duties), (x) the expense of any annual audit, (xi) the fees and
expenses incurred in connection with the listing of the securities to
be registered on any securities exchange, if applicable and (xii) the
expenses relating to printing, word processing and distributing all
Registration Statements, underwriting agreements, securities sales
agreements, indentures and any other documents necessary in order to
comply with this Agreement; provided, however, that not-
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<PAGE>
withstanding the foregoing, the Issuers will not be responsible for
any underwriter's discounts, commissions or fees attributable to the
sale of Registrable Securities.
(b) In connection with any Shelf Registration hereunder, the
Issuers shall reimburse the Holders of the Registrable Securities
being registered in such registration for the reasonable fees and
disbursements of not more than one counsel (in addition to local
counsel, if appropriate) chosen by the Holders of a majority in
aggregate principal amount of the Registrable Securities to be
included in such Registration Statement, subject to the reasonable
approval of the Issuers. Such Holders shall be responsible for any and
all other out-of-pocket expenses of the Holders of Registrable
Securities incurred in connection with the registration of the
Registrable Securities.
7. Indemnification
The Issuers agree to indemnify and hold harmless each Holder
of Registrable Securities and each Participating Broker-Dealer selling Exchange
Securities during the Applicable Period, the officers and directors of each
such person, and each person, if any, who controls any such person within the
meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act (each, a "Participant"), from and against any and all losses,
claims, damages and liabilities (including, without limitation, the reasonable
legal fees and other expenses actually 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 any Registration
Statement (or any amendment thereto) or Prospectus (as amended or supplemented
if the Issuers shall have furnished any amendments or supplements thereto) or
any preliminary prospectus, 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, in light of the circumstances under which they
were made, not misleading, except insofar as such losses, claims, damages or
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 Participant furnished to the Company in writing by such
Participant expressly for use therein; provided, however, that the foregoing
indemnity with respect to any preliminary prospectus shall not inure to the
benefit of any Participant (or to the benefit of any person controlling such
Participant) from whom the person asserting any such losses, claims, damages or
liabilities purchased Registrable Securities or Exchange Securities if such
untrue statement or omission or alleged untrue statement or omission made in
such preliminary prospectus is eliminated or remedied in the related Prospectus
(as amended or supplemented if the Issuers shall have furnished any amendments
or supplements thereto) and a copy of the related Prospectus (as so amended or
supplemented) shall not have been furnished to such person at or prior to the
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<PAGE>
sale of such Registrable Securities or Exchange Securities, as the case may be,
to such person.
Each Participant will be required to agree, severally and not
jointly, to indemnify and hold harmless the Company, its directors, its
officers and each person 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 Issuers to each Participant, but only with
reference to information relating to such Participant furnished to the Company
in writing by such Participant expressly for use in any Registration Statement
or Prospectus, any amendment or supplement thereto, or any preliminary
prospectus. The liability of any Participant under this paragraph shall in no
event exceed the proceeds received by such Participant from sales of
Registrable Securities giving rise to such obligations.
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
either of the two 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
reasonable fees and expenses actually incurred by such counsel related to such
proceeding; provided, however, that the failure to so notify the Indemnifying
Person shall not relieve it of any obligation or liability which it may have
hereunder or otherwise (unless and only to the extent that such failure results
in the loss or compromise of any rights or defenses). 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 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. Any such separate firm for the Participants
and such control persons of Participants shall be designated in writing by
Participants who sold a majority in interest of Registrable Securities sold by
all such Participants and any such separate firm
22
<PAGE>
for the Issuers, their directors, officers and such control persons of the
Issuers shall be designated in writing by the Issuers. 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
non-appealable 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 reasonable fees and expenses
actually incurred by counsel as contemplated by the third sentence 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; provided, how ever, that the
Indemnifying Person shall not be liable for any settlement effected without
its consent pursuant to this sentence if the Indemnifying Party is contesting,
in good faith, the request for reimbursement. 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 and second
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 thereunder, shall contribute to the amount paid or payable
by such Indemnified Person as a result of such losses, claims, damages or
liabilities in such proportion as is appropriate to reflect the relative fault
of the Issuers on the one hand and the Participants on the other 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 fault of the Issuers on the one hand and the Participants on the other
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 Issuers or by
the Participants and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The parties agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by
23
<PAGE>
pro rata allocation (even if the Participants were treated as one entity for
such purpose) 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 reasonable legal or other expenses actually 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 a Participant be required to contribute any amount in excess of the
amount by which proceeds received by such Participant from sales of
Registrable Securities exceeds the amount of any damages that such Participant
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 indemnity and contribution agreements contained in this
Section 7 will be in addition to any liability which the Indemnifying Persons
may otherwise have to the Indemnified Persons referred to above.
8. Rule 144 and Rule 144A
The Issuers covenant that they will file the reports required
to be filed by them under the Securities Act and the Exchange Act in a timely
manner and, if at any time the Issuers are not required to file such reports,
they will, upon the request of any Holder of Registrable Securities, make
publicly available other information so long as necessary to permit sales
pursuant to Rule 144 and Rule 144A under the Securities Act. The Issuers
further covenant that they will take such further action as any Holder of
Registrable Securities may reasonably request, all to the extent required from
time to time to enable such holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144 and Rule 144A under the Securities Act, as such Rules
may be amended from time to time, or (b) any similar rule or regulation
hereafter adopted by the SEC.
9. Underwritten Registrations
If any of the Registrable Securities covered by any Shelf
Registration are to be sold in an underwritten offering, the investment banker
or investment bankers and manager or managers that will manage the offering
will be selected by the Holders of a majority in aggregate principal amount of
such Registrable Securities included in such offering, subject to the
reasonable approval of the Issuers. No Additional Interest shall be
24
<PAGE>
payable as a result of any delay directly caused by the selection of or any
action by such underwriters.
No Holder of Registrable Securities may participate in any
underwritten registration hereunder unless such Holder (a) agrees to sell such
Holder's Registrable Securities on the basis provided in any underwriting
arrangements approved by the Issuers and the Holders of a majority in aggregate
principal amount of the Registrable Securities included in such offering and
(b) completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements. Any Holder who fails to comply with such
requirements within a reasonable period after notice shall not be entitled to
receive any Additional Interest.
10. Miscellaneous
(a) No Inconsistent Agreements. The Issuers have not, as of
the date hereof, entered and shall not, after the date of this
Agreement, enter into any agreement with respect to any of their
securities that is inconsistent with the rights granted to the Holders
of Registrable Securities in this Agreement or otherwise conflicts
with the provisions hereof.
(b) Adjustments Affecting Registrable Securities. Except as
may be required by the Indenture, the Issuers shall not, directly or
indirectly, take any action with respect to the Registrable Securities
as a class that would adversely affect the ability of the Holders of
Registrable Securities to include such Registrable Securities in a
registration undertaken pursuant to this Agreement.
(c) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, unless the Issuers have
obtained the written consent of Holders of at least a majority of the
then outstanding aggregate principal amount of Registrable Securities.
Notwithstanding the foregoing, a waiver or consent to depart from the
provisions hereof with respect to a matter that relates exclusively to
the rights of Holders of Registrable Securities whose securities are
being sold pursuant to a Registration Statement and that does not
directly or indirectly affect, impair, limit or compromise the rights
of other Holders of Registrable Securities may be given by Holders of
at least a majority in aggregate principal amount of the Registrable
Securities being sold by such Holders pursuant to such Registration
Statement, provided that the provisions of this sentence may not be
amended, modified or supplemented except in accordance with the
provisions of the immediately preceding sentence.
25
<PAGE>
(d) Notices. All notices and other communications (including
without limitation any notices or other communications to the
Trustee) provided for or permitted hereunder shall be made in writing
by hand-delivery, registered first-class mail, next-day air courier
or telecopier:
(i) if to a Holder of Registrable Securities, at the most
current address given by the Trustee to the Issuers; and
(ii) if to the Issuers, 375 Park Avenue, New York, New York
10152 (telecopy 212/648-5121 or 212/648-5951), Attention: Chief
Executive Officer.
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if mailed;
one business day after being timely delivered to a next-day air courier; and
when telephonic confirmation of receipt is obtained, if telecopied.
Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to the Trustee
under the Indenture at the address specified in such Indenture.
(e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of
the parties, including without limitation and without the need for an
express assignment, subsequent Holders of Registrable Securities;
provided, that, with respect to the indemnity and contribution
agreements in Section 7, each Holder of Registrable Securities
subsequent to the Initial Purchasers shall be bound by the terms
thereof if such Holder elects to include Registrable Securities in a
Shelf Registration; provided, however, that this Agreement shall not
inure to the benefit of or be binding upon a successor or assign of a
Holder unless and to the extent such successor or assign holds
Registrable Securities.
(f) Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the
same agreement.
(g) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect
the meaning hereof.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS
APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK,
WITHOUT REGARD TO PRINCIPLES OF
26
<PAGE>
CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(i) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set
forth herein shall remain in full force and effect and shall in no way
be affected, impaired or invalidated, and the parties hereto shall use
their reasonable best efforts to find and employ an alternative means
to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is
hereby stipulated and declared to be the intention of the parties that
they would have executed the remaining terms, provisions, covenants
and restrictions without including any of such that may be hereafter
declared invalid, illegal, void or unenforceable.
(j) Entire Agreement. This Agreement, together with the
Purchase Agreement, is intended by the parties as a final expression
of their agreement, and is intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein and therein.
(k) Securities Held by the Issuers or Its Affiliates.
Whenever the consent or approval of holders of a specified percentage
of Registrable Securities is required hereunder, Registrable
Securities held by the Issuers or any of their affiliates (as such
term is defined in Rule 405 under the Securities Act) shall not be
counted in determining whether such consent or approval was given by
the Holders of such required percentage.
(l) Subsidiary Guarantor a Party. Immediately upon the
designation of any subsidiary of the Company as a Guarantor (as
defined in the Indenture), the Company shall cause such Guarantor to
guarantee the obligations of the Issuers hereunder (including, without
limitation, the obligation to pay Additional Interest, if any,
pursuant to the terms of Section 4 hereof), by executing and
delivering to the Initial Purchaser an appropriate amendment to this
Agreement.
27
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
UNITED AUTO GROUP, INC.
By:______________________________
Name:
Title:
GUARANTORS:
DIFEO PARTNERSHIP, INC.
DIFEO PARTNERSHIP RCT, INC.
DIFEO PARTNERSHIP RCM, INC.
DIFEO PARTNERSHIP HCT, INC.
DIFEO PARTNERSHIP SCT, INC.
DIFEO PARTNERSHIP VIII, INC.
DIFEO PARTNERSHIP IX, INC.
DIFEO PARTNERSHIP X, INC.
UAG NORTHEAST, INC.
UAG NORTHEAST (NY), INC.
HUDSON TOYOTA, INC.
SOMERSET MOTORS, INC.
UAG WEST, INC.
SA AUTOMOTIVE, LTD.
SL AUTOMOTIVE, LTD.
SPA AUTOMOTIVE, LTD.
LRP, LTD.
SUN BMW, LTD.
6725 DEALERSHIP, LTD.
SCOTTSDALE MANAGEMENT GROUP, LTD.
SK MOTORS, LTD.
SCOTTSDALE AUDI, LTD.
UNITED LANDERS, INC.
LANDERS AUTO SALES, INC.
LANDERS UNITED AUTO GROUP, INC.
LANDERS UNITED AUTO GROUP NO. 2, INC.
LANDERS UNITED AUTO GROUP NO. 3, INC.
LANDERS UNITED AUTO GROUP NO. 4, INC.
LANDERS BUICK-PONTIAC, INC.
UAG ATLANTA, INC.
ATLANTA TOYOTA, INC.
UAG ATLANTA II, INC.
UNITED NISSAN, INC.,
a Georgia corporation
28
<PAGE>
UAG ATLANTA III, INC.
PEACHTREE NISSAN, INC.
UAG ATLANTA IV, INC.
UAG ATLANTA IV MOTORS, INC.
UAG ATLANTA V, INC.
CONYERS NISSAN, INC.
UAG TENNESSEE, INC.
UNITED NISSAN, INC.,
a Tennessee corporation
UAG TEXAS, INC.
UAG TEXAS II, INC.
UAG EAST, INC.
AMITY AUTO PLAZA, LTD.
AMITY NISSAN OF MASSAPEQUA, LTD.
AUTO MALL PAYROLL SERVICES, INC.
AUTOMALL STORAGE, INC.
FLORIDA CHRYSLER PLYMOUTH, INC.
J&S AUTO REFINISHING, LTD.
NORTHLAKE AUTO FINISH, INC.
PALM AUTO PLAZA, INC.
WEST PALM AUTO MALL, INC.
WEST PALM INFINITI, INC.
WEST PALM NISSAN, INC.
WESTBURY NISSAN, LTD.
WESTBURY SUPERSTORE, LTD.
UAG CAROLINA, INC.
GENE REED CHEVROLET, INC.
MICHAEL CHEVROLET-OLDSMOBILE, INC.
REED LALLIER CHEVROLET, INC.
UAG NEVADA, INC.
UNITED NISSAN, INC.,
a Nevada corporation
UNITED AUTOCARE, INC.
UNITED AUTOCARE PRODUCTS, INC.
UAG CAPITAL MANAGEMENT, INC.
UAG FINANCE COMPANY, INC.
By:______________________________
Name:
Title:
29
<PAGE>
FAIR HYUNDAI PARTNERSHIP
FAIR CHEVROLET-GEO PARTNERSHIP
DANBURY AUTO PARTNERSHIP
DANBURY CHRYSLER PLYMOUTH PARTNERSHIP
J&F OLDSMOBILE PARTNERSHIP
DIFEO HYUNDAI PARTNERSHIP
DIFEO LEASING PARTNERSHIP
DIFEO NISSAN PARTNERSHIP
DIFEO CHEVROLET-GEO PARTNERSHIP
DIFEO CHYRSLER PLYMOUTH JEEP EAGLE
PARTNERSHIP
DIFEO BMW PARTNERSHIP
By: DIFEO PARTNERSHIP, INC.,
a general partner
By:______________________________
Name:
Title:
HUDSON MOTORS PARTNERSHIP
By: DIFEO PARTNERSHIP HCT, INC.,
a general partner
By:______________________________
Name:
Title:
OCT PARTNERSHIP
By: DIFEO PARTNERSHIP VIII, INC.,
a general partner
By:______________________________
Name:
Title:
30
<PAGE>
OCM PARTNERSHIP
By: DIFEO PARTNERSHIP IX, INC.,
a general partner
By:______________________________
Name:
Title:
SOMERSET MOTORS PARTNERSHIP
By: DIFEO PARTNERSHIP SCT, INC.,
a general partner
By:______________________________
Name:
Title:
COUNTY AUTO GROUP PARTNERSHIP
By: DIFEO PARTNERSHIP RCT, INC.,
a general partner
By:______________________________
Name:
Title:
ROCKLAND MOTORS PARTNERSHIP
By: DIFEO PARTNERSHIP RCM, INC.,
a general partner
By:______________________________
Name:
Title:
31
<PAGE>
6725 AGENT PARTNERSHIP
By: SCOTTSDALE AUDI, LTD.,
a general partner
By:______________________________
Name:
Title:
SHANNON AUTOMOTIVE, LTD.
By: UAG TEXAS II, INC.,
its general partner
By:______________________________
Name:
Title:
32
<PAGE>
J.P. MORGAN SECURITIES INC.
SALOMON BROTHERS INC
CIBC WOOD GUNDY SECURITIES CORP.
MONTGOMERY SECURITIES
SCOTIA CAPITAL MARKETS (USA) INC.
By: J.P. MORGAN SECURITIES INC.
By:
---------------------------
Name:
Title:
33
<PAGE>
INDENTURE
Dated as of September 16, 1997
Between
UNITED AUTO GROUP, INC.,
THE GUARANTORS PARTY HERETO,
and
THE BANK OF NEW YORK, Trustee
---------------
$50,000,000
11% Senior Subordinated Notes due 2007, Series B
<PAGE>
CROSS-REFERENCE TABLE
Indenture
Trust Indenture Act Section Section
- --------------------------- -------
ss.310(a)(1) 7.10
(a)(2) 7.10
(a)(3) N.A.
(a)(4) N.A.
(a)(5) 7.10
(b) 7.08; 7.10; 13.02
(c) N.A.
ss.311(a) 7.11
(b) 7.11
(c) N.A.
ss.312(a) 2.05
(b) 13.03
(c) 13.03
ss.313(a) 7.06
(b)(1) N.A.
(b)(2) 7.06
(c) 7.06; 13.02
(d) 7.06
ss.314(a) 4.11; 4.12; 13.02
(b) N.A.
(c)(1) 13.04
(c)(2) 13.04
(c)(3) N.A.
(d) N.A.
(e) 13.05
(f) N.A.
ss.315(a) 7.01
(b) 7.05; 13.02
(c) 7.01(a)
(d) 7.01(c)
(e) 6.11
ss.316(a)(last sentence) 2.09
(a)(1)(A) 6.05
(a)(1)(B) 6.04
(a)(2) N.A.
(b) 6.07
(c) 10.04
ss.317(a)(1) 6.08
(a)(2) 6.09
(b) 2.04
ss.318(a) 13.01
- --------------
N.A. means Not Applicable.
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed
to be a part of this Indenture.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1. Definitions...................................................1
SECTION 1.2. Other Definitions............................................19
SECTION 1.3. Incorporation by Reference of Trust Indenture Act............19
SECTION 1.4. Rules of Construction........................................20
ARTICLE II.
THE SECURITIES
SECTION 2.1. Form and Dating..............................................20
SECTION 2.2. Execution and Authentication.................................22
SECTION 2.3. Registrar and Paying Agent...................................23
SECTION 2.4. Paying Agent To Hold Money in Trust..........................23
SECTION 2.5. Securityholder Lists.........................................24
SECTION 2.6. Transfer and Exchange........................................24
SECTION 2.7. Replacement Securities.......................................33
SECTION 2.8. Outstanding Securities.......................................33
SECTION 2.9. Treasury Securities..........................................34
SECTION 2.10. Temporary Securities.........................................34
SECTION 2.11. Cancellation.................................................34
SECTION 2.12. Defaulted Interest...........................................35
SECTION 2.13. CUSIP or CINS Number.........................................35
SECTION 2.14. Payments of Interest.........................................35
ARTICLE III.
REDEMPTION
SECTION 3.1. Notices to Trustee...........................................36
SECTION 3.2. Selection of Securities To Be Redeemed.......................36
SECTION 3.3. Notice of Redemption.........................................36
SECTION 3.4. Effect of Notice of Redemption...............................37
SECTION 3.5. Deposit of Redemption Price..................................38
SECTION 3.6. Securities Redeemed in Part..................................38
ARTICLE IV.
COVENANTS
SECTION 4.1. Payment of Securities........................................38
SECTION 4.2. Maintenance of Office or Agency..............................38
SECTION 4.3. Limitation on Transactions with Affiliates...................39
SECTION 4.4. Limitation on Incurrence of Indebtedness.....................40
SECTION 4.5. Limitation on Certain Asset Dispositions.....................41
SECTION 4.6. Limitation on Restricted Payments............................42
SECTION 4.7. Corporate Existence..........................................46
SECTION 4.8. Payment of Taxes and Other Claims............................46
(i)
<PAGE>
SECTION 4.9. Notice of Defaults...........................................47
SECTION 4.10. Maintenance of Properties....................................47
SECTION 4.11. Compliance Certificate.......................................47
SECTION 4.12. Provision of Financial Information...........................47
SECTION 4.13. Waiver of Stay, Extension or Usury Laws......................48
SECTION 4.14. Change of Control............................................48
SECTION 4.15. Limitation on Senior Subordinated Indebtedness...............50
SECTION 4.16. Limitation on Restrictions Affecting Restricted
Subsidiaries...............................................50
SECTION 4.17. Limitation on Liens..........................................51
SECTION 4.18. Subsidiary Guarantees........................................52
ARTICLE V.
MERGERS; SUCCESSOR CORPORATION
SECTION 5.1. Successor Corporation Substituted............................54
ARTICLE VI.
DEFAULT AND REMEDIES
SECTION 6.1. Events of Default............................................54
SECTION 6.2. Acceleration.................................................56
SECTION 6.3. Other Remedies...............................................56
SECTION 6.4. Waiver of Past Default.......................................56
SECTION 6.5. Control by Majority..........................................57
SECTION 6.6. Limitation on Suits..........................................57
SECTION 6.7. Rights of Holders to Receive Payment.........................58
SECTION 6.8. Collection Suit by Trustee...................................58
SECTION 6.9. Trustee May File Proofs of Claim.............................59
SECTION 6.10. Priorities...................................................59
SECTION 6.11. Undertaking for Costs........................................60
ARTICLE VII.
TRUSTEE
SECTION 7.1. Duties of Trustee............................................60
SECTION 7.2. Rights of Trustee............................................61
SECTION 7.3. Individual Rights of Trustee.................................62
SECTION 7.4. Trustee's Disclaimer.........................................62
SECTION 7.5. Notice of Defaults...........................................63
SECTION 7.6. Reports by Trustee to Holders................................63
SECTION 7.7. Compensation and Indemnity...................................63
SECTION 7.8. Replacement of Trustee.......................................65
SECTION 7.9. Successor Trustee by Merger, etc.............................66
SECTION 7.10. Eligibility; Disqualification................................66
ARTICLE VIII.
SUBORDINATION OF SECURITIES
SECTION 8.1. Securities Subordinated to Senior Debt.......................66
SECTION 8.2. Payment Over of Proceeds upon Dissolution, etc...............68
SECTION 8.3. Subrogation..................................................69
(ii)
<PAGE>
SECTION 8.4. Obligations of Company Unconditional.........................70
SECTION 8.5. Notice to Trustee............................................70
SECTION 8.6. Trustee's Relation to Senior Debt............................71
SECTION 8.7. Subordination Rights Not Impaired by Acts or Omissions
of the Company or Holders of Senior Debt...................72
SECTION 8.8. Securityholders Authorize Trustee To Effectuate
Subordination of Securities................................72
SECTION 8.9. This Article Not to Prevent Events of Default................72
SECTION 8.10. Trustee's Compensation Not Prejudiced........................73
SECTION 8.11. No Waiver of Subordination Provisions........................73
SECTION 8.12. Subordination Provisions Not Applicable to Money Held
in Trust for Securityholders; Payments May Be Paid
Prior to Dissolution.......................................73
ARTICLE IX.
DISCHARGE OF INDENTURE
SECTION 9.1. Termination of Company's Obligations.........................74
SECTION 9.2. Application of Trust Money...................................75
SECTION 9.3. Repayment to Company.........................................76
SECTION 9.4. Reinstatement................................................76
ARTICLE X.
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 10.1. Without Consent of Holders...................................77
SECTION 10.2. With Consent of Holders......................................78
SECTION 10.3. Compliance with Trust Indenture Act..........................79
SECTION 10.4. Revocation and Effect of Consents............................79
SECTION 10.5. Notation on or Exchange of Securities........................80
SECTION 10.6. Trustee To Sign Amendments, etc..............................80
ARTICLE XI.
GUARANTEE
SECTION 11.1. Unconditional Guarantee......................................81
SECTION 11.2. Severability.................................................82
SECTION 11.3. Release of a Guarantor.......................................82
SECTION 11.4. Limitation of Guarantor's Liability..........................82
SECTION 11.5. Contribution.................................................83
SECTION 11.6. Execution of Guarantee.......................................83
SECTION 11.7. Subordination of Subrogation and Other Rights................83
ARTICLE XII.
SUBORDINATION OF GUARANTEE
SECTION 12.1. Guarantee Obligations Subordinated to Senior Debt of
Guarantor..................................................84
SECTION 12.2. No Payment on Guarantees in Certain Circumstances............84
(iii)
<PAGE>
SECTION 12.3. Payment Over of Proceeds upon Dissolution, etc...............85
SECTION 12.4. Subrogation..................................................87
SECTION 12.5. Obligations of Guarantors Unconditional......................87
SECTION 12.6. Notice to Trustee............................................88
SECTION 12.7. Reliance on Judicial Order or Certificate of Liquidating
Agent......................................................89
SECTION 12.8. Trustee's Relation to Senior Debt of Guarantors..............89
SECTION 12.9. Subordination Rights Not Impaired by Acts or Omissions
of the Guarantors or Holders of Senior Debt of Guarantors..89
SECTION 12.10. Securityholders Authorize Trustee to Effectuate
Subordination of Guarantee.................................90
SECTION 12.11. This Article Not to Prevent Events of Default................90
SECTION 12.12. Trustee's Compensation Not Prejudiced........................90
SECTION 12.13. No Waiver of Guarantee Subordination Provisions..............90
SECTION 12.14. Payments May Be Paid Prior to Dissolution....................91
ARTICLE XIII.
MISCELLANEOUS
SECTION 13.1. Trust Indenture Act Controls.................................91
SECTION 13.2. Notices......................................................91
SECTION 13.3. Communications by Holders with Other Holders.................93
SECTION 13.4. Certificate and Opinion as to Conditions Precedent...........93
SECTION 13.5. Statements Required in Certificate or Opinion................93
SECTION 13.6. Rules by Trustee, Paying Agent, Registrar....................94
SECTION 13.7. Governing Law................................................94
SECTION 13.8. No Recourse Against Others...................................94
SECTION 13.9. Successors...................................................94
SECTION 13.10. Counterpart Originals........................................94
SECTION 13.11. Severability.................................................95
SECTION 13.12. No Adverse Interpretation of Other Agreements................95
SECTION 13.13. Legal Holidays...............................................95
EXHIBIT A - FORM OF SECURITY................................................A-1
EXHIBIT B - FORM OF CERTIFICATE OF TRANSFER.................................B-1
EXHIBIT C - FORM OF CERTIFICATE OF EXCHANGE.................................C-1
==============
NOTE: This Table of Contents shall not, for any purpose, be deemed to be a
part of this Indenture.
(iv)
<PAGE>
INDENTURE dated as of September 16, 1997, between UNITED AUTO
GROUP, INC., a Delaware corporation (the "Company"), the Guarantors party
hereto and THE BANK OF NEW YORK, a bank and trust company organized under the
New York Banking Law, as trustee (the "Trustee").
Each party hereto agrees as follows for the benefit of the
other parties and for the equal and ratable benefit of the Holders of the
Company's 11% Senior Subordinated Notes due 2007, Series B:
ARTICLE I.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1. Definitions.
"Acquired Indebtedness" means Indebtedness of a Person (a)
assumed in connection with an Acquisition of such Person or (b) existing at the
time such Person becomes a Restricted Subsidiary or is merged or consolidated
with or into the Company or any Restricted Subsidiary; provided, however, that
such Indebtedness (x) was not Incurred in connection with, or in contemplation
of, such Acquisition, such Person becoming a Restricted Subsidiary or such
merger or consolidation and (y) is not recourse to any Person or assets other
than such Person or its assets (including its Subsidiaries and their assets).
"Acquisition" means (i) any capital contribution (by means of
transfers of cash or other property to others or payments for property or
services for the account or use of others, or otherwise) by the Company or any
Restricted Subsidiary to any other Person, or any acquisition or purchase of
Capital Stock of any other Person by the Company or any Restricted Subsidiary,
in either case pursuant to which such Person shall become a Restricted
Subsidiary or shall be consolidated or merged with or into the Company or any
Restricted Subsidiary or (ii) any acquisition by the Company or any Restricted
Subsidiary of the assets of any Person which constitute substantially all of an
operating unit or line of business of such Person or which is otherwise outside
of the ordinary course of business.
"Additional Interest" shall have the meaning set forth in
the Registration Rights Agreement.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
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"Agent" means any Registrar, Paying Agent or co-Registrar.
See Section 2.03.
"Applicable Procedures" means with respect to any transfer or
exchange of interests in a Global Security, the rules and procedures of DTC,
Euroclear and Cedel that apply to such transfer or exchange.
"Asset Disposition" means any sale, transfer or other
disposition (including, without limitation, by merger, consolidation or
sale-and-leaseback transaction) of (i) shares of Capital Stock of any
Restricted Subsidiary (other than directors' qualifying shares) or (ii)
property or assets (other than any cash or Cash Equivalents) of the Company or
any Restricted Subsidiary; provided, however, that an Asset Disposition shall
not include (a) any such sale, transfer or other disposition to the Company or
to any Restricted Guarantor, (b) any sale, transfer or other disposition of
defaulted receivables for collection or any sale, transfer or other disposition
of property or assets in the ordinary course of business, (c) any sale,
transfer or other disposition that does not (together with all related sales,
transfers or dispositions) involve aggregate consideration in excess of $2.5
million, (d) the granting of any Lien (or foreclosure thereon) to the extent
that such Lien is granted in compliance with Section 4.17, (e) any Restricted
Payment permitted by Section 4.06, (f) the sale, assignment, lease, conveyance
or disposition or other transfer (however effected, including, without
limitation, by merger or consolidation) of all or substantially all of the
assets of the Company and the Restricted Subsidiaries, taken as a whole, in
accordance with Section 5.01 or (g) any disposition that constitutes a Change
of Control.
"Atlantic Finance" means Atlantic Auto Finance Corporation
and its successors.
"Atlantic Finance Loan" means any loan by Atlantic Finance to
the Company which is due not later than the business day next following the day
such loan was made; provided, however, that (x) the proceeds of such loan are
deposited with a floor plan lender (including any bank holding Floor Plan
Notes) and (y) such loan bears interest at a rate not higher than that accruing
on such deposit.
"Average Life" means, as of the date of determination, with
respect to any Indebtedness for borrowed money or Preferred Stock, the quotient
obtained by dividing (i) the sum of the products of the number of years from
the date of determination to the dates of each successive scheduled principal
or liquidation value payments of such Indebtedness or Preferred Stock,
respectively, and the amount of such principal or liquidation value payments,
by (ii) the sum of all such principal or liquidation value payments.
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"Basket" has the meaning set forth in Section 4.06.
"Board of Directors" means the Board of Directors of the
Company or any Guarantor, as the case may be, or any authorized committee of
that Board.
"Board Resolution" means, with respect to any Person, a duly
adopted resolution of the Board of Directors of such Person.
"Business Day" means each Monday, Tuesday, Wednesday,
Thursday and Friday which is not a day on which banking institutions in the
City of New York, New York are authorized or obligated by law or executive
order to close.
"Capital Lease Obligations" of any Person means the
obligations to pay rent or other amounts under a lease of (or other
Indebtedness arrangements conveying the right to use) real or personal property
of such Person which are required to be classified and accounted for as a
capital lease or liability on the face of a balance sheet of such Person in
accordance with GAAP. The amount of such obligations shall be the capitalized
amount thereof in accordance with GAAP and the stated maturity thereof shall be
the date of the last payment of rent or any other amount due under such lease
prior to the first date upon which such lease may be terminated by the lessee
without payment of a penalty.
"Capital Stock" of any Person means any and all shares,
interests, partnership interests, participations or other equivalents (however
designated) of ownership of such Person.
"Cash Equivalents" means (i) marketable direct obligations
issued or guaranteed by the United States of America, or any governmental
entity or agency or political subdivision thereof (provided, that the full
faith and credit of the United States of America is pledged in support
thereof), maturing within one year of the date of purchase; (ii) commercial
paper issued by corporations or financial institutions maturing within 180 days
from the date of the original issue thereof, and rated "P-1" or better by
Moody's Investors Service or "A-1" or better by Standard & Poor's Ratings Group
or an equivalent rating or better by any other nationally recognized securities
rating agency; (iii) certificates of deposit issued or acceptances accepted by
or guaranteed by any bank or trust company organized under the laws of the
United States of America or any state thereof or the District of Columbia, in
each case having capital, surplus and undivided profits totaling more than
$500,000,000, maturing within one year of the date of purchase; and (iv) money
market funds substantially all of whose assets comprise securities of the type
described in clauses (i) through (iii).
"Common Stock" of any Person means Capital Stock of such
Person that does not rank prior, as to the payment of dividends or as to the
distribution of assets upon any voluntary
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or involuntary liquidation, dissolution or winding up of such Person, to
shares of Capital Stock of any other class of such Person.
"Consolidated Cash Flow Available for Fixed Charges" means
for any period the Consolidated Net Income for such period (x) increased (to
the extent Consolidated Net Income for such period has been reduced thereby) by
the sum of (without duplication) (i) Consolidated Fixed Charges for such
period, plus (ii) Consolidated Income Tax Expense for such period, plus (iii)
the consolidated depreciation and amortization expense included in the income
statement of the Company prepared in accordance with GAAP for such period, plus
(iv) any other non-cash charges to the extent deducted from or reflected in
such Consolidated Net Income except for any non-cash charges that represent
accruals of, or reserves for, cash disbursements to be made in any future
accounting period and (y) decreased by interest income on deposits with floor
plan lenders (including any bank holding Floor Plan Notes) made with proceeds
of Atlantic Finance Loans.
"Consolidated Cash Flow Ratio" means for any period the ratio
of (i) Consolidated Cash Flow Available for Fixed Charges for such period to
(ii) Consolidated Fixed Charges for such period; provided, however, that all
Incurrences and repayments of Indebtedness (including the Incurrence giving
rise to such calculation and any repayments in connection therewith) and all
dispositions (including discontinued operations) or acquisitions of assets
(other than in the ordinary course of business) made during or after such
period and on or prior to the date of determination shall be given pro forma
effect as if they occurred on the first day of such four-quarter period, except
that Indebtedness under the Senior Credit Facility shall be deemed to be the
average daily balance of such Indebtedness during such four-quarter period.
Calculations of pro forma amounts in accordance with this definition may take
into account a reduction of cost of goods sold in the amount of interest earned
on financing proceeds deposited with any holder of Floor Plan Notes.
"Consolidated Fixed Charges" means for any period, without
duplication, (a) the consolidated interest expense included in a consolidated
income statement (without deduction of interest or finance charge income) of
the Company and the Restricted Subsidiaries for such period calculated on a
consolidated basis in accordance with GAAP (it being understood that the
foregoing does not include interest on Floor Plan Notes), but excluding (x) the
amortization of deferred financing costs and (y) interest on Atlantic Finance
Loans, and (b) dividend requirements of the Company and the Restricted
Subsidiaries with respect to Disqualified Stock and with respect to all other
Preferred Stock of Restricted Subsidiaries (in each case (i) whether in cash or
otherwise (except dividends payable solely in shares of Capital Stock (other
than any Disqualified Stock) of the Company or any Restricted Subsidiary) and
(ii) other than dividends with respect to Capital Stock held by the
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Company or any Restricted Guarantor) paid, declared, accrued or accumulated
during such period times, in the case of this clause (b), a fraction the
numerator of which is one and the denominator of which is one minus the then
effective consolidated federal, state and local income tax rate of the
Company, expressed as a decimal.
"Consolidated Income Tax Expense" means for any period the
consolidated provision for income taxes of the Company and the Restricted
Subsidiaries for such period calculated on a consolidated basis in accordance
with GAAP.
"Consolidated Net Income" means for any period the
consolidated net income (or loss) of the Company and the Restricted
Subsidiaries for such period determined on a consolidated basis in accordance
with GAAP; provided, however, that there shall be excluded therefrom (a) the
net income (or loss) of any Person acquired by the Company or any Restricted
Subsidiary in a pooling-of-interests transaction for any period prior to the
date of such transaction, (b) the net income (or loss) of any Restricted
Subsidiary (other than any Guarantor) which is then subject to restrictions
that prevent or limit the payment of dividends or the making of distributions
to such Person to the extent of such restrictions (regardless of any waiver
thereof), (c) non-cash gains and losses due solely to fluctuations in currency
values, (d) the net income (or loss) of any Person that is not a Restricted
Subsidiary, except to the extent of the amount of dividends or other
distributions representing the Company's proportionate share of such Person's
net income for such period actually paid in cash to the Company by such Person
during such period, (e) other than for calculating the Basket, gains or losses
on Asset Dispositions by the Company or any Restricted Subsidiary, (f) other
than for calculating the Basket, all extraordinary or non-recurring gains or
losses determined in accordance with GAAP, (g) the effect of FASB 52
(hyperinflationary accounting) and interpretations by the SEC thereof and (h)
in the case of a successor to the Company by consolidation or merger or as a
transferee of the Company's assets, any earnings (or losses) of the successor
corporation prior to such consolidation, merger or transfer of assets.
"Consolidated Net Worth" of any Person means the
consolidated stockholders' equity of such Person, determined on a consolidated
basis in accordance with GAAP, less (without duplication) amounts attributable
to Disqualified Stock of such Person or attributable to Unrestricted
Subsidiaries.
"Continuing Director" means a director who either was a
member of the Board of Directors of the Company on the Issue Date or who became
a director of the Company subsequent to the Issue Date and whose election, or
nomination for election by the Company's stockholders, was duly approved by a
majority of the Continuing Directors then on the Board of Directors of the
Company, either by a specific vote or by approval of the proxy
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statement issued by the Company on behalf of the entire Board of Directors of
the Company in which such individual is named as nominee for director.
"Currency Agreement" means, with respect to any Person, any
foreign exchange contract, currency swap agreement or other similar agreement
or arrangement, which may include the use of derivatives, designed to protect
such Person against, or to expose such Person to, fluctuations in currency
values.
"Default" means any event that is, or after notice or lapse
of time or both would become, an Event of Default.
"Designated Senior Debt" means (i) so long as the Senior
Credit Facility is in effect, the Senior Debt incurred thereunder and (ii) any
other Senior Debt which has at the time of initial issuance an aggregate
outstanding principal amount in excess of $25 million which has been so
designated as Designated Senior Debt by the Board of Directors of the Company
at the time of initial issuance in a resolution delivered to the Trustee.
"Disinterested Director" means a member of the Board of
Directors of the Company who does not have any material direct or indirect
financial interest in or with respect to the transaction being considered.
"Disqualified Stock" of any Person means any Capital Stock of
such Person which, by its terms (or by the terms of any security into which it
is convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the option of the holder thereof,
in whole or in part, on or prior to the final maturity of the Notes; provided,
however, that any such Capital Stock that so matures or is redeemable in part
shall be deemed Disqualified Stock only to the extent that it so matures or is
so redeemable.
"DTC" means The Depository Trust Company or its successors.
"Euroclear" means Morgan Guaranty Trust Company of New York
(Brussels Office) as operator of the Euroclear System.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated by the SEC thereunder.
"Exchange Registration Statement" has the meaning set forth
in the Registration Rights Agreement.
"Fair Market Value" means, with respect to any asset, the
price (after taking into account any liabilities relating to such asset) which
could be negotiated in an arm's-length transaction, for cash, between a willing
seller and a willing and
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able buyer, neither of which is under any compulsion to complete the
transaction; provided, however, that the Fair Market Value of any such asset
or assets shall be determined conclusively (i) for any determination pursuant
to the covenant described under Section 4.05 or 4.06 by the Board of Directors
of the Company acting in good faith, which determination shall be evidenced by
a resolution of such Board delivered to the Trustee, and (ii) for any other
determination by an officer of the Company acting in good faith.
"Floor Plan Notes" means Indebtedness of the Company or any
Restricted Subsidiary all of the proceeds of which are used to purchase
vehicles and/or vehicle parts and supplies to be sold in the ordinary course of
business of the Company and the Restricted Subsidiaries.
"GAAP" means generally accepted accounting principles,
consistently applied, as in effect on the Issue Date in the United States of
America, as set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as is approved by a significant
segment of the accounting profession in the United States.
"Guarantee" means a guarantee of the Notes by a Guarantor
under this Indenture.
"guarantee" means, as applied to any obligation, (i) a
guarantee (other than by endorsement of negotiable instruments for collection
in the ordinary course of business), direct or indirect, in any manner, of any
part or all of such obligation and (ii) an agreement, direct or indirect,
contingent or otherwise, the practical effect of which is to assure in any way
the payment or performance (or payment of damages in the event of
non-performance) of all or any part of such obligation, including, without
limiting the foregoing, the payment of amounts drawn down by letters of credit.
A guarantee shall include, without limitation, any agreement to maintain or
preserve any other Person's financial condition or to cause any other Person to
achieve certain levels of operating results. It is understood that the
obligations of the Company under the Support Agreement dated as of June 14,
1996 between the Company and Atlantic Auto Second Funding Corporation
constitute a guarantee for purposes of this Indenture only to the extent of the
accrued liability, if any, of the Company for any breach of the representations
and warranties of Atlantic Finance contained in Section 3.2 of the Purchase
Agreement dated as of June 14, 1996 between Atlantic Auto Second Funding
Corporation and Atlantic Finance, and that obligations of the Company under
similar agreements will constitute a guarantee for purposes of this Indenture
only to the extent of similar accrued liabilities.
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"Guarantor" means (i) each Subsidiary of the Company that, on
the Issue Date, is an obligor (including as guarantor) under, or in respect of,
the Senior Credit Facility and (ii) each Subsidiary of the Company that
pursuant to the terms of this Indenture executes a supplemental indenture to
this Indenture as a Guarantor, in each case, until such Subsidiary is released
from its Guarantee.
"Holder" or "Securityholder" means the Person in whose name a
Security is registered on the Registrar's books.
"Incur" means, with respect to any Indebtedness or other
obligation of any Person, to create, issue, incur (including by conversion,
exchange or otherwise), assume, guarantee or otherwise become liable in respect
of such Indebtedness or other obligation or the recording, as required pursuant
to GAAP or otherwise, of any such Indebtedness or other obligation on the
balance sheet of such Person (and "Incurrence," "Incurred" and "Incurring"
shall have meanings correlative to the foregoing). Indebtedness of any Person
or any of its Subsidiaries existing at the time such Person becomes a
Restricted Subsidiary (or is merged into or consolidates with the Company or
any Restricted Subsidiary), whether or not such Indebtedness was incurred in
connection with, or in contemplation of, such Person becoming a Restricted
Subsidiary (or being merged into or consolidated with the Company or any
Restricted Subsidiary), shall be deemed Incurred at the time any such Person
becomes a Restricted Subsidiary or merges into or consolidates with the Company
or any Restricted Subsidiary. Neither the accrual of interest, nor the
accretion of accreted value, shall be deemed to be an Incurrence.
"Indebtedness" means (without duplication), with respect to
any Person, whether recourse is to all or a portion of the assets of such
Person and whether or not contingent, (i) all indebtedness of such Person for
money borrowed, (ii) all indebtedness of such Person evidenced by bonds,
debentures, notes or other similar instruments, including obligations incurred
in connection with the acquisition of property, assets or businesses, (iii)
every reimbursement obligation of such Person with respect to letters of
credit, bankers' acceptances or similar facilities issued for the account of
such Person, (iv) all indebtedness of such Person issued or assumed as the
deferred purchase price of property or services (but excluding trade accounts
payable or accrued liabilities arising in the ordinary course of business), (v)
every Capital Lease Obligation of such Person, (vi) every net obligation under
interest rate swap or similar agreements or foreign currency hedge, exchange or
similar agreements of such Person and (vii) every obligation of the type
referred to in clauses (i) through (vi) of another Person and all dividends of
another Person the payment of which, in either case, such Person has guaranteed
or is responsible or liable for, directly or indirectly, as obligor, guarantor
or otherwise. Indebtedness (a) shall include (without duplication) the
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liquidation preference and any mandatory redemption payment obligations in
respect of any Disqualified Stock of the Company, and any Preferred Stock of a
Subsidiary of the Company, (b) shall never be calculated taking into account
any cash and cash equivalents held by such Person, (c) shall not include
obligations arising from agreements of the Company or a Subsidiary to provide
for indemnification, adjustment of purchase price, earn-out or other similar
obligations, in each case, Incurred in connection with the acquisition or
disposition of any business or assets of a Subsidiary, (d) which provides that
an amount less than the principal amount thereof shall be due upon any
declaration of acceleration thereof shall be deemed to be incurred or
outstanding in an amount equal to the accreted value thereof at the date of
determination determined in accordance with GAAP and (e) shall not be deemed to
be Incurred upon the issuance of a guarantee by the Company, in connection with
an Acquisition, of the price of its Common Stock, unless such guarantee is
evidenced by a bond, debenture, note or similar instrument.
"Indenture" means this Indenture as amended or supplemented
from time to time in accordance with its terms.
"Initial Global Securities" means the Regulation S Global
Security and the 144A Global Security, each of which contains a Securities Act
Legend.
"Initial Securities" means the Securities containing a
Securities Act Legend.
"Institutional Accredited Investor" means an institution that
is an "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3)
or (7) of Regulation D promulgated under the Securities Act.
"interest" means, with respect to the Notes, the sum of any
cash interest and any Additional Interest on the Notes.
"Interest Payment Date" has the meaning given to such term
in the Securities.
"Interest Rate Obligations" means, with respect to any
Person, the obligations of such Person under (i) interest rate swap agreements,
interest rate cap agreements and interest rate collar agreements, and (ii)
other agreements or arrangements designed to protect such Person against, or to
expose such Person to, fluctuations in interest rates.
"Investment" by any Person means any direct or indirect loan,
advance, guarantee or other extension of credit or capital contribution to (by
means of transfers of cash or other property to others or payments for property
or services for the account or use of others, or otherwise), or purchase or
acquisition of
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Capital Stock, bonds, notes, debentures or other securities or evidence of
Indebtedness issued by, any other Person.
"Issue Date" means July 23, 1997, the original issue date of
the Series A Notes.
"Lien" means, with respect to any property or assets, any
mortgage or deed of trust, pledge, hypothecation, assignment, security
interest, lien, charge, easement (other than any easement not materially
impairing usefulness or marketability), encumbrance, preference, priority or
other security agreement with respect to such property or assets (including,
without limitation, any conditional sale or other title retention agreement
having substantially the same economic effect as any of the foregoing).
"Net Available Proceeds" from any Asset Disposition by any
Person means cash or Cash Equivalents received (including by way of sale or
discounting of a note, installment receivable or other receivable, but
excluding any other consideration received (x) in the form of assumption by the
acquiror of Indebtedness or other obligations relating to such properties or
assets or (y) in any other non-cash form) therefrom by such Person, including
any cash received by way of deferred payment or upon the monetization or other
disposition of any non-cash consideration (including notes or other securities)
received in connection with such Asset Disposition, net of (i) all legal, title
and recording tax expenses, commissions, any relocation expenses incurred as a
result thereof and other fees and expenses incurred and all federal, state,
foreign and local taxes required to be accrued as a liability as a consequence
of such Asset Disposition, (ii) all payments made by such Person or any of its
Restricted Subsidiaries on, or in respect of, any Indebtedness (A) which is
secured by such assets in accordance with the terms of any Lien upon or with
respect to such assets or (B) which must, by the terms of such Lien or
otherwise (including the obtaining of any necessary consent in respect thereof
to such Asset Disposition) or by applicable law, be repaid as a result of such
Asset Disposition, (iii) all payments made with respect to liabilities
associated with the assets which are the subject of the Asset Disposition,
including, without limitation, trade payables and other accrued liabilities,
(iv) appropriate amounts to be provided by such Person or any Restricted
Subsidiary thereof, as the case may be, as a reserve in accordance with GAAP
against any liabilities associated with such assets and retained by such Person
or any Restricted Subsidiary thereof, as the case may be, after such Asset
Disposition, including, without limitation, liabilities under any
indemnification obligations and severance and other employee termination costs
associated with such Asset Disposition, until such time as such amounts are no
longer reserved or such reserve is no longer necessary (at which time any
remaining amounts will become Net Available Proceeds to be allocated in
accordance with the provisions of the second and third sentences of Section
4.05) and (v) all distributions and
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other payments made to minority interest holders in Restricted Subsidiaries of
such Person or joint ventures as a result of such Asset Disposition.
"Net Investment" means, in respect of any Investment and the
issuer thereof (and its Subsidiaries), the excess of (i) the aggregate amount
of all Investments made therein by the Company or any Restricted Subsidiary on
or after the Issue Date (including the Fair Market Value of all such
Investments not made in cash or Cash Equivalents, valued at the time of each
such Investment) over (ii) the aggregate amount returned in cash or Cash
Equivalents on or with respect to Investments in such Person (whenever such
Investment was made) whether through the sale or other disposition of the
Investment in such Person (or portion thereof) or through interest payments,
principal payments, dividends or other distributions or payments; provided,
however, that such payments or distributions shall not be (and have not been)
included in Section 4.06(a)(3)(D).
"Offer to Purchase" means a written offer (the "Offer") sent
by the Company by first class mail, postage prepaid, to each Holder at his
address appearing in the register for the Securities on the date of the Offer
offering to purchase up to the principal amount of Securities specified in such
Offer at the purchase price specified in such Offer (as determined pursuant to
this Indenture). Unless otherwise required by applicable law, the Offer shall
specify an expiration date (the "Expiration Date") of the Offer to Purchase
which shall be not less than 30 days nor more than 60 days after the date of
such Offer and a settlement date (the "Purchase Date") for purchase of
Securities within five Business Days after the Expiration Date. The Company
shall notify the Trustee in writing at least 15 Business Days (or such shorter
period as is acceptable to the Trustee) prior to the mailing of the Offer of
the Company's obligation to make an Offer to Purchase, and the Offer shall be
mailed by the Company or, at the Company's written request, by the Trustee in
the name and at the expense of the Company. The Offer shall contain all the
information required by applicable law to be included therein. The Offer shall
contain all instructions and materials necessary to enable such holders to
tender Securities pursuant to the Offer to Purchase. The Offer shall also
state:
(i) the Section of this Indenture pursuant to which the
Offer to Purchase is being made;
(ii) the Expiration Date and the Purchase Date;
(iii) the aggregate principal amount of the outstanding
Securities offered to be purchased by the Company pursuant to the
Offer to Purchase (including, if less than 100%, the manner by which
such amount has been determined pursuant to the Section of this
Indenture requiring the Offer to Purchase) (the "Purchase Amount");
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(iv) the purchase price to be paid by the Company for each
$1,000 aggregate principal amount of Securities accepted for payment
(as specified pursuant to this Indenture) (the "Purchase Price");
(v) that the Holder may tender all or any portion of the
Securities registered in the name of such Holder and that any portion
of a Security tendered must be tendered in an integral multiple of
$1,000 principal amount;
(vi) the place or places where Securities are to be
surrendered for tender pursuant to the Offer to Purchase;
(vii) that interest on any Security not tendered or tendered
but not purchased by the Company pursuant to the Offer to Purchase
will continue to accrue;
(viii) that on the Purchase Date the Purchase Price will
become due and payable upon each Security being accepted for payment
pursuant to the Offer to Purchase and that interest thereon shall
cease to accrue on and after the Purchase Date;
(ix) that each Holder electing to tender all or any portion
of a Security pursuant to the Offer to Purchase will be required to
surrender such Security at the place or places specified in the Offer
prior to the close of business on the Expiration Date (such Security
being duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Trustee duly
executed by, the Holder thereof or his attorney duly authorized in
writing);
(x) that Holders will be entitled to withdraw all or any
portion of Securities tendered if the Company (or its Paying Agent)
receives, not later than the close of business on the fifth Business
Day next preceding the Expiration Date, a facsimile transmission or
letter setting forth the name of the Holder, the principal amount of
the Securities the holder tendered, the certificate number of the
Securities the Holder tendered and a statement that such Holder is
withdrawing all or a portion of his tender;
(xi) that (a) if Securities in an aggregate principal amount
less than or equal to the Purchase Amount are duly tendered and not
withdrawn pursuant to the Offer to Purchase, the Company shall
purchase all such Securities and (b) if Securities in an aggregate
principal amount in excess of the Purchase Amount are tendered and
not withdrawn pursuant to the Offer to Purchase, the Company shall
purchase Securities having an aggregate principal amount equal to the
Purchase Amount on a pro rata basis (with such adjustments as may be
deemed appropriate so that only
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Securities in denominations of $1,000 or integral multiples thereof
shall be purchased); and
(xii) that in the case of any Holder whose Security is
purchased only in part, the Company shall execute and the Trustee
shall authenticate and deliver to the holder of such Security without
service charge, a new Security or Securities, of any authorized
denomination as requested by such holder in writing, in an aggregate
principal amount equal to and in exchange for the unpurchased portion
of the Security so tendered.
An Offer to Purchase shall be governed by and effected in
accordance with the provisions above pertaining to any Offer. An Offer to
Purchase may be conditioned on the consummation of the applicable Change of
Control events.
"Officer" means the Chairman of the Board, the Chief
Executive Officer, any Executive Vice President, any Senior Vice President, the
Chief Financial Officer, the Treasurer, or the Secretary of the Company.
"Officers' Certificate" means a certificate, signed by two
Officers (at least one of whom shall be the Chief Financial Officer or Senior
Vice President-Finance of the Company) or by an Officer and an Assistant
Treasurer or Assistant Secretary of the Company, complying with Sections 13.04
and 13.05.
"Opinion of Counsel" means a written opinion from legal
counsel who is reasonably acceptable to the Trustee. The counsel may be an
employee of or counsel to the Company or the Trustee.
"Participant" means any Person who has an account with DTC.
"Permitted Holder" means any of Trace, Harvard Private
Capital Group, Inc., Aeneas Venture Corporation and Apollo Advisors, L.P. and
their Affiliates.
"Permitted Investments" means (i) Investments in Cash
Equivalents; (ii) Investments representing Capital Stock or obligations issued
to the Company or any Restricted Subsidiary in the course of the good faith
settlement of claims against any other Person or by reason of a composition or
readjustment of debt or a reorganization of any debtor of the Company or any
Restricted Subsidiary; (iii) deposits, including interest-bearing deposits,
maintained in the ordinary course of business in banks or with floor plan
lenders; (iv) trade receivables and prepaid expenses, in each case arising in
the ordinary course of business; provided, however, that such receivables and
prepaid expenses would be recorded as assets of such Person in accordance with
GAAP; (v) endorsements for collection or deposit in the ordinary course of
business by such Person of bank drafts and similar negotiable instruments of
such other Person received as
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payment for ordinary course of business trade receivables; (vi) any Interest
Rate Obligations or Currency Agreements with an unaffiliated Person permitted
by Section 4.14; (vii) Investments received as consideration for an Asset
Disposition in compliance with Section 4.05; (viii) Investments in the Company
or any Restricted Subsidiary or any Person that after giving effect to such
Investment will be a Restricted Subsidiary; and (ix) prepaid expenses and
loans or advances to employees of the Company or any Restricted Subsidiary in
the ordinary course of business.
"Permitted Refinancing" means, with respect to any
Indebtedness, Indebtedness to the extent representing a Refinancing of such
Indebtedness; provided, however, that (a) such Indebtedness does not exceed the
amount of Indebtedness so Refinanced plus the amount of any premium required to
be paid in connection with such Refinancing pursuant to the terms of the
Indebtedness Refinanced or the amount of any premium reasonably determined by
the issuer of such Indebtedness as necessary to accomplish such Refinancing by
means of a tender offer, exchange offer or privately negotiated repurchase,
plus the expenses of such issuer reasonably incurred in connection therewith,
(b) in the case of any Refinancing of Indebtedness that is pari passu with the
Securities, such Refinancing Indebtedness is made pari passu with or
subordinate in right of payment to the Securities, and, in the case of any
Refinancing of Indebtedness that is subordinate in right of payment to the
Securities, such Refinancing Indebtedness is subordinate in right of payment to
the Securities on terms no less favorable to the Holders than those contained
in the Indebtedness being Refinanced, (c) the Refinancing Indebtedness by its
terms, or by the terms of any agreement or instrument pursuant to which such
Indebtedness is issued, does not have an Average Life that is less than the
remaining Average Life of the Indebtedness being Refinanced and does not permit
redemption or other retirement (including pursuant to any required offer to
purchase to be made by the Company or a Restricted Subsidiary) of such
Indebtedness at the option of the holder thereof prior to the final stated
maturity of the Indebtedness being Refinanced, other than a redemption or other
retirement at the option of the holder of such Indebtedness (including pursuant
to a required offer to purchase made by the Company or a Restricted Subsidiary)
which is conditioned upon a change of control of the Company pursuant to
provisions substantially similar to those contained in Section 4.14 or which is
otherwise on terms substantially similar to those in such Indebtedness being
Refinanced and (d) such Refinancing Indebtedness is Incurred by the obligor on
the Indebtedness being Refinanced or by the Company or any Restricted
Guarantor.
"Person" means any individual, corporation, limited or
general partnership, limited liability company, limited liability partnership,
joint venture, association, joint stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
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"Preferred Stock" means Capital Stock of any Person of any
class or classes (however designated) that ranks prior, as to the payment of
dividends or as to the distribution of assets upon any voluntary or involuntary
liquidation, dissolution or winding up of such Person, to Capital Stock of any
other class of such Person.
"principal" of any Security means principal of, and premium,
if any, with respect to, such Security.
"Private Exchange Securities" has the meaning set forth in
the Registration Rights Agreement.
"Public Equity Offering" means an underwritten public
offering of Common Stock of the Company pursuant to an effective registration
statement filed under the Securities Act (excluding any registration statements
filed on Form S-8 or any successor form).
"Purchase Date" has the meaning set forth in the definition
of "Offer to Purchase."
"Purchase Money Debt" means Indebtedness of the Company or
any Restricted Subsidiary Incurred for the purpose of financing all or any part
of the purchase price, or the cost of construction or improvement, of any
property; provided, however, that the aggregate amount of such Indebtedness
shall not exceed the lesser of (x) the Fair Market Value of such property or
(y) such purchase price or cost.
"Qualified Institutional Buyer" or "QIB" shall have the
meaning specified under Rule 144A under the Securities Act.
"Qualified Stock" means any Capital Stock of the Company
other than Disqualified Stock.
"Refinance" means refinance, renew, extend, replace, defease
or refund; and "Refinancing" and "Refinanced" have correlative meanings.
"Registration Rights Agreement" means the Registration
Rights Agreement dated the date hereof among the Company, the guarantors party
thereto and J.P. Morgan Securities Inc. and Scotia Capital Markets (USA) Inc.
"Regulation S" means Regulation S under the Securities Act.
"Replacement Assets" means (x) properties and assets (other
than cash or any Capital Stock or other security) that will be used in a
business of the Company and the Restricted Subsidiaries conducted on the Issue
Date or in a business reasonably related thereto or (y) Capital Stock of any
Person
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that will become on the date of Acquisition thereof a Restricted Subsidiary as
a result of such Acquisition.
"Restricted Guarantor" means, at any time of determination, a
Restricted Subsidiary that is a Guarantor at such time.
"Restricted Physical Security" means a Physical Security
containing, or required to contain, a Securities Act Legend.
"Restricted Subsidiary" means any Subsidiary of the Company
other than an Unrestricted Subsidiary.
"Rule 144" means Rule 144 under the Securities Act.
"Rule 144A" means Rule 144A under the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities" means the 11% Senior Subordinated Notes due
2007, Series B issued under this Indenture.
"Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations promulgated by the SEC thereunder.
"Senior Credit Facility" means the Credit Agreement, dated as
of March 20, 1997, among the Company, as borrower, the guarantors party
thereto, The Bank of Nova Scotia, as administrative agent, Morgan Guaranty
Trust Company of New York, as documentation agent, and the lenders named
therein, including any deferrals or Refinancings thereof, or amendments,
modifications or supplements thereto (including, without limitation, any
amendment increasing the amount borrowed thereunder), and any agreement
providing therefor whether by or with the same or any other lender, creditors
or group of creditors and including related notes, guarantee agreements and
other instruments and agreements executed in connection therewith.
"Senior Debt" means, with respect to any Person at any date,
(i) in the case of the Company or any Guarantor, all Indebtedness under the
Senior Credit Facility, including principal, premium, if any, and interest on
such Indebtedness and all other amounts due on or in connection with such
Indebtedness, including all charges, fees and expenses, (ii) all other
Indebtedness of such Person for borrowed money, including principal, premium,
if any, and interest on such Indebtedness, unless the agreement or instrument
under which such Indebtedness for borrowed money is created, incurred, assumed
or guaranteed expressly provides that such Indebtedness for borrowed money is
not senior or superior in right of payment to the Securities, and all
Refinancings or amendments thereof and (iii) all interest on
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any Indebtedness referred to in clauses (i) and (ii) accruing during the
pendency of any bankruptcy or insolvency proceeding, whether or not allowed or
allowable as a claim in such proceeding thereunder. Notwithstanding the
foregoing, Senior Debt of any Person shall not include (a) Indebtedness which
is pursuant to its terms or any agreement or instrument relating thereto
subordinated or junior in right of payment or otherwise to any other
Indebtedness of such Person (including, without limitation, Indebtedness
represented by Disqualified Stock); provided, however, that no Indebtedness
shall be deemed to be subordinated or junior in right of payment or otherwise
to any other Indebtedness of a Person solely by reason of such other
Indebtedness being secured and such Indebtedness not being secured, (b) the
Securities or the Guarantees, (c) any Indebtedness of such Person to any of
its Subsidiaries, (d) Indebtedness Incurred in violation of Section 4.04, (e)
obligations for goods, materials or services purchased or rendered in the
ordinary course of business or obligations consisting of trade payables, (f)
any liability for federal, state, local or other taxes owed or owing by such
Person and (g) any Indebtedness which, when incurred and without respect to
any election under Section 1111(b) of the Bankruptcy Code, is without recourse
to such Person.
"Series A Indenture" means the Indenture dated as of July 23,
1997 among the Company, the guarantors party thereto and The Bank of New York,
as trustee.
"Series A Notes" means the 11% Senior Subordinated Notes due
2007 issued under the Series A Indenture or substantially identical securities
for which such notes are exchanged pursuant to the Registration Rights
Agreement dated as of July 23, 1997 among the Company, the guarantors party
thereto and the initial purchasers party thereto.
"Shelf Registration Statement" has the meaning set forth in
the Registration Rights Agreement.
"Subordinated Indebtedness" of the Company or any Guarantor
means any Indebtedness (whether outstanding on the date hereof or hereafter
Incurred) which is by its terms expressly subordinate or junior in right of
payment to the Securities or the Guarantee of such Guarantor, as the case may
be.
"Subsidiary" of any Person means (i) a corporation more than
50% of the outstanding Voting Stock of which is owned, directly or indirectly,
by such Person or by one or more other Subsidiaries of such Person or by such
Person and one or more other Subsidiaries thereof or (ii) any other Person
(other than a corporation) in which such Person, or one or more other
Subsidiaries of such Person or such Person and one or more other Subsidiaries
thereof, directly or indirectly, has at least a majority ownership and voting
power relating to the policies, management and affairs thereof.
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"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code
ss.ss. 77aaa-77bbbb), as in effect on the date of this Indenture, except as
provided in Section 10.03.
"Trace" means Trace International Holdings, Inc. and its
successors.
"Trust Officer" means any officer within the corporate trust
department (or any successor group) of the Trustee including any vice
president, assistant vice president, assistant secretary or any other officer
or assistant officer of the Trustee customarily performing functions similar to
those performed by the persons who at that time shall be such officers, and
also means, with respect to a particular corporate trust matter, any other
officer to whom such trust matter is referred because of his knowledge of and
familiarity with the particular subject.
"Trustee" means the party named as such in this Indenture
until a successor replaces it in accordance with the provisions of this
Indenture and thereafter means such successor.
"Unrestricted Global Securities" means one or more Global
Securities that do not and are not required to bear the Securities Act Legend.
"Unrestricted Physical Securities" means one or more Physical
Securities that do not and are not required to bear the Securities Act Legend.
"Unrestricted Securities" means the Securities that do not
and are not required to bear the Securities Act Legend.
"Unrestricted Subsidiary" means (i) any Subsidiary of the
Company that at the time of determination has been designated an Unrestricted
Subsidiary by the Board of Directors in the manner provided below, (ii) any
Subsidiary of an Unrestricted Subsidiary and (iii) until it is redesignated as
a Restricted Subsidiary in the manner provided below, Atlantic Finance. Any
such designation by the Board of Directors will be evidenced to the Trustee by
promptly filing with the Trustee a copy of the board resolution giving effect
to such designation and an officers' certificate certifying that such
designation complied with the foregoing provisions. The Company shall not, and
shall not permit any Restricted Subsidiary to, directly or indirectly, at any
time, (a) be liable for any Indebtedness of any Unrestricted Subsidiary (other
than in the form of an Investment therein in accordance with Section 4.06) or
(b) be liable for any Indebtedness that provides that the holder thereof may
(upon notice, lapse of time or both) declare a default thereon or cause the
payment thereof to be accelerated or payable prior to its stated final maturity
upon the occurrence of a default with respect to any Indebtedness of any
Unrestricted Subsidiary. The Board of Directors may redesignate any
Unrestricted Subsidiary to
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be a Restricted Subsidiary; provided, however, that (i) no Default shall have
occurred and be continuing and (ii) Indebtedness of such Unrestricted
Subsidiary and all Liens on any asset of such Unrestricted Subsidiary
outstanding immediately following such redesignation would, if Incurred at
such time, be permitted to be Incurred under this Indenture.
"Voting Stock" of any Person means the Capital Stock of such
Person which ordinarily has voting power for the election of directors (or
persons performing similar functions) of such Person, whether at all times or
only so long as no senior class of securities has such voting power by reason
of any contingency.
"Wholly Owned Subsidiary" means a Restricted Subsidiary all
of the outstanding Capital Stock or other ownership interests of which (other
than directors' qualifying shares) shall at the time be owned by the Company
and/or by one or more Wholly Owned Subsidiaries.
SECTION 1.2. Other Definitions.
Term Defined in Section
---- ------------------
"Bankruptcy Law" 6.01
"Change of Control" 4.14
"Custodian" 6.01
"Event of Default" 6.01
"Funding Guarantor" 11.05
"Global Security" 2.01(a)
"Guarantor Blockage Period" 12.02(a)
"Guarantor Payment Blockage Notice" 12.02(a)
"144A Global Security" 2.01(a)
"Paying Agent" 2.03
"Payment Blockage Notice" 8.02(a)
"Payment Blockage Period" 8.02(a)
"Physical Security" 2.01(b)
"Registrar" 2.03
"Regulation S Global Security" 2.01(a)
"Required Filing Date" 4.12
"Securities Act Legend" 2.06(f)
"United States Government Obligation" 9.01
SECTION 1.3. Incorporation by Reference of Trust Indenture
Act.
Whenever this Indenture refers to a provision of the TIA,
the provision is incorporated by reference in and made a part of this
Indenture. The following TIA terms used in this Indenture have the following
meanings:
"Commission" means the Securities and Exchange Commission.
"indenture securities" means the Securities.
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"indenture security holder" means a Holder or Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the
Trustee.
"obligor" on the indenture securities means the Company or
any other obligor on the Securities.
All other TIA terms used in this Indenture that are defined
by the TIA, defined by TIA reference to another statute or defined by
Commission rule and not otherwise defined herein have the meanings assigned to
them therein.
SECTION 1.4. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting
principles in effect from time to time, and any other reference in
this Indenture to "generally accepted accounting principles" refers
to GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in
the plural include the singular;
(5) Section and Article references are to sections and
articles of this Indenture;
(6) provisions apply to successive events and transactions;
and
(7) "herein," "hereof" and other words of similar import
refer to this Indenture as a whole and not to any particular Article,
Section or other subdivision.
ARTICLE II.
THE SECURITIES
SECTION 2.1. Form and Dating.
(a) Global Securities. Securities offered and sold to QIBs in
reliance on Rule 144A shall be issued initially substantially in the form of
Exhibit A hereto in the name of Cede & Co. as nominee of DTC, duly executed by
the Company and
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authenticated by the Trustee as hereinafter provided. Such Security shall be
referred to herein as the "144A Global Security." Securities offered and sold
in reliance on Regulation S shall be issued initially substantially in the
form of Exhibit A hereto in the name of Cede & Co. as nominee of DTC, duly
executed by the Company and authenticated by the Trustee as hereinafter
provided. Such Security shall be referred to herein as the "Regulation S
Global Security." Unrestricted Global Securities shall be issued initially in
accordance with Sections 2.06(b)(iv), 2.06(c)(ii) and 2.06(e) in the name of
Cede & Co. as nominee of DTC, duly executed by the Company and authenticated
by the Trustee as hereinafter provided. The 144A Global Security, Regulation S
Global Security and Unrestricted Global Security are collectively referred to
herein as the "Global Securities." The aggregate principal amount of each of
the Global Securities may from time to time be increased or decreased by
adjustments made on the records of the Trustee as hereinafter provided.
Each Global Security shall represent such of the outstanding
Securities as shall be specified therein and each shall provide that it shall
represent the aggregate principal amount of outstanding Securities from time to
time endorsed thereon and that the aggregate principal amount of outstanding
Securities represented thereby may from time to time be reduced or increased,
as appropriate, to reflect exchanges, redemptions and transfers of interests
therein in accordance with the terms of this Indenture. Any endorsement of a
Global Security to reflect the amount of any increase or decrease in the
principal amount of outstanding Securities represented thereby shall be made by
the Trustee in accordance with instructions given by the Holder thereof as
required by Section 2.06.
Upon the issuance of the Global Security to DTC, DTC shall
credit, on its internal book-entry registration and transfer system, its
Participants' accounts with the respective interests owned by such
Participants. Interests in the Global Securities shall be limited to
Participants, including Euroclear and Cedel, and indirect Participants.
The Participants shall not have any rights either under this
Indenture or under any Global Security with respect to such Global Security
held on their behalf by DTC, and DTC may be treated by the Company, the Trustee
and any agent of the Company or the Trustee as the absolute owner of such
Global Security for the purpose of receiving payment of or on account of the
principal of and, subject to the provisions of this Indenture, interest on the
Global Securities and for all other purposes. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Trustee or any agent of the
Company or the Trustee from giving effect to any written certification, proxy
or other authorization furnished by DTC or impair, as between DTC and its
Participants, the operation of customary practices of DTC governing the
exercise of the rights of an owner of a beneficial interest in any Global
Security.
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The provisions of the "Operating Procedures of the Euroclear
System," "Terms and Conditions Governing Use of Euroclear," the "General Terms
and Conditions of Cedel Bank" and "Customer Handbook" of Cedel, and successors
provisions, shall be applicable to interests in the Regulation S Global
Security that are held by the Participants through Euroclear or Cedel.
(b) Physical Securities. Securities offered and sold to
Institutional Accredited Investors who are not also QIBs shall be issued
substantially in the form of Exhibit A hereto, in certificated form and issued
in the names of the purchasers thereof (or their nominees), duly executed by
the Company and authenticated by the Trustee as hereinafter provided.
Securities in certificated form shall be referred to herein as the "Physical
Securities."
(c) Securities. The provisions of the form of Securities
contained in Exhibit A hereto are incorporated herein by reference. The
Securities and the Trustee's Certificates of Authentication shall be
substantially in the form of Exhibit A hereto. The Securities may have
notations, legends or endorsements required by law, stock exchange rule or
usage. The Company shall approve the form of the Securities and any notation,
legend or endorsement (including notations relating to the Guarantee) on them.
If required, the Securities shall bear the appropriate legend regarding
original issue discount for federal income tax purposes. Each Security shall be
dated the date of its authentication. The terms and provisions contained in the
Securities shall constitute, and are hereby expressly made, a part of this
Indenture.
SECTION 2.2. Execution and Authentication.
Two Officers of the Company shall sign the Securities for the
Company by manual or facsimile signature.
If an Officer whose signature is on a Security no longer
holds that office at the time the Trustee authenticates the Security, the
Security shall be valid nevertheless.
A Security shall not be valid until an authorized officer of
the Trustee manually signs the certificate of authentication on the Security.
The signature shall be conclusive evidence that the Security has been
authenticated under this Indenture.
The Trustee shall authenticate (i) Initial Securities for
original issue in the aggregate principal amount of up to $50,000,000 in one or
more series, (ii) Private Exchange Securities from time to time only in
exchange for a like principal amount of Initial Global Securities and (iii)
Unrestricted Securities from time to time only (x) in exchange for a like
principal amount of Initial Securities or (y) in an aggregate principal amount
of not more than the excess of
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$50,000,000 over the sum of the aggregate principal amount of (A) Initial
Securities then outstanding, (B) Private Exchange Securities then outstanding
and (C) Unrestricted Securities issued in accordance with clause (iii)(x), in
each case upon a written order signed by an Officer of the Company. The order
shall specify the amount of Securities to be authenticated and the date on
which the original issue of Securities is to be authenticated. The order shall
also provide instructions concerning registration, amounts for each Holder and
delivery. The aggregate principal amount of Securities outstanding at any time
may not exceed $50,000,000 except as provided in Section 2.07. The Securities
shall be issued only in registered form, without coupons and only in
denominations of $1,000 and any integral multiple thereof.
SECTION 2.3. Registrar and Paying Agent.
The Company shall maintain an office or agency where
Securities may be presented for registration of transfer or for exchange
("Registrar") and an office or agency where Securities may be presented for
payment ("Paying Agent"). The Company may have one or more co-Registrars and
one or more additional paying agents. The term "Paying Agent" includes any
additional paying agent.
The Company shall enter into an appropriate agency agreement
with any Agent not a party to this Indenture. The agreement shall implement the
provisions of this Indenture that relate to such Agent and shall, if required,
incorporate the provisions of the TIA. The Company shall notify the Trustee in
writing of the name and address of any such Agent. If the Company fails to
maintain a Registrar or Paying Agent, the Trustee shall act as such and shall
be entitled to appropriate compensation in accordance with the provisions of
Section 7.07.
The Company initially appoints the Trustee as Registrar and
Paying Agent. The Company shall give written notice to the Trustee in the
event that the Company decides to act as Registrar. None of the Company, its
Subsidiaries or any of their Affiliates may act as Paying Agent.
SECTION 2.4. Paying Agent To Hold Money in Trust.
The Company shall require each Paying Agent to agree in
writing to hold in trust for the benefit of Securityholders or the Trustee all
money held by the Paying Agent for the payment of principal of or interest on
the Securities (whether such money has been paid to it by the Company or any
other obligor on the Securities), and the Company and the Paying Agent shall
each notify the Trustee in writing of any default by the Company (or any other
obligor on the Securities) in making any such payment. The Company at any time
may require a Paying Agent to pay all money held by it to the Trustee and
account for any funds disbursed and the Trustee may at any time during the
continuance
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of any payment default, upon written request to a Paying Agent, require such
Paying Agent to pay all money held by it to the Trustee and to account for any
funds disbursed. Upon making such payment the Paying Agent shall have no
further liability for the money delivered to the Trustee.
SECTION 2.5. Securityholder Lists.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of Securityholders. If the Trustee is not the Registrar, the Company
shall furnish to the Trustee at least five Business Days before each Interest
Payment Date and at such other times as the Trustee may request in writing a
list in such form and as of such date as the Trustee may reasonably require of
the names and addresses of Securityholders.
SECTION 2.6. Transfer and Exchange.
(a) Transfer and Exchange of Global Securities. Transfer of
the Global Securities shall be by delivery.
Global Securities will be exchanged by the Company for
Physical Securities only (i) if DTC notifies the Company that it is unwilling
or unable to continue to act as depositary with respect to the Global
Securities or ceases to be a clearing agency registered under the Exchange Act
and, in either case, a successor depositary registered as a clearing agency
under the Exchange Act is not appointed by the Company within 120 days, (ii) at
any time if the Company in its sole discretion determines that the Global
Securities (in whole but not in part) should be exchanged for Physical
Securities or (iii) if the owner of an interest in the Global Securities
requests such Physical Securities, following an Event of Default under the
Indenture, in a writing delivered through DTC to the Trustee.
Upon the occurrence of any of the events specified in the
previous paragraph, Physical Securities shall be issued in such names as DTC
shall instruct the Trustee in writing and the Trustee shall cause the aggregate
principal amount of the applicable Global Security to be reduced accordingly
and direct DTC to make a corresponding reduction in its book-entry system. The
Company shall execute and the Trustee shall authenticate and make available for
delivery to the Person designated in the instructions a Physical Security in
the appropriate principal amount. The Trustee shall make available for delivery
such Physical Securities to the Persons in whose names such Securities are so
registered. Physical Securities issued in exchange for an Initial Global
Security pursuant to this Section 2.06(a) shall bear the Securities Act Legend
and shall be subject to all restrictions on transfer contained therein. Global
Securities may also be exchanged or replaced, in whole or in part, as provided
in Sections 2.07 and 2.10. Every Security authenticated and made available for
delivery in exchange for, or in lieu of, a
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Global Security or any portion thereof, pursuant to Section .2.07 or 2.10,
shall be authenticated and made available for delivery in the form of, and
shall be, a Global Security. A Global Security may not be exchanged for
another Security other than as provided in this Section 2.06(a).
(b) Transfer and Exchange of Interests in Global Securities.
The transfer and exchange of interests in Global Securities shall be effected
through DTC, in accordance with this Indenture and the procedures of DTC
therefor. Interests in Initial Global Securities shall be subject to
restrictions on transfer comparable to those set forth herein to the extent
required by the Securities Act. The Trustee shall have no obligation to
ascertain DTC's compliance with any such restrictions on transfer. Transfers of
interests in Global Securities shall also require compliance with subparagraph
(i) below, as well as one or more of the other following subparagraphs as
applicable:
(i) All Transfers and Exchanges of Interests in Global
Securities. In connection with all transfers and exchanges of
interests in Global Securities (other than transfers of interests in a
Global Security to Persons who take delivery thereof in the form of an
interest in the same Global Security), the transferor of such interest
must deliver to the Registrar (1) instructions given in accordance
with the Applicable Procedures from a Participant or an indirect
Participant directing DTC to credit or cause to be credited an
interest in the specified Global Security in an amount equal to the
interest to be transferred or exchanged, (2) a written order given in
accordance with the Applicable Procedures containing information
regarding the Participant account to be credited with such increase
and (3) instructions given by the Holder of the Global Security to
effect the transfer referred to in (1) and (2) above.
(ii) Transfer of Interests in the Same Initial Global
Security. Interests in any Initial Global Security may be transferred
to Persons who take delivery thereof in the form of an interest in
the same Initial Global Security in accordance with the transfer
restrictions set forth in Section 2.06(f) hereof.
(iii) Transfer of Interests to Another Initial Global
Security. Interests in any Initial Global Security may be transferred
to Persons who take delivery thereof in the form of an interest in
another Initial Global Security if the Registrar receives the
following:
(A) (A)if the transferee will take delivery in the
form of an interest in the 144A Global Security, then the
transferor must deliver a certificate in the form of Exhibit
B hereto, including the certifications in item 1 thereof; or
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(B) (B)if the transferee will take delivery in the
form of an interest in the Regulation S Global Security,
then the transferor must deliver a certificate in the form
of Exhibit B hereto, including the certifications in item 2
thereof.
(iv) Transfer and Exchange of Interests in Initial Global
Security for Interests in an Unrestricted Global Security. Interests
in any Initial Global Security may be exchanged by the holder thereof
for an interest in the Unrestricted Global Security or transferred to
a Person who takes delivery thereof in the form of an interest in the
Unrestricted Global Security if:
(A) such exchange or transfer is effected pursuant
to the Exchange Registration Statement in accordance with
the Registration Rights Agreement;
(B) any such transfer is effected pursuant to the
Shelf Registration Statement in accordance with the
Registration Rights Agreement; or
(C) the Registrar receives the following:
(1) if the holder of such an interest in an Initial
Global Security proposes to exchange it for an interest in
the Unrestricted Global Security, a certificate from such
Holder in the form of Exhibit C hereto, including the
certifications in item 1(a) thereof;
(2) if the holder of such an interest in an Initial
Global Security proposes to transfer it to a Person who
shall take delivery thereof in the form of an interest in an
Unrestricted Global Security, a certificate in the form of
Exhibit B hereto, including the certification in item 4
thereof; and
(3) in each such case set forth in this paragraph
(C), an Opinion of Counsel in form reasonably acceptable to
the Company, to the effect that such exchange or transfer is
in compliance with the Securities Act and that the
restrictions on transfer contained herein and in Section
2.06(f) hereof are not required in order to maintain
compliance with the Securities Act.
If any such transfer is effected pursuant to paragraph (B) above at a
time when an Unrestricted Global Security has not yet been issued, the
Company shall issue and, upon receipt of an authentication order in
accordance with Section 2.02, the Trustee shall authenticate one or
more Unrestricted Global Securities in an aggregate principal amount
equal to
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the principal amount of interests in the Initial Global Security
transferred pursuant to paragraph (B) above.
(v) Notation by the Trustee of Transfer of Interests
Among Global Securities. Upon satisfaction of the requirements for
transfer of interests in Global Securities pursuant to clauses (iii)
or (iv) above, the Trustee, as Registrar, shall reduce or cause to be
reduced the aggregate principal amount of the relevant Global Security
from which the interests are being transferred, and increase or cause
to be increased the aggregate principal amount of the Global Security
to which the interests are being transferred, in each case, by the
principal amount so transferred and shall direct DTC to make
corresponding adjustments in its book-entry system. No transfer of
interests of a Global Security shall be effected until, and any
transferee pursuant thereto shall succeed to the rights of a holder of
such interests only when, the Registrar has made appropriate
adjustments to the applicable Global Security in accordance with this
paragraph.
(c) Transfer or Exchange of Physical Securities for
Interests in a Global Security.
(i) If any Holder of Physical Securities required to
contain the Securities Act Legend proposes to exchange such Securities
for an interest in a Global Security or to transfer such Physical
Securities to a Person who takes delivery thereof in the form of an
interest in a Global Security, then, upon receipt by the Registrar of
the following documentation (all of which may be submitted by
facsimile):
(A) if the Holder of such Physical Registered
Securities proposes to exchange such Securities for an
interest in an Initial Global Security, a certificate from
such Holder in the form of Exhibit C hereto, including the
certifications in item 2 thereof;
(B) if such Physical Securities are being
transferred to a QIB in accordance with Rule 144A under the
Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item 1
thereof; or
(C) if such Physical Securities are being
transferred to a Non-U.S. Person (as defined in Regulation
S) in an offshore transaction in accordance with Rule 904
under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications item
2 thereof,
the Trustee shall cancel the Physical Securities, increase or cause to
be increased the aggregate principal amount of,
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in the case of clause (B) above, the 144A Global Security, in the
case of clause (C) above, the Regulation S Global Security, and
direct DTC to make a corresponding increase in its book-entry system.
(ii) A Holder of Physical Securities required to contain
the Securities Act Legend may exchange such Securities for an interest
in the Unrestricted Global Security or transfer such Restricted
Physical Securities to a Person who takes delivery thereof in the form
of an interest in the Unrestricted Global Security only:
(A) if such exchange or transfer is effected
pursuant to the Exchange Registration Statement in
accordance with the Registration Rights Agreement;
(B) any such transfer is effected pursuant to the
Shelf Registration Statement in accordance with the
Registration Rights Agreement;
(C) upon receipt by the Registrar of the following
documentation (all of which may be submitted by facsimile):
(1) if the Holder of such Physical
Securities proposes to exchange such Securities for
an interest in the Unrestricted Global Security, a
certificate from such Holder in the form of Exhibit
C hereto, including the certifications in item 1(b)
thereof;
(2) if the Holder of such Registered
Securities proposes to transfer such Securities to
a Person who shall take delivery thereof in the
form of an interest in the Unrestricted Global
Security, a certificate in the form of Exhibit B
hereto, including the certifications in item 4
thereof; and
(3) in each such case set forth in this
paragraph (C), an Opinion of Counsel in form
reasonably acceptable to the Company, to the effect
that such exchange or transfer is in compliance
with the Securities Act and that the restrictions
on transfer contained herein and in Section 2.06(f)
hereof are not required in order to maintain
compliance with the Securities Act.
If any such transfer is effected pursuant to paragraph
(B) above at a time when an Unrestricted Global Security has
not yet been issued, the Company shall issue and, upon
receipt of an authentication order in accordance with Section
2.02, the Trustee shall authenticate one or more Unrestricted
Global
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Securities in an aggregate principal amount equal
to the principal amount of Physical Securities
transferred pursuant to paragraph (B) above.
(d) Transfer and Exchange of Physical Securities.
(i) Transfer of a Physical Security to Another
Physical Security. Following the occurrence of one or more of the
events specified in Section 2.06(a), a Physical Security may be
transferred to Persons who take delivery thereof in the form of
another Physical Security if the Registrar receives the following:
(A) if the transfer is being effected pursuant to
and in accordance with Rule 144A, then the transferor must
deliver a certificate in the form of Exhibit B hereto,
including the certifications in item 3(a) thereof; or
(B) if the transfer is being effected pursuant to
and in accordance with Regulation S, then the transferor
must deliver a certificate in the form of Exhibit B hereto,
including the certifications in item 3(b) thereof.
(ii) Transfer and Exchange of Restricted Physical
Securities for Unrestricted Physical Securities. Following the
occurrence of one or more of the events specified in Section 2.06(a),
a Restricted Physical Security may be exchanged by the Holder thereof
for an Unrestricted Physical Security or transferred to a Person who
takes delivery thereof in the form of an Unrestricted Physical
Security if:
(A) such exchange or transfer is effected pursuant
to the Exchange Registration Statement in accordance with
the Registration Rights Agreement;
(B) any such transfer is effected pursuant to the
Shelf Registration Statement in accordance with the
Registration Rights Agreement; or
(C) the Registrar receives a certificate from such
holder in the form of Exhibit C hereto, including the
certifications in item 1(c) thereof and an Opinion of
Counsel in form reasonably acceptable to the Company, to the
effect that such exchange or transfer is in compliance with
the Securities Act and, that the restrictions on transfer
contained herein and in Section 2.06(f) hereof are not
required in order to maintain compliance with the Securities
Act.
(iii) Exchange of Physical Securities. When Physical
Securities are presented by a Holder to the Registrar with a request
to register the exchange of such Physical Securities
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for an equal principal amount of Physical Securities of other
authorized denominations, the Registrar shall make the exchange as
requested only if the Physical Securities are endorsed or accompanied
by a written instrument of transfer in form satisfactory to the
Registrar duly executed by such Holder or by his attorney duly
authorized in writing and shall be issued only in the name of such
Holder or its nominee. The Physical Securities issued in exchange for
Physical Securities shall bear the Securities Act Legend and shall be
subject to all restrictions on transfer contained herein in each case
to the same extent as the Physical Securities so exchanged.
(iv) Return of Physical Securities. In the event of a
transfer pursuant to clauses (i) or (ii) above and the Holder thereof
has delivered certificates representing an aggregate principal amount
of Securities in excess of that to be transferred, the Company shall
execute and the Trustee shall authenticate and make available for
delivery to the Holder of such Security, without service charge, a new
Physical Security or Securities of any authorized denomination
requested by the Holder, in an aggregate principal amount equal to the
portion of the Security not so transferred.
(e) Exchange Offer. Upon the occurrence of the Exchange Offer
(as defined in the Registration Rights Agreement) in accordance with the
Registration Rights Agreement, the Company shall issue and, upon receipt of an
authentication order in accordance with Section 2.02, the Trustee shall
authenticate one or more Unrestricted Global Securities in an aggregate
principal amount equal to the principal amount of the interests in the Initial
Global Securities tendered for acceptance (and not withdrawn) by persons
participating therein. Concurrently with the issuance of such Securities, the
Trustee shall cause the aggregate principal amount of the applicable Initial
Global Securities to be reduced accordingly and direct DTC to make a
corresponding reduction in its book-entry system. The Trustee shall cancel any
Restricted Physical Certificates in accordance with Section 2.11 hereof.
In the case that one or more of the events specified in
Section 2.06(a) have occurred, upon the occurrence of such Exchange Offer, the
Company shall issue and, upon receipt of an authentication order in accordance
with Section 2.02, the Trustee shall authenticate Unrestricted Physical
Securities in an aggregate principal amount equal to the principal amount of
the Restricted Physical Securities tendered for acceptance by persons
participating therein.
(f) Legends. Each Initial Global Security and each Restricted
Physical Security shall bear the legend (the "Securities Act Legend") in
substantially the following form:
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"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED
HEREBY MAY NOT BE REOFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE
SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY
AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY
MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a)
TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144 UNDER THE SECURITIES ACT OR (c) OUTSIDE THE UNITED
STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, (2) TO THE
COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES
OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL,
AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE
RESALE RESTRICTIONS SET FORTH IN (A) ABOVE."
(g) Global Security Legend. Each Global Security shall bear
a legend in substantially the following form:
"UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR
SECURITIES IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE
TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TRUST
COMPANY, A NEW YORK CORPORATION ("DTC"), TO A NOMINEE OF DTC,
OR BY ANY SUCH NOMINEE OF DTC, OR BY DTC TO A SUCCESSOR
DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITORY. UNLESS
THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE
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OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
"TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE &
CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND
TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN SECTION 2.06 OF THE INDENTURE."
(h) Cancellation and/or Adjustment of Global Securities. At
such time as all interests in the Global Securities have been exchanged for
Physical Securities, all Global Securities shall be returned to or retained and
canceled by the Trustee in accordance with Section 2.11 hereof. At any time
prior to such cancellation, if any interest in a Global Security is exchanged
for an interest in another Global Security or for Physical Securities, the
principal amount of Securities represented by such Global Security shall be
reduced accordingly and an endorsement shall be made on such Global Security,
by the Trustee to reflect such reduction.
(i) General Provisions Relating to All Transfers and
Exchanges.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Global
Securities and Physical Securities upon a written order signed by an
Officer of the Company or at the Registrar's request.
(ii) No service charge shall be made to a Holder for any
registration of transfer or exchange, but the Company may require
payment of a sum sufficient to cover any stamp or transfer tax or
similar governmental charge payable in connection therewith (other
than any such stamp or transfer taxes or similar governmental charge
payable upon exchange or transfer pursuant to Sections 2.10, 3.06,
4.05, 4.14 and 10.05 hereof).
(iii) All Global Securities and Physical Securities issued
upon any registration of transfer or exchange of Global Securities or
Physical Securities shall be the valid obligations of the Company,
evidencing the same debt, and entitled to the same benefits under this
Indenture, as the Global Securities or Physical Securities surrendered
upon such registration of transfer or exchange.
(iv) The Company shall not be required (A) to issue, to
register the transfer of or to exchange Securities during a period
beginning at the opening of 15 Business Days before
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the day of any mailing of notice of redemption of Securities under
Section 3.02 and ending at the close of business on the day of such
mailing, (B) to register the transfer of or to exchange any Security
so selected for redemption in whole or in part, except the unredeemed
portion of any Security being redeemed in part or (C) to register the
transfer of or to exchange a Security between a record date and the
next succeeding Interest Payment Date.
(v) Prior to due presentment for the registration of a
transfer of any Security, the Trustee, any Agent and the Company may
deem and treat the Person in whose name any Security is registered as
the absolute owner of such Security for the purpose of receiving
payment of principal of and interest on such Securities and for all
other purposes, and none of the Trustee, any Agent or the Company
shall be affected by notice to the contrary.
(vi) The Trustee shall have no obligation or duty to
monitor, determine or inquire as to compliance with any restrictions
on transfer imposed under this Indenture or under applicable law with
respect to any transfers of any interest in any Security (including
any transfers between or among Participants or beneficial owners of
interests in any Global Security) or Physical Security other than to
reqire delivery of such certificates and other documentation or
evidence as are expressly required by, and to do so if and when
expressly required by the terms of, this Indenture, and to examine the
same to determine substantial compliance as to form with the express
requirements hereof.
SECTION 2.7. Replacement Securities.
If a mutilated Security is surrendered to the Trustee or if
the Holder of a Security claims that the Security has been lost, destroyed or
wrongfully taken, the Company shall issue and the Trustee shall authenticate a
replacement Security if the Trustee's requirements are met. The Holder shall
provide an indemnity bond in an amount sufficient in the judgment of the
Company and the Trustee to protect the Company, the Trustee or any Agent from
any loss which any of them may suffer if a Security is replaced may be required
by the Trustee or the Company. The Company and the Trustee each may charge such
Holder for its expenses in replacing such Security.
Every replacement Security is an additional obligation of the
Company.
SECTION 2.8. Outstanding Securities.
Securities outstanding at any time are all Securities that
have been authenticated by the Trustee except for those canceled by it, those
delivered to it for cancellation and those described in this Section as not
outstanding. A Security does
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not cease to be outstanding because the Company or one of its Affiliates holds
the Security.
If a Security is replaced pursuant to Section 2.07, it ceases
to be outstanding unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.
If the Paying Agent holds on a redemption date or Maturity
Date money sufficient to pay the principal of, and interest on Securities
payable on that date, then on and after that date such Securities cease to be
outstanding and interest on them ceases to accrue.
SECTION 2.9. Treasury Securities.
In determining whether the Holders of the required principal
amount of Securities have concurred in any direction, waiver or consent,
Securities owned by the Company, any Subsidiary or any of their respective
Affiliates shall be disregarded, except that for the purposes of determining
whether the Trustee shall be protected in relying on any such direction, waiver
or consent, only Securities that the Trustee actually knows are so owned shall
be so disregarded.
The Trustee may require an Officers' Certificate listing
securities owned by the Company, any Subsidiary or any of their respective
Affiliates.
SECTION 2.10. Temporary Securities.
Until definitive Securities are ready for delivery, the
Company may prepare and the Trustee shall authenticate temporary Securities.
Temporary Securities shall be substantially in the form of definitive
Securities but may have variations that the Company considers appropriate for
temporary Securities. Without unreasonable delay, the Company shall prepare and
the Trustee shall authenticate definitive Securities in exchange for temporary
Securities. Until such exchange, temporary Securities shall be entitled to the
same rights, benefits and privileges as definitive Securities.
SECTION 2.11. Cancellation.
The Company at any time may deliver Securities to the Trustee
for cancellation. The Registrar and the Paying Agent shall forward to the
Trustee any Securities surrendered to them for transfer, exchange or payment.
The Trustee and no one else shall cancel all Securities surrendered for
transfer, exchange, payment or cancellation. The Company may not issue new
Securities to replace, reissue or resell Securities which the Company has
redeemed, paid, purchased on the open market or otherwise, or otherwise
acquired or have been delivered to the Trustee for cancellation. The Trustee
(subject to the
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record-retention requirements of the Exchange Act) may, but shall not be
required to, destroy canceled Securities.
SECTION 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the
Securities, it shall pay the defaulted interest, plus any interest payable on
the defaulted interest pursuant to Section 4.01 hereof, to the persons who are
Securityholders on a subsequent special record date, and such term, as used in
this Section 2.12 with respect to the payment of any defaulted interest, shall
mean the fifteenth day next preceding the date fixed by the Company for the
payment of defaulted interest, whether or not such day is a Business Day. At
least 15 days before such special record date, the Company shall mail to each
Securityholder and to the Trustee a notice that states such special record
date, the payment date and the amount of defaulted interest to be paid.
SECTION 2.13. CUSIP or CINS Number.
The Company in issuing the Securities may use a "CUSIP" or
"CINS" number, and if so, such CUSIP or CINS number shall be included in
notices of redemption or exchange as a convenience to Holders; provided,
however, that any such notice may state that no representation is made as to
the correctness or accuracy of the CUSIP or CINS number printed in the notice
or on the Securities, and that reliance may be placed only on the other
identification numbers printed on the Securities. The Company will promptly
notify the Trustee of any change in the CUSIP or CINS number.
SECTION 2.14. Payments of Interest.
The Holder of a Physical Security at the close of business on
the regular record date with respect to any Interest Payment Date shall be
entitled to receive the interest payable on such Interest Payment Date
notwithstanding any transfer or exchange of such Physical Security subsequent
to the regular record date and prior to such Interest Payment Date, except if
and to the extent the Company shall default in the payment of the interest due
on such Interest Payment Date, in which case such defaulted interest shall be
paid in accordance with Section 2.12; and in the event of an exchange of a
Physical Security for a beneficial interest in any Global Security subsequent
to a regular record date or any special record date and prior to or on the
related Interest Payment Date or other payment date under Section 2.12, any
payment of the interest payable on such payment date with respect to any such
Physical Security shall be made to the Person in whose name such Physical
Security was registered on such record date. Payments of interest on the Global
Securities will be made on each Interest Payment Date to the Holder of the
Global Security on the record date with respect thereto; provided, however,
that, in the event of an exchange of all or a
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portion of a Global Security for a Physical Security subsequent to the regular
record date or any special record date and prior to or on the related Interest
Payment Date or other payment date under Section 2.12, any payment of interest
payable on such Interest Payment Date or other payment date with respect to
the Physical Security shall be made to the Holder of the Global Security as of
the applicable record date.
Subject to Section 4.01, interest shall be paid to DTC, with
respect to any Global Security held by DTC, on the applicable Interest Payment
Date in accordance with instructions received from DTC at least five Business
Days before the applicable Interest Payment Date.
ARTICLE III.
REDEMPTION
SECTION 3.1. Notices to Trustee.
If the Company elects to redeem Securities pursuant to
paragraph 5 of the Securities at the applicable redemption price set forth
thereon, it shall notify the Trustee in writing of the redemption date and the
principal amount of Securities to be redeemed.
The Company shall give the notice provided for in this
Section 3.01 at least 30 days before the redemption date (unless a shorter
notice shall be agreed to by the Trustee in writing) but not more than 60 days
before the redemption date, together with an Officers' Certificate stating that
such redemption will comply with the conditions contained herein.
SECTION 3.2. Selection of Securities To Be Redeemed.
If less than all of the Securities are to be redeemed
pursuant to paragraph 5 thereof, the Trustee shall select the Securities to be
redeemed pro rata or by lot or in such other manner as the Trustee shall deem
appropriate and fair. The Trustee shall make the selection from the Securities
then outstanding, subject to redemption and not previously called for
redemption. The Trustee may select for redemption portions (equal to $1,000 or
any integral multiple thereof) of the principal of Securities that have
denominations larger than $1,000. Provisions of this Indenture that apply to
Securities called for redemption also apply to portions of Securities called
for redemption.
SECTION 3.3. Notice of Redemption.
At least 30 days but not more than 60 days before a
redemption date, the Company shall mail a notice of redemption by first class
mail to each Holder whose Securities are to be redeemed.
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The notice shall identify the Securities to be redeemed and
shall state:
(1) the redemption date;
(2) the redemption price;
(3) the CUSIP number (subject to Section 2.13);
(4) the name and address of the Paying Agent to
which the Securities are to be surrendered for redemption;
(5) that Securities called for redemption must be
surrendered to the Paying Agent to collect the redemption
price;
(6) that, unless the Company defaults in making the
redemption payment, interest on Securities called for
redemption ceases to accrue on and after the redemption date
and the only remaining right of the Holders is to receive
payment of the redemption price upon surrender to the Paying
Agent; and
(7) if any Security is being redeemed in part, the
portion of the principal amount of such Security to be
redeemed and that, after the redemption date, upon surrender
of such Security, a new Security or Securities in principal
amount equal to the unredeemed portion thereof will be
issued.
At the Company's request, the Trustee shall give the notice
of redemption on behalf of the Company, in the Company's name and at the
Company's expense.
SECTION 3.4. Effect of Notice of Redemption.
Once a notice of redemption is mailed, Securities called for
redemption become due and payable on the redemption date and at the redemption
price. Upon surrender to the Paying Agent, such Securities shall be paid at the
redemption price, plus accrued interest thereon to the redemption date, but
interest installments whose maturity is on or prior to such redemption date
shall be payable to the Holders of record at the close of business on the
relevant record dates referred to in the Securities. The Trustee shall not be
required to (i) issue, authenticate, register the transfer of or exchange any
Security during a period beginning 15 days before the date a notice of
redemption is mailed and ending at the close of business on the date the
redemption notice is mailed, or (ii) register the transfer or exchange of any
Security so selected for redemption in whole or in part, except the unredeemed
portion of any Security being redeemed in part.
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SECTION 3.5. Deposit of Redemption Price.
On or prior to the redemption date, the Company shall deposit
with the Paying Agent money sufficient to pay the redemption price of and
accrued interest on all Securities to be redeemed on that date other than
Securities or portions thereof called for redemption on that date which have
been delivered by the Company to the Trustee for cancellation.
SECTION 3.6. Securities Redeemed in Part.
Upon surrender of a Security that is redeemed in part, the
Trustee shall authenticate for the Holder a new Security equal in principal
amount to the unredeemed portion of the Security surrendered.
ARTICLE IV.
COVENANTS
SECTION 4.1. Payment of Securities.
The Company shall pay the principal of and interest on the
Securities in the manner provided in the Securities. An installment of
principal or interest shall be considered paid on the date due if the Trustee
or Paying Agent holds on that date money designated for and sufficient to pay
the installment in full and is not prohibited from paying such money to the
Holders of the Securities pursuant to the terms of this Indenture.
The Company shall pay interest on overdue principal at the
same rate per annum borne by the Securities. The Company shall pay interest on
overdue installments of interest at the same rate per annum borne by the
Securities, to the extent lawful.
SECTION 4.2. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, The
City of New York, an office or agency where Securities may be surrendered for
registration of transfer or exchange or for presentation for payment and where
notices and demands to or upon the Company in respect of the Securities and
this Indenture may be served. The Company shall give prompt written notice to
the Trustee of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at
the address of the Trustee set forth in Section 13.02.
The Company may also from time to time designate one or more
other offices or agencies where the Securities may be presented or surrendered
for any or all such purposes and may
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from time to time rescind such designations; provided, however, that no such
designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in the Borough of Manhattan, The
City of New York, for such purposes. The Company shall give prompt written
notice to the Trustee of any such designation or rescission and of any change
in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of
the Trustee as one such office or agency of the Company in accordance with
Section 2.03.
SECTION 4.3. Limitation on Transactions with Affiliates.
The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, enter into any transaction with any of
their respective Affiliates, including, without limitation, the purchase, sale,
lease or exchange of property, the rendering of any service, or the making of
any guarantee, loan, advance or Investment, unless the terms of such
transaction are at least as favorable as the terms that could be obtained at
such time by the Company or such Restricted Subsidiary, as the case may be, in
a comparable transaction made on an arms'-length basis with a Person that is
not such an Affiliate; provided, however, that (x) if the aggregate
consideration exceeds $1.0 million, the Company shall deliver an Officers'
Certificate to the Trustee stating that a majority of the Disinterested
Directors have determined, in their good faith judgment, that the terms of such
transaction are at least as favorable as the terms that could be obtained at
such time by the Company or such Restricted Subsidiary, as the case may be, in
a comparable transaction made on an arms'-length basis with a Person that is
not such an Affiliate and (y) if the aggregate consideration exceeds $5.0
million the Company shall also deliver to the Trustee, prior to the
consummation of the transaction, the favorable written opinion of a nationally
recognized accounting, appraisal or investment banking firm as to the fairness
of the transaction to the Company or such Restricted Subsidiary, from a
financial point of view; provided, however, that this clause (y) shall not
apply to (I) transactions relating to the assumption by Trace of liabilities of
the Company or any Restricted Subsidiary under extended service contracts (or
Trace's indemnification of the Company or any Restricted Subsidiary for
liabilities thereof) or (II) the writing of extended service contracts by Trace
to customers of the Company or any Restricted Subsidiary. The provisions of
this covenant shall not apply to (i) transactions permitted by Section 4.06,
(ii) reasonable fees and compensation paid to, and indemnity provided on behalf
of, officers, directors and employees of the Company or any Restricted
Subsidiary in the ordinary course of business and on ordinary business terms or
as determined in good faith by the Board of Directors of the Company and (iii)
transactions solely between or among the Company and/or one or more Restricted
Subsidiaries.
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SECTION 4.4. Limitation on Incurrence of Indebtedness.
The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, Incur any Indebtedness, except:
(i) Indebtedness of the Company or any Restricted
Guarantor, if the Consolidated Cash Flow Ratio for the four full
fiscal quarters for which quarterly or annual financial statements are
available next preceding the Incurrence of such Indebtedness would be
greater than 2.0 to 1.0, and Permitted Refinancings thereof;
(ii) Indebtedness of the Company Incurred under the Senior
Credit Facility in an aggregate amount not to exceed $100.0 million
less any amount of Indebtedness repaid from the proceeds of Asset
Dispositions as provided under Section 4.05, which repayment results
in a permanent reduction of the commitments under the Senior Credit
Facility;
(iii) Indebtedness owed by the Company to any Restricted
Guarantor or Indebtedness owed by a Restricted Subsidiary to the
Company or a Restricted Guarantor; provided, however, upon either (x)
the transfer or other disposition by such Restricted Guarantor or the
Company of any Indebtedness so permitted under this clause (iii) to a
Person other than the Company or another Restricted Guarantor or (y)
such Restricted Guarantor's ceasing to be a Restricted Guarantor, the
provisions of this clause (iii) shall no longer be applicable to such
Indebtedness and such Indebtedness shall be deemed to have been
Incurred at the time of any such issuance, sale, transfer or other
disposition, as the case may be;
(iv) Interest Rate Obligations of the Company or any
Restricted Subsidiary relating to Indebtedness of the Company or such
Restricted Subsidiary permitted to be Incurred under this Indenture;
provided, however, that the notional amount of such Interest Rate
Obligations does not exceed the amount of the Indebtedness to which
such Interest Rate Obligations relate;
(v) Indebtedness of the Company or any Restricted
Subsidiary under Currency Agreements to the extent relating to (x)
Indebtedness of the Company or any Restricted Subsidiary permitted to
be Incurred under this Indenture and/or (y) obligations to purchase
assets, properties or services incurred in the ordinary course of
business of the Company or any Restricted Subsidiary; provided,
however, that such Currency Agreements do not increase the
Indebtedness or other obligations of the Company and the Restricted
Subsidiaries outstanding other than as a result of fluctuations in
foreign currency exchange rates or by
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reason of fees, indemnities or compensation payable thereunder;
(vi) Permitted Refinancings of any Indebtedness to the
extent outstanding on the Issue Date;
(vii) Indebtedness of the Company under the Securities
(including Unrestricted Securities), and Permitted Refinancings
thereof;
(viii) Floor Plan Notes;
(ix) Acquired Indebtedness and Permitted Refinancings
thereof;
(x) guarantees by the Company or any Restricted Guarantor of
Indebtedness of the Company or any Restricted Subsidiary otherwise
permitted to be Incurred under this Indenture;
(xi) Purchase Money Debt, and Permitted Refinancings
thereof, in an aggregate amount not to exceed $35.0 million at any
time outstanding;
(xii) Atlantic Finance Loans; and
(xiii) Indebtedness of the Company or any Restricted
Guarantor not otherwise permitted to be Incurred pursuant to clauses
(i) through (xii) above which, together with any other outstanding
Indebtedness Incurred pursuant to this clause (xiii) or Incurred
prior to the date hereof pursuant to Section 4.04(xiii) of the Series
A Indenture, does not exceed $20.0 million in the aggregate at any
time outstanding.
SECTION 4.5. Limitation on Certain Asset Dispositions.
The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, make one or more Asset Dispositions
unless: (i) the Company or such Restricted Subsidiary, as the case may be,
receives consideration for such Asset Disposition at least equal to the Fair
Market Value of the assets sold or disposed of; and (ii) not less than 80% of
the consideration for the disposition consists of (A) cash or Cash Equivalents
(including any held in escrow); (B) the assumption of Indebtedness (other than
non-recourse Indebtedness or any Subordinated Indebtedness) of the Company or
such Restricted Subsidiary or other obligations relating to such assets
(provided, however, that the Company and the Restricted Subsidiaries are
released from any liability for such Indebtedness); (C) Replacement Assets; or
(D) any combination of the foregoing clauses (A), (B) and (C). All Net
Available Proceeds of an Asset Disposition shall be applied within 360 days of
such Asset Disposition (i) to capital investments in
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properties or assets that will be used in a business of the Company and the
Restricted Subsidiaries conducted on the Issue Date or in a business
reasonably related thereto and/or (ii) to the permanent reduction and
prepayment of any Senior Debt of the Company then outstanding (including a
permanent reduction of commitments in respect thereof). Any Net Available
Proceeds from any Asset Disposition that are not applied as provided in the
immediately preceding sentence shall be used not later than the 361st day
after such Asset Disposition to make an Offer to Purchase outstanding
Securities at a purchase price in cash equal to 100% of their principal
amount, plus accrued and unpaid interest to the Purchase Date; provided,
however, that so long as the Series A Notes are outstanding and the Series A
Indenture so requires, the Company may purchase the Series A Notes before
purchasing the Securities pursuant to an Offer to Purchase under this Section
4.05. Notwithstanding the foregoing, the Company may defer making any Offer to
Purchase outstanding Securities until there are aggregate unutilized Net
Available Proceeds from Asset Dispositions otherwise subject to the two
immediately preceding sentences equal to or in excess of $10.0 million (at
which time, the entire unutilized Net Available Proceeds from Asset
Dispositions otherwise subject to the two immediately preceding sentences, and
not just the amount in excess of $10.0 million, shall be applied as required
pursuant to this paragraph). Any remaining Net Available Proceeds following
the completion of the required Offer to Purchase may be used by the Company
for any other purpose (subject to the other provisions of this Indenture) and
the amount of Net Available Proceeds then required to be otherwise applied in
accordance with this Section 4.05 shall be reset to zero, subject to any
subsequent Asset Disposition. These provisions will not apply to a transaction
consummated in compliance with Section 5.01.
In the event that the Company makes an Offer to Purchase the
Securities, the Company shall comply with any applicable securities laws and
regulations, including any applicable requirements of Section 14(e) of, and
Rule 14e-1 under, the Exchange Act.
SECTION 4.6. Limitation on Restricted Payments.
(a) The Company shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly,
(i) declare or pay any dividend, or make any distribution
of any kind or character (whether in cash, property or securities), in
respect of any class of Capital Stock of the Company or any Restricted
Subsidiary (excluding any (x) dividends or distributions payable
solely in shares of Qualified Stock or in options, warrants or other
rights to acquire such shares, or (y) in the case of any Restricted
Subsidiary, dividends or distributions payable to the Company or a
Restricted Subsidiary),
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(ii) purchase, redeem or otherwise acquire or retire for
value any shares of Capital Stock of the Company or any Restricted
Subsidiary, any options, warrants or rights to purchase or acquire
such shares or any securities convertible or exchangeable into such
shares (excluding any such shares, options, warrants, rights or
securities that are owned by the Company or a Restricted Subsidiary),
(iii) make any Investment (other than a Permitted
Investment), or make any payment on a guarantee of any obligation of
any Person other than the Company or a Restricted Subsidiary, or
(iv) redeem, defease, repurchase, retire or otherwise
acquire or retire for value, prior to any scheduled maturity,
repayment or sinking fund payment, Subordinated Indebtedness (each of
the transactions described in clauses (i) through (iv) (other than
any exception to any such clause) being a "Restricted Payment")
if, at the time thereof:
(1) a Default shall have occurred and be
continuing, or
(2) upon giving effect to such Restricted Payment,
the Company could not Incur at least $1.00 of additional
Indebtedness pursuant to Section 4.04(i), or
(3) upon giving effect to such Restricted Payment,
the aggregate amount of all Restricted Payments (other than
any Restricted Payment described in clause (ii), (iii),
(iv), (v), (vi), (vii) or (viii) of the next paragraph)
(including the Fair Market Value of all Restricted Payments
not made in cash or Cash Equivalents, valued at the time of
each such Restricted Payment) declared or made on or after
the Issue Date exceeds the sum of the following (the
"Basket"):
(A) 50% of cumulative Consolidated Net
Income of the Company (or, in the case cumulative
Consolidated Net Income of the Company shall be
negative, less 100% of such deficit) for the period
(treated as one accounting period) from the
beginning of the fiscal quarter in which the Issue
Date occurs through the last day of the fiscal
quarter for which financial statements are
available; plus
(B) the aggregate net cash proceeds
received (other than from a Subsidiary of the
Company) after the Issue Date from the issuance of,
or equity contribution with respect to, shares of
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Qualified Stock and warrants, rights or options to
purchase or acquire such shares; plus
(C) the amount by which Indebtedness of
the Company or any Restricted Subsidiary (other
than Subordinated Indebtedness) is reduced on the
Company's balance sheet upon the conversion or
exchange (other than by a Subsidiary of the
Company) subsequent to the Issue Date into
Qualified Stock (less the amount of any cash, or
the Fair Market Value of any other property,
distributed by the Company or any Restricted
Subsidiary upon such conversion or exchange to the
extent such cash or other property reduces the
amount of such Indebtedness); plus
(D) the aggregate after-tax net proceeds
(consisting of cash and Cash Equivalents) from the
sale or other disposition of, or any distribution
in respect of, any Investment (other than any such
proceeds that the Company elects to be applied
toward the calculation of Net Investment under
clause (vii) or (viii) of the next paragraph)
constituting a Restricted Payment made after the
Issue Date; provided, however, that any gain (or
loss) on such sale or disposition or any such
distribution included in such after-tax net
proceeds shall not be included in determining
Consolidated Net Income for purposes of clause (a)
above; provided, further, that amounts included in
this clause (d) shall not exceed the Net Investment
by the Company in the Person (or its Subsidiaries)
in respect of which such Investment was made; plus
(E) $10.00 million.
(b) The foregoing provisions will not prohibit any of the
following:
(i) any dividend on any class of Capital Stock of the
Company or any Restricted Subsidiary paid within 60 days after the
declaration thereof if, on the date when the dividend was declared,
the Company or such Restricted Subsidiary, as the case may be, could
have paid such dividend in accordance with the provisions of this
Indenture;
(ii) the Refinancing of any Subordinated Indebtedness
otherwise permitted pursuant to Section 4.04(v);
(iii) the exchange or conversion of any Indebtedness of the
Company or any Restricted Subsidiary for or into Qualified Stock;
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(iv) any Restricted Payment made with the proceeds of a
substantially concurrent sale (other than to a Subsidiary of the
Company) for cash of Qualified Stock;
(v) any Investment to the extent that the consideration
therefor consists of Qualified Stock;
(vi) required or ratable payments to holders of minority
interests in any Restricted Subsidiary;
(vii) any Investments in Atlantic Finance or any of its
Subsidiaries; provided, however, that the Net Investment in respect
of Investments made pursuant to this clause (vii) or made prior to
the date hereof pursuant to Section 4.06(b)(vii) of the Series A
Indenture shall not exceed $25.0 million in the aggregate at any time
outstanding; and
(viii) Investments not otherwise permitted pursuant to
clauses (i) through (vii) above; provided, however, that the Net
Investment in respect of Investments made pursuant to this clause
(viii) or made prior to the date hereof pursuant to Section
4.06(b)(viii) of the Series A Indenture shall not exceed $20.0
million in the aggregate at any time outstanding;
provided, however, that (I) with respect to each of clauses (iv), (v), (vi),
(vii) and (viii) no Default shall have occurred and be continuing and (II) no
issuance of Qualified Stock pursuant to clause (ii), (iii), (iv), (v), (vi),
(vii) or (viii) shall increase the Basket.
(c) For purposes of this Section 4.06, (i) an "Investment"
shall be deemed to be made at the time any Restricted Subsidiary is designated
as an Unrestricted Subsidiary in an amount (proportionate to the Company's
equity interest in such Restricted Subsidiary) equal to the Fair Market Value
of such Restricted Subsidiary at such time; provided, however, that in the
event that any Subsidiary acquired after the Issue Date is designated an
Unrestricted Subsidiary, the amount of Investment deemed made at such time
shall be equal to the Net Investment of the Company and the Restricted
Subsidiaries in such Restricted Subsidiary at such time; (ii) upon the
redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary, the
Basket shall be increased by the amount (proportionate to the Company's equity
interest in such Unrestricted Subsidiary) equal to the lesser of (x) the Fair
Market Value of such Unrestricted Subsidiary at the time of such redesignation
and (y) the Net Investment of the Company and the Restricted Subsidiaries in
such Unrestricted Subsidiary; provided, however, that in the event that any
Subsidiary acquired after the Issue Date is redesignated a Restricted
Subsidiary, the amount of such increase shall be equal to the Net Investment of
the Company and the Restricted Subsidiaries in such Unrestricted Subsidiary at
such time; and (iii) an "Investment" shall be deemed to be made at the time
that
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the ownership or voting power of the Company and the Restricted Subsidiaries
in any Restricted Subsidiary is reduced to below majority (but greater than
zero) in an amount equal to the Fair Market Value of such former Restricted
Subsidiary at such time multiplied by the percentage ownership or voting power
(whichever is less) of the Company and the Restricted Subsidiaries in such
former Restricted Subsidiary; provided, however, that in the event that the
ownership or voting power of any Subsidiary acquired after the Issue Date is
so reduced, the amount of Investment deemed made at such time shall be equal
to the Net Investment of the Company and the Restricted Subsidiaries in such
former Restricted Subsidiary at such time. Notwithstanding the foregoing,
Atlantic Finance and its Subsidiaries shall be designated Unrestricted
Subsidiaries as of the Issue Date and such designation shall not be deemed an
Investment.
SECTION 4.7. Corporate Existence.
Subject to Article Five, the Company shall do or shall cause
to be done all things necessary to preserve and keep in full force and effect
its corporate existence and the corporate, partnership or other existence of
each of its Subsidiaries in accordance with the respective organizational
documents of each such Subsidiary and the rights (charter and statutory) and
material franchises of the Company and its Subsidiaries; provided, however,
that the Company shall not be required to preserve any such right or franchise,
or the corporate existence of any Subsidiary, if the Board of Directors of the
Company shall determine that the preservation thereof is no longer desirable in
the conduct of the business of the Company and its Subsidiaries, taken as a
whole, and that the loss thereof is not, and will not be, adverse in any
material respect to the Holders; provided, further, however, that a
determination of the Board of Directors of the Company shall not be required in
the event of a merger of one or more Wholly Owned Subsidiaries with or into
another Wholly Owned Subsidiary or another Person, if the surviving Person is a
Wholly Owned Subsidiary organized under the laws of the United States or a
State thereof or of the District of Columbia.
SECTION 4.8. Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, all material taxes,
assessments and governmental charges levied or imposed upon the Company or any
of its Subsidiaries or upon the income, profits or property of the Company or
any of its Subsidiaries; provided, however, that the Company shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings or where the failure to
effect such payment is not adverse in any material respect to the Holders.
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SECTION 4.9. Notice of Defaults.
Within five days after becoming aware of any Default, if such
Default is then continuing, the Company shall promptly deliver an Officers'
Certificate to the Trustee specifying the details of such Default and the
action which the Company proposes to take with respect thereto.
SECTION 4.10. Maintenance of Properties.
The Company shall cause all material properties owned by or
leased to it or any of its Subsidiaries and used or useful in the conduct of
its business or the business of any of its Subsidiaries to be maintained and
kept in normal condition, repair and working order and supplied with all
necessary equipment and shall cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Company may be necessary, so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; provided,
however, that nothing in this Section 4.10 shall prevent the Company or any of
its Subsidiaries from discontinuing the use, operation or maintenance of any of
such properties, or disposing of any of them, if such discontinuance or
disposal is, in the judgment of the Board of Directors or of the board of
directors of the Subsidiary concerned, or of an officer (or other agent
employed by the Company or of any of its Subsidiaries) of the Company or such
Subsidiary having managerial responsibility for any such property, desirable in
the conduct of the business of the Company or any of its Subsidiaries, and if
such discontinuance or disposal is not adverse in any material respect to the
Holders.
SECTION 4.11. Compliance Certificate.
The Company shall deliver to the Trustee within 45 days after
the end of each of the first three fiscal quarters of the Company and within 90
days after the close of each fiscal year a certificate signed by the principal
executive officer, principal financial officer or principal accounting officer
stating that a review of the activities of the Company has been made under the
supervision of the signing officers with a view to determining whether a
Default has occurred and whether or not the signers know of any Default by the
Company that occurred during such fiscal quarter or fiscal year. If they do
know of such a Default, the certificate shall describe all such Defaults, their
status and the action the Company is taking or proposes to take with respect
thereto. The first certificate to be delivered by the Company pursuant to this
Section 4.11 shall be for the fiscal quarter ending December 31, 1997.
SECTION 4.12. Provision of Financial Information.
Whether or not the Company is subject to Section 13(a) or
15(d) of the Exchange Act, or any successor provision thereto,
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the Company shall file with the Commission the annual reports, quarterly
reports and other documents which the Company would have been required to file
with the Commission pursuant to such Section 13(a) or 15(d) or any successor
provision thereto if the Company were so required, such documents to be filed
with the Commission on or prior to the respective dates (the "Required Filing
Dates") by which the Company would have been required so to file such
documents if the Company were so required. The Company shall also in any event
(a) within 15 days of each Required Filing Date (i) transmit by mail to all
Holders of Securities as their names and addresses appear in the Security
Register, without cost to such Holders, and (ii) file with the Trustee, copies
of such annual reports, quarterly reports and other documents which the
Company is required to file with the Commission pursuant to the foregoing
sentence, and (b) if, notwithstanding the preceding sentence, filing such
documents by the Company with the Commission is not permitted under the
Exchange Act, promptly upon written request supply copies of such documents to
any prospective holder of Securities.
Delivery of such reports, information and documents to the
Trustee is for informational purposes only and the Trustee's receipt of such
shall not constitute constructive notice of any information contained therein
or determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
SECTION 4.13. Waiver of Stay, Extension or Usury Laws.
The Company covenants (to the extent that it may lawfully do
so) that it shall not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension law
or any usury law or other law, which would prohibit or forgive the Company from
paying all or any portion of the principal of and/or interest on the Securities
as contemplated herein, wherever enacted, now or at any time hereafter in
force, or which may affect the covenants or the performance of this Indenture;
and (to the extent that it may lawfully do so) the Company hereby expressly
waives all benefit or advantage of any such law, and covenants that it shall
not hinder, delay or impede the execution of any power herein granted to the
Trustee, but shall suffer and permit the execution of every such power as
though no such law had been enacted.
SECTION 4.14. Change of Control.
Within 30 days following a Change of Control, the Company
will commence an Offer to Purchase all outstanding Securities at a purchase
price in cash equal to 101% of their principal amount, plus accrued and unpaid
interest to the Purchase Date. Such Offer to Purchase will be consummated not
earlier than 30 days and not later than 60 days after the commencement thereof.
Each Holder shall be entitled to tender
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all or any portion of the Securities owned by such Holder pursuant to the
Offer to Purchase, subject to the requirement that any portion of a Security
tendered must bear an integral multiple of $1,000 principal amount.
A "Change of Control" will be deemed to have occurred in the
event that (whether or not otherwise permitted by this Indenture) after the
Issue Date (a) any transaction (including, without limitation, any merger or
consolidation) shall be consummated after which any Person or any Persons
acting together that would constitute a group (for purposes of Section 13(d) of
the Exchange Act, or any successor provision thereto) (a "Group"), together
with any Affiliates, other than Permitted Holders, shall "beneficially own" (as
defined in Rule 13d-3 under the Exchange Act, or any successor provision
thereto) at least (x) 50% of the voting power of the outstanding Voting Stock
of the Company or (y) 40% of the voting power of the Voting Stock of the
Company, and the Permitted Holders own in the aggregate less than such Person
or Group (in doing the "own less than" comparison in this clause (ii), the
holdings of the Permitted Holders who are members of the new Group shall not be
counted in the voting power of such new Group); (b) (x) the Company or any
Restricted Subsidiary sells, leases or otherwise transfers all or substantially
all of the assets of the Company and the Restricted Subsidiaries, taken as a
whole, to any Person other than a Wholly Owned Subsidiary, or (y) the Company
consolidates with or merges with or into another Person or any Person
consolidates with, or merges with or into, the Company, in either case under
this clause (b), in one transaction or series of related transactions in which
immediately after the consummation thereof Persons owning a majority of the
voting power of the Voting Stock of the Company immediately prior to such
consummation shall cease to own a majority of the voting power of the Voting
Stock of the Company or the surviving or transferee entity if other than the
Company; (c) Continuing Directors cease to constitute at least a majority of
the Board of Directors of the Company; or (d) the stockholders of the Company
approve any plan or proposal for the liquidation or dissolution of the Company.
In the event that the Company makes an Offer to Purchase the
Securities, the Company shall comply with any applicable securities laws and
regulations, including any applicable requirements of Section 14(e) of, and
Rule 14e-1 under, the Exchange Act. The Company will not be required to make an
Offer to Purchase upon a Change of Control if a third party makes the Offer to
Purchase in the manner, at the times and otherwise in compliance with the
requirements set forth in this Indenture applicable to an Offer to Purchase
made by the Company and purchases all Securities validly tendered and not
withdrawn under such Offer to Purchase.
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SECTION 4.15. Limitation on Senior Subordinated Indebtedness.
The Company (i) shall not Incur any Indebtedness that by its
terms (or by the terms of the agreement or instrument governing such
Indebtedness) is subordinate in right of payment to any other Indebtedness of
the Company unless such Indebtedness is also by its terms (or by the terms of
the agreement or instrument governing such Indebtedness) made expressly either
(x) pari passu in right of payment with the Securities or (y) subordinate in
right of payment to the Securities in the same manner and at least to the same
extent as the Securities are subordinate to Senior Debt of the Company, or (ii)
shall not permit any Guarantor to Incur any Indebtedness that by its terms (or
by the terms of the agreement or instrument governing such Indebtedness) is
subordinate in right of payment to any other Indebtedness of such Guarantor
unless such Indebtedness is also by its terms (or by the terms of the agreement
governing such Indebtedness) made expressly either (x) pari passu in right of
payment with the Guarantee of such Guarantor or (y) subordinate in right of
payment to the Guarantee of such Guarantor in the same manner and at least to
the same extent as the Guarantee of such Guarantor is subordinate to Senior
Debt of such Guarantor.
SECTION 4.16. Limitation on Restrictions Affecting
Restricted Subsidiaries.
The Company shall not, and shall not permit any Restricted
Subsidiary (other than a Restricted Guarantor) to, directly or indirectly,
create or otherwise cause or suffer to exist any consensual encumbrance or
restriction on the ability of any Restricted Subsidiary to (i) pay dividends or
make any other distributions in respect of its Capital Stock or pay any
Indebtedness or other obligation owed to the Company or any Restricted
Subsidiary, (ii) make loans or advances to, or guarantee any Indebtedness of,
the Company or any Restricted Subsidiary or (iii) transfer any of its property
or assets to the Company or any Restricted Subsidiary, except for (a) any
encumbrance or restriction existing under or by reason of any agreement in
effect on the Issue Date (including the Senior Credit Facility) as any such
agreement is in effect on such date or as such agreement is amended thereafter
but only if such encumbrance or restriction is no more restrictive than in the
agreement being amended, (b) any encumbrance or restriction under any agreement
of or relating to such Restricted Subsidiary prior to the date on which such
Restricted Subsidiary was acquired by the Company and outstanding on such date
and not Incurred in anticipation or contemplation of becoming a Restricted
Subsidiary and provided such encumbrance or restriction shall not apply to any
assets of the Company or any Restricted Subsidiary other than the Restricted
Subsidiary so acquired or its assets, (c) customary provisions contained in an
agreement that has been entered into for the sale or disposition of all or
substantially all of the Capital Stock or assets of a Restricted Subsidiary;
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provided, however, that such encumbrance or restriction is applicable only to
such Restricted Subsidiary or assets, (d) any encumbrance or restriction
existing under or by reason of applicable law, (e) customary provisions
restricting subletting or assignment of any lease governing any leasehold
interest of any Restricted Subsidiary, (f) covenants in franchise agreements
with car manufacturers customary for franchise agreements in the automobile
retailing industry, (g) covenants in purchase money obligations for property
restricting transfer of such property, (h) covenants in security agreements
securing Indebtedness of a Restricted Subsidiary (to the extent that such Liens
were otherwise incurred in accordance with Section 4.17) that restrict the
transfer of property subject to such agreements and (i) customary covenants in
Floor Plan Notes.
SECTION 4.17. Limitation on Liens.
The Company shall not, and shall not permit any Restricted
Subsidiary to, incur or suffer to exist any Lien on or with respect to any
property or assets of the Company or any Restricted Subsidiary owned on the
Issue Date or thereafter acquired or on the income or profits thereof to secure
Indebtedness, without making, or causing such Restricted Subsidiary to make,
effective provision for securing the Securities or the Guarantee of such
Restricted Subsidiary (and, if the Company shall so determine, any other
Indebtedness of the Company or such Restricted Subsidiary, including
Subordinated Indebtedness; provided, however, that Liens securing the
Securities and any Indebtedness pari passu with the Securities are senior to
such Liens securing such Subordinated Indebtedness) equally and ratably with
such Indebtedness or, in the event such Indebtedness is subordinate in right of
payment to the Securities or the Guarantee, prior to such Indebtedness, as to
such property or assets for so long as such Indebtedness shall be so secured.
The foregoing restrictions shall not apply to (i) Liens
existing on the Issue Date securing Indebtedness existing on the Issue Date;
(ii) Liens securing Senior Debt (including Liens securing Floor Plan Notes and
Indebtedness under the Senior Credit Facility) and any guarantees thereof to
the extent that the Indebtedness secured thereby is permitted to be incurred
pursuant to Section 4.04; (iii) Liens securing only the Securities and the
Guarantees, if any; (iv) Liens in favor of the Company or a Guarantor, if any;
(v) Liens to secure Indebtedness Incurred for the purpose of financing all or
any part of the purchase price or the cost of construction or improvement of
the property (or any other capital expenditure financing) subject to such
Liens; provided, however, that (a) the aggregate principal amount of any
Indebtedness secured by such a Lien does not exceed 100% of such purchase price
or cost, (b) such Lien does not extend to or cover any other property other
than such item of property and any improvements on such item, (c) the
Indebtedness secured by such Lien is Incurred by the Company within 180 days of
the acquisition, construction or improvement of such property
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and (d) the Incurrence of such Indebtedness is permitted pursuant to Section
4.04; (vi) Liens on property existing immediately prior to the time of
acquisition thereof (and not created in anticipation or contemplation of the
financing of such acquisition); (vii) Liens on property of a Person existing
at the time such Person is acquired or merged with or into or consolidated
with the Company or any such Restricted Subsidiary (and not created in
anticipation or contemplation thereof); (viii) Liens to secure Indebtedness
Incurred to Refinance, in whole or in part, any Indebtedness secured by Liens
referred to in the foregoing clauses (i)-(vii) so long as such Liens do not
extend to any property other than the property securing the Indebtedness being
Refinanced and the principal amount of Indebtedness so secured is not
increased except for the amount of any premium required to be paid in
connection with such Refinancing pursuant to the terms of the Indebtedness
Refinanced or the amount of any premium reasonably determined by the Company
as necessary to accomplish such Refinancing by means of a tender offer,
exchange offer or privately negotiated repurchase, plus the expenses of the
issuer of such Indebtedness reasonably incurred in connection with such
Refinancing; and (viii) Liens in favor of the Trustee as provided for in this
Indenture on money or property held or collected by the Trustee in its
capacity as Trustee.
SECTION 4.18. Subsidiary Guarantees.
The Company shall not permit any Subsidiary to become an
obligor (including as guarantor) under, or in respect of, the Senior Credit
Facility without causing such Subsidiary to become a Guarantor. Any such
Subsidiary shall (a) execute and deliver a supplemental indenture in form
reasonably satisfactory to the Trustee pursuant to which such Subsidiary shall
unconditionally guarantee all of the Company's obligations under the Securities
and this Indenture on the terms set forth in Articles Eleven and Twelve and (b)
deliver to the Trustee an Opinion of Counsel that such supplemental indenture
has been duly authorized, executed and delivered by such Subsidiary and
constitutes a valid and legally binding and enforceable obligation of such
Subsidiary (subject, in the case of enforceability, to customary bankruptcy,
insolvency, fraudulent conveyance and similar exceptions).
Any Subsidiary of the Company that ceases to be an obligor
(including as guarantor) under, or in respect of, the Senior Credit Facility
shall be released from its Guarantee upon delivery of an Officers' Certificate
to the Trustee certifying to such effect.
The Company may, at its option, cause any of its Subsidiaries
to be a Guarantor.
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ARTICLE V.
MERGERS; SUCCESSOR CORPORATION
SECTION 5.1. Restriction on Mergers, Consolidations and
Certain Sales of Assets.
The Company will not consolidate or merge with or into any
Person, or sell, assign, lease, convey or otherwise dispose of (or cause or
permit any Restricted Subsidiary to sell, assign, lease, convey or otherwise
dispose of (however effected, including, without limitation, by merger or
consolidation)) all or substantially all of the Company's assets (determined on
a consolidated basis for the Company and the Restricted Subsidiaries), whether
as an entirety or substantially an entirety in one transaction or a series of
related transactions, including by way of liquidation or dissolution, to any
Person unless, in each such case: (i) the entity formed by or surviving any
such consolidation or merger (if other than the Company or such Restricted
Subsidiary, as the case may be), or to which such sale, assignment, lease,
conveyance or other disposition shall have been made (the "Surviving Entity"),
is a corporation organized and existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the Surviving Entity
assumes by supplemental indenture all of the obligations of the Company on the
Securities and under the Indenture and the Registration Rights Agreement (upon
which assumption the Company will be discharged of any and all obligations on
the Securities and under this Indenture and the Registration Rights Agreement);
(iii) immediately after giving effect to such transaction and the use of any
net proceeds therefrom on a pro forma basis, the Company or the Surviving
Entity, as the case may be, (A) shall have a Consolidated Net Worth equal to or
greater than the Consolidated Net Worth of the Company immediately prior to
such transaction and (B) could Incur at least $1.00 of additional Indebtedness
pursuant to Section 4.04(i); (iv) immediately before and after giving effect to
such transaction and treating any Indebtedness that becomes an obligation of
the Company or any Restricted Subsidiary as a result of such transaction as
having been Incurred by the Company or such Restricted Subsidiary, as the case
may be, at the time of the transaction, no Default shall have occurred and be
continuing; and (v) if, as a result of any such transaction, property or assets
of the Company or a Restricted Subsidiary would become subject to a Lien not
excepted from Section 4.17, the Company, Restricted Subsidiary or the Surviving
Entity, as the case may be, shall have secured the Securities or its Guarantee,
as applicable, as required by Section 4.17. The provisions of this Section 5.01
shall not apply to any merger of a Restricted Subsidiary with or into the
Company or a Wholly Owned Subsidiary or any transaction pursuant to which a
Guarantor is to be released in accordance with the terms of its Guarantee and
this Indenture in connection with any transaction complying with Section 4.05.
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SECTION 5.1. Successor Corporation Substituted.
Upon the execution of a supplemental indenture by the
Surviving Person in form and substance satisfactory to the Trustee (as
evidenced by the Trustee's execution thereof) in accordance with Section 5.01,
the Surviving Person shall succeed to, and be substituted for, and may exercise
every right and power of and shall assume all obligations of, the Company or
such Subsidiary, as the case may be, under this Indenture, the Registration
Rights Agreement and the Securities or the Guarantees, as the case may be, with
the same effect as if such Surviving Person had been named as the Company or
such Subsidiary, as the case may be, herein and therein, and thereafter, except
in the case of a lease, the predecessor Person shall be relieved of all
obligations and covenants under this Indenture, the Registration Rights
Agreement and the Securities or the Guarantees, as the case may be.
ARTICLE VI.
DEFAULT AND REMEDIES
SECTION 6.1. Events of Default.
An "Event of Default" occurs if:
(a) the Company fails to pay principal of any Security when
due (whether or not prohibited by Article Eight or Twelve);
(b) the Company fails to pay any interest on any Security
when due, continued for 30 days (whether or not prohibited by Article Eight or
Twelve);
(c) the Company defaults in the payment of principal of and
interest on Securities required to be purchased pursuant to an Offer to
Purchase under Sections 4.05 or 4.14 hereof when due and payable (whether or
not prohibited by Article Eight or Twelve);
(d) the Company fails to perform or comply with any of the
provisions of Section 5.01;
(e) the Company fails to perform any other covenant or
agreement of the Company under the Indenture or the Securities continued for
60 days after written notice to the Company by the Trustee or holders of at
least 25% in aggregate principal amount of outstanding Securities;
(f) the Company defaults under the terms of one or more
instruments evidencing or securing Indebtedness of the Company or any
Restricted Subsidiary having an outstanding principal amount of $10.0 million
or more individually or in the aggregate that has resulted in the acceleration
of the payment of
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such Indebtedness or failure to pay principal when due at the stated final
maturity of any such Indebtedness;
(g) the rendering of a final judgment or judgments (not
subject to appeal) against the Company or any Restricted Subsidiary in an
amount of $10.0 million or more which remains undischarged or unstayed for a
period of 60 days after the date on which the right to appeal has expired;
(h) the Company or any Restricted Subsidiary pursuant to or
within the meaning of any Bankruptcy Law:
(1) commences a voluntary case or proceeding,
(2) consents to the entry of an order for relief
against it in an involuntary case or proceeding,
(3) consents to the appointment of a Custodian of
it or for all or substantially all of its property, or
(4) makes a general assignment for the benefit of
its creditors;
(i) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(1) is for relief against the Company or any
Restricted Subsidiary in an involuntary case or proceeding,
(2) appoints a Custodian of the Company or any
Restricted Subsidiary or for all or substantially all of its
property, or
(3) orders the liquidation of the Company or any
Restricted Subsidiary,
(4) and in each case the order or decree remains
unstayed and in effect for 60 days; provided, however, that
if the entry of such order or decree is appealed and
dismissed on appeal then the Event of Default hereunder by
reason of the entry of such order or decree shall be deemed
to have been cured; or
(j) any Guarantee, ceases to be in full force and effect or
is declared null and void and unenforceable or is found to be invalid or any
Guarantor denies its liability under its Guarantee (other than by reason of a
release of such Guarantor from its Guarantee in accordance with the terms of
this Indenture and such Guarantee).
The term "Bankruptcy Law" means Title 11, U.S. Code or any
similar Federal, state or foreign law for the relief of debtors. The term
"Custodian" means any receiver, trustee,
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assignee, liquidator, sequestrator or similar official under any Bankruptcy
Law.
SECTION 6.2. Acceleration.
If an Event of Default (other than an Event of Default with
respect to the Company specified in Section 6.01(h) or (i)) shall occur and be
continuing, either the Trustee or the Holders of at least 25% in aggregate
principal amount of the outstanding Securities may accelerate the maturity of
all Securities; provided, however, that after such acceleration, but before a
judgment or decree based on acceleration, the Holders of a majority in
aggregate principal amount of outstanding Securities may rescind and annul such
acceleration if all Defaults, other than the non-payment of accelerated
principal, have been cured or waived as provided in this Indenture; provided,
however, that so long as the Senior Credit Facility shall be in full force and
effect, if an Event of Default shall have occurred and be continuing (other
than an Event of Default with respect to the Company specified in Section
6.01(h) or (i)), the Securities shall not become due and payable until the
earlier to occur of (x) five Business Days following delivery of a written
notice of such acceleration of the Securities to the agent under the Senior
Credit Facility and (y) the acceleration of any Indebtedness under the Senior
Credit Facility. If an Event of Default with respect to the Company specified
in Section 6.01(h) or (i) occurs, the outstanding Securities will ipso facto
become immediately due and payable without any declaration or other act on the
part of the Trustee or any Holder.
SECTION 6.3. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy by proceeding at law or in equity to collect
the payment of principal of or interest on the Securities or to enforce the
performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Securities or does not produce any of them in the
proceeding. A delay or omission by the Trustee or any Securityholder in
exercising any right or remedy maturing upon an Event of Default shall not
impair the right or remedy or constitute a waiver of or acquiescence in the
Event of Default. No remedy is exclusive of any other remedy. All available
remedies are cumulative to the extent permitted by law.
SECTION 6.4. Waiver of Past Default.
Subject to Sections 2.09, 6.07 and 10.02, prior to the
declaration of acceleration of the Securities, (i) the Holders of not less than
a majority in aggregate principal amount of the outstanding Securities by
written notice to the Trustee may waive an existing Default and its
consequences, except a Default in the
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payment of principal of or interest on any Security as specified in Section
6.01(a) or (b), a default arising from failure to effect an Offer to Purchase
required under Section 4.14 or a Default in respect of any term or provision
of this Indenture that may not be amended or modified without the consent of
each Holder affected as provided in Section 10.02 and (ii) the Holders of
three-fourths of the aggregate principal amount of Notes affected thereby, on
behalf of all Holders, may waive a default arising from failure to effect an
Offer to Purchase required under Section 4.14. The Company shall deliver to
the Trustee an Officers' Certificate stating that the requisite percentage of
Holders have consented to such waiver and attaching copies of such consents.
In case of any such waiver, the Company, the Trustee and the Holders shall be
restored to their former positions and rights hereunder and under the
Securities, respectively. This paragraph of this Section 6.04 shall be in lieu
of ss. 316(a)(1)(B) of the TIA and such ss. 316(a)(1)(B) of the TIA is hereby
expressly excluded from this Indenture and the Securities, as permitted by the
TIA.
Upon any such waiver, such Default shall cease to exist and
be deemed to have been cured and not to have occurred, and any Event of Default
arising therefrom shall be deemed to have been cured and not to have occurred
for every purpose of this Indenture and the Securities, but no such waiver
shall extend to any subsequent or other Default or impair any right consequent
thereon.
SECTION 6.5. Control by Majority.
Subject to Section 2.09, the Holders of a majority in
principal amount of the outstanding Securities may direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on it. However, the Trustee may refuse
to follow any direction that conflicts with law or this Indenture, that the
Trustee determines may be unduly prejudicial to the rights of another
Securityholder, or that may involve the Trustee in personal liability;
provided, however, that the Trustee may take any other action deemed proper by
the Trustee which is not inconsistent with such direction. In the event the
Trustee takes any action or follows any direction pursuant to this Indenture,
the Trustee shall be entitled to indemnification satisfactory to it in its sole
discretion against any loss or expense caused by taking such action or
following such direction. This Section 6.05 shall be in lieu of ss.
316(a)(1)(A) of the TIA, and such ss. 316(a)(1)(A) of the TIA is hereby
expressly excluded from this Indenture and the Securities, as permitted by the
TIA.
SECTION 6.6. Limitation on Suits.
A Securityholder may not pursue any remedy with respect to
this Indenture or the Securities unless:
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(1) the Holder gives to the Trustee written notice of a
continuing Event of Default;
(2) the Holders of at least 25% in aggregate principal
amount of the outstanding Securities make a written request to the
Trustee to pursue a remedy;
(3) such Holder or Holders offer and, if requested, provide
to the Trustee indemnity satisfactory to the Trustee against any
loss, liability or expense;
(4) the Trustee does not comply with the request within 60
days after receipt of the request and the offer and, if requested,
the provision of indemnity; and
(5) during such 60-day period the Holders of a majority in
principal amount of the outstanding Securities (excluding Affiliates
of the Company) do not give the Trustee a direction which, in the
opinion of the Trustee, is inconsistent with the request.
A Securityholder may not use this Indenture to prejudice the
rights of another Securityholder or to obtain a preference or priority over
such other Securityholder.
Section 6.06 limitations do not apply to a suit instituted by
a Holder of a Note for enforcement of payment of the principal or of interest
on such Security on or after the respective due dates therefor.
SECTION 6.7. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the
right of any Holder to receive payment of principal of and interest on the
Securities, on or after the respective due dates therefor, or to bring suit for
the enforcement of any such payment on or after such respective dates, shall
not be impaired or affected without the consent of such Holder.
SECTION 6.8. Collection Suit by Trustee.
If an Event of Default in payment of interest or principal
specified in Section 6.01(a) or (b) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company or any other obligor on the Securities for the whole amount of
principal and accrued interest remaining unpaid, together with interest overdue
on principal and to the extent that payment of such interest is lawful,
interest on overdue installments of interest, in each case at the rate per
annum borne by the Securities and such further amount as shall be sufficient to
cover the costs and expenses of collection, including the reasonable
compensation,
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expenses, disbursements and advances of the Trustee, its agents
and counsel.
SECTION 6.9. Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers
or documents as may be necessary or advisable in order to have the claims of
the Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Securityholders allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Securities), its creditors or its property and
shall be entitled and empowered to collect and receive any monies or other
property payable or deliverable on any such claims and to distribute the same,
and any Custodian in any such judicial proceedings is hereby authorized by
each Securityholder to make such payments to the Trustee and, in the event
that the Trustee shall consent to the making of such payments directly to the
Securityholders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agent
and counsel, and any other amounts due the Trustee under Section 7.07. Nothing
herein contained shall be deemed to authorize the Trustee to authorize or
consent to or accept or adopt on behalf of any Securityholder any plan of
reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof, or to authorize the Trustee to
vote in respect of the claim of any Securityholder in any such proceeding.
SECTION 6.10. Priorities.
If the Trustee collects any money or property pursuant to
this Article Six, it shall pay out the money or property in the following
order:
First: to the Trustee for amounts due under Section 7.07;
Second: subject to Articles Eight and Twelve, to Holders for
amounts due and unpaid on the Securities for principal and interest, ratably,
without preference or priority of any kind, according to the amounts due and
payable on the Securities for principal and interest, respectively; and
Third: to the Company.
The Trustee, upon prior written notice to the Company, may
fix a record date and payment date for any payment to Securityholders pursuant
to this Section 6.10.
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SECTION 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees and expenses, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section 6.11 shall not apply to a suit by the
Trustee, a suit by a Holder or group of Holders of more than 10% in aggregate
principal amount of the outstanding Securities, or to any suit instituted by
any Holder for the enforcement or the payment of the principal or interest on
any Securities on or after the respective due dates therefor.
ARTICLE VII.
TRUSTEE
SECTION 7.1. Duties of Trustee.
(a) If a Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture and
use the same degree of care and skill in their exercise as a prudent person
would exercise or use under the circumstances in the conduct of such person's
own affairs.
(b) Except during the continuance of a Default:
(1) The Trustee undertakes to perform such duties
and only such duties as are specifically set forth in this
Indenture, and no implied covenants or obligations shall be
read into this Indenture against the Trustee; and
(2) In the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed
therein, upon certificates or opinions conforming to the
requirements of this Indenture; provided, however, the
Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of
this Indenture (but need not confirm or investigate the
accuracy of mathematical calculations or other facts stated
therein).
(c) The Trustee shall not be relieved from liability for its
own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
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(1) This paragraph does not limit the effect of
paragraph (b) of this Section 7.01;
(2) The Trustee shall not be liable for any error
of judgment made in good faith by a Trust Officer, unless it
is proved that the Trustee was negligent in ascertaining the
pertinent facts; and
(3) The Trustee shall not be liable with respect to
any action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to
Section 6.05.
(d) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or to take or omit to take any
action under this Indenture or take any action at the request or direction of
Holders if it shall have reasonable grounds for believing that repayment of
such funds is not assured to it or it does not receive an indemnity
satisfactory to it in its sole discretion against such risk, liability, loss,
fee or expense which might be incurred by it in compliance with such request or
direction.
(e) Every provision of this Indenture that in any way
relates to the Trustee is subject to paragraphs (a), (b), (c) and (d) of this
Section 7.01.
(f) The Trustee shall not be liable for interest on any
money or assets received by it except as the Trustee may agree in writing with
the Company. Money or assets held in trust by the Trustee need not be
segregated from other funds or assets except to the extent required by law.
SECTION 7.2. Rights of Trustee.
Subject to Section 7.01:
(a) The Trustee may rely and shall be protected in acting or
refraining from acting on any document believed by it to be genuine and to
have been signed or presented by the proper Person. The Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
consult with counsel of its selection and may require an Officers' Certificate
and an Opinion of Counsel, which shall conform to the provisions of Section
13.05. The Trustee shall not be liable for any action it takes, suffers or
omits to take in good faith in reliance on such certificate or opinion.
(c) The Trustee may act through attorneys and agents of its
selection and shall not be responsible for the misconduct
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or negligence of any agent or attorney (other than an agent who is an employee
of the Trustee) appointed with due care.
(d) The Trustee shall not be liable for any action it takes
or omits to take in good faith which it reasonably believes to be authorized
or within its rights or powers conferred upon it by this Indenture.
(e) The Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request or
direction of any of the Securityholders pursuant to this Indenture, unless such
Securityholders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be incurred
by it in compliance with such request or direction.
(f) Provided the Trustee acts in good faith, the Trustee
shall not be bound to make any investigation into the facts or matters stated
in any resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Trustee, in its discretion,
may make such further inquiry or investigation into such facts or matters as it
may see fit, and, if the Trustee shall determine to make such further inquiry
or investigation, it shall be entitled to examine the books, records and
premises of the Company, personally or by agent or attorney at the sole cost of
the Company and shall incur no liability or additional liability of any kind by
reason of such inquiry or investigation.
(g) The Trustee shall not be deemed to have notice of any
Default unless a Trust Officer of the Trustee has actual knowledge thereof or
unless written notice of any event which is in fact such a default is received
by the Trustee at the Corporate Trust Office of the Trustee, and such notice
references the Securities and this Indenture.
SECTION 7.3. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may
become the owner or pledgee of Securities and may otherwise deal with the
Company or its Affiliates with the same rights it would have if it were not
Trustee. Any Agent may do the same with like rights. However, the Trustee is
subject to Sections 7.10 and 7.11.
SECTION 7.4. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture or the
Securities, it shall not be accountable for the Company's use of the proceeds
from the Securities, and it shall not be responsible for any statement of the
Company in this Indenture or any document issued in connection with the sale of
Securities or
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any statement in the Securities other than the Trustee's certificate of
authentication.
SECTION 7.5. Notice of Defaults.
The Trustee shall, within 90 days after the occurrence of any
Default with respect to the Securities, give the Holders notice of all uncured
Defaults known to it; provided, however, that, except in the case of an Event
of Default or a Default in payment with respect to the Securities or a Default
in complying with Section 5.01, the Trustee shall be protected in withholding
such notice if and so long as the Board of Directors of the Trustee, the
executive committee or a trust committee of directors or responsible officers
of the Trustee in good faith determine that the withholding of such notice is
in the interest of the Holders.
SECTION 7.6. Reports by Trustee to Holders.
If required by TIA ss.313(a), within 60 days after each
July 1 beginning with the July 1 following the date of this Indenture, the
Trustee shall mail to each Securityholder a report dated as of such July 1 that
complies with TIA ss.313(a). The Trustee also shall comply with TIA ss.313(b),
(c) and (d).
A copy of each such report at the time of its mailing to
Securityholders shall be filed with the Commission, the Company and each stock
exchange, if any, on which the Securities are listed in accordance with TIA ss.
313(d).
The Company shall promptly notify the Trustee in writing if
the Securities become listed on any securities exchange or of any delisting
therefrom.
SECTION 7.7. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time such
compensation as the Company and the Trustee shall from time to time agree in
writing for its services. The Trustee's compensation shall not be limited by
any law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee upon request for all reasonable disbursements, expenses
and advances (including reasonable fees, disbursements and expenses of its
agents and counsel) incurred or made by it in addition to the compensation for
its services except any such disbursements, expenses and advances as may be
attributable to the Trustee's negligence or bad faith. Such expenses shall
include the reasonable compensation, disbursements and expenses of the
Trustee's agents, accountants, experts and counsel and any taxes or other
expenses incurred by a trust created pursuant to Section 9.01 hereof.
The Company shall indemnify the Trustee or any predecessor
Trustee and their agents for, and hold them harmless
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against any and all loss, damage, claims, liability or expense, including
taxes (other than franchise taxes imposed on the Trustee and taxes based upon,
measured by or determined by the income of the Trustee), arising out of or in
connection with the acceptance or administration of the trust or trusts
hereunder, including the costs and expenses of enforcing this Indenture
against the Company (including Section 7.07) and of defending itself against
any claim (whether asserted by any Securityholder or the Company or any other
person) or liability in connection with the exercise or performance of any of
their powers or duties hereunder, except to the extent that such loss, damage,
claim, liability or expense is due to their own negligence or bad faith. The
Trustee shall notify the Company promptly of any claim asserted against the
Trustee for which it may seek indemnity. However, the failure by the Trustee
to so notify the Company shall not relieve the Company of its obligations
hereunder (unless and only to the extent that such failure results in the loss
or compromise of any rights or defenses). The Company shall defend the claim
and the Trustee shall cooperate in the defense (and may employ its own
counsel) at the Company's expense; provided, however, that the Company's
reimbursement obligation with respect to counsel employed by the Trustee will
be limited to the reasonable fees and expenses of such counsel. The Company
need not pay for any settlement made without its written consent, which
consent shall not be unreasonably withheld. The Company need not reimburse any
expense or indemnify against any loss or liability incurred by the Trustee as
a result of the violation of this Indenture by the Trustee.
To the extent permitted by the Senior Credit Facility, to
secure the Company's payment obligations in this Section 7.07, the Trustee
shall have a Lien prior to the Securities against all money or property held or
collected by the Trustee or any predecessor Trustee, in their capacity as
Trustee, except money or property held in trust to pay principal of or interest
on particular Securities.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(h) or (i) occurs, the expenses
(including the reasonable fees and expenses of its agents and counsel) and the
compensation for the services shall be preferred over the status of the Holders
in a proceeding under any Bankruptcy Law and are intended to constitute
expenses of administration under any Bankruptcy Law. The Company's obligations
under this Section 7.07 and any claim arising hereunder shall survive the
resignation or removal of any Trustee, the discharge of the Company's
obligations pursuant to Article Nine and any rejection or termination under any
Bankruptcy Law.
The provisions of this Section 7.07 shall survive the
termination of this Indenture.
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SECTION 7.8. Replacement of Trustee.
The Trustee may resign at any time by so notifying the
Company in writing. The Holders of a majority in aggregate principal amount of
the outstanding Securities may remove the Trustee by so notifying the Trustee
and the Company in writing and may appoint a successor Trustee with the
Company's consent. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an
insolvent under any Bankruptcy Law;
(3) a custodian or other public officer takes
charge of the Trustee or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists
in the office of Trustee for any reason (the Trustee in such event being
referred to herein as the retiring Trustee), the Company shall promptly appoint
a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. As promptly as
practicable after that, the retiring Trustee shall transfer, after payment of
all sums then owing to the Trustee pursuant to Section 7.07, all property held
by it as Trustee to the successor Trustee, subject to the Lien provided in
Section 7.07, the resignation or removal of the retiring Trustee shall become
effective, and the successor Trustee shall have the rights, powers and duties
of the Trustee under this Indenture. A successor Trustee shall mail notice of
its succession to each Securityholder.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company or the Holders of at least 10% in aggregate principal amount of the
outstanding Securities may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any
Securityholder may petition any court of competent jurisdiction for the removal
of the Trustee and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this
Section 7.08, the Company's obligations under Section 7.07 shall continue for
the benefit of the retiring Trustee.
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SECTION 7.9. Successor Trustee by Merger, etc.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation or banking corporation, the resulting, surviving or transferee
corporation or banking corporation without any further act shall be the
successor Trustee.
SECTION 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee which shall be
eligible to act as Trustee under TIA ss.ss. 310(a)(1) and 310(a)(5). The
Trustee (or in the case of a corporation included in a bank holding company,
the related bank holding company) shall have a combined capital and surplus of
at least $50,000,000 as set forth in its most recent published annual report of
condition. If the Trustee has or shall acquire any "conflicting interest"
within the meaning of TIA ss. 310(b), the Trustee and the Company shall comply
with the provisions of TIA ss. 310(b); provided, however, that there shall be
excluded from the operation of TIA ss. 310(b)(1) any indenture or indentures
under which other securities, or certificates of interest or participation in
other securities, of the Company are outstanding, if the requirements for such
exclusion set forth in TIA ss. 310(b)(1) are met. If at any time the Trustee
shall cease to be eligible in accordance with the provisions of this Section,
the Trustee shall resign immediately in the manner and with the effect
hereinbefore specified in this Article Seven.
SECTION 7.10.1. Preferential Collection of Claims Against
Company.
The Trustee shall comply with TIA ss. 311(a), excluding any
creditor relationship listed in TIA ss. 311(b). A Trustee who has resigned or
been removed shall be subject to TIA ss. 311(a) to the extent indicated
therein.
ARTICLE VIII.
SUBORDINATION OF SECURITIES
SECTION 8.1. Securities Subordinated to Senior Debt.
The Company covenants and agrees, and the Trustee and each
Holder by acceptance of the Securities likewise covenant and agree, that all
Securities shall be issued subject to the provisions of this Article; and each
person holding any Security, whether upon original issue or upon transfer,
assignment or exchange thereof, accepts and agrees that all payments of the
principal of and interest on the Securities by the Company shall, to the extent
and in the manner set forth in this Article, be subordinated and junior in
right of payment to the prior payment in full of all Senior Debt of the
Company.
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SECTION 8.1.1. No Payment on Securities in Certain
Circumstances.
(a) No direct or indirect payment by or on behalf of the
Company of principal of or interest on the Securities (other than payments to
Holders from funds held in trust for the benefit of Holders pursuant to Section
9.01), whether pursuant to the terms of the Securities or upon acceleration or
otherwise, will be made if, at the time of such payment, there exists a default
in the payment of all or any portion of the obligations on any Designated
Senior Debt, whether at maturity, on account of mandatory redemption or
prepayment, acceleration or otherwise, and such default shall not have been
cured or waived. In addition, during the continuance of any non-payment default
or non-payment event of default with respect to any Designated Senior Debt
pursuant to which the maturity thereof may be accelerated, and upon receipt by
the Trustee of written notice (a " Payment Blockage Notice") from a holder or
holders of such Designated Senior Debt or the trustee or agent acting on behalf
of such Designated Senior Debt, then, unless and until such default or event of
default has been cured or waived or has ceased to exist or such Designated
Senior Debt has been discharged or repaid in full, or the requisite holders of
such Designated Senior Debt have otherwise agreed in writing, no payment or
distribution will be made by or on behalf of the Company on account of or with
respect to the Securities (except payments to Holders from funds held in trust
for the benefit of Holders pursuant to Section 9.01), during a period (a
"Payment Blockage Period") commencing on the date of receipt of such Payment
Blockage Notice by the Trustee and ending 179 days thereafter.
Notwithstanding anything herein to the contrary, (x) in no
event will a Payment Blockage Period extend beyond 179 days from the date the
Payment Blockage Notice in respect thereof was given and (y) there must be 180
days in any 365 day period during which no Payment Blockage Period is in
effect. Not more than one Payment Blockage Period may be commenced with respect
to the Securities during any period of 365 consecutive days. No default or
event of default that existed or was continuing on the date of commencement of
any Payment Blockage Period with respect to the Designated Senior Debt
initiating such Payment Blockage Period may be, or be made, the basis for the
commencement of any other Payment Blockage Period by the holder or holders of
such Designated Senior Debt or the trustee or agent acting on behalf of such
Designated Senior Debt, whether or not within a period of 365 consecutive days,
unless such default or event of default has been cured or waived for a period
of not less than 90 consecutive days.
(b) In the event that, notwithstanding the foregoing, any
payment shall be received by the Trustee or any Holder when such payment is
prohibited by Section 8.02(a), such payment shall be held in trust for the
benefit of, and shall be paid over or
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delivered to, the holders of Designated Senior Debt or their respective
representatives, or to the trustee or trustees under any indenture pursuant to
which any of such Designated Senior Debt may have been issued, as their
respective interests may appear, but only to the extent that, upon notice from
the Trustee to the holders of Designated Senior Debt that such prohibited
payment has been made, the holders of the Designated Senior Debt (or their
representative or representatives or a trustee) notify the Trustee in writing
of the amounts then due and owing on the Designated Senior Debt, if any, and
only the amounts specified in such notice to the Trustee shall be paid to the
holders of Designated Senior Debt.
SECTION 8.2. Payment Over of Proceeds upon Dissolution, etc.
(a) Upon any payment or distribution of assets or securities
of the Company of any kind or character (whether in cash, property or
securities) upon any dissolution or winding up or total or partial liquidation
or reorganization of the Company, whether voluntary or involuntary or in
bankruptcy, insolvency, receivership or other proceedings, all amounts due or
to become due with respect to Senior Debt of the Company (including any
interest accruing subsequent to an event of bankruptcy or insolvency, whether
or not allowed or allowable thereunder) shall first be paid in full, or payment
provided for, before the Holders or the Trustee on their behalf shall be
entitled to receive any payment by the Company of the principal of or interest
on the Securities, or any payment to acquire any of the Securities for cash,
property or securities, or any distribu tion with respect to the Securities of
any cash, property or securities. Before any payment may be made by, or on
behalf of, the Company of the principal of or interest on the Securities upon
any such dissolution or winding up or liquidation or reorganization, any
payment or distribution of assets or securities of the Company of any kind or
character, whether in cash, property or securities, to which the Holders of the
Securities or the Trustee on their behalf would be entitled, but for the
subordination provisions of this Indenture, shall be made by the Company or by
any receiver, trustee in bankruptcy, liquidating trustee, agent or other person
making such payment or distribution, directly to the holders of Senior Debt of
the Company (pro rata to such holders on the basis of the respective amounts of
Senior Debt held by such holders) or their representative(s) or to the
trustee(s) under any indenture pursuant to which any such Senior Debt may have
been issued as their respective interests may appear, to the extent necessary
to pay all such Senior Debt in full after giving effect to any concurrent
payment, distribution or provision therefor to or for the holders of such
Senior Debt.
(b) In the event that, notwithstanding the foregoing
provision prohibiting such payment or distribution, any payment or distribution
of assets or securities of the Company of any
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kind or character, whether in cash, property or securities, shall be received
by the Trustee or any Holder at a time when such payment or distribution is
prohibited by Section 8.03(a) and before all obligations in respect of Senior
Debt are paid in full, or payment provided for, such payment or distribution
shall be received and held in trust for the benefit of, and shall be paid over
or delivered to, the holders of Senior Debt or their respective
representative(s), or to the trustee(s) under any indenture pursuant to which
any of such Senior Debt may have been issued, as their respective interests
may appear, for application to the payment of Senior Debt remaining unpaid
until all such Senior Debt has been paid in full after giving effect to any
concurrent payment, distribution or provision therefor to or for the holders
of such Senior Debt.
(c) The consolidation of the Company with, or the merger of
the Company with or into, another corporation or the liquidation or dissolution
of the Company following the conveyance or transfer of its property as an
entirety, or substantially as an entirety, to another corporation upon the
terms and conditions provided in Article Five shall not be deemed a
dissolution, winding-up, liquidation or reorganization for the purposes of this
Section if such other corporation shall, as a part of such consolidation,
merger, conveyance or transfer, comply with the conditions stated in Article
Five.
SECTION 8.3. Subrogation.
Upon the payment in full of all Senior Debt, or provision for
payment, the Holders shall be subrogated (equally and ratably with all pari
passu Indebtedness) to the rights of the holders of Senior Debt to receive
payments or distributions of cash, property or securities of the Company made
on such Senior Debt until the principal of and interest on the Securities shall
be paid in full; and, for the purposes of such subrogation, no payments or
distributions to the holders of the Senior Debt of any cash, property or
securities to which the Holders or the Trustee on their behalf would be
entitled except for the provisions of this Article, and no payment over
pursuant to the provisions of this Article to the holders of Senior Debt by
Holders or the Trustee on their behalf shall, as between the Company, its
creditors other than holders of Senior Debt, and the Holders, be deemed to be a
payment by the Company to or on account of the Senior Debt. It is understood
that the provisions of this Article are and are intended solely for the purpose
of defining the relative rights of the Holders, on the one hand, and the
holders of the Senior Debt, on the other hand.
If any payment or distribution to which the Holders would
otherwise have been entitled but for the provisions of this Article shall have
been applied, pursuant to the provisions of this Article, to the payment of all
amounts payable under Senior Debt, then and in such case, the Holders shall be
entitled to receive from the holders of such Senior Debt any payments or
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distributions received by such holders of Senior Debt in excess of the amount
required to make payment in full, or provision for payment, of such Senior
Debt.
SECTION 8.4. Obligations of Company Unconditional.
Nothing contained in this Article or elsewhere in this
Indenture or in the Securities is intended to or shall impair, as among the
Company and the Holders, the obligation of the Company, which is absolute and
unconditional, to pay to the Holders the principal of and interest on the
Securities as and when the same shall become due and payable in accordance with
their terms, or is intended to or shall affect the relative rights of the
Holders and creditors of the Company other than the holders of the Senior Debt,
nor shall anything herein or therein prevent any Holder or the Trustee on their
behalf from exercising all remedies otherwise permitted by applicable law upon
default under this Indenture, subject to the rights, if any, under this Article
of the holders of the Senior Debt in respect of cash, property or securities of
the Company received upon the exercise of any such remedy.
Without limiting the generality of the foregoing, nothing
contained in this Article shall restrict the right of the Trustee or the
Holders to take any action to declare the Securities to be due and payable
prior to their stated maturity pursuant to Section 6.01 or to pursue any rights
or remedies hereunder; provided, however, that all Senior Debt then due and
payable shall first be paid in full before the Holders or the Trustee are
entitled to receive any direct or indirect payment from the Company of
principal of or interest on the Securities.
SECTION 8.5. Notice to Trustee.
The Company shall give prompt written notice to the Trustee
of any fact known to the Company which would prohibit the making of any payment
to or by the Trustee in respect of the Securities pursuant to the provisions of
this Article. Failure to give such notice to the Trustee shall not affect the
subordination of the Securities to Senior Debt. The Trustee shall not be
charged with knowledge of the existence of any default or event of default with
respect to any Senior Debt or of any other facts which would prohibit the
making of any payment to or by the Trustee unless and until the Trustee shall
have received notice in writing to that effect signed by an Officer of the
Company, or by a holder of Senior Debt or trustee or agent therefor; and prior
to the receipt of any such written notice, the Trustee shall, subject to
Article Seven, be entitled to assume that no such facts exist; provided,
however, that if the Trustee shall not have received the notice provided for in
this Section 8.06 at least three Business Days prior to the date upon which by
the terms of this Indenture any moneys shall become payable for any purpose
(including, without limitation, the payment of the principal of or interest on
any Security), then,
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regardless of anything herein to the contrary, the Trustee shall have full
power and authority to receive any moneys from the Company and to apply the
same to the purpose for which they were received, and shall not be affected by
any notice to the contrary which may be received by it on or after such prior
date. Nothing contained in this Section 8.06 shall limit the right of the
holders of Senior Debt to recover payments as contemplated by Section 8.02 or
8.03. The Trustee shall be entitled to rely on the delivery to it of a written
notice by a Person representing himself or itself to be a holder of any Senior
Debt (or a trustee on behalf of, or other representative of, such holder) to
establish that such notice has been given by a holder of such Senior Debt or a
trustee or representative on behalf of any such holder.
In the event that the Trustee determines in good faith that
any evidence is required with respect to the right of any Person as a holder of
Senior Debt to participate in any payment or distribution pursuant to this
Article, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Debt held by
such Person, the extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
Person under this Article, and if such evidence is not furnished, the Trustee
may defer any payment to such Person pending judicial determination as to the
right of such Person to receive such payment.
SECTION 8.5.1. Reliance on Judicial Order or Certificate of
Liquidating Agent.
Upon any payment or distribution of assets or securities
referred to in this Article, the Trustee and the Holders of the Securities
shall be entitled to rely upon any order or decree made by any court of
competent jurisdiction in which bankruptcy, dissolution, winding-up,
liquidation or reorganization proceedings are pending, or upon a certificate of
the receiver, trustee in bankruptcy, liquidating trustee, agent or other person
making such payment or distribution, delivered to the Trustee or to the Holders
for the purpose of ascertaining the persons entitled to participate in such
distribution, the holders of the Senior Debt and other indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article.
SECTION 8.6. Trustee's Relation to Senior Debt.
The Trustee and any Paying Agent shall be entitled to all the
rights set forth in this Article with respect to any Senior Debt which may at
any time be held by it in its individual or any other capacity to the same
extent as any other holder of Senior Debt, and nothing in this Indenture shall
deprive the Trustee or any Paying Agent of any of its rights as such holder.
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With respect to the holders of Senior Debt, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article, and no implied covenants or
obligations with respect to the holders of Senior Debt shall be read into this
Indenture against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Debt (except as provided in Section
8.03(b)). The Trustee shall not be charged with knowledge of the existence of
Senior Debt or of any facts that would prohibit any payment hereunder unless
the Trustee shall have received notice to that effect at the address of the
Trustee set forth in Section 13.02.
SECTION 8.7. Subordination Rights Not Impaired by Acts or
Omissions of the Company or Holders of Senior Debt.
No right of any present or future holders of any Senior Debt
to enforce subordination as provided herein shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms of this Indenture, regardless of
any knowledge thereof which any such holder may have or otherwise be charged
with. The provisions of this Article are intended to be for the benefit of, and
shall be enforceable directly by, the holders of Senior Debt.
SECTION 8.8. Securityholders Authorize Trustee To Effectuate
Subordination of Securities.
Each Holder of Securities by his acceptance of such
Securities authorizes and expressly directs the Trustee on his behalf to take
such action as may be necessary or appropriate to effectuate the subordination
provided in this Article, and appoints the Trustee his attorney-in-fact for
such purposes, including, in the event of any dissolution, winding up,
liquidation or reorganization of the Company (whether in bankruptcy,
insolvency, receivership, reorganization or similar proceedings or upon an
assignment for the benefit of creditors or otherwise) tending towards
liquidation of the business and assets of the Company, the filing of a claim
for the unpaid balance of its or his Securities in the form required in those
proceedings.
SECTION 8.9. This Article Not to Prevent Events of Default.
The failure to make a payment on account of principal of or
interest on the Securities by reason of any provision of this Article shall not
be construed as preventing the occurrence of an Event of Default specified in
Section 6.01(a), (b) or (c).
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SECTION 8.10. Trustee's Compensation Not Prejudiced.
Nothing in this Article shall apply to amounts due to the
Trustee pursuant to other sections in this Indenture.
SECTION 8.11. No Waiver of Subordination Provisions.
Without in any way limiting the generality of Section 8.09,
the holders of Senior Debt may, at any time and from time to time, without the
consent of or notice to the Trustee or the Holders of the Securities, without
incurring responsibility to the Holders of the Securities and without impairing
or releasing the subordination provided in this Article or the obligations
hereunder of the Holders of the Securities to the holders of Senior Debt, do
any one or more of the following: (a) change the manner, place or terms of
payment or extend the time of payment of, or renew or alter, Senior Debt or any
instrument evidencing the same or any agreement under which Senior Debt is
outstanding or secured; (b) sell, exchange, release or otherwise deal with any
property pledged, mortgaged or otherwise securing Senior Debt; (c) release any
Person liable in any manner for the collection of Senior Debt; and (d) exercise
or refrain from exercising any rights against the Company and any other Person.
SECTION 8.12. Subordination Provisions Not Applicable to
Money Held in Trust for Securityholders; Payments May Be Paid Prior to
Dissolution.
All money and United States Government Obligations deposited
in trust with the Trustee pursuant to and in accordance with Article Nine shall
be for the sole benefit of the Holders and shall not be subject to this Article
Eight.
Nothing contained in this Article or elsewhere in this
Indenture shall prevent (i) the Company, except under the conditions described
in Section 8.02, from making payments of principal of and interest on the
Securities, or from depositing with the Trustee any moneys for such payments or
from effecting a termination of the Company's and the Guarantors' obligations
under the Securities and this Indenture as provided in Article Nine, or (ii)
the application by the Trustee of any moneys deposited with it for the purpose
of making such payments of principal of and interest on the Securities, to the
holders entitled thereto unless at least three Business Days prior to the date
upon which such payment becomes due and payable, the Trustee shall have
received the written notice provided for in Section 8.02(b) or in Section 8.06.
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ARTICLE IX.
DISCHARGE OF INDENTURE
SECTION 9.1. Termination of Company's Obligations.
(a) Discharge. Subject to the provisions of Article Eight,
the Company may terminate its substantive obligations and the substantive
obligations of the Guarantors, if any, in respect of the Securities and the
Guarantees by delivering all outstanding Securities to the Trustee for
cancellation and paying all sums payable by the Company on account of principal
of and interest on all Securities or otherwise.
(b) Covenant Defeasance. In addition to the provisions of
Section 9.01(a), the Company may, provided that no Default has occurred and is
continuing or would arise therefrom (or, with respect to a Default specified in
Section 6.01(h) or (i), any time on or prior to the 91st calendar day after the
date of such deposit (it being understood that this condition shall not be
deemed satisfied until after such 91st day)) and provided that no default under
any Senior Debt would result therefrom, terminate its substantive obligations
and the substantive obligations of the Guarantors, if any, in respect of the
Securities and the Guarantees (except for the Company's obligation to pay the
principal of and the interest on the Securities and such Guarantors' guarantee
thereof) by (i) depositing with the Trustee, under the terms of an irrevocable
trust agreement, money or direct non-callable obligations of the United States
of America for the payment of which its full faith and credit is pledged
("United States Government Obligations") sufficient (without reinvestment) to
pay all remaining indebtedness on the Securities to maturity or to redemption,
(ii) deliver ing to the Trustee either an Opinion of Counsel or a ruling
directed to the Trustee from the Internal Revenue Service to the effect that
the Holders will not recognize income, gain or loss for federal income tax
purposes as a result of such deposit and termination of obligations, (iii)
delivering to the Trustee an Opinion of Counsel to the effect that the
Company's exercise of its option under this paragraph will not result in the
Company, the Trustee or the trust created by the Company's deposit of funds
pursuant to this provision becoming or being deemed to be an "investment
company" under the Investment Company Act of 1940, as amended, and (iv)
delivering to the Trustee an Officers' Certificate and an Opinion of Counsel
each stating that there has been compliance with all conditions precedent
provided for herein.
(c) Legal Defeasance. In addition to the provisions of
Section 9.01(a) and (b), the Company may, provided that no Default has occurred
and is continuing or would arise therefrom (or, with respect to a Default
specified in Section 6.01(h) or (i), any time on or prior to the 91st calendar
day after the date of such deposit (it being understood that this condition
shall
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not be deemed satisfied until after such 91st day)) and provided that no
default under any Senior Debt would result therefrom, terminate all of its
substantive obligations and all of the substantive obligations of the
Guarantors, if any, in respect of the Securities and the Guarantees (including
the Company's obligation to pay the principal of and interest on the
Securities and such Guarantors' guarantee thereof) by (i) depositing with the
Trustee, under the terms of an irrevocable trust agreement, money or United
States Government Obligations sufficient (without reinvestment) to pay all
remaining indebtedness on the Securities to maturity or to redemption, (ii)
delivering to the Trustee either a ruling directed to the Trustee from the
Internal Revenue Service to the effect that the Holders will not recognize
income, gain or loss for federal income tax purposes as a result of such
deposit and termination of obligations or an Opinion of Counsel based upon
such a ruling addressed to the Trustee or a change in the applicable Federal
tax law since the date of this Indenture, to such effect, (iii) delivering to
the Trustee an Opinion of Counsel to the effect that the Company's exercise of
its option under this paragraph will not result in the Company, the Trustee or
the trust created by the Company's deposit of funds pursuant to this provision
becoming or being deemed to be an "investment company" under the Investment
Company Act of 1940, as amended, and (iv) delivering to the Trustee an
Officers' Certificate and an Opinion of Counsel each stating that there has
been compliance with all conditions precedent provided for herein.
(d) Notwithstanding the foregoing paragraphs 9.01(b) and (c)
above, the Company's obligations contained in Sections 2.03, 2.05, 2.06, 2.07,
4.02, 7.07, 7.08, 9.03 and 9.04 shall survive until the Securities are no
longer outstanding. In addition, notwithstanding the foregoing paragraph
9.01(b), in that instance the Company's obligations contained in Section 4.01
shall also survive until the Securities are no longer outstanding. Thereafter
the Company's obligations in Section 7.07, 9.03 and 9.04 shall survive. The
Company may make an irrevocable deposit pursuant to this Section 9.01 only if
at such time it is not prohibited from doing so under the subordination
provisions of this Indenture and the Company has delivered to the Trustee and
any Paying Agent an Officers' Certificate to that effect. After such delivery
or irrevocable deposit and delivery of an Officers' Certificate and Opinion of
Counsel, the Trustee upon request of the Company shall acknowledge in writing
the discharge of the Company's and the Guarantors' (if any) obligations under
the Securities, the Guarantees and this Indenture other than those surviving
obligations specified in this paragraph (d).
SECTION 9.2. Application of Trust Money.
The Trustee shall hold in trust money or United States
Government Obligations deposited with it pursuant to Section 9.01, and shall
apply the deposited money and the money from United States Government
Obligations in accordance with this
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Indenture solely to the payment of principal of and interest on the
Securities. The Company shall indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the United States Government
Obligations deposited pursuant to Section 9.01 or the principal and interest
received in respect thereof other than any such tax, fee or other charge which
by law is for the account of the Holders of outstanding Securities.
SECTION 9.3. Repayment to Company.
Subject to Sections 7.07 and 9.01, the Trustee shall promptly
pay to the Company upon receipt by the Trustee of the Company's written request
accompanied by an Officers' Certificate any excess money held by it at any
time. The Trustee shall pay to the Company upon such request any money held by
it for the payment of principal or interest that remains unclaimed for two
years; provided, however, that the Trustee before being required to make any
payment may at the expense of the Company cause to be published once in a
newspaper of general circulation in The City of New York or mail to each Holder
entitled to such money notice that such money remains unclaimed and that, after
a date specified therein which shall be at least 30 days from the date of such
publication or mailing, any unclaimed balance of such money then remaining
shall be repaid to the Company. After payment to the Company, Securityholders
entitled to money must look to the Company for payment as general creditors
unless an applicable abandoned property law designates another person, and all
liability of the Trustee or Paying Agent with respect to such money shall
thereupon cease.
SECTION 9.4. Reinstatement.
If the Trustee is unable to apply any money or United States
Government Obligations in accordance with Section 9.01 by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, the
Company's and the Guarantors'(if any) obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to Section 9.01 until such time as the Trustee is permitted to apply
all such money or United States Government Obligations in accordance with
Section 9.01; provided, however, that if the Company has made any payment of
interest on or principal of any Securities because of the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Securities to receive such payment from the money or United States
Government Obligations held by the Trustee.
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ARTICLE X.
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 10.1. Without Consent of Holders.
The Company and the Guarantors, if any, when authorized by a
resolution of their respective Boards of Directors, and the Trustee may amend
or supplement this Indenture or the Securities without notice to or consent of
any Securityholder:
(i) to cure any ambiguity, defect or inconsistency;
provided, however, that such amendment or supplement does not adversely affect
the rights of any Holder;
(ii) to effect the assumption by a successor Person of all
obligations of the Company under the Securities and this Indenture in
connection with any transaction complying with Article Five of this
Indenture;
(iii) to provide for uncertificated Securities in addition
to or in place of certificated Securities;
(iv) to comply with any requirements of the Commission in
order to effect or maintain the qualification of this Indenture under
the TIA;
(v) to make any change that would provide any additional
benefit or rights to the Holders;
(vi) to make any other change that does not adversely affect
the rights of any Holder under this Indenture;
(vii) to evidence the succession of another Person to any
Guarantor and the assumption by any such successor of the covenants
of such Guarantor herein and in the Guarantee;
(viii) to add to the covenants of the Company or the
Guarantors for the benefit of the Holders, or to surrender any right
or power herein conferred upon the Company or any Guarantor;
(ix) to secure the Securities pursuant to the requirements
of Section 4.17 or otherwise; or
(x) to reflect the release of a Guarantor from its
obligations with respect to its Guarantee in accordance with the
provisions of Section 11.03 and to add a Guarantor pursuant to the
requirements of Section 4.18;
provided, however, that the Company has delivered to the
Trustee an Opinion of Counsel and an Officers' Certificate each stating that
such amendment or supplement complies with the provisions of this Section
10.01.
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SECTION 10.2. With Consent of Holders.
The Company, the Guarantors, if any, and the Trustee may
amend or supplement this Indenture or the Securities with the written consent
of the Holders of at least a majority in principal amount of the outstanding
Securities. However, without the consent of each Holder affected, an
amendment, supplement or waiver may not:
(1) change the Stated Maturity of the principal of
any Security;
(2) alter the optional redemption or repurchase
provisions of any Security or this Indenture in a manner
adverse to the holders of the Securities (other than the
provisions of this Indenture relating to any Offer to
Purchase required under Section 4.05 or 4.14);
(3) reduce the principal amount of any Security;
(4) reduce the rate of or extend the time for
payment of interest on any Security;
(5) change the place or currency of payment of the
principal of or interest on any Security;
(6) modify any provisions of this Indenture
relating to the waiver of past defaults (other than to add
sections of this Indenture subject thereto) or the right of
the Holders to institute suit for the enforcement of any
payment on or with respect to any Security or the
Guarantees, or the modification and amendment of this
Indenture and the Securities (other than to add sections of
this Indenture or the Securities which may not be amended,
supplemented or waived without the consent of each Holder
affected);
(7) reduce the percentage of the principal amount
of outstanding Securities necessary for amendment to or
waiver of compliance with any provision of this Indenture or
the Securities or for waiver of any Default;
(8) waive a default in the payment of principal of,
interest on, or redemption payment with respect to, any
Security (except a rescission of acceleration of the
Securities by the Holders as provided in this Indenture and
a waiver of the payment default that resulted from such
acceleration);
(9) modify the ranking or priority of the
Securities or the Guarantee, if any, or modify the
definition of Senior Debt or Designated Senior Debt or
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amend or modify the subordination provisions of this
Indenture in any manner adverse to the Holders; or
(10) release any Guarantor from its Guarantee or
this Indenture otherwise than in accordance with this
Indenture (it being understood that nothing in this clause
(10) requires the consent of Holders of more than a majority
in aggregate principal amount of outstanding Securities to
amend or modify Section 4.05).
In addition, no such modification or amendment may, without
the consent of the Holders of three-fourths of the aggregate principal amount
of Securities affected thereby, modify any of the provisions (including the
definitions relating thereto) relating to any Offer to Purchase required under
Section 4.14 in a manner materially adverse to the Holders.
The Holders of a majority in aggregate principal amount of
the outstanding Securities, on behalf of all holders of Securities, may waive
compliance by the Company with certain restrictive provisions of this
Indenture. Subject to certain rights of the Trustee, as provided in this
Indenture, (i) the Holders of a majority in aggregate principal amount of the
outstanding Securities, on behalf of all Holders of Securities, may waive any
past default under this Indenture, except a default in the payment of principal
or interest or a default arising from failure to purchase any Security tendered
pursuant to an Offer to Purchase required pursuant to Section 4.14, or a
default in respect of a provision that under this Indenture cannot be modified
or amended without the consent of the Holder of each outstanding Security
affected and (ii) the Holders of three-fourths of the aggregate principal
amount of Securities affected thereby, on behalf of all Holders, may waive a
default arising from failure to effect an Offer to Purchase required under
Section 4.14.
It shall not be necessary for the consent of the Holders
under this Section 10.02 to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent approves the
substance thereof.
SECTION 10.3. Compliance with Trust Indenture Act.
Every amendment to or supplement of this Indenture or the
Securities shall comply with the TIA as then in effect.
SECTION 10.4. Revocation and Effect of Consents.
Until an amendment or waiver becomes effective, a consent to
it by a Holder is a continuing consent by the Holder and every subsequent
Holder of that Security or portion of that Security that evidences the same
debt as the consenting Holder's Security, even if notation of the consent is
not made on any
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Security. Subject to the following paragraph, any such Holder or subsequent
Holder may revoke the consent as to such Holder's Security or portion of such
Security by written notice to the Trustee or the Company received before the
date on which the Trustee receives an Officers' Certificate certifying that
the Holders of the requisite principal amount of Securities have consented
(and not theretofore revoked such consent) to the amendment, supplement or
waiver.
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Holders entitled to consent to any
amendment, supplement or waiver. If a record date is fixed, then,
notwithstanding the last sentence of the immediately preceding paragraph, those
Persons who were Holders at such record date (or their duly designated
proxies), and only those Persons, shall be entitled to consent to such
amendment, supplement or waiver or to revoke any consent previously given,
whether or not such Persons continue to be Holders after such record date.
No such consent shall be valid or effective for more than 90 days after such
record date.
After an amendment, supplement or waiver becomes effective,
it shall bind every Securityholder, unless it makes a change described in the
second sentence of Section 10.02. In that case the amendment, supplement or
waiver shall bind each Holder of a Security who has consented to it and every
subsequent Holder of a Security or portion of a Security that evidences the
same debt as the consenting Holder's Security.
SECTION 10.5. Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a
Security, the Trustee may require the Holder of the Security to deliver it to
the Trustee. The Trustee may place an appropriate notation on the Security
about the changed terms and return it to the Holder. Alternatively, if the
Company or the Trustee so determines, the Company in exchange for the Security
shall issue and the Trustee shall authenticate a new Security that reflects the
changed terms. Failure to make the appropriate notation or issue a new Security
shall not affect the validity and effect of such amendment, supplement or
waiver.
SECTION 10.6. Trustee To Sign Amendments, etc.
The Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel and an Officers' Certificate
each stating that the execution of any amendment, supplement or waiver
authorized pursuant to this Article Ten is authorized or permitted by this
Indenture and that such amendment, supplement or waiver constitutes the legal,
valid and binding obligation of the Company and the Guarantors, enforceable in
accordance with its terms (subject to customary exceptions). The Trustee shall
execute any amendment, supplement or waiver authorized pursuant to this Article
Ten, provided,
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however, that the Trustee may, but shall not be obligated to, execute any such
amendment, supplement or waiver which affects the Trustee's own rights, duties
or immunities under this Indenture or otherwise. In signing any amendment,
supplement or waiver, the Trustee shall be entitled to receive an indemnity
reasonably satisfactory to it.
ARTICLE XI.
GUARANTEE
SECTION 11.1. Unconditional Guarantee.
Each Guarantor who becomes a party to this Indenture hereby
unconditionally, jointly and severally, guarantees to each Holder of a Security
authenticated and delivered by the Trustee and to the Trustee and its
successors and assigns that: the principal of and interest on the Securities
will be promptly paid in full when due, subject to any applicable grace period,
whether at maturity, by acceleration or otherwise, and interest on the overdue
principal and interest on any overdue interest on the Securities and all other
obligations of the Company to the Holders or the Trustee hereunder or under the
Securities will be promptly paid in full or performed, all in accordance with
the terms hereof and thereof; subject, however, to the limitations set forth in
Section 11.04. Each such Guarantor hereby agrees that its obligations hereunder
shall be unconditional, irrespective of the validity, regularity or
enforceability of the Securities or this Indenture, the absence of any action
to enforce the same, any waiver or consent by any Holder of the Securities with
respect to any provisions hereof or thereof, the recovery of any judgment
against the Company, any action to enforce the same or any other circumstance
which might otherwise constitute a legal or equitable discharge or defense of a
guarantor. Each such Guarantor hereby waives diligence, presentment, demand of
payment, filing of claims with a court in the event of insolvency or bankruptcy
of the Company, any right to require a proceeding first against the Company,
protest, notice and all demands whatsoever and covenants that the Guarantee
will not be discharged except by complete performance of the obligations
contained in the Securities, this Indenture, and this Guarantee. If any Holder
or the Trustee is required by any court or otherwise to return to the Company,
any Guarantor, or any custodian, trustee, liquidator or other similar official
acting in relation to the Company or any Guarantor, any amount paid by the
Company or any Guarantor to the Trustee or such Holder, this Guarantee, to the
extent theretofore discharged, shall be reinstated in full force and effect.
Each Guarantor further agrees that, as between each Guarantor, on the one hand,
and the Holders and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article Six for
the purpose of this Guarantee, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the obligations
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guaranteed hereby, and (y) in the event of any acceleration of such obligations
as provided in Article Six, such obligations (whether or not due and payable)
shall forthwith become due and payable by each Guarantor for the purpose of
this Guarantee.
SECTION 11.2. Severability.
In case any provision of this Guarantee shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
SECTION 11.3. Release of a Guarantor.
If the Securities are defeased in accordance with Section
9.01(c), or if all of the Capital Stock of any Guarantor is sold (including by
issuance or otherwise) by the Company or any of its Subsidiaries in a
transaction constituting an Asset Disposition (or which, but for the provisions
of clause (c) of the definition of such term, would constitute an Asset
Disposition), and, if required by this Indenture, (x) the Net Available
Proceeds from such Asset Disposition are used in accordance with Section 4.05
or (y) the Company delivers to the Trustee an Officers' Certificate covenanting
that the Net Available Proceeds from such Asset Disposition will be used in
accordance with Section 4.05 and within the time limits specified by such
Section 4.05, then such Guarantor shall be released and discharged from all
obligations under this Article Eleven upon such use in the case of clause (x)
or upon such delivery in the case of clause (y). The Trustee shall, at the sole
cost and expense of the Company and upon receipt at the reasonable request of
the Trustee of an Opinion of Counsel that the provisions of this Section 11.03
have been complied with, deliver an appropriate instrument evidencing such
release upon receipt of a request by the Company accompanied by an Officers'
Certificate certifying as to the compliance with this Section. Any Guarantor
not so released remains liable for the full amount of principal of and interest
on the Securities and the other obligations of the Company hereunder as
provided in this Article Eleven.
SECTION 11.4. Limitation of Guarantor's Liability.
Each Guarantor, and by its acceptance hereof each Holder and
the Trustee, hereby confirms that it is the intention of all such parties that
the guarantee by such Guarantor pursuant to its Guarantee not constitute a
fraudulent transfer or conveyance for purposes of title 11 of the United States
Code, as amended, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent
Transfer Act or any similar U.S. Federal or state or other applicable law. To
effectuate the foregoing intention, the Holders and such Guarantor hereby
irrevocably agree that the obligations of such Guarantor under the Guarantee
shall be limited to the maximum amount as will, after giving effect to all
other contingent and fixed liabilities of such Guarantor and
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after giving effect to any collections from or payments made by or on behalf
of any other Guarantor in respect of the obligations of such other Guarantor
under its Guarantee or pursuant to Section 11.05, result in the obligations of
such Guarantor under the Guarantee not constituting such fraudulent transfer
or conveyance.
SECTION 11.5. Contribution.
In order to provide for just and equitable contribution among
the Guarantors, the Guarantors agree, inter se, that in the event any payment
or distribution is made by any Guarantor (a "Funding Guarantor") under the
Guarantee, such Funding Guarantor shall be entitled to a contribution from all
other Guarantors in a pro rata amount, based on the net assets of each
Guarantor (including the Funding Guarantor), determined in accordance with
GAAP, subject to Section 11.04, for all payments, damages and expenses incurred
by that Funding Guarantor in discharging the Company's obligations with respect
to the Securities or any other Guarantor's obligations with respect to the
Guarantee.
SECTION 11.6. Execution of Guarantee.
To further evidence their Guarantee to the Holders, any
Guarantor required to Guarantee the Securities pursuant to Section 4.18 shall
execute the endorsement of Guarantee in substantially the form set forth in
Exhibit A hereto, which endorsement shall be delivered to each Holder to be
attached to each Security. Each such Guarantor hereby agrees that its Guarantee
set forth in Section 11.01 shall remain in full force and effect
notwithstanding any failure to endorse on each Security a notation of such
Guarantee. Each such Guarantee shall be signed on behalf of each Guarantor by
its Chairman of the Board, its President or one of its Vice Presidents prior to
the authentication of the Security on which it is endorsed, and the delivery of
such Security by the Trustee, after the authentication thereof hereunder, shall
constitute due delivery of such Guarantee on behalf of such Guarantor. Such
signature upon the Guarantee may be manual or facsimile signature of such
officer and may be imprinted or otherwise reproduced on the Guarantee, and in
case such officer who shall have signed the Guarantee shall cease to be such
officer before the Security on which such Guarantee is endorsed shall have been
authenticated and delivered by the Trustee or disposed of by the Company, such
Security nevertheless may be authenticated and delivered or disposed of as
though the Person who signed the Guarantee had not ceased to be such officer of
the Guarantor.
SECTION 11.7. Subordination of Subrogation and Other Rights.
Each Guarantor hereby agrees that any claim against the
Company that arises from the payment, performance or enforcement of such
Guarantor's obligations under its Guarantee or this
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Indenture, including, without limitation, any right of subrogation, shall be
subject and subordinate to, and no payment with respect to any such claim of
such Guarantor shall be made before, the payment in full in cash of all
outstanding Securities in accordance with the provisions provided therefor in
this Indenture.
ARTICLE XII.
SUBORDINATION OF GUARANTEE
SECTION 12.1. Guarantee Obligations Subordinated to Senior
Debt of Guarantor.
Each Guarantor covenants and agrees, and the Trustee and each
Holder of the Securities by his acceptance thereof likewise covenant and agree,
that the Guarantees shall be issued subject to the provisions of this Article;
and each person holding any Security, whether upon original issue or upon
transfer, assignment or exchange thereof, accepts and agrees that all payments
of the principal of and interest on the Securities pursuant to the Guarantee
made by or on behalf of any Guarantor shall, to the extent and in the manner
set forth in this Article, be subordinated and junior in right of payment to
the prior payment in full of all Senior Debt of such Guarantor.
SECTION 12.2. No Payment on Guarantees in Certain
Circumstances.
(a) No direct or indirect payment by or on behalf of any
Guarantor of principal of or interest on the Securities (other than payments to
Holders from funds held in trust for the benefit of Holders pursuant to Section
9.01) pursuant to such Guarantor's Guarantee, whether pursuant to the terms of
the Securities, upon acceleration or otherwise, will be made if, at the time of
such payment, there exists a default in the payment of all or any portion of
the obligations on any Designated Senior Debt of such Guarantor whether at
maturity, on account of mandatory redemption or prepayment, acceleration or
otherwise, and such default shall not have been cured or waived. In addition,
during the continuance of any non-payment default or non-payment event of
default with respect to any Designated Senior Debt pursuant to which the
maturity thereof may be accelerated, and upon receipt by the Trustee of written
notice (the "Guarantor Payment Blockage Notice") from a holder or holders of
such Designated Senior Debt or the trustee or agent acting on behalf of such
Designated Senior Debt, then, unless and until such default or event of default
has been cured or waived or has ceased to exist or such Designated Senior Debt
has been discharged or repaid in full, or the requisite holders of such
Designated Senior Debt have otherwise agreed in writing, no payment or
distribution will be made by or on behalf of such Guarantor on account of or
with respect to the Securities (other than payments to Holders from funds held
in trust for the benefit
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of Holders pursuant to Section 9.01), during a period (a "Guarantor Blockage
Period") commencing on the date of receipt of such Guarantor Payment Blockage
Notice by the Trustee and ending 179 days thereafter.
Notwithstanding anything herein or in the Securities to the
contrary, (x) in no event shall a Guarantor Blockage Period extend beyond 179
days from the date the Guarantor Payment Blockage Notice was given and (y)
there must be 180 days in any 365 day period during which no Guarantor Payment
Blockage Period is in effect with respect to such Guarantor. Not more than one
Guarantor Blockage Period may be commenced with respect to each Guarantor
during any period of 365 consecutive days. No default or event of default that
existed or was continuing on the date of commencement of any Guarantor Blockage
Period with respect to the Designated Senior Debt initiating such Guarantor
Payment Blockage Period may be, or be made, the basis for the commencement of
any Guarantor Blockage Period by the holder or holders of such Designated
Senior Debt or the trustee or agent acting on behalf of such Designated Senior
Debt, whether or not within a period of 365 consecutive days, unless such
default or event of default has been cured or waived for a period of not less
than 90 consecutive days.
(b) In the event that, notwithstanding the foregoing, any
payment shall be received by the Trustee or any Holder when such payment is
prohibited by Section 12.02(a), such payment shall be held in trust for the
benefit of, and shall be paid over or delivered to, the holders of such
Designated Senior Debt or their respective representatives, or to the trustee
or trustees under any indenture pursuant to which any of such Designated Senior
Debt may have been issued, as their respective interests may appear, but only
to the extent that, upon notice from the Trustee to the holders of such
Designated Senior Debt that such prohibited payment has been made, the holders
of such Designated Senior Debt (or their representative or representatives or a
trustee) notify the Trustee in writing of the amounts then due and owing on
such Designated Senior Debt, if any, and only the amounts specified in such
notice to the Trustee shall be paid to the holders of such Designated Senior
Debt.
SECTION 12.3. Payment Over of Proceeds upon Dissolution, etc.
(a) Upon any payment or distribution of assets or securities
of any Guarantor of any kind or character (whether in cash, property or
securities) upon any dissolution or winding-up or total or partial liquidation
or reorganization of such Guarantor, whether voluntary or involuntary or in
bankruptcy, insolvency, receivership or other proceedings, all amounts due or
to become due with respect to all Senior Debt of such Guarantor shall first be
paid in full, or payment provided for, before the Holders or the Trustee on
their behalf shall be entitled to receive any payment by such Guarantor of the
principal of or
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interest on the Securities pursuant to such Guarantor's Guarantee, or any
payment to acquire any of the Securities for cash, property or securities, or
any distribution with respect to the Securities of any cash, property or
securities. Before any payment may be made by, or on behalf of, any Guarantor
of the principal of or interest on the Securities upon any such dissolution or
winding-up or liquidation or reorganization, any payment or distribution of
assets or securities of such Guarantor of any kind or character, whether in
cash, property or securities, to which the Holders of the Securities or the
Trustee on their behalf would be entitled, but for the subordination
provisions of this Indenture, shall be made by such Guarantor or by any
receiver, trustee in bankruptcy, liquidating trustee, agent or other Person
making such payment or distribution, directly to the holders of the Senior
Debt of such Guarantor or their representative(s) or to the trustee(s) under
any indenture pursuant to which any of such Senior Debt may have been issued,
as their respective interests may appear, to the extent necessary to pay all
such Senior Debt in full after giving effect to any concurrent payment,
distribution or provision therefor to or for the holders of such Senior Debt.
(b) In the event that, notwithstanding the foregoing
provision prohibiting such payment or distribution, any payment or distribution
of assets or securities of any kind or character, whether in cash, property or
securities, shall be received by the Trustee or any Holder at a time when such
payment or distribution is prohibited by Section 12.03(a) and before all
obligations in respect of the Senior Debt of such Guarantor are paid in full,
or payment provided for, such payment or distribution shall be received and
held in trust for the benefit of, and shall be paid over or delivered to, the
holders of such Senior Debt or their respective representative(s), or to the
trustee(s) under any indenture pursuant to which any of such Senior Debt may
have been issued, as their respective interests may appear, for application to
the payment of such Senior Debt remaining unpaid until all such Senior Debt has
been paid in full after giving effect to any concurrent payment, distribution
or provision therefor to or for the holders of such Senior Debt.
(c) The consolidation of any Guarantor with, or the merger of
any Guarantor with or into, another corporation or the liquidation or
dissolution of any Guarantor following the conveyance or transfer of its
property as an entirety, or substantially as an entirety, to another
corporation upon the terms and conditions provided in Article Five or Section
11.03 shall not be deemed a dissolution, winding-up, liquidation or
reorganization for the purposes of this Section if such other corporation
shall, as a part of such consolidation, merger, conveyance or transfer, comply
with the conditions stated in Article Five or such Guarantor or successor
entity shall be released from the Guarantee pursuant to the terms of Section
11.03.
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SECTION 12.4. Subrogation.
Upon the payment in full of all Senior Debt of a Guarantor,
or provision for payment, the Holders shall be subrogated (equally and ratably
with all pari passu Indebtedness) to the rights of the holders of such Senior
Debt to receive payments or distributions of cash, property or securities of
such Guarantor made on such Senior Debt until the principal of and interest on
the Securities shall be paid in full; and, for the purposes of such
subrogation, no payments or distributions to the holders of such Senior Debt of
any cash, property or securities to which the Holders or the Trustee on their
behalf would be entitled except for the provisions of this Article, and no
payment over pursuant to the provisions of this Article to the holders of such
Senior Debt by Holders or the Trustee on their behalf shall, as between such
Guarantor, its creditors other than holders of such Senior Debt, and the
Holders, be deemed to be a payment by such Guarantor to or on account of such
Senior Debt. It is understood that the provisions of this Article are and are
intended solely for the purpose of defining the relative rights of the Holders,
on the one hand, and the holders of Senior Debt of the Guarantors, on the other
hand.
If any payment or distribution to which the Holders would
otherwise have been entitled but for the provisions of this Article shall have
been applied, pursuant to the provisions of this Article, to the payment of all
amounts payable under Senior Debt, then and in such case, the Holders shall be
entitled to receive from the holders of such Senior Debt any payments or
distributions received by such holders of Senior Debt in excess of the amount
required to make payment in full, or provision for payment, of such Senior
Debt.
SECTION 12.5. Obligations of Guarantors Unconditional.
Nothing contained in this Article or elsewhere in this
Indenture or in the Securities or the Guarantee is intended to or shall impair,
as among the Guarantors and the Holders, the obligation of each Guarantor,
which is absolute and unconditional, to pay to the Holders the principal of and
interest on the Securities as and when the same shall become due and payable in
accordance with the terms of the Guarantee, or is intended to or shall affect
the relative rights of the Holders and creditors of any Guarantor other than
the holders of Senior Debt, nor shall anything herein or therein prevent any
Holder or the Trustee on their behalf from exercising all remedies otherwise
permitted by applicable law upon default under this Indenture, subject to the
rights, if any, under this Article of the holders of Senior Debt in respect of
cash, property or securities of any Guarantor received upon the exercise of any
such remedy.
Without limiting the generality of the foregoing, nothing
contained in this Article shall restrict the right of the
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Trustee or the Holders to take any action to declare the Securities to be due
and payable prior to their stated maturity pursuant to Section 6.01 or to
pursue any rights or remedies hereunder; provided, however, that all Senior
Debt of any Guarantor then due and payable shall first be paid in full before
the Holders or the Trustee are entitled to receive any direct or indirect
payment from such Guarantor of principal of or interest on the Securities
pursuant to such Guarantor's Guarantee.
SECTION 12.6. Notice to Trustee.
The Company shall give prompt written notice to the Trustee
of any fact known to the Company or such Guarantor which would prohibit the
making of any payment to or by the Trustee in respect of the Securities
pursuant to the provisions of this Article. Failure to give such notice to the
Trustee shall not affect the subordination of the Securities to Senior Debt of
Guarantors. The Trustee shall not be charged with knowledge of the existence of
any default or event of default with respect to any Senior Debt or of any other
facts which would prohibit the making of any payment to or by the Trustee
unless and until the Trustee shall have received notice in writing to that
effect signed by an Officer of the Company, or by a holder of Senior Debt or
trustee or agent therefor; and prior to the receipt of any such written notice,
the Trustee shall, subject to Article Seven, be entitled to assume that no such
facts exist; provided, however, that if the Trustee shall not have received the
notice provided for in this Section 12.06 at least three Business Days prior to
the date upon which by the terms of this Indenture any moneys shall become
payable for any purpose (including, without limitation, the payment of the
principal of or interest on any Security), then, regardless of anything herein
to the contrary, the Trustee shall have full power and authority to receive any
moneys from any Guarantor and to apply the same to the purpose for which they
were received, and shall not be affected by any notice to the contrary which
may be received by it on or after such prior date. Nothing contained in this
Section 12.06 shall limit the right of the holders of Senior Debt of a
Guarantor to recover payments as contemplated by Section 12.02 or 12.03. The
Trustee shall be entitled to rely on the delivery to it of a written notice by
a Person representing himself or itself to be a holder of any Senior Debt of a
Guarantor (or a trustee on behalf of, or other representative of, such holder)
to establish that such notice has been given by a holder of such Senior Debt of
a Guarantor or a trustee or representative on behalf of any such holder.
In the event that the Trustee determines in good faith that
any evidence is required with respect to the right of any Person as a holder of
Senior Debt of a Guarantor to participate in any payment or distribution
pursuant to this Article, the Trustee may request such Person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of such
Senior Debt held by such Person, the extent to which such Person
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is entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such Person under this Article, and if such
evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment.
SECTION 12.7. Reliance on Judicial Order or Certificate of
Liquidating Agent.
Upon any payment or distribution of assets or securities of a
Guarantor referred to in this Article, the Trustee and the Holders of the
Securities shall be entitled to rely upon any order or decree made by any court
of competent jurisdiction in which bankruptcy, dissolution, winding-up,
liquidation or reorganization proceedings are pending, or upon a certificate of
the receiver, trustee in bankruptcy, liquidating trustee, agent or other person
making such payment or distribution, delivered to the Trustee or to the Holders
for the purpose of ascertaining the persons entitled to participate in such
distribution, the holders of Senior Debt of such Guarantor and other
indebtedness of such Guarantor, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article.
SECTION 12.8. Trustee's Relation to Senior Debt of
Guarantors.
The Trustee and any Paying Agent shall be entitled to all the
rights set forth in this Article with respect to any Senior Debt of Guarantors
which may at any time be held by it in its individual or any other capacity to
the same extent as any other holder of such Senior Debt, and nothing in this
Indenture shall deprive the Trustee or any Paying Agent of any of its rights as
such holder.
With respect to the holders of a Guarantor's Senior Debt, the
Trustee undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article, and no implied
covenants or obligations with respect to the holders of such Senior Debt shall
be read into this Indenture against the Trustee. The Trustee shall not be
deemed to owe any fiduciary duty to the holders of Senior Debt of Guarantors
(except as provided in Section 12.03(b)). The Trustee shall not be charged with
knowledge of the existence of Senior Debt or of any facts that would prohibit
any payment hereunder unless the Trustee shall have received notice to that
effect at the address of the Trustee set forth in Section 13.02.
SECTION 12.9. Subordination Rights Not Impaired by Acts or
Omissions of the Guarantors or Holders of Senior Debt of Guarantors.
No right of any present or future holders of any Senior Debt
of Guarantors to enforce subordination as provided herein
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shall at any time in any way be prejudiced or impaired by any act or failure
to act on the part of any Guarantor or by any act or failure to act, in good
faith, by any such holder, or by any noncompliance by any Guarantor with the
terms of this Indenture, regardless of any knowledge thereof which any such
holder may have or otherwise be charged with. The provisions of this Article
are intended to be for the benefit of, and shall be enforceable directly by,
the holders of Senior Debt of Guarantors.
SECTION 12.10. Securityholders Authorize Trustee to
Effectuate Subordination of Guarantee.
Each Holder of Securities by his acceptance of such
Securities authorizes and expressly directs the Trustee on his behalf to take
such action as may be necessary or appropriate to effectuate the subordination
provided in this Article, and appoints the Trustee his attorney-in-fact for
such purposes, including, in the event of any dissolution, winding up,
liquidation or reorganization of any Guarantor (whether in bankruptcy,
insolvency, receivership, reorganization or similar proceedings or upon an
assignment for the benefit of creditors or otherwise) tending towards
liquidation of the business and assets of such Guarantor, the filing of a claim
for the unpaid balance of its or his Securities in the form required in those
proceedings.
SECTION 12.11. This Article Not to Prevent Events of Default.
The failure to make a payment on account of principal of or
interest on the Securities by reason of any provision of this Article shall not
be construed as preventing the occurrence of an Event of Default specified in
Section 6.01(a), (b) or (c).
SECTION 12.12. Trustee's Compensation Not Prejudiced.
Nothing in this Article shall apply to amounts due to the
Trustee pursuant to other sections in this Indenture.
SECTION 12.13. No Waiver of Guarantee Subordination
Provisions.
Without in any way limiting the generality of Section 12.09,
the holders of Senior Debt of Guarantors may, at any time and from time to
time, without the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to the Holders of the Securities
and without impairing or releasing the subordination provided in this Article
or the obligations hereunder of the Holders of the Securities to the holders of
Senior Debt of Guarantors, do any one or more of the following: (a) change the
manner, place or terms of payment or extend the time of payment of, or renew or
alter, Senior Debt of Guarantors or any instrument evidencing the same or any
agree-
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<PAGE>
ment under which such Senior Debt is outstanding or secured; (b) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing such Senior Debt; (c) release any Person liable in any
manner for the collection of such Senior Debt; and (d) exercise or refrain
from exercising any rights against any Guarantor and any other Person.
SECTION 12.14. Payments May Be Paid Prior to Dissolution.
Nothing contained in this Article or elsewhere in this
Indenture shall prevent (i) a Guarantor, except under the conditions described
in Section 12.02, from making payments of principal of and interest on the
Securities, or from depositing with the Trustee any moneys for such payments,
or (ii) the application by the Trustee of any moneys deposited with it for the
purpose of making such payments of principal of and interest on the Securities,
to the holders entitled thereto unless at least three Business Days prior to
the date upon which such payment becomes due and payable, the Trustee shall
have received the written notice provided for in Section 12.02(b) or in Section
12.06.
ARTICLE XIII.
MISCELLANEOUS
SECTION 13.1. Trust Indenture Act Controls.
This Indenture is subject to the provisions of the TIA that
are required to be a part of this Indenture, and shall, to the extent
applicable, be governed by such provisions. If any provision of this Indenture
modifies any TIA provision that may be so modified, such TIA provision shall be
deemed to apply to this Indenture as so modified. If any provision of this
Indenture excludes any TIA provision that may be so excluded, such TIA
provision shall be excluded from this Indenture.
The provisions of TIA ss.ss. 310 through 317 that impose
duties on any Person (including the provisions automatically deemed included
unless expressly excluded by this Indenture) are a part of and govern this
Indenture, whether or not physically contained herein.
SECTION 13.2. Notices.
Any notice or communication shall be sufficiently given if in
writing and delivered in person, by facsimile, by overnight courier, or mailed
by first-class mail addressed as follows:
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<PAGE>
if to the Company:
United Auto Group, Inc.
375 Park Avenue, 11th Floor
New York, NY 10152
Attention: Chairman and Chief Executive Officer
Facsimile: (212) 593-1363
Telephone: (212) 230-0400
with a copy to:
Jack H. Nusbaum, Esq.
Willkie Farr & Gallagher
153 East 53rd Street
New York, New York 10022
Facsimile: (212) 821-8111
Telephone: (212) 821-8000
if to the Trustee:
The Bank of New York
101 Barclay Street, 21W
New York, New York 10007
Attention: Corporate Trust Trustee Administration
Facsimile: (212) 815-5915
Telephone: (212) 815-5783
The Company or the Trustee by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to
Holders) shall be deemed to have been duly given: at the time delivered by
hand, if personally delivered; five Business Days after being deposited in the
mail, postage prepaid, if mailed; when telephonic acknowledgment of receipt is
obtained, if telecopied; and the next Business Day after timely delivery to the
courier, if sent by overnight courier promising next Business Day delivery.
Any notice or communication to a Holder shall be mailed, by
first class mail, postage prepaid, or by overnight air courier promising next
Business Day delivery, including any notice delivered in connection with TIA
ss.ss. 310(b), 313(c), 314(a) and 315(b), to him at his address as set forth on
the registration books of the Registrar and shall be sufficiently given to him
if so mailed within the time prescribed. To the extent required by the TIA, any
notice or communication shall also be mailed to any Person described in TIA ss.
313(c).
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<PAGE>
Failure to mail a notice or communication to a
Securityholder or any defect in it shall not affect its sufficiency with
respect to other Securityholders. If a notice or communication is given in the
manner provided above, it is duly given, whether or not the addressee receives
it.
SECTION 13.3. Communications by Holders with Other Holders.
Securityholders may communicate pursuant to TIA ss. 312(b)
with other Securityholders with respect to their rights under this Indenture
or the Securities. The Company, the Trustee, the Registrar and any other
person shall have the protection of TIA ss. 312(c).
SECTION 13.4. Certificate and Opinion as to Conditions
Precedent.
Upon any request or application by the Company to the Trustee
to take or refrain from taking any action under this Indenture, the Company
shall furnish to the Trustee at the request of the Trustee:
(1) an Officers' Certificate in form and substance
satisfactory to the Trustee stating that, in the opinion of
the signers, all conditions precedent, if any, provided for
in this Indenture relating to the proposed action have been
complied with;
(2) an Opinion of Counsel in form and substance
satisfactory to the Trustee stating that, in the opinion of
such counsel, all such conditions precedent have been
complied with; and
(3) where applicable, a certificate or opinion by
an independent certified public accountant satisfactory to
the Trustee that complies with TIA ss. 314(c).
SECTION 13.5. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that the person making such
certificate or opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of
the examination or investigation upon which the statements
or opinions contained in such certificate or opinion are
based;
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<PAGE>
(3) a statement that, in the opinion of such
person, he has made such examination or investigation as is
necessary to enable him to express an informed opinion as to
whether or not such covenant or condition has been complied
with; and
(4) a statement as to whether or not, in the
opinion of such person, such condition or covenant has been
complied with; provided, however, that with respect to
matters of fact an Opinion of Counsel may rely on an
Officers' Certificate or certificates of public officials.
SECTION 13.6. Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules for action by or at a
meeting of Securityholders. The Paying Agent or Registrar may make reasonable
rules for its functions.
SECTION 13.7. Governing Law.
The laws of the State of New York shall govern this
Indenture, the Securities and the Guarantee without regard to principles of
conflicts of law.
SECTION 13.8. No Recourse Against Others.
No director, officer, employee or stockholder, as such, of
the Company or any of its Subsidiaries shall have any liability for any
obligations of the Company or any Guarantor under the Securities, the
Guarantees or this Indenture or for any claim based on, in respect of or by
reason of such obligations or their creation. Each Securityholder by accepting
a Security waives and releases all such liability. The waiver and release are
part of the consideration for issuance of the Securities.
SECTION 13.9. Successors.
All agreements of the Company in this Indenture and the
Securities shall bind its successor. All agreements of each Guarantor in this
Indenture and the Guarantee of such Guarantor shall bind its successor. All
agreements of the Trustee in this Indenture shall bind its successor.
SECTION 13.10. Counterpart Originals.
The parties may sign any number of copies of this Indenture.
Each signed copy shall be an original, but all of them together represent the
same agreement.
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<PAGE>
SECTION 13.11. Severability.
In case any provision in this Indenture, in the Securities or
in the Guarantee shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby, and a Holder shall have no claim therefor against
any party hereto.
SECTION 13.12. No Adverse Interpretation of Other
Agreements.
This Indenture may not be used to interpret another
indenture, loan or debt agreement of the Company or a Subsidiary. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.
SECTION 13.13. Legal Holidays.
If a payment date is not a Business Day at a place of
payment, payment may be made at that place on the next succeeding Business Day,
and no interest shall accrue for the intervening period.
[Signature Pages Follow]
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<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed as of the date first written above.
UNITED AUTO GROUP, INC.
By: __________________
Name:
Title:
GUARANTORS:
DIFEO PARTNERSHIP, INC.
DIFEO PARTNERSHIP RCT, INC.
DIFEO PARTNERSHIP RCM, INC.
DIFEO PARTNERSHIP HCT, INC.
DIFEO PARTNERSHIP SCT, INC.
DIFEO PARTNERSHIP VIII, INC.
DIFEO PARTNERSHIP IX, INC.
DIFEO PARTNERSHIP X, INC.
UAG NORTHEAST, INC.
UAG NORTHEAST (NY), INC.
HUDSON TOYOTA, INC.
SOMERSET MOTORS, INC.
UAG WEST, INC.
SA AUTOMOTIVE, LTD.
SL AUTOMOTIVE, LTD.
SPA AUTOMOTIVE, LTD.
LRP, LTD.
SUN BMW, LTD.
6725 DEALERSHIP, LTD.
SCOTTSDALE MANAGEMENT GROUP, LTD.
SK MOTORS, LTD.
SCOTTSDALE AUDI, LTD.
UNITED LANDERS, INC.
LANDERS AUTO SALES, INC.
LANDERS UNITED AUTO GROUP, INC.
LANDERS UNITED AUTO GROUP NO. 2,
INC.
LANDERS UNITED AUTO GROUP NO. 3,
INC.
LANDERS UNITED AUTO GROUP NO. 4,
INC.
LANDERS BUICK-PONTIAC, INC.
UAG ATLANTA, INC.
ATLANTA TOYOTA, INC.
UAG ATLANTA II, INC.
UNITED NISSAN, INC.,
a Georgia corporation
UAG ATLANTA III, INC.
PEACHTREE NISSAN, INC.
UAG ATLANTA IV, INC.
UAG ATLANTA IV MOTORS, INC.
<PAGE>
UAG ATLANTA V, INC.
CONYERS NISSAN, INC.
UAG TENNESSEE, INC.
UNITED NISSAN, INC.,
a Tennessee corporation
UAG TEXAS, INC.
UAG TEXAS II, INC.
UAG EAST, INC.
AMITY AUTO PLAZA, LTD.
AMITY NISSAN OF MASSAPEQUA, LTD.
AUTO MALL PAYROLL SERVICES, INC.
AUTOMALL STORAGE, INC.
FLORIDA CHRYSLER PLYMOUTH, INC.
J&S AUTO REFINISHING, LTD.
NORTHLAKE AUTO FINISH, INC.
PALM AUTO PLAZA, INC.
WEST PALM AUTO MALL, INC.
WEST PALM INFINITI, INC.
WEST PALM NISSAN, INC.
WESTBURY NISSAN, LTD.
WESTBURY SUPERSTORE, LTD.
UAG CAROLINA, INC.
GENE REED CHEVROLET, INC.
MICHAEL CHEVROLET-OLDSMOBILE, INC.
REED LALLIER CHEVROLET, INC.
UAG NEVADA, INC.
UNITED NISSAN, INC.,
a Nevada corporation
UNITED AUTOCARE, INC.
UNITED AUTOCARE PRODUCTS, INC.
UAG CAPITAL MANAGEMENT, INC.
UAG FINANCE COMPANY, INC.
UAG ATLANTA VI, INC.
UNITED JEEP EAGLE CHRYSLER PLYMOUTH
OF STONE MOUNTAIN, INC.
By: __________________
Name:
Title:
<PAGE>
FAIR HYUNDAI PARTNERSHIP
FAIR CHEVROLET-GEO PARTNERSHIP
DANBURY AUTO PARTNERSHIP
DANBURY CHRYSLER PLYMOUTH
PARTNERSHIP
J&F OLDSMOBILE PARTNERSHIP
DIFEO HYUNDAI PARTNERSHIP
DIFEO LEASING PARTNERSHIP
DIFEO NISSAN PARTNERSHIP
DIFEO CHEVROLET-GEO PARTNERSHIP
DIFEO CHRYSLER PLYMOUTH JEEP
EAGLE PARTNERSHIP
DIFEO BMW PARTNERSHIP
By: DIFEO PARTNERSHIP, INC.,
a general partner
By: __________________
Name:
Title:
HUDSON MOTORS PARTNERSHIP
By: DIFEO PARTNERSHIP HCT, INC.,
a general partner
By: __________________
Name:
Title:
OCT PARTNERSHIP
By DIFEO PARTNERSHIP VIII, INC.,
a general partner
By: __________________
Name:
Title:
<PAGE>
OCM PARTNERSHIP
By DIFEO PARTNERSHIP IX, INC.,
a general partner
By: __________________
Name:
Title:
SOMERSET MOTORS PARTNERSHIP
By: DIFEO PARTNERSHIP SCT, INC.,
a general partner
By: __________________
Name:
Title:
COUNTY AUTO GROUP PARTNERSHIP
By: DIFEO PARTNERSHIP RCT, INC.,
a general partner
By: __________________
Name:
Title:
ROCKLAND MOTORS PARTNERSHIP
By: DIFEO PARTNERSHIP RCM, INC.,
a general partner
By: __________________
Name:
Title:
<PAGE>
6725 AGENT PARTNERSHIP
By: SCOTTSDALE AUDI, LTD.,
a general partner
By: __________________
Name:
Title:
SHANNON AUTOMOTIVE, LTD.
By: UAG TEXAS II, INC.,
its general partner
By: __________________
Name:
Title:
<PAGE>
THE BANK OF NEW YORK,
as Trustee
By: __________________
Name:
Title:
<PAGE>
EXHIBIT A
UNITED AUTO GROUP, INC.
CUSIP No.
No. $
11% SENIOR SUBORDINATED NOTE DUE 2007, SERIES B
UNITED AUTO GROUP, INC. promises to pay to
or registered assigns the principal sum of
Dollars on July 15, 2007.
Interest Payment Dates: January 15 and July 15, beginning
January 15, 1998.
Record Dates: January 1 and July 1, beginning
January 1, 1998.
IN WITNESS WHEREOF, UNITED AUTO GROUP, INC. has caused this
instrument to be executed by duly authorized officers.
UNITED AUTO GROUP, INC.
By: ________________________
Name:
Title:
Dated: By: ________________________
Name:
Title:
Certificate of Authentication:
This is one of the 11% Senior Subordinated Notes due 2007,
Series B referred to in the within-mentioned Indenture.
THE BANK OF NEW YORK
a Trustee
By
----------------------- Date:
Authorized Signatory
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<PAGE>
(REVERSE OF SECURITY)
UNITED AUTO GROUP, INC.
11% Senior Subordinated Note due 2007, Series B
1. Interest.
United Auto Group, Inc., a Delaware corporation (the "Company"),
promises to pay interest at the rate of 11% per annum on the principal amount
of this Security semiannually commencing on January 15, 1998, until the
principal hereof is paid or made available for payment. Interest on the
Securities will accrue from and including the most recent date to which
interest has been paid or, if no interest has been paid, from and including
September 16, 1997, through but excluding the date on which interest is paid.
If an Interest Payment Date falls on a day that is not a Business Day, the
interest payment to be made on such Interest Payment Date will be made on the
next succeeding Business Day with the same force and effect as if made on such
Interest Payment Date, and no additional interest will accrue as a result of
such delayed payment. Interest will be computed on the basis of a 360-day year
of twelve 30-day months.
2. Method of Payment; Ranking.
The interest payable on the Securities, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in the Indenture
(as defined below), be paid to the Person in whose name this Security is
registered at the close of business on the regular record date, which shall be
the January 1 or July 1 (whether or not a Business Day) next preceding such
Interest Payment Date. Any such interest not so punctually paid or duly
provided for, and any interest payable on such defaulted interest (to the
extent lawful), will forthwith cease to be payable to the Holder on such
regular record date and shall be paid to the person in whose name this Security
is registered at the close of business on a special record date for the payment
of such defaulted interest to be fixed by the Company, notice of which shall be
given to Holders not less than 15 days prior to such special record date.
Payment of the principal of and interest on this Security will be made at the
agency of the Company maintained for that purpose in New York, New York and at
any other office or agency maintained by the Company for such purpose, in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts; provided, however, that
at the option of the Company payment of interest may be made by check mailed to
the address of the Person entitled thereto as such address shall appear in the
Security register.
The Securities will rank pari passu in right of payment with the
11% Senior Subordinated Notes due 2007 originally issued by the Company on July
23, 1997.
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3. Paying Agent and Registrar.
Initially, The Bank of New York (the "Trustee") will act as Paying
Agent and Registrar. The Company may change any Paying Agent, Registrar or
co-Registrar without notice to the Holders of Securities. The Company or any
of its Subsidiaries may act as Registrar or co-Registrar but may not act as
Paying Agent.
4. Indenture.
This Security is one of a duly authorized issue of Securities of
the Company, designated as its 11% Senior Subordinated Notes due 2007, Series B
(the "Securities"), limited in aggregate principal amount to $50,000,000
(except for Securities issued in substitution for destroyed, lost or stolen
Securities) issuable under an indenture dated as of September 16, 1997 (the
"Indenture"), among the Company, the guarantors party thereto (the
"Guarantors") and the Trustee. The terms of the Securities include those stated
in the Indenture and those made part of the Indenture by the Trust Indenture
Act of 1939 (the "Act") (15 U.S. Code ss.ss. 77aaa-77bbbb) as in effect on the
date of the Indenture. The Securities are subject to all such terms, and
Holders of Securities are referred to the Indenture and the Act for a statement
of them. Each Securityholder, by accepting a Security, agrees to be bound to
all of the terms and provisions of the Indenture, as the same may be amended
from time to time. Payment on each Security is guaranteed on a senior
subordinated basis, jointly and severally, by the Guarantors pursuant to
Article Eleven of the Indenture.
The Securities are subordinated in right of payment to all Senior
Debt of the Company to the extent and in the manner provided in the Indenture.
Each Holder of a Security, by accepting a Security, agrees to such
subordination, authorizes the Trustee to give effect to such subordination and
appoints the Trustee as attorney-in-fact for such purpose.
Capitalized terms contained in this Security to the extent not
defined herein shall have the meanings assigned to them in the Indenture.
5. Optional Redemption.
The Securities will be subject to redemption, at the option of the
Company, in whole or in part, at any time on or after July 15, 2002 and prior
to maturity, upon not less than 30 nor more than 60 days' notice mailed to each
Holder of Securities to be redeemed, in amounts of $1,000 or an integral
multiple of $1,000, at the following redemption prices (expressed as
percentages of principal amount), plus accrued interest to but excluding the
date fixed for redemption (subject to the right of Holders on the relevant
Record Date to receive interest due on an Interest Payment Date that is on or
prior to the date fixed for
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redemption), if redeemed during the 12-month period beginning July 15 of the
years indicated:
Year Percentage
2002 105.500%
2003 103.667
2004 101.833
2005 and thereafter 100.000
In addition, prior to July 15, 2000, the Company may redeem
Securities with the net cash proceeds received by the Company from one or more
Public Equity Offerings at a redemption price equal to 111% of the principal
amount thereof, plus accrued and unpaid interest to (but excluding) the date
fixed for redemption; provided, however, that at least 66 2/3% in aggregate
principal amount of the Securities originally issued remains outstanding
immediately after any such redemption (excluding any Securities owned by the
Company or any of its Affiliates). Notice of redemption pursuant to this
paragraph must be mailed to Holders of Securities to be redeemed not later than
60 days following the consummation of the relevant Public Equity Offering.
Selection of Securities for any partial redemption shall be made by
the Trustee, in accordance with the rules of any national securities exchange
on which the Securities may be listed or, if the Securities are not so listed,
pro rata or by lot or in such other manner as the Trustee shall deem
appropriate and fair. Securities in denominations larger than $1,000 may be
redeemed in part but only in integral multiples of $1,000. Notice of redemption
will be mailed before the date fixed for redemption to each Holder of
Securities to be redeemed at his or her registered address.
On and after the date fixed for redemption, interest will cease to accrue on
Securities or portions thereof called for redemption.
The Securities will not have the benefit of any sinking fund.
6. Offer to Purchase upon Occurrence
of a Change of Control.
Within 30 days following a Change of Control, the Company will
offer to purchase the Securities at a purchase price equal to 101% of the
principal amount thereof plus any accrued and unpaid interest thereon.
7. Notice of Redemption.
Notice of redemption will be mailed by first class mail at least
30 days but not more than 60 days before the redemption date to each Holder of
Securities to be redeemed at his registered address. Securities in
denominations larger than
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$1,000 may be redeemed in part. On and after the redemption date, interest
ceases to accrue on those Securities or portion of them called for redemption.
8. Denominations; Transfer; Exchange.
The Securities are in registered form without coupons in
denominations of $1,000 and integral multiples of $1,000. A Holder may transfer
or exchange Securities in accordance with the Indenture. The Registrar may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and to pay any taxes and fees required by law or permitted
by the Indenture. The Registrar need not transfer or exchange any Securities
selected for redemption.
9. Persons Deemed Owners.
The registered Holder of a Security may be treated as the owner of
it for all purposes.
10. Unclaimed Funds.
If funds for the payment of principal or interest remain unclaimed
for two years, the Trustee or Paying Agent will repay the funds to the Company
at its request. After such repayment Holders of Securities entitled to such
funds must look to the Company for payment unless an abandoned property law
designates another person.
11. Discharge Prior to Redemption or Maturity.
The Indenture will be discharged and canceled except for certain
Sections thereof, subject to the terms of the Indenture, upon the payment of
all the Securities or upon the irrevocable deposit with the Trustee of funds or
United States Government Obligations sufficient for such payment or redemption.
12. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Securities may
be amended or supplemented with the consent of the Holders of at least a
majority in principal amount of the outstanding Securities, and any past
default or compliance with any provision may be waived with the consent of the
Holders of a majority in principal amount of the outstanding Securities.
Without notice to or the consent of any Holder, the Company, the Guarantors and
the Trustee may amend or supplement the Indenture or the Securities to cure any
ambiguity, defect or inconsistency, or to make any change that does not
adversely affect the rights of any Holder of Securities.
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<PAGE>
13. Restrictive Covenants.
The Indenture restricts, among other things, the ability of the
Company or any Restricted Subsidiary to permit any Liens to be imposed on their
assets, to make certain Restricted Payments and Investments, limits the
Indebtedness which the Company or any Restricted Subsidiary may incur and
limits the terms on which the Company may engage in certain Asset Dispositions.
The Company is also obligated under certain circumstances to make an offer to
purchase Securities with the net cash proceeds of certain Asset Dispositions.
The Company must report quarterly to the Trustee on compliance with the
covenants in the Indenture.
14. Successor Corporation.
Pursuant to the Indenture, the ability of the Company to
consolidate with, merge with or into or transfer its assets to another person
is conditioned upon certain requirements, including certain financial
requirements applicable to the surviving Person.
15. Defaults and Remedies.
If an Event of Default shall occur and be continuing, the
principal of all of the outstanding Securities, plus all accrued and unpaid
interest, if any, to the date the Securities become due and payable, may be
declared due and payable in the manner and with the effect provided in the
Indenture.
16. Trustee Dealings with Company.
The Trustee in its individual or any other capacity, may become the
owner or pledgee of Securities and make loans to, accept deposits from, and
perform services for the Company or its Affiliates, and may otherwise deal with
the Company or its Affiliates, as if it were not Trustee.
17. No Recourse Against Others.
No director, officer, employee or stockholder, as such, of the
Company or any of its Subsidiaries shall have any liability for any obligations
of the Company or any Guarantor under the Securities, the Guarantee or the
Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. Each Holder of a Security by accepting a
Security waives and releases all such liability. The waiver and release are
part of the consideration for the issue of the Securities.
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<PAGE>
18. Authentication.
This Security shall not be valid until the Trustee signs the
certificate of authentication on the other side of this Security.
19. Abbreviations.
Customary abbreviations may be used in the name of Securityholder
or an assignee, such as TEN COM (= tenants in common), TEN ENT (= tenants by
the entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors
Act).
20. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Company has caused CUSIP
numbers to be printed on the Securities and has directed the Trustee to use
CUSIP numbers in notices of redemption as a convenience to Securityholders. No
representation is made as to the accuracy of such numbers either as printed on
the Securities or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.
21. Governing Law.
The laws of the State of New York shall govern the Indenture, this
Security and the Guarantee without regard to principles of conflicts of law.
The Company will furnish to any Holder of record of Securities upon
written request and without charge a copy of the Indenture.
A-7
<PAGE>
[FORM OF NOTATION ON SECURITY RELATING TO GUARANTEE]
SENIOR SUBORDINATED GUARANTEE
The Guarantor(s) (as defined in the Indenture
referred to in the Security upon which this notation is endorsed) hereby,
jointly and severally, unconditionally guarantee on a senior subordinated basis
(such guarantee by each Guarantor being referred to herein as the
"Guarantee") the due and punctual payment of the principal of, premium, if any,
and interest on the Securities, whether at maturity, by acceleration or
otherwise, the due and punctual payment of interest on the overdue principal,
premium and interest, if any, on the Securities, and the due and punctual
performance of all other obligations of the Company to the Holders or the
Trustee, all in accordance with the terms set forth in Article Eleven of the
Indenture.
The obligations of each Guarantor to the Holders of
Securities and to the Trustee pursuant to the Guarantee and the Indenture are
expressly set forth, and are expressly subordinated and subject in right of
payment to the prior payment in full of all Senior Debt of such
Guarantor, to the extent and in the manner provided, in Article Twelve of the
Indenture, and reference is hereby made to such Indenture for the precise terms
of the Guarantee therein made.
The Guarantee shall not be valid or obligatory for
any purpose until the certificate of authentication on the Securities upon
which the Guarantee is noted shall have been executed by the Trustee under the
Indenture by the manual signature of one of its authorized
officers.
This Guarantee shall be governed by and construed in
accordance with the laws of the State of New York without regard to principles
of conflicts of law.
This Guarantee is subject to release upon the terms
set forth in the Indenture.
[GUARANTORS]
By: _____________________________
Name:
Title:
A-8
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Security, fill in the
form below and have your signature guaranteed:
I or we assign and transfer this Security to:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type name, address and zip code and social security or
tax ID number of assignee)
and irrevocably appoint , agent to transfer this
Security on the books of the Company. The agent may substitute another to act
for him.
Dated: Signed:
------------------ ----------------
(Sign exactly as name
appears on the other side
of this Security)
Signature Guarantee:
------------------------
SIGNATURE GUARANTEE
Signatures must be guaranteed by an "eligible guarantor institution" meeting
the requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
A-9
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you the Holder want to elect to have this Security purchased by the Company,
check the box: [ ]
If you want to elect to have only part of this Security purchased by the
Company, state the amount: $
------------
Dated: Your signature:
----------- ----------------------
(Sign exactly as name
appears on the other
side of this Security)
Signature Guarantee:
-------------------------------------------
SIGNATURE GUARANTEE
Signatures must be guaranteed by an "eligible guarantor institution" meeting
the requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
A-10
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
UNITED AUTO GROUP, INC.
375 Park Avenue
New York, NY 10152
Attention:
[Name and Address of Registrar]
Re: 11% Senior Subordinated Notes due 2007, Series B
Reference is hereby made to the Indenture, dated as of
September 16, 1997 (the "Indenture"), between United Auto Group, Inc. (the
"Company"), and The Bank of New York, as trustee. Capitalized terms used but
not defined herein shall have the meanings given to them in the Indenture.
________________, (the "Transferor") owns and proposes to
transfer the Security[s] specified in Annex A hereto in the principal amount of
$___ in such Security[s] (the "Transfer"), to ________ (the "Transferee"), as
further specified in Annex A hereto. In the event that Transferor holds
Physical Securities, this Certificate is accompanied by one or more
certificates aggregating at least the principal amount of Securities proposed
to be Transferred. In connection with the Transfer, the Transferor hereby
certifies that:
1. [ ] CHECK IF TRANSFEREE WILL TAKE AN INTEREST IN THE 144A GLOBAL SECURITY.
The Transfer is being effected pursuant to and in accordance with Rule 144A
under the United States Securities Act of 1933, as amended (the "Securities
Act"), and, accordingly, the Transferor hereby further certifies that the
Securities are being transferred to a Person that the Transferor reasonably
believes is purchasing the Securities for its own account, or for one or more
accounts with respect to which such Person exercises sole investment
discretion, and such Person and each such account is a "qualified institutional
buyer" within the meaning of Rule 144A in a transaction meeting the
requirements of Rule 144A and such Transfer is in compliance with any
applicable blue sky securities laws of any state of the United States. Upon
consummation of the proposed Transfer in accordance with the terms of the
Indenture, the transferred Security will be subject to the restrictions on
transfer enumerated in the Securities Act Legend and in the Indenture and the
Securities Act.
B-1
<PAGE>
2. [ ] CHECK IF TRANSFEREE WILL TAKE AN INTEREST IN THE REGULATION S GLOBAL
SECURITY PURSUANT TO REGULATION S. The Transfer is being effected pursuant to
and in accordance with Rule 904 under the Securities Act and, accordingly, the
Transferor hereby further certifies that (i) the Transfer is not being made to
a person in the United States and (x) at the time the buy order was originated,
the Transferee was outside the United States or such Transferor and any Person
acting on its behalf reasonably believed and believes that the Transferee was
outside the United States or (y) the transaction was executed in, on or through
the facilities of a designated offshore securities market and neither such
Transferor nor any Person acting on its behalf knows that the transaction was
prearranged with a buyer in the United States, (ii) no directed selling efforts
have been made in contravention of the requirements of Rule 904(b) of
Regulation S under the Securities Act and (iii) the transaction is not part of
a plan or scheme to evade the registration requirements of the Securities Act.
Upon consummation of the proposed transfer in accordance with the terms of the
Indenture, the Security will be subject to the restrictions on Transfer
enumerated in the Securities Act Legend printed on the Regulation S Global
Security and in the Indenture and the Securities Act.
3. [ ] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A RESTRICTED
PHYSICAL SECURITY PURSUANT TO RULE 144A OR REGULATION S. One or more of the
events specified in Section 2.06(a) of the Indenture have occurred and the
Transfer is being effected in compliance with the transfer restrictions
applicable to Securities bearing the Securities Act Legend and pursuant to and
in accordance with the Securities Act, and accordingly the Transferor hereby
further certifies that (check one):
(a) [ ] such Transfer is being effected pursuant to and in
accordance with Rule 144A under the Securities Act and the Transferor certifie
s to the effect set forth in paragraph 1 above; or
(b) [ ] such Transfer is being effected pursuant to and in
accordance with Rule 904 under the Securities Act and the Transferor certifies
to the effect set forth in paragraph 2 above.
4. [ ] CHECK IF TRANSFEREE WILL TAKE AN INTEREST IN THE UNRESTRICTED GLOBAL
SECURITY The Transfer is being effected pursuant to and in accordance with Rule
144 under the Securities Act and in compliance with the transfer restrictions
contained in the Indenture, and the restrictions on transfer contained in the
Indenture and the Securities Act Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred Securities will
no longer be subject to the restrictions on transfer enumerated in the
B-2
<PAGE>
Securities Act Legend and in the Indenture and the Securities Act.
5. [ ] CHECK IF TRANSFEREE WILL TAKE AN INTEREST IN THE PHYSICAL GLOBAL
SECURITY THAT DOES NOT BEAR THE SECURITIES ACT LEGEND One or more of the events
specified in Section 2.06(a) of the Indenture have occurred and the Transfer is
being effected pursuant to and in accordance with Rule 144 under the Securities
Act and in compliance with the transfer restrictions contained in the
Indenture, and the restrictions on transfer contained in the Indenture and the
Securities Act Legend are not required in order to maintain compliance with the
Securities Act. Upon consummation of the proposed Transfer in accordance with
the terms of the Indenture, the transferred Securities will no longer be
subject to the restrictions on transfer enumerated in the
Securities Act Legend and in the Indenture and the Securities Act.
B-3
<PAGE>
This certificate and the statements contained herein are made
for your benefit and the benefit of the Issuers.
[Insert Name of Transferor]
By: ___________________________
Name:
Title:
Dated:_________________
B-4
<PAGE>
FORM OF ANNEX A TO CERTIFICATE
OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) [ ] Interests in the
(i) [ ] 144A Global Security (CUSIP _____), or
(ii) [ ] Regulation S Global Security (CINS _____).
(b) [ ] Physical Security.
2. That the Transferee will hold:
[CHECK ONE]
(a) [ ] Interests in the:
(i) [ ] 144A Global Security (CUSIP _____), or
(ii) [ ] Regulation S Global Security (CINS _____), or
(iii) [ ] Unrestricted Global Security (CUSIP _____); or
(b) [ ] Physical Securities that bear the Securities Act Legend;
(c) [ ] Physical Securities that do not bear the Securities Act
Legend;
in accordance with the terms of the Indenture.
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
UNITED AUTO GROUP, INC.
375 Park Avenue
New York, NY 10152
Attention:
[Name and Address of Registrar]
Re: 11% Senior Subordinated Notes due 2007, Series B
(CUSIP _______________)
Reference is hereby made to the Indenture, dated as of
September 16, 1997 (the "Indenture"), between United Auto Group, Inc. (the
"Company") and The Bank of New York, as trustee. Capitalized terms used but
not defined herein shall have the meanings given to them in the Indenture.
__________, (the "Holder") owns and proposes to exchange the
Security[s] specified herein, in the principal amount of $___ in such
Security[s] (the "Exchange"). In the event Holder holds Physical Securities,
this Certificate is accompanied by one or more certificates aggregating at
least the principal amount of Securities proposed to be Exchanged. In
connection with the Exchange, the Holder hereby certifies that:
1. EXCHANGE OF RESTRICTED PHYSICAL SECURITIES OR INTERESTS IN THE INITIAL
GLOBAL SECURITY FOR PHYSICAL SECURITIES THAT DO NOT BEAR THE SECURITIES ACT
LEGEND OR UNRESTRICTED GLOBAL SECURITIES
(A) [ ] CHECK IF EXCHANGE IS FROM INITIAL GLOBAL SECURITIES TO THE
UNRESTRICTED GLOBAL SECURITY. In connection with the Exchange of the Holder's
Initial Global Security to the Unrestricted Global Security in an equal
principal amount, the Holder hereby certifies (i) the Unrestricted Global
Securities are being acquired for the Holder's own account without transfer,
(ii) such Exchange has been effected in compliance with the transfer
restrictions applicable to the Initial Global Securities and pursuant to and in
accordance with the Securities Act of 1933, as amended (the "Securities Act")
and (iii) the restrictions on transfer contained in the Indenture and the
Securities Act Legend are not required in order to maintain compliance with the
Securities Act.
(B) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED PHYSICAL SECURITIES TO AN
INTEREST IN THE UNRESTRICTED GLOBAL SECURITY. In connection with the Holder's
Exchange of Restricted Physical Securities for Interest in the Unrestricted
Global Security, (i) the Interest in the Unrestricted Global Security are being
C-1
<PAGE>
acquired for the Holder's own account without transfer, (ii) such Exchange has
been effected in compliance with the transfer restrictions applicable to
Restricted Physical Securities and pursuant to and in accordance with the
Securities Act and (iii) the restrictions on transfer contained in the
Indenture and the Securities Act Legend are not required in order to maintain
compliance with the Securities Act.
(C) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED PHYSICAL SECURITIES TO
PHYSICAL SECURITIES THAT DO NOT BEAR THE SECURITIES ACT LEGEND. In connection
with the Holder's Exchange of a Restricted Physical Security for Physical
Securities that do not bear the Securities Act Legend, the Holder hereby
certifies (i) the Physical Securities that do not bear the Securities Act
Legend are being acquired for the Holder's own account without transfer, (ii)
such Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Physical Securities and pursuant to and in accordance
with the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Securities Act Legend are not required in order to maintain
compliance with the Securities Act and (iv) one or more of the events specified
in Section 2.06(a) of the Indenture have occurred.
2. [ ] CHECK IF EXCHANGE IS FROM RESTRICTED PHYSICAL SECURITIES TO INTERESTS IN
AN INITIAL GLOBAL SECURITY . In connection with the Exchange of the Holder's
Restricted Physical Security for interests in an Initial Global Security
[[CHECK ONE] [ ] 144A Global Security, [ ] Regulation S Global Security], with
an equal principal amount, (i) the interests in the Initial Global Security are
being acquired for the Holder's own account without transfer and (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Physical Security and pursuant to and in
accordance with the Securities Act. Upon consummation of the proposed Exchange
in accordance with the terms of the Indenture, the Initial Global Security
issued will be subject to the restrictions on transfer enumerated in the
Securities Act Legend printed on the Initial Global Securities and in the
Indenture and the Securities Act.
C-2
<PAGE>
This certificate and the statements contained herein are made
for your benefit and the benefit of the Issuers.
-----------------------------------
[Insert Name of Holder]
By: ______________________________
Name:
Title:
Dated: __________________
C-3
<PAGE>
REGISTRATION RIGHTS AGREEMENT
Dated as of September 16, 1997
among
UNITED AUTO GROUP, INC.,
THE GUARANTORS SIGNATORY HERETO
and
J.P. MORGAN SECURITIES INC.,
and
SCOTIA CAPITAL MARKETS (USA) INC.
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is
dated as of September 16, 1997, by and among UNITED AUTO GROUP, INC., a
Delaware corporation (the "Company"), the guarantors signatory hereto (the
"Guarantors," and together with the Company, the "Issuers"), and J.P. MORGAN
SECURITIES INC. and SCOTIA CAPITAL MARKETS (USA) INC. (together the "Initial
Purchasers").
This Agreement is entered into in connection with the
Purchase Agreement, dated as of September 11, 1997, between the Issuers and the
Initial Purchasers (the "Purchase Agreement") relating to the sale by the
Company to the Initial Purchasers, of $50,000,000 aggregate principal amount of
its 11% Senior Subordinated Notes due 2007, Series B (the "Notes"). In order to
induce the Initial Purchasers to enter into the Purchase Agreement, the Issuers
have agreed to provide the registration rights set forth in this Agreement for
the equal benefit of the Initial Purchasers and their direct and indirect
transferees. The execution and delivery of this Agreement is a condition to the
Initial Purchasers' obligation to purchase the Notes under the Purchase
Agreement.
The parties hereby agree as follows:
1. Definitions
As used in this Agreement, the following terms shall have the
following meanings:
Additional Interest: See Section 4.
Advice: See Section 5.
Applicable Period: See Section 2(b).
<PAGE>
Company: See the introductory paragraph to this Agreement.
Consummation Date: The 165th day after the Issue Date.
Effectiveness Date: The 135th day after the Issue Date.
Effectiveness Period: See Section 3(a).
Event Date: See Section 4(b).
Exchange Act: The Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder.
Exchange Offer: See Section 2(a).
Exchange Registration Statement: See Section 2(a).
Exchange Securities: See Section 2(a).
Filing Date: The 60th day after the Issue Date.
Guarantor: Each Person who has executed this Agreement as a
guarantor or becomes a guarantor of the Notes.
Holder: Any record holder of Registrable Securities.
Indemnified Person: See Section 7.
Indemnifying Person: See Section 7.
Indenture: The Indenture, dated as of September 16, 1997,
among the Company, the Guarantors and The Bank of New York, as trustee,
pursuant to which the Notes are being issued, as amended or supplemented from
time to time in accordance with the terms thereof.
Initial Purchasers: See the introductory paragraph to this
Agreement.
Initial Shelf Registration: See Section 3(a).
Inspectors: See Section 5(p).
Issue Date: The date of original issuance of the Notes.
Issuers: See the introductory paragraph to this Agreement.
NASD: See Section 5(t).
- 2 -
<PAGE>
Notes: See the preamble to this Agreement.
Participant: See Section 7.
Participating Broker-Dealer: See Section 2(b).
Person: An individual, corporation, limited or general
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
Private Exchange: See Section 2(b).
Private Exchange Securities: See Section 2(b).
Prospectus: The prospectus included in any Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
Records: See Section 5(p).
Registrable Securities: The Notes upon original issuance of
the Notes and at all times subsequent thereto, each Exchange Security as to
which Section 2(c)(1)(i) hereof is applicable upon original issuance and at all
times subsequent thereto and, if issued, the Private Exchange Securities, until
in the case of any such Notes, Exchange Securities or Private Exchange
Securities, as the case may be, (i) a Registration Statement (other than, with
respect to any Exchange Security as to which Section 2(c)(1)(i) hereof is
applicable, the Exchange Registration Statement) covering such Notes, Exchange
Securities or Private Exchange Securities has been declared effective by the
SEC and such Notes, Exchange Securities or Private Exchange Securities, as the
case may be, have been disposed of in accordance with such effective
Registration Statement, (ii) such Notes, Exchange Securities or Private
Exchange Securities, as the case may be, are sold in compliance with Rule 144
or would be permitted to be sold pursuant to Rule 144(k), or (iii) such Notes,
Exchange Securities or Private Exchange Securities, as the case may be, cease
to be outstanding.
Registration Statement: Any registration statement of the
Issuers, including, but not limited to, the Exchange Registration Statement,
that covers any of the Registrable Securities pursuant to the provisions of
this Agreement, including the Prospectus, amendments and supplements to such
registration state-
- 3 -
<PAGE>
ment, including post-effective amendments, all exhibits, and all material
incorporated by reference or deemed to be incorporated by reference in such
registration statement.
Rule 144: Rule 144 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than
Rule 144A) or regulation hereafter adopted by the SEC providing for offers and
sales of securities made in compliance therewith resulting in offers and sales
by subsequent holders that are not affiliates of an issuer of such securities
being free of the registration and prospectus delivery requirements of the
Securities Act.
Rule 144A: Rule 144A promulgated under the Securities Act,
as such Rule may be amended from time to time, or any similar rule (other than
Rule 144) or regulation hereafter adopted by the SEC.
Rule 415: Rule 415 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and
the rules and regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2(c).
Shelf Registration: See Section 3(b).
Subsequent Shelf Registration: See Section 3(b).
TIA: The Trust Indenture Act of 1939, as amended.
Trustee: The trustee as defined in the Indenture and, if
existent, the trustee under any indenture governing the Exchange Securities
and Private Exchange Securities (if any).
Underwritten registration or underwritten offering: A
registration in which securities of the Issuers are sold to an underwriter for
reoffering to the public.
2. Exchange Offer
(a) The Issuers agree to file with the SEC as soon as
practicable after the Issue Date, but in no event later than the
Filing Date, an offer to exchange (the "Exchange Offer") any and all
of the Registrable Securities for a like aggregate principal amount of
debt securities of the Issuers which are identical in all material
respects to the Notes (the "Exchange Securities") (and which are
entitled to the benefits of the Indenture or a trust indenture which
is
- 4 -
<PAGE>
identical in all material respects to the Indenture (other than such
changes as are necessary to comply with any requirements of the SEC
to effect or maintain the qualification of such trust indenture under
the TIA) and which has been qualified under the TIA), except that the
Exchange Securities shall have been registered pursuant to an
effective Registration Statement under the Securities Act and shall
contain no legend thereon with respect to restrictions on transfer
pursuant to the Securities Act. The Issuers agree to use their
reasonable best efforts to keep the Exchange Offer open for at least
20 business days (or longer if required by applicable law) after the
date notice of the Exchange Offer is mailed to Holders and to
consummate the Exchange Offer on or prior to the Consummation Date.
The Exchange Offer will be registered under the Securities Act on the
appropriate form (the "Exchange Registration Statement") and will
comply with all applicable tender offer rules and regulations under
the Exchange Act. If after such Exchange Registration Statement is
initially declared effective by the SEC and prior to the consummation
of the Exchange Offer, the Exchange Offer or the issuance of the
Exchange Securities thereunder is interfered with by any stop order,
injunction or other order or requirement of the SEC or any other
governmental agency or court such Exchange Registration Statement
shall be deemed not to have become effective for purposes of this
Agreement. Each Holder who participates in the Exchange Offer will be
deemed to represent that any Exchange Securities received by it will
be acquired in the ordinary course of its business, that at the time
of the consummation of the Exchange Offer such Holder will have no
arrangement with any person to participate in the distribution of the
Exchange Securities in violation of the provisions of the Securities
Act, and that such Holder is not an affiliate of the Issuers within
the meaning of the Securities Act. Upon consummation of the Exchange
Offer in accordance with this Section 2, the provisions of this
Agreement (other than the first four sentences of this Section 2(a))
shall continue to apply, mutatis mutandis, solely with respect to
Registrable Securities that are Private Exchange Securities and
Exchange Securities held by Participating Broker-Dealers, and the
Issuers shall have no further obligation to register Registrable
Securities (other than Private Exchange Securities and other than
Exchange Securities as to which clause (c)(1)(i) hereof applies)
pursuant to Section 3 of this Agreement. No securities other than the
Exchange Securities shall be included in the Exchange Registration
Statement, except to the extent required by contractual obligations
in effect on the Issue Date.
(b) The Issuers shall include within the Prospectus contained
in the Exchange Registration Statement one or more section(s)
reasonably acceptable to the Initial Purchasers, which shall contain a
summary statement of the publicly disseminated positions of the Staff
of the SEC with respect to
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<PAGE>
the potential "underwriter" status of any broker-dealer that is the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of
Exchange Securities received by such broker-dealer in the Exchange
Offer (a "Participating Broker-Dealer"). Such section(s) shall also
allow the use of the prospectus by all persons subject to the
prospectus delivery requirements of the Securities Act (other than a
Participating Broker Dealer (an "Excluded Participating Broker
Dealer") who either (x) acquired Notes other than for its own account
as a result of market-making activities or other trading activities
or (y) has entered into any arrangement or understanding with any
Issuer or any affiliate of any Issuer to distribute the Exchange
Securities) and include a statement describing the means by which
Participating Broker-Dealers may resell the Exchange Securities.
The Issuers shall use their reasonable best efforts to keep
the Exchange Registration Statement effective and to amend and supplement the
Prospectus contained therein in order to permit such Prospectus to be lawfully
delivered by all persons subject to the prospectus delivery requirements of the
Securities Act for such period of time as such persons must comply with such
requirements in order to resell the Exchange Securities; provided, however,
that such period shall not exceed 120 days (or such longer period if extended
pursuant to the last paragraph of Section 5) (the "Applicable Period");
provided, further, however, that, if requested by the Company in the letter of
transmittal for the Exchange Offer, such persons shall have expressed that they
may be subject to such requirements and have undertaken to use their reasonable
best efforts to notify the Company when they are no longer subject to such
requirements (if they are no longer subject to such requirements at any time
prior to the expiration of the Applicable Period).
If, prior to consummation of the Exchange Offer, an Initial
Purchaser holds any Notes acquired by it and having the status of an unsold
allotment in the initial distribution, the Issuers upon the request of such
Initial Purchaser shall, simultaneously with the delivery of the Exchange
Securities in the Exchange Offer, issue and deliver to each such Initial
Purchaser, in exchange (the "Private Exchange") for the Notes held by such
Initial Purchaser, a like principal amount of debt securities of the Issuers
that are identical in all material respects to the Exchange Securities (the
"Private Exchange Securities") (and which are issued pursuant to the same
indenture as the Exchange Securities) except for the placement of a restrictive
legend on such Private Exchange Securities. If practicable, the Private
Exchange Securities shall bear the same CUSIP number as the Exchange
Securities. Interest on the Exchange Securities and Private Exchange Securities
will accrue from the last interest payment date on which interest was paid on
the Notes surrendered in exchange therefor or, if no interest has been paid on
the Notes, from the Issue Date.
- 6 -
<PAGE>
Any indenture under which the Exchange Securities or the
Private Exchange Securities will be issued shall provide that the holders of
any of the Exchange Securities and the Private Exchange Securities will vote
and consent together on all matters (to which such holders are entitled to vote
or consent) as one class and that none of the holders of the Exchange
Securities and the Private Exchange Securities will have the right to vote or
consent as a separate class on any matter (to which such holders are entitled
to vote or consent).
(c) If (1) prior to the consummation of the Exchange Offer,
the Issuers reasonably determine in good faith or Holders of a
majority in aggregate principal amount of the Registrable Securities
notify the Issuers that they have reasonably determined in good faith
that (i) in the opinion of counsel, the Exchange Securities would not,
upon receipt, be tradeable by such Holders who are not affiliates of
the Issuers or Excluded Participating Broker Dealers without
registration under the Securities Act and without registration under
applicable blue sky or state securities laws or (ii) in the opinion of
counsel, the SEC is unlikely to permit the consummation of the
Exchange Offer and/or (2) subsequent to the consummation of the
Private Exchange, any holder of Private Exchange Securities so
requests with respect to the Private Exchange Securities and/or (3)
the Exchange Offer is commenced and not consummated prior to the 60th
day following the Consummation Date for any reason, then the Issuers
shall promptly deliver to the Holders and the Trustee notice thereof
(the "Shelf Notice") and shall thereafter file an Initial Shelf Reg
istration as set forth in Section 3 (which only in the circumstances
contemplated by clause (2) of this sentence will relate solely to the
Private Exchange Securities) pursuant to Section 3. The parties hereto
agree that, following the delivery of a Shelf Notice to the Holders of
Registrable Securities (only in the circumstances contemplated by
clauses (1) and/or (3) of the preceding sentence), the Issuers shall
not have any further obligation to conduct the Exchange Offer or the
Private Exchange under this Section 2.
3. Shelf Registration
If a Shelf Notice is delivered as contemplated by Section
2(c), then:
(a) Initial Shelf Registration. The Issuers shall as promptly
as reasonably practicable prepare and file with the SEC a Registration
Statement for an offering to be made on a continuous basis pursuant to
Rule 415 covering all of the Registrable Securities (the "Initial
Shelf Registration"). If the Issuers shall have not yet filed an
Exchange Offer and the Shelf Notice was delivered at least 45 days
prior to the Filing Date, the Issuers shall file with the SEC the
Initial Shelf Registration on or prior to the Filing Date.
- 7 -
<PAGE>
Otherwise, the Issuers shall file with the SEC the Initial Shelf
Registration within 60 days of the delivery of the Shelf Notice. The
Initial Shelf Registration shall be on Form S-1 or another
appropriate form permitting registration of such Registrable
Securities for resale by such holders in the manner or manners
designated by them (including, without limitation, one or more
underwritten offerings). The Issuers may permit securities other than
the Registrable Securities to be included in the Initial Shelf
Registration or any Subsequent Shelf Registration to the extent
required by contractual obligations of the Company in effect on the
Issue Date. The Issuers shall use their reasonable best efforts to
cause the Initial Shelf Registration to be declared effective under
the Securities Act on or prior to the 135th day after the filing
thereof with the SEC and to keep the Initial Shelf Registration
continuously effective under the Securities Act until the date which
is 24 months from the Issue Date (subject to extension pursuant to
the last paragraph of Section 5 hereof) (the "Effectiveness Period"),
or such shorter period ending when (i) all Registrable Securities
covered by the Initial Shelf Registration have been sold in the
manner set forth and as contemplated in the Initial Shelf
Registration or (ii) a Subsequent Shelf Registration covering all of
the Registrable Securities has been declared effective under the
Securities Act.
Notwithstanding any other provision of this Agreement, the
Issuers may postpone or suspend the filing or effectiveness of a
Registration Statement (or any amendments or supplements thereto) if
(i) such action is required by applicable law or (ii) such action is
taken by the Issuers in good faith and for valid business reasons (not
including the avoidance of the Issuers' obligations hereunder),
including the acquisition or divestiture of assets, other pending
corporate developments, public filings with the SEC or other similar
events, so long as the Issuers promptly thereafter comply with the
requirements of Section 5(b) hereof, if applicable. Notwithstanding
the occurrence of any event referred to in the immediately preceding
sentence, such event shall not suspend, postpone or in any other
manner affect the running of any time periods for the purpose of
determining the entitlement of the Holders to Additional Interest
under Section 4 hereof.
(b) Subsequent Shelf Registrations. If the Initial Shelf
Registration or any Subsequent Shelf Registration ceases to be
effective for any reason at any time during the Effectiveness Period
(other than because of the sale of all of the securities registered
thereunder), the Issuers shall use their reasonable best efforts to
obtain the prompt withdrawal of any order suspending the effectiveness
thereof, and in any event shall within 45 days of such cessation of
effectiveness amend the Shelf Registration in a manner reasonably
expected to obtain the withdrawal of the order sus-
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<PAGE>
pending the effectiveness thereof, or file an additional "shelf"
Registration Statement pursuant to Rule 415 covering all of the
Registrable Securities (a "Subsequent Shelf Registration"). If a
Subsequent Shelf Registration is filed, the Issuers shall use their
reasonable best efforts to cause the Subsequent Shelf Registration to
be declared effective as soon as practicable after such filing and to
keep such Registration Statement continuously effective for a period
equal to the number of days in the Effectiveness Period less the
aggregate number of days during which the Initial Shelf Registration
or any Subsequent Shelf Registration was previously continuously
effective. As used herein the term "Shelf Registration" means the
Initial Shelf Registration and any Subsequent Shelf Registration.
(c) Supplements and Amendments. The Issuers shall promptly
supplement and amend the Shelf Registration if required by the rules,
regulations or instructions applicable to the registration form used
for such Shelf Registration or if required by applicable law.
4. Additional Interest
(a) The Issuers and the Initial Purchasers agree that the
Holders of Registrable Securities will suffer damages if the Issuers
fail to fulfill their obligations under Section 2 or Section 3 hereof
and that it would not be feasible to ascertain the extent of such
damages with precision. Accordingly, the Issuers agree to pay, as
liquidated damages, additional interest on the Registrable Securities
("Additional Interest") under the circumstances and to the extent set
forth below (each of which shall be given independent effect and shall
not be duplicative):
(i) if the Exchange Registration Statement has not been filed
on or prior to the Filing Date or the Initial Shelf Registration has
not been filed on or prior to the date by which it is required to be
filed pursuant to Section 3(a) hereof, Additional Interest shall
accrue on the Registrable Securities over and above the stated
interest at a rate of 25 basis points per annum for the first 90 days
immediately following the Filing Date or such required date, as the
case may be, such Additional Interest rate increasing by an additional
25 basis points per annum at the beginning of each subsequent 90-day
period;
(ii) if Additional Interest is not then accruing pursuant to
Section 4(a)(i) and the Exchange Registration Statement is not
declared effective by the SEC on or prior to the Effectiveness Date or
the Initial Shelf Registration is not declared effective on or prior
to the 135th day after filing thereof, Additional Interest shall
accrue on the Registrable Securities included or which should have
been included in such Registration Statement over and above the stated
inter-
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<PAGE>
est at a rate of 25 basis points per annum for the first 90 days
immediately following the day after the Effectiveness Date, such
Additional Interest rate increasing by an additional 25 basis points
per annum at the beginning of each subsequent 90-day period; and
(iii) if Additional Interest is not then accruing pursuant to
Section 4(a)(i) and 4(a)(ii) and (A) the Issuers have not exchanged
Exchange Securities for all Notes validly tendered in accordance with
the terms of the Exchange Offer on or prior to the Consummation Date
(including by reason of the Exchange Registration Statement ceasing to
be effective) or (B) if applicable, the Shelf Registration has been
declared effective and such Shelf Registration ceases to be effective
at any time during the Effectiveness Period, then Additional Interest
shall be accrued on the Registrable Securities (over and above any
interest otherwise payable on the Registrable Securities) at a rate of
25 basis points per annum for the first 90 days commencing on the (x)
165th day after the Issue Date, in the case of (A) above, or (y) the
day such Shelf Registration ceases to be effective in the case of (B)
above, such Additional Interest rate increasing by an additional 25
basis points per annum at the beginning of each such subsequent 90-day
period;
provided, however, that the Additional Interest rate on the Registrable
Securities may not exceed at any one time in the aggregate 100 basis points per
annum; and provided, further, that (1) upon the filing of the Exchange
Registration Statement or a Shelf Registration as required hereunder (in the
case of clause (a)(i) of this Section 4), (2) upon the effectiveness of the
Exchange Registration Statement or the Shelf Registration as required hereunder
(in the case of clause (a)(ii) of this Section 4), or (3) upon the exchange of
Exchange Securities for all Notes tendered (in the case of clause (a)(iii)(A)
of this Section 4), or upon the effectiveness of the Shelf Registration which
had ceased to remain effective (in the case of clause (a)(iii)(B) of this
Section 4), Additional Interest on the Registrable Securities as a result of
such clause (or the relevant subclause thereof), as the case may be, shall
cease to accrue. It is understood and agreed that, notwithstanding any
provision to the contrary, so long as any Registrable Security is then covered
by an effective Shelf Registration Statement, no Additional Interest shall
accrue on such Registrable Security. Payment of any Additional Interest shall
be subject to Section 9 and the penultimate paragraph of Section 5.
(b) The Issuers shall notify the Trustee within five business
days after each and every date on which an event occurs in respect of
which Additional Interest is required to be paid (an "Event Date").
The Issuers shall pay the Additional Interest due on the Registrable
Securities by depositing with the Trustee, in trust, for the benefit
of the Holders thereof, on or before the applicable semi-annual
in-
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<PAGE>
terest payment date, immediately available funds in sums sufficient
to pay the Additional Interest then due to Holders of Registrable
Securities. The Additional Interest amount due shall be payable on
each interest payment date to the record Holder of Registrable
Securities entitled to receive the interest payment to be made on
such date as set forth in the Indenture. The amount of Additional
Interest will be determined by applying the applicable Additional
Interest rate to the principal amount of the affected Registrable
Securities of such Holders, (determined on the basis of a 360-day
year comprised of twelve 30-day months and, in the case of a partial
month, the actual number of days elapsed). Each obligation to pay
Additional Interest shall be deemed to accrue immediately following
the occurrence of the applicable Event Date provided, however, that
if the applicable Event Date is not a business day, Additional
Interest shall not begin to accrue or increase, as the case may be,
until the next succeeding business day. The parties hereto agree that
the Additional Interest provided for in this Section 4 constitutes
the sole and exclusive remedy for a breach of Section 2 or 3 and is a
reasonable estimate of the damages that may be incurred by Holders of
Registrable Securities by reason of the failure of a Shelf
Registration or Exchange Registration Statement to be filed or
declared effective, an Exchange Offer to be consummated or a Shelf
Registration to remain effective, as the case may be, in accordance
with this Section 4.
5. Registration Procedures
In connection with the registration of any Registrable
Securities pursuant to Sections 2 or 3 hereof, the Issuers shall effect such
registrations to permit the sale of such Registrable Securities in accordance
with the intended method or methods of disposition thereof, and pursuant
thereto the Issuers shall:
(a) Use their reasonable best efforts to prepare and file
with the SEC a Registration Statement or Registration Statements, as
soon as practicable after the date hereof but in any event prior to
the applicable date prescribed by Section 2 or 3, and to use their
reasonable best efforts to cause each such Registration Statement to
become effective and remain effective as provided herein; provided,
however, that, if (1) such filing is pursuant to Section 3, or (2) a
Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange
Securities during the Applicable Period, before filing any
Registration Statement or Prospectus or any amendments or supplements
thereto, the Issuers shall upon written request furnish to and afford
the Holders of the Registrable Securities (which in the case of
Registrable Securities in the form of global certificates shall be The
Depository Trust Company ("DTC")) and each such
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<PAGE>
Participating Broker-Dealer, as the case may be, covered by such
Registration Statement, their counsel and the managing underwriters,
if any, a reasonable opportunity to review copies of all such
documents (including copies of any documents to be incorporated by
reference therein and all exhibits thereto) proposed to be filed.
(b) Prepare and file with the SEC such amendments and
post-effective amendments to each Shelf Registration or Exchange
Registration Statement, as the case may be, as may be necessary to
keep such Registration Statement continuously effective for the
Effectiveness Period or the Applicable Period, as the case may be;
cause the related Prospectus to be supplemented by any required
Prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 (or any similar provisions then in force) under the
Securities Act; and comply with the provisions of the Securities Act
and the Exchange Act with respect to the disposition of all securities
covered by such Registration Statement as so amended or in such
Prospectus as so supplemented and with respect to the subsequent
resale of any securities being sold by a Participating Broker-Dealer
covered by any such Prospectus; the Issuers shall not be deemed to
have used their reasonable best efforts to keep a Registration
Statement effective during the Applicable Period if the Issuers
voluntarily take any action that would result in selling Holders of
the Registrable Securities covered thereby or Participating
Broker-Dealers seeking to sell Exchange Securities not being able to
sell such Registrable Securities or such Exchange Securities during
that period unless such action is required by applicable law or unless
the Issuers comply with this Agreement, including without limitation,
the provisions of paragraph 5(k) hereof and the last paragraph of this
Section 5.
(c) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Securities during the Applicable Period, notify the selling
Holders of Registrable Securities, or each such Participating
Broker-Dealer, as the case may be, their counsel and the managing
underwriters, if any, who have provided the Issuers with their names
and addresses promptly (but in any event within two business days),
and confirm such notice in writing, (i) when a Prospectus or any
Prospectus supplement or post-effective amendment has been filed, and,
with respect to a Registration Statement or any post-effective
amendment, when the same has become effective under the Securities Act
(including in such notice a written statement that any Holder may,
upon request, obtain, without charge, one conformed copy of such
Registration Statement or post-effective amendment including financial
statements and schedules,
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<PAGE>
documents incorporated or deemed to be incorporated by reference and
exhibits), (ii) of the issuance by the SEC of any stop order
suspending the effectiveness of a Registration Statement or of any
order preventing or suspending the use of any preliminary prospectus
or the initiation of any proceedings for that purpose, (iii) of the
receipt by the Issuers of any notification with respect to the
suspension of the qualification or exemption from qualification of a
Registration Statement or any of the Registrable Securities or the
Exchange Securities to be sold by any Participating Broker-Dealer for
offer or sale in any jurisdiction, or the initiation or threatening
of any proceeding for such purpose, (iv) of the happening of any
event or any information becoming known that makes any statement made
in such Registration Statement or related Prospectus or any document
incorporated or deemed to be incorporated therein by reference untrue
in any material respect or that requires the making of any changes in
such Registration Statement, Prospectus or documents so that, in the
case of the Registration Statement, it will not 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 that in the case of the Prospectus, it
will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or neces sary
to make the statements therein, in the light of the circumstances
under which they were made, not misleading, and (v) of the Issuers'
reasonable determination that a post-effective amendment to a
Registration Statement would be appropriate.
(d) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Securities during the Applicable Period, use its reasonable
best efforts to oppose the issuance of any order suspending the
effectiveness of a Registration Statement or of any order preventing
or suspending the use of a Prospectus or suspending the qualification
(or exemption from qualification) of any of the Registrable Securities
or the Exchange Securities to be sold by any Participating
Broker-Dealer, for sale in any jurisdiction, and, if any such order is
issued, to use its reasonable best efforts to obtain the withdrawal of
any such order at the earliest possible moment.
(e) If a Shelf Registration is required pursuant to Section
3, before filing any Registration Statement or prospectus or any
amendment or supplement thereto (including any document that would be
incorporated by reference therein) furnish counsel for the Holders of
Registrable Securities covered by such Shelf Registration a reasonable
op-
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<PAGE>
portunity to review copies of all such documents proposed to be
filed.
(f) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Securities during the Applicable Period, furnish to each
selling Holder of Registrable Securities and to each such
Participating Broker-Dealer who so requests and to counsel and each
managing underwriter, if any, without charge, one conformed copy of
the Registration Statement or Statements and each post-effective
amendment thereto, including financial statements and schedules, and
if requested, all documents incorporated or deemed to be incorporated
therein by reference and all exhibits.
(g) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Securities during the Applicable Period, deliver to each
selling Holder of Registrable Securities, or each such Participating
Broker-Dealer, as the case may be, their counsel, and the
underwriters, if any, without charge, as many copies of the Prospectus
or Prospectuses (including each form of preliminary prospectus) and
each amendment or supplement thereto and any documents incorporated by
reference therein as such Persons may reasonably request; and, subject
to the last paragraph of this Section 5, the Issuers hereby consent to
the use of such Prospectus and each amendment or supplement thereto by
each of the selling holders of Registrable Securities or each such
Participating Broker-Dealer, as the case may be, and the underwriters
or agents, if any, and dealers (if any), in connection with the
offering and sale of the Registrable Securities covered by or the sale
by Participating Broker-Dealers of the Exchange Securities pursuant to
such Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities or
any delivery of a Prospectus contained in the Exchange Registration
Statement by any Participating Broker-Dealer who seeks to sell
Exchange Securities during the Applicable Period, to use its
reasonable best efforts to register or qualify, and to cooperate with
the selling Holders of Registrable Securities or each such
Participating Broker-Dealer, as the case may be, the underwriters, if
any, and their respective counsel in connection with the registration
or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under
the securities or Blue Sky laws of such jurisdictions within the
United States as any selling
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<PAGE>
Holder, Participating Broker-Dealer, or the managing underwriters
reasonably request in writing; provided, however, that where Exchange
Securities held by Participating Broker-Dealers or Registrable
Securities are offered other than through an underwritten offering,
the Issuers agree to cause their counsel to perform Blue Sky
investigations and file registrations and qualifications required to
be filed pursuant to this Section 5(h); keep each such registration
or qualification (or exemption therefrom) effective during the period
such Registration Statement is required to be kept effective and do
any and all other reasonable acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Exchange
Securities held by Participating Broker-Dealers or the Registrable
Securities covered by the applicable Registration Statement;
provided, however, that no Issuer shall be required to (A) qualify
generally to do business in any jurisdiction where it is not then so
qualified, (B) take any action that would subject it to general
service of process in any such jurisdiction where it is not then so
subject or (C) subject itself to taxation in excess of a nominal
dollar amount in any such jurisdiction.
(i) If a Shelf Registration is filed pursuant to Section 3,
reasonably cooperate with the selling Holders of Registrable
Securities and the managing underwriters, if any, to facilitate the
timely preparation and delivery of certificates representing
Registrable Securities to be sold, which certificates shall not bear
any legends with respect to restrictions on transfer pursuant to the
Securities Act and shall be in a form eligible for deposit with DTC;
and enable such Registrable Securities to be registered in such names
as the managing underwriter or under writers, if any, or Holders may
request.
(j) Use its reasonable best efforts to cause the Registrable
Securities covered by the Registration Statement to be registered with
or approved by such other United States governmental agencies or
authorities of the United States as may be necessary to enable the
seller or sellers thereof or the underwriters, if any, to consummate
the disposition of such Registrable Securities, except as may be
required solely as a consequence of the nature of such selling
Holder's business, in which case the Issuers will cooperate in all
reasonable respects with the filing of such Registration Statement and
the granting of such approvals.
(k) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Securities during the Applicable Period, upon the occurrence
of any event contemplated by paragraph 5(c)(iv) or 5(c)(v) above, as
promptly as practicable prepare and (subject to Section 5(a)
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<PAGE>
and the second paragraph of Section 3(a) above) file with the SEC,
solely at the expense of the Issuers, a supplement or post-effective
amendment to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be
incorporated therein by reference, or file any other required
document so that, as thereafter delivered to the purchasers of the
Registrable Securities being sold thereunder or to the purchasers of
the Exchange Securities to whom such Prospectus will be delivered by
a Participating Broker-Dealer, any such Prospectus will not contain
an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which
they were made, not misleading.
(l) Use its reasonable best efforts to cause the Registrable
Securities covered by a Registration Statement or the Exchange
Securities, as the case may be, to be rated with the appropriate
rating agencies, if so requested by the Holders of a majority in
aggregate principal amount of Registrable Securities covered by such
Registration Statement or the Exchange Securities, as the case may be,
or the managing underwriters, if any.
(m) Prior to the effective date of the first Registration
Statement relating to the Registrable Securities, (i) provide the
Trustee with certificates for the Registrable Securities in a form
eligible for deposit with DTC and (ii) provide a CUSIP number for the
Registrable Securities.
(n) Use its reasonable best efforts to cause all Registrable
Securities covered by such Registration Statement or the Exchange
Securities, as the case may be, to be (i) listed on each securities
exchange, if any, on which similar securities issued by the Issuers
are then listed, or (ii) authorized to be quoted on the National
Association of Securities Dealers Automated Quotation System
("NASDAQ") or the National Market System of NASDAQ if similar
securities of the Issuers are so authorized.
(o) In connection with an underwritten offering of
Registrable Securities pursuant to a Shelf Registration, enter into an
underwriting agreement as is customary in underwritten offerings and
take all such other actions as are reasonably requested by the
managing underwriters in order to expedite or facilitate the
registration or the disposition of such Registrable Securities, and in
such connection, (i) make such representations and warranties to the
underwriters, with respect to the business of the Company and its
subsidiaries, if any, and the Registration Statement, Prospectus and
documents, if any, incorporated or deemed to be incorporated by
reference therein, in each case, as are customarily made by issuers to
underwriters in underwritten of-
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<PAGE>
ferings, and confirm the same if and when requested; (ii) obtain an
opinion of counsel to the Issuers and updates thereof in form and
substance reasonably satisfactory to the managing underwriters,
addressed to the underwriters covering the matters customarily
covered in opinions requested in underwritten offerings and such
other matters as may be reasonably requested by underwriters; (iii)
obtain "cold comfort" letters and updates thereof in form and
substance reasonably satisfactory to the managing underwriters from
the independent certified public accountant(s) of the Company (and,
if necessary, any other independent certified public accountants of
any subsidiary of the Company or of any business acquired by the
Company for which financial statements and financial data are, or are
required to be, included in the Registration Statement), addressed to
each of the underwriters, such letters to be in customary form and
covering matters of the type customarily covered in "cold comfort"
letters in connection with underwritten offerings and such other
matters as may be reasonably requested by underwriters; and (iv) if
an underwriting agreement is entered into, the same shall contain
indemnification provisions and procedures no less favorable than
those set forth in Section 7 hereof (or such other provisions and
procedures acceptable to Holders of a majority in aggregate principal
amount of Registrable Securities covered by such Registration
Statement and the managing underwriters or agents) with respect to
all parties to be indemnified pursuant to said Section. The above
shall be done at each closing under such underwriting agreement, or
as and to the extent required thereunder.
(p) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Securities during the Applicable Period, make available for
inspection by any selling Holder of such Registrable Securities being
sold, or each such Participating Broker-Dealer, as the case may be,
any underwriter participating in any such disposition of Registrable
Securities, if any, and any attorney, accountant or other agent
retained by any such selling holder or each such Participating
Broker-Dealer, as the case may be, or underwriter (collectively, the
"Inspectors"), at the offices where normally kept, during reasonable
business hours, all financial and other records, pertinent corporate
documents and properties of the Issuers (collectively, the "Records"),
as shall be reasonably necessary to enable them to exercise any
applicable due diligence responsibilities, and cause the officers,
directors and employees of the Issuers to supply all information in
each case reasonably requested by any such Inspector in connection
with such Registration Statement. Records determined in good faith by
the Issuers to be confidential shall not be disclosed by any In-
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<PAGE>
spector notified of such determination unless (i) the disclosure of
such Records is necessary to avoid or correct a misstatement or
omission in such Registration Statement, (ii) the release of such
Records is ordered pursuant to a subpoena or other order from a court
of competent jurisdiction or (iii) the information in such Records
has been made generally available to the public by the Company. Each
selling Holder of such Registrable Securities and each such
Participating Broker-Dealer will be required to agree that
information obtained by it as a result of such inspections shall be
deemed confidential and shall not be used by it as the basis for any
market transactions in the securities of the Issuers unless and until
such is made generally available to the public by the Company. Each
selling Holder of such Registrable Securities and each such
Participating Broker-Dealer will be required to further agree that it
will, upon learning that disclosure of such Records is sought in a
court of competent jurisdiction, give notice to the Issuers and allow
them at their own expense to undertake appropriate action to prevent
disclosure of the Records deemed confidential.
(q) Provide an indenture trustee for the Registrable
Securities or the Exchange Securities, as the case may be, and cause
the Indenture or the trust indenture provided for in Section 2(a), as
the case may be, to be qualified under the TIA not later than the
effective date of the Exchange Offer or the first Registration
Statement relating to the Registrable Securities; and in connection
therewith, cooperate with the trustee under any such indenture and the
holders of the Registrable Securities, to effect such changes to such
indenture as may be required for such indenture to be so qualified in
accordance with the terms of the TIA; and execute, and use its
reasonable best efforts to cause such trustee to execute, all
documents as may be required to effect such changes, and all other
forms and documents required to be filed with the SEC to enable such
indenture to be so qualified in a timely manner.
(r) Comply in all material respects with all applicable rules
and regulations of the SEC and make generally available to its
securityholders earning statements satisfying the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder (or any
similar rule promul gated under the Securities Act) no later than 90
days after the end of any 12-month period (i) commencing at the end of
any fiscal quarter in which Registrable Securities are sold to
underwriters in a firm commitment or best efforts underwritten
offering and (ii) if not sold to underwriters in such an offering,
commencing on the first day of the first fiscal quarter of the Issuers
after the effective date of a Shelf Registration Statement, which
statements shall cover said 12-month periods.
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<PAGE>
(s) If an Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Registrable Securities by Holders to
the Issuers (or to such other Person as directed by the Issuers) in
exchange for the Exchange Securities or the Private Exchange
Securities, as the case may be, the Issuers shall mark, or caused to
be marked, on such Registrable Securities that such Registrable
Securities are being cancelled in exchange for the Exchange Securities
or the Private Exchange Securities, as the case may be; in no event
shall such Registrable Securities be marked as paid or otherwise
satisfied.
(t) Reasonably cooperate with each seller of Registrable
Securities covered by any Registration Statement and each underwriter,
if any, participating in the disposition of such Registrable
Securities and their respective counsel in connection with any filings
required to be made with the National Association of Securities
Dealers, Inc. (the "NASD").
(u) Use its reasonable best efforts to take all other steps
necessary to effect the registration of the Registrable Securities
covered by a Registration Statement contemplated hereby.
The Issuers may require each seller of Registrable Securities
or Participating Broker-Dealer as to which any registration is being effected
to furnish to the Issuers such information regarding such seller or
Participating Broker-Dealer and the distribution of such Registrable Securities
or Exchange Securities to be sold by such Participating Broker-Dealer, as the
case may be, as the Issuers may, from time to time, reasonably request. The
Issuers may exclude from such registration the Registrable Securities of any
seller or Participating Broker-Dealer who fails to furnish such information
within a reasonable time after receiving such request and, notwithstanding
anything to the contrary in this Agreement, such Seller or Participating Broker
Dealer shall not be entitled to receive any Additional Interest pursuant to
Section 4. Each seller as to which any Shelf Registration is being effected is
deemed to agree to furnish promptly to the Issuers all information required to
be disclosed in order to make the information previously furnished to the
Issuers by such seller not materially misleading.
Each Holder of Registrable Securities and each Participating
Broker-Dealer agrees by acquisition of such Registrable Securities or Exchange
Securities to be sold by such Participating Broker-Dealer, as the case may be,
that, upon receipt of any notice from the Issuers of the happening of any event
of the kind described in Section 5(c)(ii), 5(c)(iii), 5(c)(iv), or 5(c)(v),
such Holder shall forthwith discontinue disposition of such Registrable
Securities covered by such Registration Statement or Prospectus or Exchange
Securities to be sold by such Participating Broker-Dealer, as the case may be,
until such holder's
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<PAGE>
receipt of the copies of the supplemented or amended Prospectus contemplated
by Section 5(k), or until it is advised in writing (the "Advice") by the
Issuers that the use of the applicable Prospectus may be resumed, and has
received copies of any amendments or supplements thereto. In the event the
Issuers shall give any such notice, each of the Effectiveness Period and the
Applicable Period shall be extended by the number of days during such periods
from and including the date of the giving of such notice to and including the
date when each seller of Registrable Securities covered by such Registration
Statement or Exchange Securities to be sold by such Participating
Broker-Dealer, as the case may be, shall have received (x) the copies of the
supplemented or amended Prospectus contemplated by Section 5(k) or (y) the
Advice.
6. Registration Expenses
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Issuers shall be borne by the
Issuers whether or not the Exchange Offer or a Shelf Registration is
filed or becomes effective, including, without limitation, (i) all
registration and filing fees (including, without limitation, (A) fees
with respect to filings required to be made with the NASD in
connection with an underwritten offering and (B) fees and expenses of
compliance with state securities or Blue Sky laws (including, without
limitation, reasonable fees and disbursements of counsel in connection
with Blue Sky qualifications of the Registrable Securities or Exchange
Securities and determination of the eligibility of the Registrable
Securities or Exchange Securities for investment under the laws of
such jurisdictions in the United States (x) where the holders of
Registrable Securities are located, in the case of the Exchange
Securities, or (y) as provided in Section 5(h), in the case of
Registrable Securities or Exchange Securities to be sold by a
Participating Broker-Dealer during the Applicable Period)), (ii)
printing expenses (including, without limitation, expenses of printing
certificates for Registrable Securities or Exchange Securities in a
form eligible for deposit with DTC and of printing prospectuses if the
printing of prospectuses is requested by the managing underwriters, if
any, or, in respect of Registrable Securities or Exchange Securities
to be sold by any Participating Broker-Dealer during the Applicable
Period, by the Holders of a majority in aggregate principal amount of
the Registrable Securities included in any Registration Statement or
of such Exchange Securities, as the case may be), (iii) messenger,
telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Issuers and fees and disbursements of special counsel
for the sellers of Registrable Securities (subject to the provisions
of Section 6(b)), (v) fees and disbursements of all independent
certified public accountants referred to in Section 5(o)(iii)
(including, without limitation, the expenses of any special audit and
"cold comfort" letters required by or incidental to such perform-
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<PAGE>
ance), (vi) rating agency fees, (vii) Securities Act liability
insurance, if the Issuers desires such insurance, (viii) fees and
expenses of all other Persons retained by the Issuers, (ix) internal
expenses of the Issuers (including, without limitation, all salaries
and expenses of officers and employees of the Issuers performing
legal or accounting duties), (x) the expense of any annual audit,
(xi) the fees and expenses incurred in connection with the listing of
the securities to be registered on any securities exchange, if
applicable and (xii) the expenses relating to printing, word
processing and distributing all Registration Statements, underwriting
agreements, securities sales agreements, indentures and any other
documents necessary in order to comply with this Agreement; provided,
however, that notwithstanding the foregoing, the Issuers will not be
responsible for any underwriter's discounts, commissions or fees
attributable to the sale of Registrable Securities.
(b) In connection with any Shelf Registration hereunder, the
Issuers shall reimburse the Holders of the Registrable Securities
being registered in such registration for the reasonable fees and
disbursements of not more than one counsel (in addition to local
counsel, if appropriate) chosen by the Holders of a majority in
aggregate principal amount of the Registrable Securities to be
included in such Registration Statement, subject to the reasonable
approval of the Issuers. Such Holders shall be responsible for any and
all other out-of-pocket expenses of the Holders of Registrable
Securities incurred in connection with the registration of the
Registrable Securities.
7. Indemnification
The Issuers agree to indemnify and hold harmless each Holder
of Registrable Securities and each Participating Broker-Dealer selling Exchange
Securities during the Applicable Period, the officers and directors of each
such person, and each person, if any, who controls any such person within the
meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act (each, a "Participant"), from and against any and all losses,
claims, damages and liabilities (including, without limitation, the reasonable
legal fees and other expenses actually 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 any Registration
Statement (or any amendment thereto) or Prospectus (as amended or supplemented
if the Issuers shall have furnished any amendments or supplements thereto) or
any preliminary prospectus, 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, in light of the circumstances under which they
were made, not misleading, except insofar as such losses, claims, damages or
liabilities are caused by any untrue statement or omission or alleged untrue
statement or omission made in reliance
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<PAGE>
upon and in conformity with information relating to any Participant furnished
to the Company in writing by such Participant expressly for use therein;
provided, however, that the foregoing indemnity with respect to any
preliminary prospectus shall not inure to the benefit of any Participant (or
to the benefit of any person controlling such Participant) from whom the
person asserting any such losses, claims, damages or liabilities purchased
Registrable Securities or Exchange Securities if such untrue statement or
omission or alleged untrue statement or omission made in such preliminary
prospectus is eliminated or remedied in the related Prospectus (as amended or
supplemented if the Issuers shall have furnished any amendments or supplements
thereto) and a copy of the related Prospectus (as so amended or supplemented)
shall not have been furnished to such person at or prior to the sale of such
Registrable Securities or Exchange Securities, as the case may be, to such
person.
Each Participant will be required to agree, severally and not
jointly, to indemnify and hold harmless the Company, its directors, its
officers and each person 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 Issuers to each Participant, but only with
reference to information relating to such Participant furnished to the Company
in writing by such Participant expressly for use in any Registration Statement
or Prospectus, any amendment or supplement thereto, or any preliminary
prospectus. The liability of any Participant under this paragraph shall in no
event exceed the proceeds received by such Participant from sales of
Registrable Securities giving rise to such obligations.
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
either of the two 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
reasonable fees and expenses actually incurred by such counsel related to such
proceeding; provided, however, that the failure to so notify the Indemnifying
Person shall not relieve it of any obligation or liability which it may have
hereunder or otherwise (unless and only to the extent that such failure results
in the loss or compromise of any rights or defenses). 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 Indem-
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<PAGE>
nified 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 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. Any such separate firm for the
Participants and such control persons of Participants shall be designated in
writing by Participants who sold a majority in interest of Registrable
Securities sold by all such Participants and any such separate firm for the
Issuers, their directors, officers and such control persons of the Issuers
shall be designated in writing by the Issuers. 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
non-appealable 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 reasonable fees and expenses
actually incurred by counsel as contemplated by the third sentence 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; provided, how ever, that the
Indemnifying Person shall not be liable for any settlement effected without
its consent pursuant to this sentence if the Indemnifying Party is contesting,
in good faith, the request for reimbursement. 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 and second
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 thereunder, shall contribute to the amount paid or payable
by such Indemnified Person as a result of such losses, claims, damages or
liabilities in such proportion as is appropriate to reflect the relative fault
of the Issuers on the one hand and the
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<PAGE>
Participants on the other 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 fault of the Issuers on the
one hand and the Participants on the other 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 Issuers or by the Participants and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The parties 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 Participants were treated as one entity for such purpose) 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
reasonable legal or other expenses actually 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 a
Participant be required to contribute any amount in excess of the amount by
which proceeds received by such Participant from sales of Registrable
Securities exceeds the amount of any damages that such Participant 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 indemnity and contribution agreements contained in this
Section 7 will be in addition to any liability which the Indemnifying Persons
may otherwise have to the Indemnified Persons referred to above.
8. Rule 144 and Rule 144A
The Issuers covenant that they will file the reports required
to be filed by them under the Securities Act and the Exchange Act in a timely
manner and, if at any time the Issuers are not required to file such reports,
they will, upon the request of any Holder of Registrable Securities, make
publicly available other information so long as necessary to permit sales
pursuant to Rule 144 and Rule 144A under the Securities Act. The Issuers
further covenant that they will take such further action as any Holder of
Registrable Securities may reasonably request, all to the extent required from
time to time to enable such holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by
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<PAGE>
(a) Rule 144 and Rule 144A under the Securities Act, as such Rules may be
amended from time to time, or (b) any similar rule or regulation hereafter
adopted by the SEC.
9. Underwritten Registrations
If any of the Registrable Securities covered by any Shelf
Registration are to be sold in an underwritten offering, the investment banker
or investment bankers and manager or managers that will manage the offering
will be selected by the Holders of a majority in aggregate principal amount of
such Registrable Securities included in such offering, subject to the
reasonable approval of the Issuers. No Additional Interest shall be payable as
a result of any delay directly caused by the selection of or any action by such
underwriters.
No Holder of Registrable Securities may participate in any
underwritten registration hereunder unless such Holder (a) agrees to sell such
Holder's Registrable Securities on the basis provided in any underwriting
arrangements approved by the Issuers and the Holders of a majority in aggregate
principal amount of the Registrable Securities included in such offering and
(b) completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements. Any Holder who fails to comply with such
requirements within a reasonable period after notice shall not be entitled to
receive any Additional Interest.
10. Miscellaneous
(a) No Inconsistent Agreements. The Issuers have not, as of
the date hereof, entered and shall not, after the date of this
Agreement, enter into any agreement with respect to any of their
securities that is inconsistent with the rights granted to the Holders
of Registrable Securities in this Agreement or otherwise conflicts
with the provisions hereof.
(b) Adjustments Affecting Registrable Securities. Except as
may be required by the Indenture, the Issuers shall not, directly or
indirectly, take any action with respect to the Registrable Securities
as a class that would adversely affect the ability of the Holders of
Registrable Securities to include such Registrable Securities in a
registration undertaken pursuant to this Agreement.
(c) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, unless the Issuers have
obtained the written consent of Holders of at least a majority of the
then outstanding aggregate principal amount of Registrable Securities.
Notwithstanding the foregoing, a waiver or consent to depart
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<PAGE>
from the provisions hereof with respect to a matter that relates
exclusively to the rights of Holders of Registrable Securities whose
securities are being sold pursuant to a Registration Statement and
that does not directly or indirectly affect, impair, limit or
compromise the rights of other Holders of Registrable Securities may
be given by Holders of at least a majority in aggregate principal
amount of the Registrable Securities being sold by such Holders
pursuant to such Registration Statement, provided that the provisions
of this sentence may not be amended, modified or supplemented except
in accordance with the provisions of the immediately preceding
sentence.
(d) Notices. All notices and other communications (including
without limitation any notices or other communications to the
Trustee) provided for or permitted hereunder shall be made in writing
by hand-delivery, registered first-class mail, next-day air courier
or telecopier:
(i) if to a Holder of Registrable Securities, at the most
current address given by the Trustee to the Issuers; and
(ii) if to the Issuers, 375 Park Avenue, New York, New York
10152 (telecopy 212/648-5121 or 212/648-5951), Attention: Chief
Executive Officer.
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered;
five business days after being deposited in the mail, postage
prepaid, if mailed; one business day after being timely delivered to
a next-day air courier; and when telephonic confirmation of receipt
is obtained, if telecopied.
Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to the Trustee
under the Indenture at the address specified in such Indenture.
(e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of
the parties, including without limitation and without the need for an
express assignment, subsequent Holders of Registrable Securities;
provided, that, with respect to the indemnity and contribution
agreements in Section 7, each Holder of Registrable Securities
subsequent to the Initial Purchasers shall be bound by the terms
thereof if such Holder elects to include Registrable Securities in a
Shelf Registration; provided, however, that this Agreement shall not
inure to the benefit of or be binding upon a successor or assign of a
Holder unless and to the extent such successor or assign holds
Registrable Securities.
- 26 -
<PAGE>
(f) Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the
same agreement.
(g) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect
the meaning hereof.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS
APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES
HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE
STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT.
(i) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set
forth herein shall remain in full force and effect and shall in no way
be affected, impaired or invalidated, and the parties hereto shall use
their reasonable best efforts to find and employ an alternative means
to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is
hereby stipulated and declared to be the intention of the parties that
they would have executed the remaining terms, provisions, covenants
and restrictions without including any of such that may be hereafter
declared invalid, illegal, void or unenforceable.
(j) Entire Agreement. This Agreement, together with the
Purchase Agreement, is intended by the parties as a final expression
of their agreement, and is intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein and therein.
(k) Securities Held by the Issuers or Its Affiliates.
Whenever the consent or approval of holders of a specified percentage
of Registrable Securities is required hereunder, Registrable
Securities held by the Issuers or any of their affiliates (as such
term is defined in Rule 405 under the Securities Act) shall not be
counted in determining whether such consent or approval was given by
the Holders of such required percentage.
(l) Subsidiary Guarantor a Party. Notwithstanding Section
10(c), immediately upon the designation of any subsidiary of the
Company as a Guarantor (as defined in the In-
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<PAGE>
denture), the Company shall cause such Guarantor to guarantee the
obligations of the Issuers hereunder (including, without limitation,
the obligation to pay Additional Interest, if any, pursuant to the
terms of Section 4 hereof), by executing and delivering to the
Initial Purchaser an appropriate amendment to this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
UNITED AUTO GROUP, INC.
By:______________________________
Name:
Title:
GUARANTORS:
DIFEO PARTNERSHIP, INC.
DIFEO PARTNERSHIP RCT, INC.
DIFEO PARTNERSHIP RCM, INC.
DIFEO PARTNERSHIP HCT, INC.
DIFEO PARTNERSHIP SCT, INC.
DIFEO PARTNERSHIP VIII, INC.
DIFEO PARTNERSHIP IX, INC.
DIFEO PARTNERSHIP X, INC.
UAG NORTHEAST, INC.
UAG NORTHEAST (NY), INC.
HUDSON TOYOTA, INC.
SOMERSET MOTORS, INC.
UAG WEST, INC.
SA AUTOMOTIVE, LTD.
SL AUTOMOTIVE, LTD.
SPA AUTOMOTIVE, LTD.
LRP, LTD.
SUN BMW, LTD.
6725 DEALERSHIP, LTD.
SCOTTSDALE MANAGEMENT GROUP, LTD.
SK MOTORS, LTD.
SCOTTSDALE AUDI, LTD.
UNITED LANDERS, INC.
LANDERS AUTO SALES, INC.
LANDERS UNITED AUTO GROUP, INC.
LANDERS UNITED AUTO GROUP NO. 2, INC.
LANDERS UNITED AUTO GROUP NO. 3, INC.
LANDERS UNITED AUTO GROUP NO. 4, INC.
LANDERS BUICK-PONTIAC, INC.
UAG ATLANTA, INC.
ATLANTA TOYOTA, INC.
UAG ATLANTA II, INC.
UNITED NISSAN, INC.,
a Georgia corporation
UAG ATLANTA III, INC.
PEACHTREE NISSAN, INC.
UAG ATLANTA IV, INC.
UAG ATLANTA IV MOTORS, INC.
UAG ATLANTA V, INC.
CONYERS NISSAN, INC.
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<PAGE>
UAG TENNESSEE, INC.
UNITED NISSAN, INC.,
a Tennessee corporation
UAG TEXAS, INC.
UAG TEXAS II, INC.
UAG EAST, INC.
AMITY AUTO PLAZA, LTD.
AMITY NISSAN OF MASSAPEQUA, LTD.
AUTO MALL PAYROLL SERVICES, INC.
AUTOMALL STORAGE, INC.
FLORIDA CHRYSLER PLYMOUTH, INC.
J&S AUTO REFINISHING, LTD.
NORTHLAKE AUTO FINISH, INC.
PALM AUTO PLAZA, INC.
WEST PALM AUTO MALL, INC.
WEST PALM INFINITI, INC.
WEST PALM NISSAN, INC.
WESTBURY NISSAN, LTD.
WESTBURY SUPERSTORE, LTD.
UAG CAROLINA, INC.
GENE REED CHEVROLET, INC.
MICHAEL CHEVROLET-OLDSMOBILE, INC.
REED LALLIER CHEVROLET, INC.
UAG NEVADA, INC.
UNITED NISSAN, INC.,
a Nevada corporation
UNITED AUTOCARE, INC.
UNITED AUTOCARE PRODUCTS, INC.
UAG CAPITAL MANAGEMENT, INC.
UAG FINANCE COMPANY, INC.
UAG ATLANTA VI, INC.
UNITED JEEP EAGLE CHRYSLER
PLYMOUTH OF STONE MOUNTAIN, INC.
By:______________________________
Name:
Title:
- 30 -
<PAGE>
FAIR HYUNDAI PARTNERSHIP
FAIR CHEVROLET-GEO PARTNERSHIP
DANBURY AUTO PARTNERSHIP
DANBURY CHRYSLER
PLYMOUTH PARTNERSHIP
J&F OLDSMOBILE PARTNERSHIP
DIFEO HYUNDAI PARTNERSHIP
DIFEO LEASING PARTNERSHIP
DIFEO NISSAN PARTNERSHIP
DIFEO CHEVROLET-GEO PARTNERSHIP
DIFEO CHYRSLER PLYMOUTH JEEP
EAGLE PARTNERSHIP
DIFEO BMW PARTNERSHIP
By: DIFEO PARTNERSHIP, INC.,
a general partner
By:______________________________
Name:
Title:
HUDSON MOTORS PARTNERSHIP
By: DIFEO PARTNERSHIP HCT, INC.,
a general partner
By:______________________________
Name:
Title:
OCT PARTNERSHIP
By: DIFEO PARTNERSHIP VIII, INC.,
a general partner
By:______________________________
Name:
Title:
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<PAGE>
OCM PARTNERSHIP
By: DIFEO PARTNERSHIP IX, INC.,
a general partner
By:______________________________
Name:
Title:
SOMERSET MOTORS PARTNERSHIP
By: DIFEO PARTNERSHIP SCT, INC.,
a general partner
By:______________________________
Name:
Title:
COUNTY AUTO GROUP PARTNERSHIP
By: DIFEO PARTNERSHIP RCT, INC.,
a general partner
By:______________________________
Name:
Title:
ROCKLAND MOTORS PARTNERSHIP
By: DIFEO PARTNERSHIP RCM, INC.,
a general partner
By:______________________________
Name:
Title:
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<PAGE>
6725 AGENT PARTNERSHIP
By: SCOTTSDALE AUDI, LTD.,
a general partner
By:______________________________
Name:
Title:
SHANNON AUTOMOTIVE, LTD.
By: UAG TEXAS II, INC.,
its general partner
By:______________________________
Name:
Title:
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<PAGE>
J.P. MORGAN SECURITIES INC.
SCOTIA CAPITAL MARKETS (USA) INC.
By: J.P. MORGAN SECURITIES INC.
By: _____________________________
Name:
Title:
- 34 -
<PAGE>
STOCK PURCHASE AGREEMENT
DATED JULY 25, 1997
AMONG
UNITED AUTO GROUP, INC.,
UAG WEST TEXAS, INC.,
ALL AMERICAN CHEVROLET, INC.,
LYNN ALEXANDER, INC.,
JO-VENA AUTOMOTIVE, INC.,
LYNN RICH MANAGEMENT COMPANY
AND
R. LYNN ALEXANDER
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1. PURCHASE AND SALE OF SHARES.................................1
1.1. Certain Definitions.........................................1
1.2. Purchase and Sale of the Shares.............................2
1.3. Net Worth Adjustment........................................4
1.4. Post-Closing Adjustment.....................................6
1.5. Additional Purchase Price...................................6
1.6. Effective Date..............................................7
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANIES AND
THE STOCKHOLDER ..........................................7
2.1. Organization and Good Standing..............................7
2.2. Subsidiaries................................................7
2.3. Capitalization..............................................8
2.4. Authority; Approvals and Consents...........................8
2.5. Financial Statements........................................9
2.6. Absence of Undisclosed Liabilities..........................10
2.7. Absence of Material Adverse Effect; Conduct of Business.....10
2.8. Taxes.......................................................11
2.9. Legal Matters...............................................12
2.10. Property....................................................13
2.11. Environmental Matters.......................................14
2.12. Inventories.................................................16
2.13. Accounts Receivable.........................................16
2.14. Insurance...................................................17
2.15. Contracts, etc..............................................17
2.16. Labor Relations.............................................18
2.17. Employee Benefit Plans......................................19
2.18. Other Benefit and Compensation Plans or Arrangements........21
2.19. Transactions with Insiders..................................22
2.20. Propriety of Past Payments..................................22
2.21. Interest in Competitors.....................................23
2.22. Brokers.....................................................23
2.23. Accounts....................................................23
2.24. Disclosure..................................................23
2.25. Net Worth...................................................24
2.26. Working Capital.............................................24
2.27. Extended Warranty...........................................24
i
<PAGE>
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER...........24
3.1. Ownership of Shares; Title..................................24
3.2. Authority...................................................24
3.3. Real Property and Improvements..............................25
3.4. Qualification of Stockholder................................26
3.5. Fiduciary Duties............................................26
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF UAG.......................26
4.1. Organization and Good Standing..............................26
4.2. Sub.........................................................27
4.3. Authority; Approvals and Consents...........................27
4.4. Disclosure..................................................28
ARTICLE 5. COVENANTS AND ADDITIONAL AGREEMENTS.........................28
5.1. Access; Confidentiality.....................................28
5.2. Furnishing Information; Announcements.......................29
5.3. Antitrust Improvements Act Compliance.......................29
5.4. Certain Changes and Conduct of Business.....................30
5.5. No Intercompany Payables or Receivables.....................33
5.6. Negotiations................................................33
5.7. Consents; Cooperation.......................................33
5.8. Additional Agreements.......................................34
5.9. Interim Financial Statements................................34
5.10. Notification of Certain Matters.............................34
5.11. Assurance by the Stockholder................................35
5.12. Section 338(h)(10) Election.................................35
5.13. Non-Interference............................................35
5.14. Right of First Refusal......................................36
5.15. Working Capital.............................................36
5.16. Fiesta Dodge Chrysler Plymouth Jeep Eagle, Inc..............36
5.17. Loan Payoffs................................................36
5.18. Broker's Fees...............................................37
ARTICLE 6. CONDITIONS TO THE OBLIGATIONS OF UAG AND SUB TO
EFFECT THE CLOSING .......................................37
6.1. Representations and Warranties; Agreements; Covenants.......37
6.2. Authorization; Consents.....................................37
6.3. Opinions of the Companies' and the Stockholder' Counsel.....37
6.4. Absence of Litigation.......................................38
6.5. No Material Adverse Effect..................................38
6.6. Working Capital.............................................38
6.7. Completion of Due Diligence.................................38
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6.8. Board Approval..............................................39
6.9. Certificates................................................39
6.10. Legal Matters...............................................39
6.11. Approval of Manufacturers and Distributors..................39
6.12. Nondisturbance Agreements/Estoppel Certificates.............39
6.13. Title Insurance.............................................39
6.14. Schedules...................................................40
6.15. Memoranda of Lease..........................................40
6.16. Employment Agreement........................................40
6.17. Leases......................................................40
6.18. Resignation of the Companies' Directors.....................40
ARTICLE 7. CONDITIONS TO THE OBLIGATIONS OF THE COMPANIES AND
THE STOCKHOLDER TO EFFECT THE CLOSING ....................40
7.1. Representations and Warranties; Agreements..................40
7.2. Authorization of the Agreement, Consents....................41
7.3. Opinions of UAG's and Sub's Counsel.........................41
7.4. Absence of Litigation.......................................41
7.5. Certificates................................................41
7.6. Legal Matters...............................................42
7.7. Employment Agreement........................................42
7.8. Leases......................................................42
ARTICLE 8. TERMINATION.................................................42
8.1. Termination.................................................42
8.2. Effect of Termination.......................................43
ARTICLE 9. INDEMNIFICATION.............................................43
9.1. Indemnification by the Stockholder..........................43
9.2. Indemnification by UAG......................................44
9.3. Procedures..................................................44
9.4. Offset......................................................45
9.5. Remedies....................................................45
9.6. Definitions.................................................45
ARTICLE 10. MISCELLANEOUS...............................................46
10.1. Survival of Provisions......................................46
10.2. Fees and Expenses...........................................46
10.3. Headings....................................................46
10.4. Notices.....................................................46
10.5. Assignment..................................................48
10.6. Entire Agreement............................................48
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10.7. Waiver and Amendments.......................................48
10.8. Counterparts................................................49
10.9. Accounting Terms............................................49
10.10. Schedules...................................................49
10.11. Severability................................................49
10.12. Remedies....................................................49
10.13. Governing Law...............................................50
10.14. Time is of the Essence......................................50
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT, dated July 25, 1997, is by and among
United Auto Group, Inc., a Delaware corporation ("UAG"), UAG West Texas, Inc.,
a Delaware corporation ("UAG West Texas" or "Sub"), All American Chevrolet,
Inc., a Texas corporation ("AAC"), Lynn Alexander, Inc., a Texas Corporation
("LA"), Lynn Rich Management Company, a Texas corporation ("LRM"), Jo-Vena
Automotive, Inc., a Texas Corporation ("Jo-Vena" and, together with AAC, LA and
LRM, the "Companies") and R. Lynn Alexander, an individual resident of the
state of Texas ("Mr. Alexander" or the "Stockholder").
W I T N E S S E T H:
WHEREAS, UAG West Texas is a wholly-owned subsidiary of UAG;
WHEREAS, the Companies operate automobile dealerships and related
businesses in San Angelo, Texas;
WHEREAS, Jo-Vena owns 100% of the issued and outstanding stock of LA;
WHEREAS, the Stockholder owns or has the irrevocable right to acquire
all of the issued and outstanding shares of Jo-Vena and AAC (the "Shares");
WHEREAS, Sub desires to purchase all of the Shares from the
Stockholder, and the Stockholder desires to sell the Shares to Sub (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, Sub will
own one hundred percent (100%) of the issued and outstanding shares of the
capital stock of the Companies;
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:
(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, Page his or her spouse,
issue, parents, siblings, estate, any Affiliate of such person and any trust
for the benefit of his or her spouse and/or issue.
<PAGE>
(b) "Business Day" shall mean any day excluding Saturday, Sunday and
any day which is a legal holiday under Federal law.
(c) "Closing Date" shall have the meaning ascribed to it in Section
1.2(b).
(d) "GAAP" shall mean generally accepted accounting principles which
are in effect in the United States from time to time as applied on a consistent
basis.
(e) "Liens" shall mean any mortgages, pledges, title defects or
objections, liens, claims, security interests, prior assignments, conditional
and installment sale agreements, encumbrances or charges of any kind.
(f) "Material Adverse Effect" shall mean, with respect to the
Companies, any change in, or effect on, any of the Companies (including the
respective businesses thereof) which is, or might be, materially adverse to the
business, operations, assets, condition (financial or otherwise) or prospects
of such Company; and, with respect to UAG, any change in, or effect on, UAG
(including the businesses thereof) which is, or might be, materially adverse to
the business, operations, assets, condition (financial or otherwise) or
prospects of UAG.
(g) "Person" shall mean and include an individual, corporation,
partnership, limited liability company, joint venture, association, trust, any
other incorporated or unincorporated organization or entity and a governmental
entity or any department or agency thereto.
(h) "Pre-Tax Earnings" shall mean net earnings (or losses), before
taxes, computed in accordance with GAAP.
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 Stockholder shall sell to Sub, and Sub shall
purchase from the Stockholder, the Shares for an aggregate purchase price (the
"Purchase Price") equal to (i) Ten Million Five Hundred Sixty-Two Thousand Five
Hundred Dollars ($10,562,500) in cash (the "Base Price"), which Base Price is
subject to adjustment after the Closing as provided in Section 1.3 below; and
(ii) a promissory note (the "Note") in a form mutually acceptable to the
parties for the principal amount of One Million Two Hundred Fifty Thousand
Dollars ($1,250,000) with interest payable quarterly at 6% per annum and with
the principal maturing on March 31, 2000; provided, however, that the principal
amount of the Note is subject to adjustment after Closing pursuant to the
provisions of Section 1.4 hereof. At the Closing referred to in Section 1.2(b)
hereof:
(i) the Stockholder shall sell, assign, transfer and deliver to
UAG the Shares representing 100% of the issued and outstanding capital
stock of AAC and Jo-Vena and deliver the certificates representing such
Shares accompanied by stock powers duly executed in blank; and
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(ii) Sub shall accept and purchase the Shares from the
Stockholder and in payment therefor shall (A) deliver to the Stockholder
immediately available funds in an aggregate amount equal to the Base Price
by wire transfer to an account designated in writing by the Stockholder or
by certified funds; and (B) deliver to the Stockholder the Note.
(iii) Mr. Alexander, the Companies and Sub shall enter into an
employment agreement in a form mutually acceptable to Mr. Alexander and Sub
(the "Employment Agreement"). The Employment Agreement shall be for a
five-year term and shall provide that Mr. Alexander shall be employed as
Chief Operating Officer of Sub and the Companies. Mr. Alexander's initial
annual salary shall be Two Hundred Forty Thousand Dollars ($240,000) (the
"Base Salary") and the Base Salary shall be reviewed and adjusted annually
thereafter by the Chief Executive Officer of UAG; provided, however, that
the Base Salary shall not be less than Two Hundred Forty Thousand Dollars
($240,000) for any year of the term.
(iv) Each of the Companies and L&B Land and Cattle Company, Inc.
(the "Landlord") shall enter into a lease for the real property on which
the Companies operate in a form mutually acceptable to the parties (each a
"Lease" and, collectively, the "Leases"), such form to be agreed to by the
parties within twenty (20) Business Days of the date of this Agreement.
Each Lease shall be for a twenty (20) year term commencing on the Closing
Date and the lessee shall have the option to renew the Lease for two
additional five year terms (with the lease rate adjusted to fair market
value at the time each such period commences). Each Lease shall be a triple
net lease. The initial aggregate annual lease rate for the Leases shall be
Five Hundred Seventy Thousand Dollars ($570,000) (the "Initial Lease
Rate"); provided, however, that UAG shall have the option to obtain, at its
expense, an appraisal of the fair market lease rate for such properties
and, if such appraisal determines that the Initial Lease Rate exceeds the
fair market lease rate, then the Landlord may elect to reduce the Initial
Lease Rate with a corresponding adjustment to the purchase price to reflect
the increased earnings the Companies could be expected to achieve as a
result of the lower lease rate. On the second anniversary of the Closing
Date and every two years thereafter, the lease rate for each Lease shall
increase to an amount equal to the lease rate then in effect plus an amount
equal to a percentage of the lease rate then in effect, which percentage
shall be equal to the percentage increase in the Consumer Price Index
published from time to time by the United States Department of Labor
("CPI") for the area in which such Company operates for the calendar year
immediately preceding the adjustment date. UAG shall guarantee the
performance of the obligations of the Companies under the Leases.
(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 as soon as practicable following the date on which all
conditions to the obligations of the parties hereunder (other than those
requiring an exchange of certificates, opinions or other documents, or the
taking of other action, at the Closing) have been satisfied or waived, but no
3
<PAGE>
later than September 30, 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 Stockholder shall deliver to Sub 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 1.2(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 Companies and the Stockholder at or prior to the Closing or
otherwise required in connection herewith;
(ii) Sub shall (A) pay to the Stockholder funds as required by
Section 1.2(a)(ii) hereof; (B) deliver to Mr. Alexander the Note; and (C)
deliver to the Stockholder all opinions, certificates and other instruments
and documents required to be delivered by UAG or Sub at or prior to the
Closing or otherwise required in connection herewith.
1.3. NET WORTH ADJUSTMENT.
(a) On the Closing Date, or as soon as practicable thereafter (but no
later than 15 days after the Closing Date), the Stockholder shall deliver to
UAG a consolidated balance sheet of the Companies 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 accordance
with GAAP (and shall include adjustments consistent with the adjustments set
forth on the combined balance sheet of the Companies attached hereto as
Schedule 1.3 (the "May 31 Combined Balance Sheet"). In connection with the
preparation of the Closing Date Balance Sheet, the Stockholder and the
Companies shall permit the Reviewer (as defined below) and other
representatives of UAG to conduct a physical inventory at each location where
inventory is held by the Companies.
(b) Within ninety (90) days after delivery of the Closing Date Balance
Sheet, (i) Coopers & Lybrand or such other accounting firm (the "Reviewer") as
may be selected by UAG shall audit or otherwise review the Closing Date Balance
Sheet in such manner as UAG and the Reviewer deem appropriate, and (ii) UAG
shall deliver such reviewed balance sheet (the "Reviewed Balance Sheet") to the
Stockholder. The Reviewed Balance Sheet (i) shall be prepared in accordance
with GAAP (and shall include adjustments consistent with the adjustments set
forth on the May 31 Combined Balance Sheet) and (ii) shall include a schedule
showing the computation of the Final Net Worth (as defined in Section 1.3(g)(i)
hereof), computed in accordance with the definition of Net Worth set forth in
Section 1.3(g)(ii) hereof. UAG and the Reviewer shall have the opportunity to
consult with the Stockholder, the Companies and each of the accountants and
other representatives of the Stockholder and the Companies and to examine the
work papers, schedules and other documents prepared by the
4
<PAGE>
Stockholder, the Companies and each of such accountants and other
representatives during the preparation of the Closing Date Balance Sheet.
(c) The Stockholder shall have a period of forty-five (45) days after
delivery of the Reviewed Balance Sheet to present in writing to UAG all
objections the Stockholder may have to any of the matters set forth or
reflected therein, which objections shall be set forth in reasonable detail. If
no objections are raised within such 45-day period, the Reviewed Balance Sheet
shall be deemed accepted and approved by the Stockholder and a supplemental
closing (the "Supplemental Closing") shall take place within five (5) Business
Days following the expiration of such 45-day period, or on such other date as
may be mutually agreed upon in writing by UAG and the Stockholder.
(d) If the Stockholder shall raise any objection within such 45-day
period, UAG 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 UAG 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
public accountants mutually acceptable to UAG 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 UAG and the Stockholder
and the Supplemental Closing, if any, shall take place five (5) Business Days
following the receipt of such determination by UAG and the Stockholder. The
fees and expenses of the accounting firm referred to in this Section 1.3(e)
shall be paid one-half by UAG and one-half by the Stockholder.
(f) UAG and the Stockholder agree to cooperate with each other and
each other's authorized representatives and with any accounting firm selected
by UAG and the Stockholder pursuant to Section 1.3(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 1.3 (a) through (e) hereof
(such amount being referred to herein as the "Final Net Worth") shall be less
than the Net Worth on the May 31 Combined Balance Sheet (the "Agreed Net
Worth") (the amount of any such deficiency being referred to herein as the "Net
Worth Deficiency"), the Stockholder shall pay to UAG at the Supplemental
Closing, by wire transfer of immediately available funds to an account
designated in writing by UAG at least 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.).
(ii) "Net Worth" computed in connection with the Closing Date Balance
Sheet and the Reviewed Balance Sheet shall mean the amount by which the total
assets (not including intangible assets) exceed the total liabilities
reflected, in each case, on the balance sheets of
5
<PAGE>
Companies comprising the Closing Date Balance Sheet or the Reviewed Balance
Sheet, as the case may be; provided, however, that for purposes of determining
the Final Net Worth, the Net Worth on the Closing Date Balance Sheet and the
Reviewed Balance Sheet shall be reduced by an amount equal to the net income of
the Companies for the period beginning on the first day of the calendar month
during which the Closing occurs and ending on the Closing Date.
1.4. POST-CLOSING ADJUSTMENT.
If the Companies, on a combined basis, have Pre-Tax Earnings for the
two-year period commencing on January 1, 1998 and ending on December 31, 1999
("1998-1999 Earnings") of less than Five Million One Hundred Thousand Dollars
($5,100,000) (the amount of any such deficiency being referred to herein as the
"Earnings Deficiency"), then the principal amount of the Note shall be reduced
by an amount equal to three and three-fourths (3.75) times the Earnings
Deficiency. If there is a dispute as to the amount of the 1998-1999 Earnings,
then, to the extent that the amount of any interest or principal payment to be
made under the Note is contingent upon the resolution of such dispute, Sub
shall have no obligation to make such payment until the amount of the 1998-1999
Earnings is agreed to by the parties or is finally determined by an independent
certified public accounting firm, mutually agreed upon by Sub and the
Stockholder. The costs and fees of any such accounting firm shall be paid
one-half by Sub and one-half by the Stockholder. For purposes of determining
Pre-Tax Earnings in connection with this Section, (i) management fees paid to
UAG or UAG West Texas and overhead expenses attributable to UAG or UAG West
Texas shall not be considered as expenses of the Companies; and (ii) warranty
income shall be accounted for as set forth on Schedule 1.4 hereof.
1.5. ADDITIONAL PURCHASE PRICE.
If the Companies, on a combined basis, have Pre-Tax Earnings for the
two-year period commencing on January 1, 1998 and ending on December 31, 1999
(the "1998-1999 Earnings") that exceed Six Million Nine Hundred Thousand
Dollars ($6,900,000), then, in consideration for the sale of the Shares by the
Stockholder to Sub, Sub will make an additional payment to the Stockholder in
the aggregate amount equal to [(1998-1999 Earnings - $6,900,000) X 3.75]. If
Sub is required to make an additional payment pursuant to the provisions of
this Section 1.5, then Sub shall make such payment no later than March 31,
2000. If there is a dispute as to the amount of the 1998-1999 Earnings, then,
to the extent that the amount of any additional payment is contingent upon the
resolution of such dispute, Sub shall have no obligation to make such payment
until the amount of the 1998-1999 Earnings is agreed to by the parties or is
finally determined by an independent certified public accounting firm, mutually
agreed upon by Sub and the Stockholder. The costs and fees of any such
accounting firm shall be paid one-half by Sub and one-half by the Stockholder.
For purposes of determining Pre-Tax Earnings in connection with this Section,
(i) management fees paid to UAG or UAG West Texas and overhead expenses
attributable to UAG or UAG West Texas shall not be considered as expenses of
the Companies; and (ii) warranty income shall be accounted as set forth on
Schedule 1.4 hereof.
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1.6. EFFECTIVE DATE.
The obligations of the parties hereunder shall not take effect
until the date earlier of: (i) the date on which the parties have notified each
of the Companies' manufacturers (the "Effective Date") or (ii) July 30, 1997.
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES
OF THE COMPANIES 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 Companies
and the Stockholder no later than ten (10) Business Days after the date hereof,
the Companies and the Stockholder hereby jointly and severally represent and
warrant to UAG as follows:
2.1. ORGANIZATION AND GOOD STANDING.
Each of the Companies is a corporation duly organized, validly
existing and in good standing under the laws of the State of Texas and has the
corporate power and authority to own, lease and operate the properties used in
its businesses and to carry on its business 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.
The Companies do not have any interest or investment in any Person,
except that Jo-Vena owns 100% of the issued and outstanding shares of LA free
and clear of any Liens, claims or encumbrances.
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2.3. CAPITALIZATION.
The authorized stock of each of the Companies, the number of shares of
capital stock which are issued and outstanding and the record owner of all such
shares 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. Except as set forth on Schedule 2.3 hereof, 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. 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.
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. The execution, delivery and performance by each of the
Companies and the 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
Bylaws (including any comparable governing instrument with a different
name) of any of the Companies;
(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) or, except as set forth on Schedule 2.4 hereto,
require any consent or waiver of any party to any Company Agreement;
8
<PAGE>
(iii) result in the creation of any security interest upon, or
any person obtaining any right to acquire, any properties, assets or rights
of any of the Companies (other than the rights of UAG to acquire the Shares
pursuant to this Agreement);
(iv) violate or conflict with any Legal Requirements (as defined
in Section 2.9 hereof) applicable to any of the Companies or any of their
respective businesses or properties; or
(v) require any authorization, consent, order, permit or approval
of, or notice to, or filing, registration or qualification with, any
governmental, administrative or judicial authority, except in connection
with or in compliance with the provisions of the H-S-R Act (as defined in
Section 5.3).
Except as set forth or referred to above, no authorization, consent, order,
permit or approval of, or notice to, or filing, registration or qualification
with, any governmental, administrative or judicial authority is necessary to be
obtained or made by the 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.
Attached as Schedule 2.5 are true and complete copies of:
(i) (A) the compiled consolidated balance sheet of the Companies
as of December 31, 1996, and the related consolidated statements of income,
stockholders' equity and cash flows for the fiscal year ended December 31,
1996, together with the notes thereto and (B) the compiled consolidated
balance sheet of the Companies as of December 31, 1995, and the related
consolidated statements of income, stockholders' equity and cash flows for
the fiscal year ended December 31, 1995, together with the notes thereto,
in each case accompanied by the report of independent certified public
accountants; and
(ii) the monthly and year-to-date financial statements provided
to each of the manufacturers for the months ended June 30, 1997 and May 31,
1997 (each a "Company Factory Statement and, collectively, the "Company
Factory Statements");
(all the foregoing financial statements, including the notes thereto, being
referred to herein collectively as the "Company Financial Statements"). The
Company Financial Statements are consistent with and in accordance with the
books and records of the Companies, fairly present the financial position,
results of operations, stockholders' equity and changes in financial position
of the Companies as of the dates and for the periods indicated in conformity
with GAAP consistently applied (except as otherwise indicated on Schedule 2.5
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 Companies for federal income tax purposes, and the
unaudited financial statements included in the Company Financial
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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. 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.
2.6. ABSENCE OF UNDISCLOSED LIABILITIES.
The Companies do not have any liabilities of any nature whatsoever
(whether 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 on the most recent Company Financial
Statements, (ii) current liabilities incurred in the ordinary course of
business and consistent with past practice after June 30, 1997 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. None of the Companies is 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, 1996, each Company has operated in the ordinary
course of business consistent with past practice, except as set forth on
Schedule 2.7(a) hereto, and there has not been:
(i) any material adverse change in the assets, properties,
business, operations, prospects, net income or financial condition of any
of the Companies, 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 any of the Companies, whether or not
covered by insurance;
(iii) any change in any method of accounting or accounting
practice of any of the Companies; or
(iv) any loss of the employment, services or benefits of any
general manager, office manager, controller or any equivalent employee of
any of the Companies.
(b) Since December 31, 1996, except as set forth in Schedule 2.7(b)
hereto, the Companies have not:
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(i) incurred any material obligation or liability (whether
absolute, accrued, contingent or otherwise), except in the ordinary course
of business consistent with past practice;
(ii) failed to discharge or satisfy any lien or pay or satisfy
any obligation or liability (whether absolute, accrued, contingent or
otherwise), other than liabilities being contested in good faith and for
which adequate reserves have been provided;
(iii) mortgaged, pledged or subjected to any lien any of its
property or other assets, except for mechanics liens and liens for taxes
not yet due and payable;
(iv) sold or transferred any assets or cancelled any debts or
claims or waived any rights, except in the ordinary course of business
consistent with past practice;
(v) defaulted on any material obligation;
(vi) 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
$50,000, or aggregate capital expenditures in excess of $200,000, or
additions to property, plant and equipment other than ordinary repairs and
maintenance;
(x) discontinued any franchise or the sale of any products or
product line or program;
(xi) incurred any obligation or liability for the payment of
severance benefits; or
(xii) entered into any agreement or made any commitment to do any
of the foregoing.
2.8. TAXES.
LRM has made a valid election pursuant to Section 1362(a) of the
Internal Revenue Code, as amended (the "Code"), to be on "S Corporation" within
the meaning of Section 1361(a)(1) of the Code and has continued to qualify as
such for all taxable years since
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its formation and will continue to so qualify through the closing date. 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 tax returns for the fiscal years ended since
December 31, 1992 have been furnished or made available 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 sent or received since December 31, 1992 by the
Companies to or from any federal, state or local tax authorities. The Companies
have adequately reserved for the payment of all Taxes with respect to periods
ended on or prior to 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 Financial Statements, or will be reflected on the Closing Date
Balance Sheet, the Companies are not liable, or will not become liable, for any
Taxes for any period ending on or prior to the Closing Date. Except as set
forth on Schedule 2.8 hereto, the Companies have not been subject to a federal
or state tax audit of any kind since December 31, 1992, and no adjustment has
been proposed by the Internal Revenue Service ("IRS") with respect to any
return for any prior or subsequent year. With respect to the audits referred to
on Schedule 2.8 hereto and except as indicated thereon, no such audit has
resulted in an adjustment in excess of $25,000. Neither the Companies nor the
Stockholder know of any basis for an assertion of a deficiency for Taxes
against the Companies. The Stockholder will cooperate, and will cause his
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 Companies
or the Stockholder, threatened against or affecting, the Companies, any ERISA
Plan (as defined in Section 2.17(a) hereof) or any of their 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 Companies for any such Claims, and (ii) the Companies
are not subject to any judgment, decree, writ, injunction, ruling or order
(collectively, "Judgments") of any
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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 business of the Companies is 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 their
business or properties. The Companies hold, and are 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 Companies own or hold all Permits material to the conduct of
their 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.
Set forth on Schedule 2.10(a) hereto is a list of all interests in
real property owned by or leased to the Companies, including all real property
owned or leased by the Stockholder or other Affiliates (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").
With respect to any leased Real Property, there are no defaults by either party
under such leases and no state of facts exist which with the giving of notice
or the passage of time, or both, would constitute a default under such leases.
True and correct copies of all leases relating to the Real Property, together
with any amendments and modifications thereto, are attached as Schedule
2.10(b). All improvements to the Real Property ("Improvements") and all
machinery, equipment and other tangible property owned or used by or leased to
the Companies are fit for the particular purposes for which they are used by
the Companies. Such tangible properties 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, to the
knowledge of the Stockholder and the Companies, 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 Companies as presently conducted.
Certificates of Occupancy have 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 written notice (and, to the knowledge of the Stockholder and
the Companies, no 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 Stockholder with respect to the
Real Property.
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2.11. ENVIRONMENTAL MATTERS.
(a) Except as set forth on Schedule 2.11(a) hereto, (i) the Companies,
the Real Property, the Improvements and any property formerly owned, occupied
or leased by the Companies are 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. 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, release,
presence, 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 amended and as in
effect from time to time (including without limitation the following statutes
and all regulations thereunder as amended and in effect from time to time: 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. e 6901 et seq.) ("RCRA"), the
Occupational Safety and Health Act of 1970 (29 U.S.C. e 651 et seq.) ("OSHA"),
and the Hazardous Materials Transportation Act, 49 U.S.C. e 1801 et seq.
("HMTA")). As used herein, "Environmental Permits" shall mean all permits,
licenses, approvals, authorizations, consents or registrations required under
applicable Environmental Laws in connection with the ownership, use and/or
operation of the Companies' business or the Real Property or Improvements.
As used herein, "Hazardous Materials" shall mean, collectively, (i)
those substances included within the definitions of or identified as "hazardous
chemicals," "hazardous waste," "hazardous substances," "hazardous materials,"
"toxic substances", "extremely hazardous substances", "toxic pollutants",
"contaminants", "pollutants" or similar terms in or pursuant to, without
limitation, CERCLA, RCRA, OSHA, 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) lead-based paint (D)
polychlorinated biphenyls, (E) designated as a "hazardous substance" pursuant
to Section 311 of the Clean Water Act, 33 U.S.C. e 1251 et seq. (33 U.S.C. e
1321) or listed pursuant to Section 307 of the Clean Water Act (33 U.S.C. e
1317), (F) flammable explosives, (G) radioactive materials, and (iv) such other
substances, materials and wastes which are or
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become regulated or classified as hazardous, toxic or as "special wastes" under
any Environmental Laws.
(b) The Companies 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 Companies, 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 Companies have 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
Companies, the Real Property or any portion thereof, the Improvements or any
property formerly owned, occupied or leased by the Companies, nor, to the
knowledge of the Companies 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 (provided, however, that certain petroleum products are stored and
handled on the Real Property in the ordinary course of the Companies' business
in full 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 and all secondary containment requirements with respect to above ground
storage tanks), (ii) none of the Real Property or any portion thereof, the
Improvements or 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) none of the Real Property, the Improvements
or any property formerly owned, occupied or leased by the Companies, or, to the
knowledge of the Companies or the Stockholder, 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 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
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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 threatened claim, litigation, or administrative proceeding, or known
prior claim, litigation or administrative proceeding, arising under any
Environmental Law involving 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 the knowledge of the Stockholder 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) The Stockholder and the Companies have provided to UAG all
environmental studies and reports obtained by them or known to them 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, and any property formerly owned, occupied or leased by the
Companies, 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 Financial
Statements and the values at which inventories will be carried on the Closing
Date Balance Sheet reflect, or will reflect, the normal inventory valuation
policies of the Companies, and such values are, or in the case of the Closing
Date Balance Sheet will be, in conformity with GAAP consistently applied
(except that no adjustment shall be made to the LIFO reserve for 1997 through
the Closing Date). All inventories reflected on the Company Financial
Statements will be currently marketable and will reasonably be anticipated to
be sold at normal mark-ups within sixty (60) days after the Closing Date in the
ordinary course of business, except for spare parts inventory which inventory
is carried at the lower of cost or market (with market being equal to the
amount of any refund, if any, that would be paid by the applicable manufacturer
if the parts are returned to such manufacturer).
2.13. ACCOUNTS RECEIVABLE.
All accounts receivable reflected on the Company Financial Statements
are, and all accounts receivable that will be or will have been reflected on
the Closing Date Balance
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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 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 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 underwritten by
financially secure insurers, 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. 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 any of the Companies is a party or by which any of the Companies or
any of their 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 business, operations, assets, condition (financial or
otherwise) or prospects of any 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 or will be 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 Companies 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 Companies. There are no material
unresolved disputes involving the Companies under any Company Agreement.
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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 set forth on Schedule 2.16(b) hereto, none of the
Companies is 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
Companies, nor do the Stockholder or the Companies 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 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 Stockholder's or
the Companies' 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 Companies, 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. ee 2101-2109, and the regulations
promulgated therein.
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2.17. EMPLOYEE BENEFIT PLANS.
(a) Set forth on Schedule 2.17(a) hereto is a true and complete list
of:
(i) each employee pension benefit plan, as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974 ("ERISA"),
maintained by the 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 intended to be
qualified pursuant to Section 401(a) of 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 Companies
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;
(iii) each ERISA Plan has operated since its inception in
accordance with the reporting and disclosure requirements imposed under
ERISA and the Code and has timely filed Form 5500e (or 5500-C or 5500-R)
and predecessors thereof; and
(iv) no ERISA Plan is liable for any federal, state, local or
foreign Taxes.
(c) Each Pension Benefit Plan intended to be qualified under
Section 401(a) of the Code:
(i) has been qualified, from its inception, under Section 401(a)
of the Code, and the trust established thereunder has been exempt from
taxation under Section 501(a) of the Code and is currently in compliance
with applicable federal laws;
(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
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(iii) is not currently under investigation, audit or review by
the IRS or (to the knowledge of the Companies and 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
Companies 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 Companies 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 Companies 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 Companies 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 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 Financial Statements reflect in the
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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
Financial Statements.
(g) With respect to any Multiemployer Plan (1) the Companies have not,
since their 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 Companies under any
Multiemployer Plan, computed as if a "complete withdrawal" by the Companies had
occurred under each such Plan as of December 31, 1996; and (3) the Companies
have 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 Companies 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 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 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, 1996 exceeded $75,000. True and
complete copies of all of the written plans, arrangements and agreements
referred to on Schedule 2.18(a) ("Compensation Commitments") have been or
will be provided or made available 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 written summary has been
provided to UAG with respect to any Compensation Commitment which is
unwritten.
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(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
Companies 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.
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, 1996. For purposes of this Agreement:
(i) the term "Insider" shall mean the Stockholder, any director
or officer of any of the Companies, 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 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
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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
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 Companies that is engaged
in the retail sale of automobiles or light duty trucks.
2.22. BROKERS.
Neither the Companies, nor any director, officer or employee thereof,
nor the Stockholder or any representative of the Stockholder, have 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; except that Mr.
Alexander has agreed to pay Ben Hicks & Associates (the "Broker") upon the
closing and funding of the transactions contemplated hereby an amount equal to
One Hundred Twenty-Five Thousand Dollars ($125,000) in full satisfaction of any
obligations of the Stockholder or the Companies relating to the services of
Broker.
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 Stockholder have made any material
misrepresentation to UAG relating to the Companies or the Shares or the Real
Property or Improvements and neither the Companies nor the Stockholder have
omitted to state to UAG any material fact relating to the Companies or the
Shares or the Real Property or Improvements which is necessary in order to make
the information given by or on behalf of the Companies or the Stockholder to
UAG not misleading. To the knowledge of the Companies and the Stockholder, no
fact, event, condition or contingency exists or has
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occurred which has, or in the future can reasonably be expected to have, a
Material Adverse Effect, which has not been disclosed in the Company Financial
Statements or the Schedules to this Agreement.
2.25. NET WORTH.
On the Closing Date, the Net Worth of the Companies will be equal to
or greater than the Agreed Net Worth.
2.26. WORKING CAPITAL.
On the Closing Date, the working capital of each Company will be
sufficient to operate the business of such Company consistent with past
practice.
2.27. EXTENDED WARRANTY.
The Companies shall have no liability for any extended warranty sold
prior to the Closing Date.
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
no later than ten (10) Business Days after the date hereof, the Stockholder
hereby represents and warrants to UAG as follows:
3.1. OWNERSHIP OF SHARES; TITLE.
The Stockholder is, or on the Closing Date will be, the owner of
record and beneficially of the Shares as set forth on Schedule 3.1 hereof and
has, or on the Closing Date will have and shall transfer to Sub at the Closing,
good and marketable title to the Shares, free and clear of any and all security
interests, pledge agreements, Liens, proxies and voting or other agreements
except restrictions on transfer imposed by applicable federal and state
securities laws. Jo-Vena is the owner of record and beneficially of 100% of the
issued and outstanding capital stock of LA and has good and marketable title to
such capital stock, free and clear of any and all security interests, pledge
agreements, Liens, proxies and voting or other agreements.
3.2. AUTHORITY.
The Stockholder has all requisite power and authority and has full
legal capacity and are competent to execute, deliver and perform this Agreement
and the Documents to which they are a party and to consummate the transactions
contemplated hereby and thereby (including the disposition of the Shares to Sub
as contemplated by this Agreement). This Agreement has been duly executed and
delivered by each Stockholder and constitutes, and the
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Documents to which each Stockholder is a party when executed and delivered by
such Stockholder will constitute, a valid and binding obligation of such
Stockholder, enforceable against him or it 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 the Stockholder and the consummation of the
transactions contemplated hereby and thereby do not and will not:
(i) (after notice or lapse of time or both) conflict with, result
in a breach of any provision of, constitute a default under, result in the
modification or cancellation of, or give rise to any right of termination
or acceleration in respect of, any material contract, agreement,
commitment, understanding, arrangement or restriction to which the
Stockholder is a party or to which the Stockholder or any of his property
is subject;
(ii) violate or conflict with any Legal Requirements applicable
to the Stockholder or any of 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 (as
defined in Section 5.3 hereof); or
Except as set forth or referred to above, no authorization, consent, order,
permit or approval of, or notice to, or filing, registration or qualification
with, any governmental, administrative or judicial authority is necessary to be
obtained or made by the 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.
3.3. REAL PROPERTY AND IMPROVEMENTS.
The Real Property and Improvements owned by Landlord are owned 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 knowledge of
Landlord or the Stockholder, in the future will materially affect the use of
such Real Property or such Improvements for the conduct of the respective
businesses of the Companies 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 such Real Property or Improvements other than the existing
leases in favor of the Companies, which are to be terminated at the Closing by
agreement between the parties and pursuant to which the owners shall
acknowledge that there are no defaults under any such leases and that the
Companies have no liability arising out of or relating to such leases. Attached
as Schedule 3.3(b) are all surveys, title binders, title policies and copies of
any exceptions to title relating to such Real Property or Improvements.
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3.4. QUALIFICATION OF STOCKHOLDER.
Mr. Alexander (i) is an "accredited investor" within the meaning of
Regulation D of the Securities Act, and Mr. Alexander is acquiring the Note to
be issued pursuant to the terms of this Agreement for his own account and not
with a view to, or for resale in connection with, any distribution thereof;
(ii) Mr. Alexander understands and acknowledges that the Note has not been
registered under the Securities Act or any state securities laws by reason of
certain exemptions from the registration provisions thereof which depend upon,
among other things, the bona fide nature of the Stockholder's investment intent
as expressed herein; (iii) Mr. Alexander is able to bear the economic risk of
such Note and has such knowledge and experience in financial and business
matters that he is capable of evaluating the risks and merits of the Note; (iv)
Mr. Alexander acknowledges that the Note was not offered to him by means of
publicly disseminated advertisements or sales literature, or as part of a
general solicitation; (v) Mr. Alexander acknowledges that in deciding to
proceed with the transaction set forth herein he has relied solely on his own
independent investigation of UAG; and (vi) Mr. Alexander understands and
acknowledges that the Note will bear a legend restricting transfer.
3.5. FIDUCIARY DUTIES.
Mr. Alexander has satisfied any and all fiduciary (or other) duties
that he may have as a director, officer or stockholder of All American
Chevrolet, Inc. to Nancy S. Scholz and Ms. Scholz has been advised of Mr.
Alexander's intention to enter into this Stock Purchase Agreement and the
material terms hereof.
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 and Sub no
later than ten (10) Business Days after the date hereof, UAG and Sub hereby
jointly and severally represent and warrant to the Companies and the
Stockholder as follows:
4.1. ORGANIZATION AND GOOD STANDING.
UAG is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has the corporate power
and authority to own, lease and operate the properties used in its business and
to carry on its business as now being conducted. UAG is duly qualified to do
business and is in good standing as a foreign corporation in each state and
jurisdiction where qualification as a foreign corporation is required, except
for such failures to be qualified and in good standing, if any, which when
taken together with all other such failures of UAG and the Sub would not, or
could not reasonably be expected to, in the aggregate have a Material Adverse
Effect on UAG. UAG has made available to the Stockholder complete and correct
copies of its charter and bylaws, as amended and presently in effect.
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4.2. SUB.
Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, has the corporate power and
authority to own, lease and operate the properties and assets used in its
business and to carry on its business as now being conducted, and is duly
qualified to do business and in good standing as a foreign corporation in each
jurisdiction where qualification as a foreign corporation is required, except
for such failures to be qualified and in good standing, if any, which when
taken together with all other such failures of UAG and its subsidiaries would
not, or could not reasonably be expected to, in the aggregate have a Material
Adverse Effect. All of the outstanding shares of capital stock of the Sub have
been validly authorized and issued, are fully paid and non-assessable, have not
been issued in violation of any preemptive rights or of any federal or state
securities law.
4.3. AUTHORITY; APPROVALS AND CONSENTS.
UAG and Sub have the corporate power and authority to enter into this
Agreement and the Documents to which they are a party and to perform their
obligations hereunder and thereunder. At the time of the Closing, 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 Sub and no other corporate proceedings on the part of UAG
or Sub 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 a valid and binding obligation of, UAG and Sub,
enforceable against UAG and Sub in accordance with their respective terms.
Except as set forth on Schedule 4.5 hereto, the execution, delivery and
performance by UAG and Sub of this Agreement and the Documents to which they
are a party and the consummation of the transactions contemplated hereby and
thereby do not and will not:
(i) contravene any provisions of the Certificate of Incorporation
or Bylaws 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;
(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;
(iv) violate or conflict with any Legal Requirements applicable
to UAG or its respective businesses or properties that would or could
reasonably be expected to have a Material Adverse Effect on UAG and the UAG
Subsidiaries, taken as a whole; or
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(v) require any authorization, consent, order, permit or approval
of, or notice to, or filing, registration or qualification with, any
governmental, administrative or judicial authority, except in connection
with or in compliance with the provisions of the H-S-R Act (as defined in
Section 5.3 hereof).
Except as set forth or referred to above, no authorization, consent,
order, permit or approval of, or notice to, or filing, registration or
qualification with, any governmental administrative or judicial authority is
necessary to be obtained or made by UAG to enable UAG to continue to conduct
its business and operations and use its properties after the Closing in a
manner which is in all material respects consistent with that in which they are
presently conducted. As used in this Agreement, the term "UAG Agreement" shall
mean all mortgages, indenture notes, agreements, contracts, leases, licenses,
franchises, obligations, instruments or other commitments, arrangements or
understandings of any kind, whether written or oral, binding or non-binding, to
which UAG or the UAG Subsidiaries is a party or by which UAG or the UAG
Subsidiaries or any of their assets or properties may be bound or affected,
including all amendments, modifications, extensions or renewals of any of the
foregoing, and which involve receipts or payments by UAG or UAG Subsidiaries
which exceed $250,000 per year. "UAG Subsidiary" shall mean any corporation or
other entity in which UAG, directly or indirectly, owns beneficially securities
representing 50% or more of (i) the aggregate equity or profit interests or
(ii) the combined voting power of voting interests ordinarily entitled to vote
for management or otherwise.
4.4. DISCLOSURE.
Neither UAG nor Sub has made any material misrepresentation to the
Companies or the Stockholder relating to this Agreement and neither UAG nor the
Sub has omitted to state to the Companies or the Stockholder any material fact
relating to this Agreement which is necessary in order to make the information
given by or on behalf of UAG or Sub to the Companies or the Stockholder or
their representatives at or prior to Closing not misleading. No fact, event,
condition or contingency exists or has occurred which has, or in the future can
reasonably be expected to have, a Material Adverse Effect on UAG.
ARTICLE 5.
COVENANTS AND ADDITIONAL AGREEMENTS
5.1. ACCESS; CONFIDENTIALITY.
Between the date hereof and the Closing Date, the Stockholder and the
Companies 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 Companies and will cause their officers to furnish to UAG and Sub and
their authorized representatives any and all financial, technical and operating
data and other information pertaining to the businesses and properties of the
Companies, and (ii) make available for inspection and copying by UAG and Sub
true and complete copies of any documents relating to the foregoing. UAG and
Sub will hold in confidence (unless and to the extent compelled to disclose by
judicial or administrative process
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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 promptly return to
the Companies, upon the reasonable request of the Companies, all Confidential
Information furnished by the Companies and the Stockholder and held by UAG and
Sub, including all copies thereof. As used herein, "Confidential Information"
shall mean all information concerning the Companies obtained by UAG or Sub from
the Companies 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 or (z) which is or becomes known to the public,
other than through a breach by UAG or Sub of this Agreement. The Stockholder
and the Companies will hold in confidence (unless and to the extent compelled
to disclose by judicial or administrative process, or, in the opinion of their
counsel, by other requirements of law) all UAG Confidential Information (as
defined below) and will not disclose the same to any third party except as may
reasonably be necessary to carry out this Agreement and the transactions
contemplated hereby. If this Agreement is terminated, the Stockholder will
promptly return to UAG, upon the reasonable request of UAG, all UAG
Confidential Information furnished by UAG and held by the Stockholder,
including all copies thereof. As used herein, "UAG Confidential Information"
shall mean all information concerning UAG obtained by the Stockholder and the
Companies in connection with the transactions contemplated by this Agreement,
except information (x) ascertained or obtained from public information, (y)
received from a third party not employed or otherwise affiliated with UAG or
(z) which is or becomes known to the public, other than a breach by the
Stockholder and the Companies of this Agreement.
5.2. FURNISHING INFORMATION; ANNOUNCEMENTS.
The Stockholder and the Companies, 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 Companies or UAG and Sub, 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
Stockholder nor the Companies, on the one hand, nor UAG nor Sub, on the other
hand, or any representative thereof, shall issue any press releases or
otherwise make any public statement with respect to the transactions
contemplated hereby without the prior consent of the other, except as may be
required by law (including federal or state securities laws) as determined by
such parties' counsel, in its sole discretion.
5.3. ANTITRUST IMPROVEMENTS ACT COMPLIANCE.
UAG and Sub and the Stockholder 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
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under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"H-S-R Act"), and the rules and regulations promulgated thereunder, with
respect to the transactions contemplated herein. The parties shall use their
best efforts to make such filings promptly, to respond to any requests for
additional information made by either of such agencies, to cause the waiting
periods under the H-S-R Act to terminate or expire at the earliest possible
date and to resist vigorously, at their respective cost and expense (including,
without limitation, the institution or defense of legal proceedings), any
assertion that the transactions contemplated herein constitute a violation of
the antitrust laws, all to the end of expediting consummation of the
transactions contemplated herein; provided, however, that if UAG or the
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.
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 Stockholder shall cause the Companies to,
conduct their business solely in the ordinary course consistent with past
practices and, without the prior written consent of UAG, neither the
Stockholder nor the Companies will, except as required or permitted pursuant to
the terms hereof, permit any of the Companies to:
(i) make any material change in the conduct of its business 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 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 (except that AAC may take a loan for use by AAC not to
exceed $75,000), 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
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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 its assets, or any part thereof, to any Lien
or suffer such to be imposed other than such Liens as may arise in the
ordinary course of business consistent with past practices by operation of
law which will not have, or cannot reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect;
(vi) 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 its capital stock (other than distributions of
net income attributable to period from May 31, 1997 through August 31,
1997) or redeem, retire, purchase or otherwise acquire, directly or
indirectly, any shares of its capital stock;
(vii) acquire any assets, raw materials or properties, or enter
into any other transaction, other than in the ordinary course of business
consistent with past practices;
(viii) enter into any new (or amend any existing) employee
benefit plan, program or arrangement or any new (or amend any existing)
employment, severance or consulting agreement, grant any general increase
in the compensation of officers or employees (including any such increase
pursuant to any bonus, pension, profit-sharing or other plan or commitment)
or grant any increase in the compensation payable or to become payable to
any employee, except in accordance with pre-existing contractual provisions
or consistent with past practices;
(ix) make or commit to make any individual capital expenditure in
excess of $50,000, or aggregate capital expenditures in excess of $150,000;
(x) pay, loan or advance any amount to, or sell, transfer or
lease any properties or assets to, or enter into any agreement or
arrangement with, any of their Affiliates;
(xi) guarantee any indebtedness for borrowed money or any other
obligation of any other Person, other than in the ordinary course of
business consistent with past practice;
(xii) fail to keep in full force and effect insurance comparable
in amount and scope to coverage maintained by the Company (or on behalf of
the Company) on the date hereof;
(xiii) make any loan, advance or capital contribution to or
investment in any Person;
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(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 Company 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
Stockholder and the Companies will cause each of the Companies to use its
reasonable best efforts to:
(i) continue to maintain, in all material respects, its
properties in accordance with present practices in a condition suitable for
their current use;
(ii) comply with all applicable Environmental Laws, and, in the
event the Company shall receive notice that there exists a violation of any
Environmental Law with respect to its operations or any Real Property,
promptly (and in any event within the time period permitted by the
applicable governmental authority) remove or remedy such violation in
accordance with all applicable Environmental Laws; provided, however, that
any remediation or removal shall be subject to the prior approval of UAG;
(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 Company 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
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(vi) continue to conduct its business in the ordinary course
consistent with past practices.
(c) From and after the date of this Agreement and until the Closing
Date, the Stockholder shall not, except with the prior written consent of UAG
and except as required or permitted pursuant to the terms hereof:
(i) make any material change to the Real Property or the
Improvements;
(ii) subject the Real Property or the Improvements, or any part
thereof, to any new Lien or suffer such to be imposed;
(iii) take any other action that would cause any of the
representations or warranties made by the Stockholder in this Agreement not
to remain true and correct; or
(iv) commit himself to do any of the foregoing.
5.5. 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 his Affiliates (other
than the Companies) on the one hand, and the Companies, on the other hand.
5.6. NEGOTIATIONS.
Until the earlier of 120 days from the date hereof or the termination
of this Agreement by UAG pursuant to Section 8.1 hereof, neither the
Stockholder, nor the Companies, nor their officers, directors, employees,
advisors, agents, representatives, Affiliates or anyone acting on behalf of the
Stockholder, 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 merger, sale of assets (other than in the ordinary course of
business), liquidation, purchase or sale of shares of capital stock or similar
transaction involving any of the Companies. 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 Companies or the Stockholder may receive or of which
any of such parties may become aware.
5.7. CONSENTS; COOPERATION.
Subject to the terms and conditions hereof, the Stockholder and the
Companies 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,
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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 of 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 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.
The Stockholder and the Companies agree to execute and deliver any and all
documents that the respective manufacturers typically require a selling dealer
to execute in connection with the transfer of a dealership. In case at any time
after the Closing any further action is necessary or desirable to carry out the
purposes of this Agreement, the Stockholder and the proper officers of the
Companies shall take all such necessary action.
5.9. INTERIM FINANCIAL STATEMENTS.
Within twenty (20) days after the end of each calendar month after the
date of this Agreement and continuing until the Closing Date, the Companies
will deliver to UAG the most recent monthly and year-to-date financial
statements provided to their respective manufacturers. All such statements
shall fairly present the financial position, results of operations of the
Companies as of the date or for the periods indicated and shall be prepared on
a basis consistent with the Company Factory Statements.
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 parties hereto of: (i) any
information that indicates that any representation and warranty of such party
contained herein was not true and correct as of the date hereof or will not be
true and correct as of the Closing, (ii) the occurrence of any event which
could result in the failure to satisfy a condition specified in Article 6 or
Article 7 hereof, as applicable, (iii) any notice or other communication from
any third person alleging that the consent of such third person is or may be
required in connection with the transactions
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contemplated by this Agreement, and (iv) in the case of the Stockholder 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. The Stockholder shall (x) promptly advise UAG of any
event that has, or could in the future have, a Material Adverse Effect (y)
confer on a regular 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 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 the Companies or any of their assets or operations, 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 any of
the Shares) or the occurrence of any other event of which the Stockholder has
knowledge which could result in any failure to consummate the sale of the
Shares as contemplated hereby.
5.11. ASSURANCE BY THE STOCKHOLDER.
The Stockholder shall comply with the covenants set forth in this
Agreement and shall use his best efforts to cause the Companies to comply with
the covenants set forth in this Agreement.
5.12. SECTION 338(H)(10) ELECTION.
The Stockholder agrees to join with Sub, if Sub so requests, in making
a timely election with respect to any of the Companies to treat the purchase
and sale of the Shares relating to such Company pursuant to this Agreement as a
sale of all of the assets under Section 338(h)(10) of the Internal Revenue Code
of 1986, as amended (the "Code"), as permitted pursuant to Section
1.338(h)(10)-1(a) of the Treasury Regulations promulgated thereunder. The
Stockholder agrees to cooperate with UAG to cause the Companies to timely file
for federal and/or state income tax purposes any return or extension of the due
date thereof as required under the Code to effect or reflect any such election
under Section 338(h)(10) of the Code.
5.13. NON-INTERFERENCE.
After the Closing Date and for a period of five (5) years thereafter,
the Stockholder and his Affiliates shall not knowingly interfere with or
disrupt, or attempt to interfere with or disrupt, the relationship, contractual
or otherwise, between the Companies or any customer, supplier, manufacturer,
distributor, consultant, independent contractor or employee of the Companies
and agrees not to solicit or hire any employee of the Companies unless such
employee has already terminated his or her employment with the Companies.
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5.14. RIGHT OF FIRST REFUSAL.
During the period ending on fifth anniversary of the Closing Date, Sub
shall not sell more than 50% of the issued and outstanding capital stock of any
of the Companies to a third party (other than an Affiliate of UAG) and the
Companies shall not sell substantially all of their assets to a third party
(other than an Affiliate of UAG) (any such stock sale or asset sale being
referred to herein as a "Third Party Sale') unless, prior to closing such Third
Party Sale, Sub gives Mr. Alexander written notice (the "Offer Notice"), which
notice shall include (i) the material terms and conditions of the proposed
Third Party Sale and (ii) an offer (the "First Offer") to sell to Mr. Alexander
upon the same material terms and conditions. If Mr. Alexander accepts the First
Offer within thirty (30) days after UAG gives notice thereof, Mr. Alexander,
Sub and the applicable Companies shall enter into an agreement for the
acquisition of such Companies or their assets upon the same terms and
conditions as those provided for in the First Offer and such other terms and
conditions as may be mutually agreeable to the parties. If Mr. Alexander does
not accept the First Offer within thirty (30) days after UAG gives notice
thereof, or accepts the First Offer but does not enter into a definitive
agreement within thirty (30) days thereafter, then Sub and the applicable
Companies may close the Third Party Sale, provided that such sale shall be made
on terms not materially less favorable to UAG, Sub or the Companies than the
terms contained in the First Offer.
5.15. WORKING CAPITAL.
On the Closing Date, the Companies shall have net working capital
(computed in accordance with GAAP, together with adjustments consistent with
the adjustments on the May 31 Combined Balance Sheet) of not less than Four
Million Dollars ($4,000,000).
5.16. FIESTA DODGE CHRYSLER PLYMOUTH JEEP EAGLE, INC.
No later than two years after the Closing Date, Mr. Alexander agrees
to (i) sell, transfer or otherwise assign his ownership interest in Fiesta
Dodge Chrysler Plymouth Jeep Eagle, Inc. ("Fiesta") to a third party that is
not an Affiliate of the Stockholder or the Companies or (ii) cause Fiesta to
sell, transfer or assign all or substantially all of its assets to a third
party that is not an Affiliate of the Stockholder or the Companies.
5.17. LOAN PAYOFFS.
The parties acknowledge that as of the date hereof, the Companies have
(i) outstanding notes payable to the Stockholder in the principal amount of One
Million Five Hundred Thousand Six Hundred Sixty-Six Dollars ($1,500,666) (the
"Stockholder's Loan") and (ii) outstanding notes payable to Nancy S. Scholz in
the principal amount of Three Hundred Seventy-Five Thousand Dollars ($375,000)
(the "Scholz Loan"). Prior to the Closing Date, the Companies shall pay all
principal and interest on the Stockholder's Loan and the Scholz Loan.
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5.18. BROKER'S FEES.
At the Closing, Sub agrees to pay Ben Hicks & Associates a broker's
fee equal to two percent (2%) of the Base Price.
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 or 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 Companies and the
Stockholder contained in this Agreement shall be true and correct as of the
date hereof and (having been deemed to have been made again at and as of the
Closing) shall be true and correct as of the Closing. Each of the obligations
of the Companies 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 respects as of the Closing. At the Closing, UAG shall have received
a certificate, dated the Closing Date and duly executed by the Stockholder, to
the effect that the conditions set forth in the two preceding sentences have
been satisfied.
6.2. AUTHORIZATION; CONSENTS.
(a) All corporate action necessary to authorize the execution,
delivery and performance of this Agreement and the 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
manufacturers with whom the Companies have entered into franchise agreements)
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 STOCKHOLDER' COUNSEL.
UAG and Sub shall have been furnished with the opinion of counsel for
the Companies and the Stockholder, dated the Closing Date, in form and
substance satisfactory to UAG and its counsel, which opinion shall have been
rendered with respect to those matters contained in Sections 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
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furnished by officers and directors of the Companies and by government
officials and upon such other documents and data as such counsel deem
appropriate as a basis for their opinions. Such counsel may specify the state
or states in which they are admitted to practice, that they are not admitted to
the Bar in any other state or experts in the law of any other state and that
such opinions are limited to the State of Texas 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
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, 1996 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 any of
the Companies.
6.6. WORKING CAPITAL.
On the Closing Date, the Stockholder shall deliver to UAG a balance
sheet of the Companies dated as of the most recent practicable date preceding
the Closing Date, prepared in accordance with GAAP (together with adjustments
and treatment of Working Capital set forth on the May 31 Combined Balance
Sheet) (the "Estimated Closing Date Balance Sheet"). The Estimated Closing Date
Balance Sheet shall show as of the date thereof net working capital of not less
than Four Million Dollars ($4,000,000) (the "Delivered Working Capital"). The
Delivered Working Capital shall be sufficient to satisfy any working capital
requirements of the applicable manufacturers and shall be sufficient for the
Companies to continue to conduct their business in the ordinary course
consistent with past practice.
6.7. COMPLETION OF DUE DILIGENCE.
UAG and Sub 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 or Phase II environmental audits of the
Companies, 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, then the expenses of performing the Phase II environmental
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audit shall be paid one-half by UAG and one-half by the Stockholder; provided,
however, that the Stockholder may elect not to pay any costs of the Phase II
audit but, if the Stockholder elects 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 recommended, the Stockholder shall pay the entire costs of the Phase II
audit.
6.8. BOARD APPROVAL.
The Board of Directors of UAG and Sub shall have approved the
consummation of all of the transactions contemplated by this Agreement.
6.9. CERTIFICATES.
The Stockholder and the Companies shall have furnished UAG and Sub
with a certificate, dated as of the Closing Date, executed by the Stockholder
certifying to the fulfillment of the conditions set forth in Sections 6.4, 6.5
and 6.6 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.
6.10. LEGAL MATTERS.
All certificates, instruments, opinions and other documents required
to be executed or delivered by or on behalf of the Stockholder 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 Stockholder and the
Companies in furtherance of the transactions contemplated hereby, shall be
reasonably satisfactory in form and substance to counsel for UAG and Sub.
6.11. APPROVAL OF MANUFACTURERS AND DISTRIBUTORS.
The Stockholder, UAG, Sub and the Companies shall have obtained the
consent, authorization and approval of each of the manufacturers whose consent
is required for the transfer of the Companies to Sub on terms no less favorable
to those granted to the Stockholder and the Companies immediately prior to the
execution of this Agreement.
6.12. NONDISTURBANCE AGREEMENTS/ESTOPPEL CERTIFICATES.
UAG shall have been provided with nondisturbance agreements and
estoppel certificates in form and substance satisfactory to UAG with respect to
the Real Property and the Leases.
6.13. TITLE INSURANCE.
UAG, at its option, shall have obtained title insurance on behalf of
the Companies with respect to the leasehold estates arising out of the Leases
in form and substance satisfactory to UAG.
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6.14. SCHEDULES.
The Companies and the Stockholder 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.
6.15. MEMORANDA OF LEASE.
The appropriate parties shall have executed memoranda of lease in form
and substance satisfactory to UAG.
6.16. EMPLOYMENT AGREEMENT.
Sub, the Companies and Mr. Alexander shall have entered the Employment
Agreement.
6.17. LEASES.
The Companies and Landlord shall have entered into the Leases.
6.18. RESIGNATION OF THE COMPANIES' DIRECTORS.
Each of the persons who is a director of the Companies on the Closing
Date shall have tendered to Sub in writing his or her resignation as such in
form and substance satisfactory to UAG.
ARTICLE 7.
CONDITIONS TO THE OBLIGATIONS OF
THE COMPANIES AND THE STOCKHOLDER
TO EFFECT THE CLOSING
The obligations of the Companies and the Stockholder 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 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 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 UAG and Sub to the effect that the
conditions set forth in the preceding two sentences have been satisfied.
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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
manufacturers with whom the Companies have entered into franchise agreements)
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
reasonably satisfactory to the Stockholder and his counsel, which opinion shall
have been rendered with respect to those matters contained in Sections 4.1, 4.2
and 4.3 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 the 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, 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 the
Stockholder, in good faith and with the advice of counsel, believe makes it
undesirable to proceed with the consummation of the transactions contemplated
hereby.
7.5. 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.
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7.6. LEGAL MATTERS.
All certificates, instruments, opinions and other documents required
to be executed or delivered by or on behalf of UAG or Sub under the provisions
of this Agreement, and all other actions and proceedings required to be taken
by or on behalf of UAG or Sub in furtherance of the transactions contemplated
hereby, shall be reasonably satisfactory in form and substance to counsel for
the Stockholder.
7.7. EMPLOYMENT AGREEMENT.
Sub and the Companies shall have entered into the Employment
Agreement.
7.8. LEASES.
The Companies shall have entered into the Leases.
ARTICLE 8.
TERMINATION
8.1. TERMINATION.
This Agreement may be terminated at any time prior to Closing:
(i) by mutual consent of UAG and the Stockholder;
(ii) by either UAG or the Stockholder if the Closing shall not
have taken place on or prior to September 30, 1997, or such later date as
shall have been approved by UAG and the Stockholder;
(iii) by UAG or the Stockholder if any court of competent
jurisdiction in the United States or other United States governmental body
shall have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement, and such order, decree, ruling or other
action shall have become final and non-appealable;
(iv) by UAG or Sub if any of the conditions specified in Article
6 hereof have not been met or waived by UAG and Sub at such time as such
condition is no longer capable of satisfaction;
(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;
(vi) by either UAG 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 (if curable) within ten
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(10) Business Days following receipt by the breaching party of written
notice of such breach.
If UAG or the Stockholder 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 (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 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 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 9.6
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 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 Companies or the conduct of the business of the Companies prior to the
Closing Date (a "Stockholder Third Party Claim"). As used herein, "Event of
Breach" shall be and mean any one or more of the following: (i) any untruth or
inaccuracy in any representation of the Stockholder or the Companies or the
breach of any warranty of the Stockholder or the Companies 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 Companies (or
any representative of the Stockholder 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 the Stockholder or the Companies duly to perform or observe any term,
provision, covenant, agreement or condition on the part of the Stockholder or
the Companies to be performed or observed.
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9.2. INDEMNIFICATION BY UAG.
Notwithstanding the Closing, UAG indemnifies and agrees to fully
defend, save and hold harmless on an after-tax basis the Stockholder and 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, (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
the conduct of the business of the Companies 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 any representative of UAG) to the Stockholder or the Companies (or any
representative of the Stockholder or the Companies) and any misrepresentation
in or omission from any document furnished to the Stockholder or the Companies
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 Event of Breach occurs or is alleged and a UAG Indemnified
Party asserts that the Stockholder or the Companies have become obligated to a
UAG Indemnified Party pursuant to Section 9.1, or if any Stockholder Third
Party Claim is begun, made or instituted as a result of which the Stockholder
or the Companies 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, Sub 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 obligation to provide
indemnification hereunder, provided that any failure to so notify the
Indemnifying Party shall not relieve them from any liability that it may have
to the Indemnified Party under this Article 9. If such notice relates to a
Third Party Claim, each Indemnifying Party, jointly and severally, agrees to
defend, contest or otherwise protect such Indemnified Party against any such
Third Party Claim at its 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
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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 of the other parties (or any Affiliate of the other parties) to such
Indemnified Party in connection with any of the Documents, may be recovered by
the Indemnified Party by an offset against any or all amounts due to such other
parties pursuant to this Agreement or the Documents.
9.5. 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, 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
45
<PAGE>
representation, warranty, covenant or agreement shall be the entire amount of
any Cost suffered, paid or required to be paid by the respective Indemnified
Party as a result of such breach.
ARTICLE 10.
MISCELLANEOUS
10.1. SURVIVAL OF PROVISIONS.
The respective representations, warranties, covenants and agreements
of each of the parties to this Agreement (except covenants and agreements which
are expressly required to be performed and are performed in full on or before
the Closing Date) shall survive the Closing Date and the consummation of the
transactions contemplated by this Agreement. In the event of a breach of any
such representations, warranties or covenants, the party to whom such
representations, warranties or covenants have been made shall have 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.
10.2. FEES AND EXPENSES.
If the Closing does not occur and Section 5.6 hereof is breached, then
the Stockholder 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 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 for next business day delivery or
facsimile transmission (with original to follow by mail) or mailed by
registered or certified mail, postage prepaid (return receipt requested), as
follows:
If to the Companies before the Closing Date:
R. Lynn Alexander
4310 Sherwood Way
San Angelo, Texas 76901
with a copy to:
46
<PAGE>
W. Drew Darby, Esq.
136 West Twohig
San Angelo, Texas 76903
and
Kevin G. McMahon, C.P.A.
2230 Indiana Avenue
Lubbock, Texas 79410
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 10152
Attn: General Counsel
with a copy to:
Rogers & Hardin
2700 International Tower
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attn: Michael Rosenzweig, Esq.
If to the Stockholder:
R. Lynn Alexander
4310 Sherwood Way
San Angelo, Texas 76901
with a copy to:
W. Drew Darby, Esq.
136 West Twohig
San Angelo, Texas 76903
and
Kevin G. McMahon, C.P.A.
2230 Indiana Avenue
Lubbock, Texas 79410
If to UAG or Sub:
United Auto Group, Inc.
47
<PAGE>
375 Park Avenue
New York, New York 10152
Attn: General Counsel
with a copy to:
Rogers & Hardin
2700 International 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 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 its obligations hereunder to any Affiliate of UAG or Sub,
but in such event shall UAG remain fully liable for the performance of all of
such obligations in the manner prescribed in this Agreement.
10.6. ENTIRE AGREEMENT.
This Agreement (including the Schedules hereto) and the Documents
embody the entire agreement and understanding of the parties with respect to
the transactions contemplated hereby and supersede all prior written or oral
commitments, arrangements or understandings between the parties with respect
thereto and all prior drafts of this Agreement. There are no restrictions,
agreements, promises, warranties, covenants or undertakings with respect to the
transactions contemplated hereby other than those expressly set forth herein or
in the Documents. Prior drafts of this Agreement shall not be used as a basis
for interpreting this Agreement.
10.7. WAIVER AND AMENDMENTS.
Each of the Stockholder and the Companies, as one party, and UAG and
Sub, as the other party, may by written notice to the other parties (i) extend
the time for the performance of any of the obligations or other actions of the
other parties, (ii) waive any inaccuracies in the representations or warranties
of the other parties contained in this
48
<PAGE>
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 not be considered as disclosure pursuant to any other
provision, subprovision, section or subsection of this Agreement or Schedule to
this Agreement and shall not be deemed to limit any representations or
warranties made herein.
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 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.
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, or the payment of certain fees, costs and expenses as set
forth in Section 10.2, shall be the exclusive remedy of either party for a
breach of this Agreement. The parties hereto shall have the right to seek any
other remedy in law or equity in lieu of or in addition to any remedies
provided in this Agreement, including an action for damages for breach of
contract.
49
<PAGE>
10.13. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance the
laws of the State of Delaware without giving effect to any choice or conflict
of law provision or rule that would cause the laws of any other jurisdiction to
apply.
10.14. 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:
---------------------------------
George G. Lowrance
Executive Vice President
UAG WEST TEXAS, INC.
By:
---------------------------------
George G. Lowrance
Vice President
ALL AMERICAN CHEVROLET, INC.
------------------------------------
By:
Its:
LYNN ALEXANDER, INC.
------------------------------------
By:
Its:
JO-VENA AUTOMOTIVE, INC.
------------------------------------
By:
Its:
50
<PAGE>
LYNN RICH MANAGEMENT COMPANY
------------------------------------
By:
Its:
------------------------------------
R. LYNN ALEXANDER, Individually
51
<PAGE>
STOCK PURCHASE AGREEMENT
DATED JULY 25, 1997
AMONG
UNITED AUTO GROUP, INC.,
UAG CLASSIC, INC.,
CLASSIC AUTO GROUP, INC.,
CHERRY HILL CLASSIC CARS, INC.
CLASSIC ENTERPRISES, INC.
CLASSIC BUICK, INC.
CLASSIC CHEVROLET, INC.
CLASSIC MANAGEMENT, INC.
AND
THOMAS J. HESSERT, JR.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1. PURCHASE AND SALE OF SHARES......................................1
1.1. Certain Definitions...............................................1
1.2. Purchase and Sale of the Shares...................................3
1.3. Net Worth Adjustment..............................................4
1.4. Post-Closing Adjustment...........................................6
1.5. Capital Debt......................................................6
1.6. Additional Purchase Price.........................................7
1.7. Effective Date....................................................7
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANIES AND THE
STOCKHOLDER......................................................7
2.1. Organization and Good Standing....................................7
2.2. Subsidiaries......................................................7
2.3. Capitalization....................................................8
2.4. Authority; Approvals and Consents.................................8
2.5. Financial Statements..............................................9
2.6. Absence of Undisclosed Liabilities................................9
2.7. Absence of Material Adverse Effect; Conduct of Business..........10
2.8. Taxes............................................................11
2.9. Legal Matters....................................................12
2.10. Property.........................................................12
2.11. Environmental Matters............................................13
2.12. Inventories......................................................14
2.13. Accounts Receivable..............................................15
2.14. Insurance........................................................15
2.15. Contracts; etc...................................................15
2.16. Labor Relations..................................................16
2.17. Employee Benefit Plans...........................................16
2.18. Other Benefit and Compensation Plans or Arrangements.............19
2.19. Transactions with Insiders.......................................19
2.20. Propriety of Past Payments.......................................20
2.21. Interest in Competitors..........................................20
2.22. Brokers..........................................................20
2.23. Accounts.........................................................21
2.24. Disclosure.......................................................21
2.25. Net Worth........................................................21
2.26. Working Capital..................................................21
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER...............21
3.1. Ownership of Shares; Title.......................................21
3.2. Authority........................................................21
3.3. Real Property and Improvements...................................22
(i)
<PAGE>
3.4. Qualification of Stockholder.....................................22
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF UAG...........................23
4.1. Organization and Good Standing...................................23
4.2. Sub..............................................................23
4.3. Authority; Approvals and Consents................................23
4.4. Disclosure.......................................................24
4.5. SEC Filings......................................................24
ARTICLE 5. COVENANTS AND ADDITIONAL AGREEMENTS.............................25
5.1. Access; Confidentiality..........................................25
5.2. Furnishing Information; Announcements............................25
5.3. Antitrust Improvements Act Compliance............................26
5.4. Certain Changes and Conduct of Business..........................26
5.5. No Intercompany Payables or Receivables..........................29
5.6. Negotiations.....................................................29
5.7. Consents; Cooperation............................................29
5.8. Additional Agreements............................................29
5.9. Interim Financial Statements.....................................30
5.10. Notification of Certain Matters..................................30
5.11. Assurance by the Stockholder.....................................30
5.12. Section 338(h)(10) Election......................................30
5.13. Non-Interference.................................................31
5.14. Right of First Refusal...........................................31
5.15. Rebates, Refunds and Incentive Programs..........................31
ARTICLE 6. CONDITIONS TO THE OBLIGATIONS OF UAG AND SUB TO EFFECT
THE CLOSING.....................................................32
6.1. Representations and Warranties; Agreements; Covenants............32
6.2. Authorization; Consents..........................................32
6.3. Opinions of the Companies' and the Stockholder's Counsel.........32
6.4. Absence of Litigation............................................32
6.5. No Material Adverse Effect.......................................33
6.6. Net Worth........................................................33
6.7. Completion of Due Diligence......................................33
6.8. Board Approval...................................................33
6.9. Certificates.....................................................33
6.10. Legal Matters....................................................34
6.11. Approval of Manufacturers and Distributors.......................34
6.12. Environmental Laws...............................................34
6.13. Nondisturbance Agreements/Estoppel Certificates..................34
6.14. Title Insurance..................................................34
6.15. Schedules........................................................34
6.16. Memoranda of Lease...............................................34
6.17. Employment Agreement.............................................34
6.18. Leases...........................................................34
6.19. Resignation of the Companies' Directors..........................35
(ii)
<PAGE>
ARTICLE 7. CONDITIONS TO THE OBLIGATIONS OF THE COMPANIES AND THE
STOCKHOLDER TO EFFECT THE CLOSING...............................35
7.1. Representations and Warranties; Agreements.......................35
7.2. Authorization of the Agreement, Consents.........................35
7.3. Opinions of UAG's and Sub's Counsel..............................35
7.4. Absence of Litigation............................................36
7.5. Certificates.....................................................36
7.6. Legal Matters....................................................36
7.7. Employment Agreement.............................................36
7.8. Leases...........................................................36
7.9. Approval of Manufacturers and Distributors.......................36
ARTICLE 8. TERMINATION.....................................................37
8.1. Termination......................................................37
8.2. Effect of Termination............................................37
ARTICLE 9. INDEMNIFICATION.................................................38
9.1. Indemnification by the Stockholder...............................38
9.2. Indemnification by UAG...........................................38
9.3. Procedures.......................................................39
9.4. Offset...........................................................39
9.5. Remedies.........................................................40
9.6. Definitions......................................................40
9.7. Limitation on Indemnification....................................40
ARTICLE 10. MISCELLANEOUS...................................................41
10.1. Survival of Provisions...........................................41
10.2. Fees and Expenses................................................41
10.3. Headings.........................................................41
10.4. Notices..........................................................41
10.5. Assignment.......................................................43
10.6. Entire Agreement.................................................43
10.7. Waiver and Amendments............................................43
10.8. Counterparts.....................................................44
10.9. Accounting Terms.................................................44
10.10. Schedules........................................................44
10.11. Severability.....................................................44
10.12. Remedies.........................................................44
10.13. Governing Law....................................................44
10.14. Time is of the Essence...........................................44
(iii)
<PAGE>
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT, dated July 25, 1997, is by and among
United Auto Group, Inc., a Delaware corporation ("UAG"), UAG Classic, Inc., a
Delaware corporation ("UAG Classic" or "Sub"), Classic Auto Group, Inc., a New
Jersey corporation ("CAG"), Cherry Hill Classic Cars, Inc., a New Jersey
corporation ("CHCC"), Classic Enterprises, Inc., a New Jersey corporation
("CE"), Classic Buick, Inc., a New Jersey corporation ("CCB"), Classic
Chevrolet, Inc., a New Jersey corporation ("CC"), Classic Management, Inc., a
New Jersey corporation ("CMI" and, together with CAG, CHCC, CE, CCB and CC, the
"Companies") and Thomas J. Hessert, Jr., an individual resident of the State of
New Jersey (the "Stockholder").
W I T N E S S E T H:
WHEREAS, UAG Classic is a wholly-owned subsidiary of UAG;
WHEREAS, the Companies operate Acura, BMW, Buick (2), Chevrolet (2),
Honda, Jaguar, Nissan and Saab dealerships and related businesses in New
Jersey;
WHEREAS, the Stockholder owns all of the issued and outstanding shares
of the capital stock of the Companies (the "Shares");
WHEREAS, UAG Classic desires to purchase all of the Shares from the
Stockholder, and the Stockholder desires to sell the Shares to UAG Classic (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 Classic will own one hundred percent (100%) of the issued and
outstanding shares of the capital stock of the Companies;
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:
(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 or her spouse,
issue, parents, siblings, estate, any Affiliate of such person and any trust
for the benefit of his or her spouse and/or issue.
(b) "Business Day" shall mean any day excluding Saturday, Sunday and
any day which is a legal holiday under Federal law.
(c) "Closing Date" shall have the meaning ascribed to it in Section
1.2(b).
<PAGE>
(d) "GAAP" shall mean generally accepted accounting principles which
are in effect in the United States on the Closing Date.
(e) "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 the 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. ss. 6901 et seq.) ("RCRA"),
the Occupational Safety and Health Act of 1970 (29 U.S.C. ss. 651 et seq.)
("OSHA"), and the Hazardous Materials Transportation Act, 49 U.S.C. ss. 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) any substance
designated as a "hazardous substance" pursuant to Section 311 of the Clean
Water Act, 33 U.S.C. ss. 1251 et seq. (33 U.S.C. ss. 1321) or listed pursuant
to Section 307 of the Clean Water Act (33 U.S.C. ss. 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.
(f) "Knowledge" shall mean, with respect to the Stockholder, that the
Stockholder knew or reasonably should have known of the particular matter
referred to; with respect to the Companies, that any person responsible for
overseeing the day to day operations of any of the Companies or any general
manager, executive manager, office manager (or any person with similar such
responsibilities regardless of title) knew or reasonably should have known of
the particular matter referred to; and, with respect to UAG, that the President
or any Vice-President of UAG knew or reasonably should have known of the
particular matter referred to.
(g) "Liens" shall mean any mortgages, pledges, title defects or
objections, liens, claims, security interests, prior assignments, conditional
and installment sale agreements, encumbrances or charges of any kind.
(h) "Material Adverse Effect" shall mean, with respect to the
Companies, any change in, or effect on, any of the Companies (including the
respective businesses thereof) which is, or might be, materially adverse to the
business, operations, assets, condition (financial or otherwise) or prospects
of such Company when taken as a whole; and, with respect to UAG, any change in,
or effect on, UAG (including the businesses thereof) which is, or might be,
materially adverse to the business, operations, assets, condition (financial or
otherwise) or prospects of UAG.
(i) "Person" shall mean and include an individual, corporation,
partnership, limited liability company, joint venture, association, trust, any
other incorporated or unincorporated organization or entity and a governmental
entity or any department or agency thereto.
(j) "Pre-Tax Earnings" shall mean net earnings (or losses), before
taxes, computed in accordance with GAAP.
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<PAGE>
(k) "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.
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 Stockholder shall sell to Sub, and Sub shall
purchase from the Stockholder, the Shares for an aggregate purchase price (the
"Purchase Price") equal to (i) Twenty-Eight Million Dollars ($28,000,000) in
cash (the "Base Price"), which Base Price is subject to adjustment after the
Closing as provided in Sections 1.3 and 1.6 below; and (ii) a promissory note
(the "Note") of UAG Classic guaranteed by UAG in a form mutually acceptable to
the parties for the principal amount of Two Million Dollars ($2,000,000) with
interest payable quarterly at the initial rate of six and one-half percent (6
1/2%) per annum which rate shall be adjusted quarterly according to the change,
if any, in the applicable federal mid-term rate as determined pursuant to
Section 1274(d) of the Code (which change shall be determined by comparing the
applicable rate as of the first day of such quarter with the applicable rate on
the first day of the preceding quarter) and with the principal maturing on the
four year anniversary of the Closing Date; provided, however, that the
principal amount of the Note is subject to adjustment after Closing pursuant to
the provisions of Section 1.4 hereof. At the Closing referred to in Section
1.2(b) hereof:
(i) the Stockholder shall sell, assign, transfer and deliver to
UAG the Shares representing 100% of the issued and outstanding capital
stock of the Companies and 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 (A) deliver to the Stockholder
immediately available funds in an aggregate amount equal to the Base Price
by wire transfer to an account designated in writing by the Stockholder;
and (B) deliver to the Stockholder the Note.
(iii) the Stockholder, the Companies and Sub shall enter into an
employment agreement in a form mutually acceptable to the Stockholder and
Sub (the "Employment Agreement"). The Employment Agreement shall be for a
five-year term and shall provide that the Stockholder shall be employed as
Chief Operating Officer of Sub and the Companies. The Stockholder's initial
annual salary shall be Three Hundred Forty Thousand Dollars ($340,000) (the
"Base Salary") and the Base Salary shall be reviewed and adjusted annually
thereafter by the Chief Executive Officer of UAG; provided, however, that
the Base Salary shall not be less than Three Hundred Forty Thousand Dollars
($340,000) for any year of the term, plus such bonuses and stock options as
may be granted by the appropriate compensation or option committee of UAG.
It is anticipated that Stockholder will receive bonuses and options
comparable to other executive regional managers of UAG.
(iv) Each of the Companies (except CAG) and the Stockholder shall
enter into a lease for the real property on which such Company operates in
a form mutually acceptable to the parties (each a "Lease" and collectively
the "Leases"). Each Lease shall be for a twenty (20) year term commencing
on the Closing Date (with the lease rate adjusted to fair market lease rate
on the tenth anniversary of the Closing Date) and the lessee shall have the
option to renew the Lease for two additional five year terms (with the
lease rate adjusted to
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<PAGE>
fair market lease rate at the time each such period commences). Each Lease
shall be a triple net lease. The initial monthly lease rate for each Lease
shall be an amount equal to the current lease rate being paid by each
Company. On the second anniversary of the Closing Date and every two years
thereafter until the eighth anniversary and then commencing again on the
twelfth anniversary and every two years thereafter during the initial term,
the lease rate for each Lease shall increase to an amount equal to the
lease rate then in effect plus an amount equal to a percentage of the lease
rate then in effect, which percentage shall be equal to the percentage
increase in the Consumer Price Index published from time to time by the
United States Department of Labor ("CPI") for the metropolitan area in
which such Company operates from the time of the last adjustment; provided,
however, that the adjustment at the twelfth anniversary shall reflect the
increase from the tenth anniversary. The Stockholder represents and
warrants that the initial lease rate for each property is substantially
equal to the fair market lease rate for such property as determined by
taking into account the property's fair market value. The Leases shall be
cross-defaulted with the Note.
(b) Closing. Subject to the conditions set forth in this Agreement,
the purchase and sale of the Shares pursuant to this Agreement (the "Closing")
shall take place as soon as practicable following the date on which all
conditions to the obligations of the parties hereunder (other than those
requiring an exchange of certificates, opinions or other documents, or the
taking of other action, at the Closing) have been satisfied or waived, but no
later than September 30, 1997; provided, however, that UAG or the Stockholder
may extend the Closing Date for a period of thirty (30) days by giving notice
to the other party prior to September 30, 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 Stockholder shall deliver to Sub certificates
representing the Shares and accompanied by stock powers as required by
Section 1.2(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 Companies and the Stockholder at or prior to the Closing or
otherwise required in connection herewith;
(ii) Sub shall (A) pay to the Stockholder funds as required by
Section 1.2(a)(ii) hereof; (B) deliver to the Stockholder the Note; and (C)
deliver to the Stockholder all opinions, certificates and other instruments
and documents required to be delivered by UAG or Sub at or prior to the
Closing or otherwise required in connection herewith.
1.3. NET WORTH ADJUSTMENT
(a) On the Closing Date, or as soon as practicable thereafter (but no
later than 20 days after the Closing Date), the Stockholder shall deliver to
UAG a consolidated balance sheet of the Companies 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 accordance
with GAAP. In connection with the preparation of the Closing Date Balance
Sheet, the Stockholder and the Companies shall permit the Reviewer (as defined
below) and other representatives of UAG to conduct a physical inventory at each
location where inventory is held by the Companies.
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(b) Within sixty (60) days after delivery of the Closing Date Balance
Sheet, (i) Coopers & Lybrand or such other accounting firm (the "Reviewer") as
may be selected by UAG shall audit or otherwise review the Closing Date Balance
Sheet in such manner as UAG and the Reviewer deem appropriate, and (ii) UAG
shall deliver such reviewed balance sheet (the "Reviewed Balance Sheet") to the
Stockholder. The Reviewed Balance Sheet (i) shall be prepared in accordance
with GAAP and (ii) shall include a schedule showing the computation of the
Final Net Worth (as defined in Section 1.3(g)(i) hereof), computed in
accordance with the definition of Net Worth set forth in Section 1.3(g)(ii)
hereof. UAG and the Reviewer shall have the opportunity to consult with the
Stockholder, the Companies and each of the accountants and other
representatives of the Stockholder and the Companies and to examine the work
papers, schedules and other documents prepared by the Stockholder, the
Companies and each of such accountants and other representatives during the
preparation of the Closing Date Balance Sheet.
(c) The Stockholder shall have a period of forty-five (45) days after
delivery of the Reviewed Balance Sheet to present in writing to UAG all
objections the Stockholder may have to any of the matters set forth or
reflected therein, which objections shall be set forth in reasonable detail. If
no objections are raised within such 45-day period, the Reviewed Balance Sheet
shall be deemed accepted and approved by the Stockholder and a supplemental
closing (the "Supplemental Closing") shall take place within five (5) Business
Days following the expiration of such 45-day period, or on such other date as
may be mutually agreed upon in writing by UAG and the Stockholder.
(d) If the Stockholder shall raise any objection within such 45-day
period, UAG 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 UAG 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
public accountants mutually acceptable to UAG 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 UAG and the Stockholder
and the Supplemental Closing, if any, shall take place five (5) Business Days
following the receipt of such determination by UAG and the Stockholder. The
fees and expenses of the accounting firm referred to in this Section 1.3(e)
shall be paid one-half by UAG and one-half by the Stockholder.
(f) UAG and the Stockholder agree to cooperate with each other and
each other's authorized representatives and with any accounting firm selected
by UAG and the Stockholder pursuant to Section 1.3(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 1.3 (a) through (e) hereof
(such amount being referred to herein as the "Final Net Worth") shall be less
than Seven Million One Hundred Fifty-Five Thousand Dollars ($7,155,000) (the
amount of any such deficiency being referred to herein as the "Net Worth
Deficiency"), the Stockholder shall pay to UAG at the Supplemental Closing, by
wire transfer of immediately available funds to an account designated in
writing by UAG at least 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.).
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(ii) "Net Worth" computed in connection with the Closing Date
Balance Sheet and the Reviewed Balance Sheet shall mean the amount by which the
total assets (not including intangible assets or any LIFO reserve) exceed the
total liabilities (including accruals for all Taxes owed or to be owed by the
Companies through the Closing Date) reflected, in each case, on the balance
sheets of Companies comprising the Closing Date Balance Sheet or the Reviewed
Balance Sheet, as the case may be.
1.4. POST-CLOSING ADJUSTMENT.
If the Companies, on a combined basis, have Pre-Tax Earnings for the
calendar year ending December 31, 1997 ("1997 Earnings") of less than Six
Million Dollars ($6,000,000) (the amount of any such deficiency being referred
to herein as the "Earnings Deficiency"), then, the principal amount of the Note
shall be reduced by an amount equal to five (5) times the Earnings Deficiency.
If the Earnings Deficiency exceeds Four Hundred Thousand Dollars ($400,000)
(the amount of any such excess being referred to herein as the "Excess
Deficiency"), then the Stockholder shall pay to Sub cash in an amount equal to
five (5) times the Excess Deficiency. On or before March 31, 1998, Sub shall
deliver to the Stockholder a consolidated statement of income for the Companies
for the year ended December 31, 1997 together with a calculation of the 1997
Earnings (the "1997 Income Statement"). The Stockholder shall have a period of
thirty (30) days after delivery of the 1997 Income Statement to present in
writing to UAG all objections the Stockholder may have to any of the matters
set forth or reflected therein, which objections shall be set forth in
reasonable detail. If no objections are raised within such 30-day period, the
1997 Earnings as set forth on the 1997 Income Statement shall be deemed
accepted and approved by the Stockholder. If the Stockholder shall raise any
objection within such 30-day period, UAG and the Stockholder shall attempt to
resolve the matter or matters in dispute. If such dispute cannot be resolved by
UAG and the Stockholder within sixty (60) days after the delivery of the 1997
Income Statement, then the specific matters in dispute shall be submitted to a
firm of independent public accountants mutually acceptable to UAG and the
Stockholder, which firm shall make a final and binding determination as to such
matter or matters. The fees and expenses of the accounting firm referred to in
this Section 1.4 shall be paid one-half by UAG and one-half by the Stockholder.
If there is a dispute as to the amount of the 1997 Earnings, then, to the
extent that the amount of any interest or principal payment to be made under
the Note or the amount of cash, if any, to be paid by the Stockholder to UAG is
contingent upon the resolution of such dispute, Sub or the Stockholder, as
applicable, shall have no obligation to make such payment until the amount of
the 1997 Earnings is agreed to by the parties or is finally determined in
accordance herewith. For purposes of determining 1997 Earnings in connection
with Sections 1.4 and 1.6, (i) used car inventory reserves will be calculated
in the same manner used in preparing the June 30 Financial Statements except
that such reserves for 1997 shall be reduced by fifty percent (50%); (ii)
"Interest on Debt and "LIFO Reserve" as set forth on the June 30th Financial
Statements under "Other Expenses" shall be excluded, (iii) any overhead
expenses or management fees attributable to UAG or UAG Classic shall be
excluded and (iv) expenses and fees relating to a proposed initial public
offering (except audit fees) shall be added back to 1997 Earnings.
1.5. CAPITAL DEBT.
On or before the Closing Date, the Stockholder shall pay the
outstanding principal and all accrued but unpaid interest on the notes payable
set forth on Schedule 1.5 (which notes payable had an outstanding principal
balance of Three Million Five Hundred Thirty-Five Thousand Dollars ($3,535,000)
as of June 30, 1997) (the "Capital Debt") in full satisfaction of the
Companies' obligations arising out of or relating to the Capital Debt. If the
Companies, or any of them, have any liabilities or obligations relating to the
Capital Debt as of the Closing, then the Base Price shall be reduced by an
amount equal to any remaining outstanding principal and all accrued but unpaid
interest on the Capital Debt as of such time.
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1.6. ADDITIONAL PURCHASE PRICE.
If the Companies, on a combined basis, have Pre-Tax Earnings for the
calendar year ending December 31, 1997 ("1997 Earnings") that exceed Six
Million Dollars ($6,000,000), then, in consideration for the sale of the Shares
by the Stockholder to Sub, Sub will make an additional payment to the
Stockholder in an aggregate amount equal to (1997 Earnings minus $6,000,000).
If Sub is required to make an additional payment pursuant to the provisions of
this Section 1.6, then Sub shall make such payment no later than April 30,
1998. If there is a dispute as to the amount of the 1997 Earnings, then, to the
extent that the amount of any additional payment is contingent upon the
resolution of such dispute, Sub shall have no obligation to make such payment
until the amount of the 1997 Earnings is agreed to by the parties or is finally
determined in accordance with Section 1.4.
1.7. EFFECTIVE DATE.
The obligations of the parties hereunder shall not take effect until
the first Business Day after the parties have notified each of the Companies'
manufacturers of the transactions contemplated hereby, but in no events later
than July 31, 1997 (the "Effective Date").
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES
OF THE COMPANIES AND THE STOCKHOLDER
Subject to the parties' agreement and acknowledgement that the
Schedules referred to in this Article 2 are to be delivered by the Companies
and the Stockholder no later than thirty (30) days after the Effective Date
hereof, the Companies and the Stockholder hereby jointly and severally
represent and warrant to UAG as follows:
2.1. ORGANIZATION AND GOOD STANDING.
Each of the Companies is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has the corporate power and authority to own, lease and
operate the properties used in its businesses and to carry on its business 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.
The Companies do not have any interest or investment in any Person.
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2.3. CAPITALIZATION.
The authorized stock of each 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. 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.
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. The execution, delivery and performance by each of the
Companies and the 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
Bylaws (including any comparable governing instrument with a different
name) of any of the Companies;
(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) or, except as set forth on Schedule 2.4 hereto,
require any consent or waiver of any party to any Company Agreement;
(iii) result in the creation of any security interest upon, or
any person obtaining any right to acquire, any properties, assets or rights
of any of the Companies (other than the rights of UAG to acquire the Shares
pursuant to this Agreement);
(iv) violate or conflict with any Legal Requirements (as defined
in Section 2.9 hereof) applicable to any of the Companies or any of their
respective businesses or properties; or
(v) require any authorization, consent, order, permit or approval
of, or notice to, or filing, registration or qualification with, any
governmental, administrative or
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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).
Except as set forth or referred to above, no authorization, consent, order,
permit or approval of, or notice to, or filing, registration or qualification
with, any governmental, administrative or judicial authority is necessary to be
obtained or made by the 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.
Attached as Schedule 2.5 are true and complete copies of:
(i) (A) the audited consolidated balance sheet of the Companies
as of December 31, 1996, and the related consolidated statement of income,
stockholders' equity and cash flow for the fiscal year ended December 31,
1996, together with the notes thereto and (B) the audited consolidated
balance sheet of the Companies as of December 31, 1995, and the related
consolidated statement 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;
(ii) the unaudited consolidated balance sheets of the Companies
as of June 30, 1997 (the "Company Balance Sheet") and the unaudited
statements of income and stockholder's equity for the six-month period
ended on such date, together with the notes thereto (collectively the "June
30 Financial Statements");
(iii) the monthly and year-to-date financial statements provided
to each of the manufacturers for the months ended June 30, 1997 and May 31,
1997 (each a "Company Factory Statement and, collectively, the "Company
Factory Statements");
(all the foregoing financial statements, including the notes thereto, being
referred to herein collectively as the "Company Financial Statements"). The
Company Financial Statements are consistent with and in accordance with the
books and records of the Companies, fairly present the financial position,
results of operations, stockholders' equity and changes in financial position
of the Companies as of the dates and for the periods indicated in conformity
with GAAP (except that the Company Factory Statements are prepared in
accordance with manufacturer requirements), consistently applied (except as
otherwise indicated in such statements) during such periods, and can be
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 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. 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.
2.6. ABSENCE OF UNDISCLOSED LIABILITIES.
The Companies do not have any liabilities of any nature whatsoever
(whether known or unknown, due or to become due, accrued, absolute, contingent
or otherwise), including, without limitation,
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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 on the most recent Company Financial Statements, (ii) current
liabilities incurred in the ordinary course of business and consistent with
past practice after June 30, 1997 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. None of the Companies
is 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, 1996, each Company has operated in the ordinary
course of business consistent with past practice, except as set forth on
Schedule 2.7(a) hereto, and there has not been:
(i) any material adverse change in the assets, properties,
business, operations, prospects, net income or financial condition of any
of the Companies, 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 any of the Companies, whether or not
covered by insurance;
(iii) any change in any method of accounting or accounting
practice of any of the Companies; or
(iv) any loss of the employment, services or benefits of any
general manager, new car sales manager, used car sales manager, service
manager, parts manager, office manager, controller or any equivalent
employee of any of the Companies.
(b) Since December 31, 1996, except as set forth in Schedule 2.7(b)
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;
(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;
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(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
$50,000, or aggregate capital expenditures in excess of $200,000, or
additions to property, plant and equipment other than ordinary repairs and
maintenance;
(x) discontinued any franchise or the sale of any products or
product line or program;
(xi) incurred any obligation or liability for the payment of
severance benefits; or
(xii) entered into any agreement or made any commitment to do any
of the foregoing.
2.8. TAXES.
The Companies have each made a valid election pursuant to Section
1362(a) of the Internal Revenue Code of 1986, as amended (the "Code"), to be an
"S Corporation" within the meaning of Section 1361(a)(1) of the Code and have
continued to qualify as such for all taxable years since their formation and
will continue to so qualify until the Closing. 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 tax returns for the fiscal years ended since
December 31, 1992 have been furnished or made available to UAG or its
representatives to 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 sent or received since December 31, 1992 by the
Companies to or from any federal, state or local tax authorities. The Companies
have adequately reserved for the payment of all Taxes with respect to periods
ended on or prior to 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, or will be reflected on the Closing Date Balance
Sheet, the Companies are not liable, or will not become liable, for any Taxes
for any
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period ending on or prior to the Closing Date. Except as set forth on Schedule
2.8 hereto, the Companies have not been subject to a federal or state tax audit
of any kind since December 31, 1992, and no adjustment has been proposed by the
Internal Revenue Service ("IRS") with respect to any return for any prior or
subsequent year. With respect to the audits referred to on Schedule 2.8 hereto
and except as indicated thereon, no such audit has resulted in an adjustment in
excess of $25,000. Neither the Companies nor the Stockholder know of any basis
for an assertion of a deficiency for Taxes against the Companies. The
Stockholder will cooperate, and will cause his 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 Companies
or the Stockholder, threatened against or affecting, the Companies, any ERISA
Plan (as defined in Section 2.17(a) hereof) or any of their 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 Companies 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. Schedule 2.9(a) hereto identifies each Claim
and Judgment disclosed thereon which is fully covered by an insurance policy.
(b) The business of the Companies is being conducted in all material
respects 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 their business or properties. The Companies hold, and are 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 Companies own or hold all Permits material to the conduct of
their 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.
Set forth on Schedule 2.10(a) hereto is a list of all interests in
real property owned by or leased to the Companies, including all real property
owned or leased by the Stockholder (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"). With respect to any
leased Real Property, there are no defaults by either party under and no state
of facts exist which with the giving of notice or the passage of time, or both,
would constitute a default under such leases. True and correct copies of all
leases relating to the Real Property, together with any amendments and
modifications thereto, are attached as Schedule 2.10(b). All improvements to
the Real Property ("Improvements") and all machinery, equipment and other
tangible property owned or used by or leased to the Companies are, to the
knowledge of the Stockholder and the Companies, fit for the particular purposes
for which they are used by the Companies. Such tangible properties 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, to the knowledge of the Stockholder and the Companies, such
Improvements do not encroach in any respect on property of
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others. To the knowledge of the Companies and the Stockholder 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. Certificates of Occupancy have 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 written notice (and, to the
knowledge of the Stockholder and the Companies, no 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
Stockholder with respect to the Real Property.
2.11. ENVIRONMENTAL MATTERS.
(a) Except as set forth on Schedule 2.11(a) hereto, (i) the Companies,
the Real Property, the Improvements and any property formerly owned, occupied
or leased by the Companies are in compliance with all Environmental Laws
(provided, however, that as to the Real Property or Improvements, such
representation, as it may relate to compliance for any period prior to the
Initial Date, is limited to the knowledge of the Stockholder and the
Companies), (ii) the Companies have obtained all Environmental Permits, (iii)
such Environmental Permits are in full force and effect, and (iv) the Companies
are in full compliance with all terms and conditions of such Environmental
Permits. As used in this Agreement, Initial Date shall mean with respect to any
portion of the Real Property or the Improvements, the earlier of (i) date the
Stockholder or the Companies first acquired any ownership or leasehold interest
in such property and (ii) the date on which the Companies first began
conducting operations on such property.
(b) The Companies and the Stockholder have not violated, done or
suffered any act which could give rise to liability under, and, to the
knowledge of the Stockholder and the Companies, are not otherwise exposed to
liability under, any Environmental Law. After the Initial Date (and, to the
knowledge of the Stockholder and the Companies, with respect to events prior to
the Initial Date), no event has occurred with respect to the Real Property, the
Improvements or any property formerly owned, occupied or leased by the
Companies, 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 Stockholder and the Companies, the
Companies have no contingent liability under any Environmental Law. There are
no liens under any Environmental Law on the Real Property or Improvements.
(c) Except as set forth on Schedule 2.11(c) hereto, (i) after the
Initial Date (and, to the knowledge of the Stockholder and the Companies, with
respect to any use prior to the Initial Date) neither the Companies, the Real
Property or any portion thereof, the Improvements or any property formerly
owned, occupied or leased by the Companies, nor, to the knowledge of the
Companies 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 (provided,
however, that certain petroleum products are stored and handled on the Real
Property in the ordinary course of the Companies' businesses in full 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 and all secondary
containment requirements with respect to above ground storage tanks), (ii)
after the Initial Date (and, to the knowledge of the Stockholder and the
Companies, with respect to investigations prior to the Initial Date), none of
the Real Property or any portion thereof, the Improvements or any property
formerly owned, occupied or leased by the
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Companies has been subject to investigation by any governmental authority
evaluating the need to investigate or undertake Remedial Action at such
property, and (iii) to the knowledge of the Companies and the Stockholder, none
of the Real Property, the Improvements or any property formerly owned, occupied
or leased by the Companies, or 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.
(d) Except as set forth on Schedule 2.11(d) hereto, after the Initial
Date (and, to the knowledge of the Stockholder and the Companies, prior to the
Initial Date), 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 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 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 the knowledge of the
Stockholder 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) The Stockholder and the Companies have provided to UAG all
environmental studies and reports obtained by them or known to them 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, and any property formerly owned, occupied or leased by the
Companies, 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. Any
testing shall not be construed as a waiver of any rights which UAG has arising
out of the representations and warranties contained herein.
2.12. INVENTORIES.
The values at which inventories are carried on the Company Financial
Statements and the values at which inventories will be carried on the Closing
Date Balance Sheet reflect, or will reflect, the normal inventory valuation
policies of the Companies, and such values are, or in the case of the Closing
Date Balance Sheet will be, in conformity with GAAP consistently applied. All
inventories reflected on the Company Financial Statements or arising since the
date thereof are currently marketable and can reasonably
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be anticipated to be sold at customary mark-ups within sixty (60) days after
the date hereof in the ordinary course of business, except for spare parts
inventory which inventory is carried at the lower of cost or market (with
market being equal to the amount of any refund that would be paid by the
applicable manufacturer if the parts are returned to such manufacturer).
2.13. ACCOUNTS RECEIVABLE.
All accounts receivable reflected on the Company Financial Statements
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 120 days of
the Closing Date, and are subject to no defenses, setoffs or counterclaims
other than normal cash discounts accrued in the ordinary course of business.
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 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 and 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. 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 any of the Companies is a party or by which any of the Companies or
any of their 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 business, operations, assets, condition (financial or
otherwise) or prospects of any 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 or will be 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 Companies 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 Companies that would have or could
reasonably be expected to have a Material Adverse Effect as to any
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Company. There are no material unresolved disputes involving 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 set forth on Schedule 2.16(b) hereto, none of the
Companies is 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
Companies, nor do the Stockholder or the Companies 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 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 Stockholder's or
the Companies' 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 Companies, 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. ss.ss. 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:
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(i) each employee pension benefit plan, as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974 ("ERISA"),
maintained by the 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 intended to be
qualified pursuant to Section 401(a) of 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 Companies
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;
(iii) each ERISA Plan has operated since its inception in
accordance with the reporting and disclosure requirements imposed under
ERISA and the Code and has timely filed Form 5500e (or 5500-C or 5500-R)
and predecessors thereof; and
(iv) no ERISA Plan is liable for any federal, state, local or
foreign Taxes.
(c) Each Pension Benefit Plan intended to be qualified under
Section 401(a) of the Code:
(i) has been qualified, from its inception, under Section 401(a)
of the Code, and the trust established thereunder has been exempt from
taxation under Section 501(a) of the Code and is currently in compliance
with applicable federal laws;
(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 Companies and 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:
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(i) no liability to the Pension Benefit Guaranty Corporation
("PBGC") under Sections 4062-4064 of ERISA has been incurred by the
Companies 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 Companies 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 Companies 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 Companies 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 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 Sheet.
(g) With respect to any Multiemployer Plan (1) the Companies have not,
since their 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 Companies under any
Multiemployer Plan, computed as if a "complete withdrawal" by the Companies had
occurred under each such Plan as of December 31, 1996; and (3) the Companies
have 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) Except as set forth on Schedule 2.17(h), with respect to the
Welfare Benefit Plans:
(i) There are no 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) No claims for benefits are in dispute or litigation.
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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 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, 1996 exceeded $75,000. 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 or will be made available 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 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
Companies 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.
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, 1996. For purposes of this Agreement:
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(i) the term "Insider" shall mean the Stockholder, any director
or officer of any of the Companies, 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 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
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 Companies that is engaged
in the retail sale or servicing of automobiles or light duty trucks.
2.22. BROKERS.
Neither the Companies, 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 Documents.
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2.23. ACCOUNTS.
Schedule 2.23 hereof correctly identifies each bank account maintained
by or on behalf or for the benefit of the 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 Stockholder has made any material
misrepresentation to UAG relating to the Companies or the Shares or the Real
Property or Improvements and neither the Companies nor the Stockholder have
omitted to state to UAG any material fact relating to the Companies or the
Shares or the Real Property or Improvements which is necessary in order to make
the information given by or on behalf of the Companies or the Stockholder to
UAG not misleading. To the knowledge of the Companies and the Stockholder, no
fact, event, condition or contingency exists or has occurred which has, or in
the future can reasonably be expected to have, a Material Adverse Effect, which
has not been disclosed in the Company Financial Statements or the Schedules to
this Agreement.
2.25. NET WORTH.
On the Closing Date, the Net Worth of the Companies will be equal to
or greater than Seven Million One Hundred Fifty-Five Thousand Dollars
($7,155,000).
2.26. WORKING CAPITAL.
On the Closing Date, the working capital of each Company will be
sufficient to operate the business of such Company consistent with past
practice.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDER
Subject to the parties' agreement and acknowledgement that the
Schedules referred to in this Article 3 are to be delivered by the Stockholder
no later than ten (10) Business Days after the Effective Date hereof, the
Stockholder hereby represents and warrants to UAG as follows:
3.1. OWNERSHIP OF SHARES; TITLE.
The Stockholder is the owner of record and beneficially of the Shares
as 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 security interests, pledge agreements, Liens, proxies and voting
or other agreements except restrictions on transfer imposed by applicable
federal and state securities laws.
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 the Documents to which he is a party and to consummate the transactions
contemplated hereby and thereby (including the disposition of the Shares to Sub
as contemplated by this Agreement). This Agreement has been duly executed and
delivered by the Stockholder and constitutes, and each of the Documents to
which the Stockholder is a party when executed
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and delivered by the Stockholder will constitute, a valid and binding
obligation of the Stockholder, enforceable against him 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 the Stockholder and the
consummation of the transactions contemplated hereby and thereby do not and
will not:
(i) (after notice or lapse of time or both) conflict with, result
in a breach of any provision of, constitute a default under, result in the
modification or cancellation of, or give rise to any right of termination
or acceleration in respect of, any material contract, agreement,
commitment, understanding, arrangement or restriction to which the
Stockholder is a party or to which the Stockholder or any of his property
is subject;
(ii) violate or conflict with any Legal Requirements applicable
to the Stockholder or any of 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.
3.3. REAL PROPERTY AND IMPROVEMENTS.
The Real Property and Improvements owned by the Stockholder or his
Affiliates are owned 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 knowledge of the Stockholder or his Affiliates, in the
future will materially affect the use of such Real Property or such
Improvements for the conduct of the respective businesses of the Companies 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 provided on Schedule 3.3(a), no one has been granted any
right to purchase or lease such Real Property or Improvements other than the
existing leases in favor of the Companies, which are to be terminated at the
Closing by agreement between the parties and pursuant to which the owners shall
acknowledge that there are no defaults under any such leases and that the
Companies have no liability arising out of or relating to such leases. Attached
as Schedule 3.3(b) are all surveys, title binders, title policies and copies of
any exceptions to title relating to such Real Property or Improvements.
3.4. QUALIFICATION OF STOCKHOLDER.
The Stockholder (i) is an "accredited investor" within the meaning of
Regulation D of the Securities Act, and the Stockholder is acquiring the Note
to be issued pursuant to the terms of this Agreement for his own account and
not with a view to, or for resale in connection with, any distribution thereof;
(ii) the Stockholder understands and acknowledges that the Note has not been
registered under the Securities Act or any state securities laws by reason of
certain exemptions from the registration provisions thereof which depend upon,
among other things, the bona fide nature of the Stockholder's investment intent
as expressed herein; (iv) the Stockholder is able to bear the economic risk of
investment in the Note and has such knowledge and experience in financial and
business matters that he is capable of evaluating the risks and merits of the
Note; (v) the Stockholder acknowledges that the Note was not offered to him by
means of publicly disseminated advertisements or sales literature, or as part
of a general solicitation; (vi) the Stockholder acknowledges that in deciding
to proceed with the transaction set forth herein he has relied solely on his
own independent investigation of UAG; and (vii) the Stockholder understands and
acknowledges that the transfer of the Note shall be restricted.
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ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF UAG
Subject to the parties' agreement and acknowledgement that the
Schedules referred to in this Article 4 are to be delivered by UAG and Sub no
later than ten (10) Business Days after the Effective Date hereof, UAG and Sub
hereby jointly and severally represent and warrant to the Companies and the
Stockholder as follows:
4.1. ORGANIZATION AND GOOD STANDING.
UAG is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has the corporate power
and authority to own, lease and operate the properties used in its business and
to carry on its business as now being conducted. UAG is duly qualified to do
business and is in good standing as a foreign corporation in each state and
jurisdiction where qualification as a foreign corporation is required, except
for such failures to be qualified and in good standing, if any, which when
taken together with all other such failures of UAG and the Sub would not, or
could not reasonably be expected to, in the aggregate have a Material Adverse
Effect on UAG. UAG has made available to the Stockholder complete and correct
copies of its charter and bylaws, as amended and presently in effect.
4.2. SUB.
Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, has the corporate power and
authority to own, lease and operate the properties and assets used in its
business and to carry on its business as now being conducted, and is duly
qualified to do business and in good standing as a foreign corporation in each
jurisdiction where qualification as a foreign corporation is required, except
for such failures to be qualified and in good standing, if any, which when
taken together with all other such failures of UAG and its subsidiaries would
not, or could not reasonably be expected to, in the aggregate have a Material
Adverse Effect.
4.3. AUTHORITY; APPROVALS AND CONSENTS.
UAG and Sub have the corporate power and authority to enter into this
Agreement and the Documents to which they are a party and to perform their
obligations hereunder and thereunder. At the time of the Closing, 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 Sub and no other corporate proceedings on the part of UAG
or Sub 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 a valid and binding obligation of, UAG and Sub,
enforceable against UAG and Sub in accordance with their respective terms.
Except as set forth on Schedule 4.5 hereto, the execution, delivery and
performance by UAG and Sub of this Agreement and the Documents to which they
are a party and the consummation of the transactions contemplated hereby and
thereby do not and will not:
(i) contravene any provisions of the Certificate of Incorporation
or Bylaws 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
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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;
(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;
(iv) violate or conflict with any Legal Requirements applicable
to UAG or its respective businesses or properties that would or could
reasonably be expected to have a Material Adverse Effect on UAG and the UAG
Subsidiaries, taken as a whole; or
(v) require any authorization, consent, order, permit or approval
of, or notice to, or filing, registration or qualification with, any
governmental, administrative or judicial authority, except in connection
with or in compliance with the provisions of the H-S-R Act.
Except as set forth or referred to above, no authorization, consent,
order, permit or approval of, or notice to, or filing, registration or
qualification with, any governmental administrative or judicial authority is
necessary to be obtained or made by UAG to enable UAG to continue to conduct
its business and operations and use its properties after the Closing in a
manner which is in all material respects consistent with that in which they are
presently conducted. As used in this Agreement, the term "UAG Agreement" shall
mean all mortgages, indenture notes, agreements, contracts, leases, licenses,
franchises, obligations, instruments or other commitments, arrangements or
understandings of any kind, whether written or oral, binding or non-binding, to
which UAG or the UAG Subsidiaries is a party or by which UAG or the UAG
Subsidiaries or any of their assets or properties may be bound or affected,
including all amendments, modifications, extensions or renewals of any of the
foregoing, and which involve receipts or payments by UAG or UAG Subsidiaries
which exceed $500,000 per year. "UAG Subsidiary" shall mean any corporation or
other entity in which UAG, directly or indirectly, owns beneficially securities
representing 50% or more of (i) the aggregate equity or profit interests or
(ii) the combined voting power of voting interests ordinarily entitled to vote
for management or otherwise.
4.4. DISCLOSURE.
Neither UAG nor Sub has made any material misrepresentation to the
Companies or the Stockholder relating to this Agreement and neither UAG nor the
Sub has omitted to state to the Companies or the Stockholder any material fact
relating to this Agreement which is necessary in order to make the information
given by or on behalf of UAG or Sub to the Companies or the Stockholder or
their representatives at or prior to Closing not misleading. To the knowledge
of the Companies and the Stockholder, no fact, event, condition or contingency
exists or has occurred which has, or in the future can reasonably be expected
to have, a Material Adverse Effect, which has not been disclosed in the Company
Financial Statements or the Schedules to this Agreement or the SEC Filings.
4.5. SEC FILINGS.
UAG has heretofore made available to the Stockholder UAG's
Registration Statement on Form S-1 as declared effective by the SEC on October
23, 1996, and UAG's Annual Report on Form 10-K for the period ending December
31, 1996 and the filed Quarterly Report on Form 10-Q for the relevant periods
in 1997 (the "SEC Filings"). As of their respective dates, the SEC filings did
not 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, in light of the circumstances under which they were made, not
misleading.
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ARTICLE 5.
COVENANTS AND ADDITIONAL AGREEMENTS
5.1. ACCESS; CONFIDENTIALITY.
Between the date hereof and the Closing Date, the Stockholder and the
Companies 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 Companies and will cause their officers to furnish to UAG and Sub and
their authorized representatives any and all financial, technical and operating
data and other information pertaining to the businesses and properties of the
Companies, and (ii) make available for inspection and copying by UAG and Sub
true and complete copies of any documents relating to the foregoing. UAG and
Sub will hold in confidence (unless and to the extent compelled to disclose by
judicial or administrative process or, in the opinion of its counsel, by other
requirements of law) all Confidential Information (as defined below) and will
not disclose the same to any third party except in connection with obtaining
financing and otherwise as may reasonably be necessary to carry out this
Agreement and the transactions contemplated hereby, including any due diligence
review by or on behalf of UAG and Sub. If this Agreement is terminated, UAG and
Sub will promptly return to the Companies, upon the reasonable request of the
Companies, all Confidential Information furnished by the Companies and the
Stockholder and held by UAG and Sub, including all copies thereof. As used
herein, "Confidential Information" shall mean all information concerning the
Companies obtained by UAG or Sub from the Companies 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 or (z) which
is or becomes known to the public, other than through a breach by UAG or Sub of
this Agreement. The Stockholder and the Companies will hold in confidence
(unless and to the extent compelled to disclose by judicial or administrative
process, or, in the opinion of their counsel, by other requirements of law) all
UAG Confidential Information (as defined below) and will not disclose the same
to any third party except as may reasonably be necessary to carry out this
Agreement and the transactions contemplated hereby. If this Agreement is
terminated, the Stockholder will promptly return to UAG, upon the reasonable
request of UAG, all UAG Confidential Information furnished by UAG and held by
the Stockholder, including all copies thereof. As used herein, "UAG
Confidential Information" shall mean all information concerning UAG obtained by
the Stockholder and the Companies in connection with the transactions
contemplated by this Agreement, except information (x) ascertained or obtained
from public information, (y) received from a third party not employed or
otherwise affiliated with UAG or (z) which is or becomes known to the public,
other than a breach by the Stockholder and the Companies of this Agreement.
5.2. FURNISHING INFORMATION; ANNOUNCEMENTS.
The Stockholder and the Companies, 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 Companies or UAG and Sub, 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
Stockholder nor the Companies, on the one hand, nor UAG nor Sub, on the other
hand, or any representative thereof, shall issue any press releases or
otherwise make any public statement with respect to the transactions
contemplated hereby without the prior consent of the other, except as may be
required by law (including federal or state securities laws) as determined by
such parties' counsel.
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5.3. ANTITRUST IMPROVEMENTS ACT COMPLIANCE.
UAG and Sub and the Stockholder 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. The parties shall use their best efforts to make such
filings promptly, to respond to any requests for additional information made by
either of such agencies, to cause the waiting periods under the H-S-R Act to
terminate or expire at the earliest possible date and to resist vigorously, at
their respective cost and expense (including, without limitation, the
institution or defense of legal proceedings), any assertion that the
transactions contemplated herein constitute a violation of the antitrust laws,
all to the end of expediting consummation of the transactions contemplated
herein; provided, however, that if UAG or the 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.
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 Stockholder shall cause the Companies to,
conduct their business solely in the ordinary course consistent with past
practices and, without the prior written consent of UAG, neither the
Stockholder nor the Companies will, except as required or permitted pursuant to
the terms hereof, permit any of the Companies to:
(i) make any material change in the conduct of its business 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 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 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;
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(v) subject any of its assets, or any part thereof, to any Lien
or suffer such to be imposed other than such Liens as may arise in the
ordinary course of business consistent with past practices by operation of
law which will not have, or cannot reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect;
(vi) 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 its capital stock (other than distributions of
net income attributable to the period from June 30, 1997 through the
Closing Date which distribution may be deferred by Stockholder until
December 31, 1997) or redeem, retire, purchase or otherwise acquire,
directly or indirectly, any shares of its capital stock;
(vii) acquire any assets, raw materials or properties, or enter
into any other transaction, other than in the ordinary course of business
consistent with past practices;
(viii) enter into any new (or amend any existing) employee
benefit plan, program or arrangement or any new (or amend any existing)
employment, severance or consulting agreement, grant any general increase
in the compensation of officers or employees (including any such increase
pursuant to any bonus, pension, profit-sharing or other plan or commitment)
or grant any increase in the compensation payable or to become payable to
any employee, except in accordance with pre-existing contractual provisions
or consistent with past practices;
(ix) make or commit to make any individual capital expenditure in
excess of $50,000, or aggregate capital expenditures in excess of $150,000;
(x) pay, loan or advance any amount to, or sell, transfer or
lease any properties or assets to, or enter into any agreement or
arrangement with, any of their Affiliates;
(xi) guarantee any indebtedness for borrowed money or any other
obligation of any other Person, other than in the ordinary course of
business consistent with past practice;
(xii) fail to keep in full force and effect insurance comparable
in amount and scope to coverage maintained by the Company (or on behalf of
the Company) on the date hereof;
(xiii) make any loan, advance or capital contribution to or
investment in any Person;
(xiv) make any change in any method of accounting or accounting
principle, method, estimate or practice except for any such change required
by reason of a concurrent change in GAAP or write-down the value of any
inventory or write-off as uncollectible any accounts receivable except in
the ordinary course of business consistent with past practices;
(xv) settle, release or forgive any material claim or litigation
or waive any material right;
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(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 Company 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
Stockholder and the Companies will cause each of the Companies to use its
reasonable best efforts to:
(i) continue to maintain, in all material respects, its
properties in accordance with present practices in a condition suitable for
their current use;
(ii) comply with all applicable Environmental Laws, and, in the
event the Company shall receive notice that there exists a violation of any
Environmental Law with respect to its operations or any Real Property,
promptly (and in any event within the time period permitted by the
applicable governmental authority) remove or remedy such violation in
accordance with all applicable Environmental Laws; provided, however, that
any remediation or removal shall be subject to the prior approval of UAG;
(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 Company 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.
(c) From and after the date of this Agreement and until the Closing
Date, the Stockholder shall not, except with the prior written consent of UAG
and except as required or permitted pursuant to the terms hereof:
(i) make any material change to the Real Property or the
Improvements;
(ii) subject the Real Property or the Improvements, or any part
thereof, to any new Lien or suffer such to be imposed;
(iii) take any other action that would cause any of the
representations or warranties made by the Stockholder in this Agreement not
to remain true and correct; or
(iv) commit himself to do any of the foregoing.
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5.5. 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 his Affiliates (other
than the Companies) on the one hand, and the Companies, on the other hand.
5.6. NEGOTIATIONS.
Until the earlier of 120 days from the date hereof or the termination
of this Agreement by UAG pursuant to Section 8.1 hereof, neither the
Stockholder, nor the Companies, nor their officers, directors, employees,
advisors, agents, representatives, Affiliates or anyone acting on behalf of the
Stockholder, 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 merger, sale of assets (other than in the ordinary course of
business), liquidation, purchase or sale of shares of capital stock or similar
transaction involving any of the Companies. 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 Companies or the Stockholder may receive or of which
any of such parties may become aware.
5.7. CONSENTS; COOPERATION.
Subject to the terms and conditions hereof, the Stockholder and the
Companies 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
Companies of all of 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 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.
The Stockholder and the Companies agree to execute and deliver any and all
documents that the respective manufacturers typically require a selling dealer
to execute in connection with the transfer of a dealership. In case at any time
after the Closing any further
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action is necessary or desirable to carry out the purposes of this Agreement,
the Stockholder and the proper officers of the Companies shall take all such
necessary action.
5.9. INTERIM FINANCIAL STATEMENTS.
Within twenty (20) days after the end of each calendar month after the
date of this Agreement and continuing until the Closing Date, the Companies
will deliver to UAG the most recent monthly and year-to-date financial
statements provided to their respective manufacturers. All such statements
shall fairly present the financial position and results of operations of the
Companies as of the date or for the periods indicated and shall be prepared on
a basis consistent with the Company Factory Statements.
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 parties hereto of: (i) any
information that indicates that any representation and warranty of such party
contained herein was not true and correct as of the date hereof or will not be
true and correct as of the Closing, (ii) the occurrence of any event which
could result in the failure to satisfy a condition specified in Article 6 or
Article 7 hereof, as applicable, (iii) any notice or other communication from
any third person alleging that the consent of such third person is or may be
required in connection with the transactions contemplated by this Agreement,
and (iv) in the case of the Stockholder 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. The
Stockholder shall (x) promptly advise UAG of any event that has, or could in
the future have, a Material Adverse Effect (y) confer on a regular 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 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 the Company or any of their
assets or operations, 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 any of the Shares) or the occurrence of any
other event of which the Stockholder has knowledge which could result in any
failure to consummate the sale of the Shares as contemplated hereby.
5.11. ASSURANCE BY THE STOCKHOLDER.
The Stockholder shall comply with its covenants set forth in this
Agreement and shall use his best efforts to cause the Companies to comply with
its covenants set forth in this Agreement.
5.12. SECTION 338(H)(10) ELECTION.
The Stockholder agrees to join with Sub, if Sub so requests, in making
a timely election with respect to any of the Companies to treat the purchase
and sale of the Shares relating to such Company pursuant to this Agreement as a
sale of all of such Company's assets under Section 338(h)(10) of the Internal
Revenue Code of 1986, as amended (the "Code"), as permitted pursuant to Section
1.338(h)(10)-1(a) of the Treasury Regulations promulgated thereunder. In the
event of such an election, Sub agrees to promptly pay to the Stockholder the
amount of any additional federal, state or other tax (including any penalties
and
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interest thereon) that is imposed on the Stockholder by reason of making such
an election. Thus, in the event that the federal, state and/or other tax
imposed on the Stockholder by reason of the stock sale exceeds the tax that
would have been imposed if no such election had been made, Sub will be
responsible for such excess. Sub further agrees to "gross up" any payment to
the Stockholder pursuant to this paragraph to take into account that any such
payment would itself be subject to income tax. Stockholder agrees to cooperate
with Sub to cause the Companies to timely file for federal and/or state income
tax purposes, with respect to the Company's final short period as an S
corporation under the Code through the Closing Date, any return or extension of
the due date thereof as required under the Code to effect or reflect any such
election under Section 338(h) (10) of the Code.
5.13. NON-INTERFERENCE.
After the Closing Date and for a period of five (5) years thereafter,
the Stockholder and his Affiliates shall not knowingly interfere with or
disrupt, or attempt to interfere with or disrupt, the relationship, contractual
or otherwise, between the Companies or any customer, supplier, manufacturer,
distributor, consultant, independent contractor or employee of the Companies
and agree not to solicit or hire any employee of the Companies unless such
employee has already terminated his or her employment with the Companies.
5.14. RIGHT OF FIRST REFUSAL.
During the period ending on the earlier of the fourth anniversary of
the Closing or the date on which all principal and interest on the Note is paid
in full, Sub shall not sell more than 50% of the issued and outstanding capital
stock of any of the Companies to a third party (other than an Affiliate of UAG)
and the Companies shall not sell substantially all of their assets to a third
party (other than an Affiliate of UAG) (any such stock sale or asset sale being
referred to herein as a "Third Party Sale') unless, prior to closing such Third
Party Sale, UAG gives the Stockholder written notice (the "Offer Notice"),
which notice shall include (i) the terms and conditions of the proposed Third
Party Sale and (ii) an offer (the "First Offer") to sell to the Stockholder
upon the same terms and conditions. If the Stockholder accepts the First Offer
within thirty (30) days after UAG gives notice thereof, the Stockholder, Sub
and the applicable Company shall enter into an agreement for the acquisition of
the Company or its assets upon the same terms and conditions as those provided
for in the First Offer and such other terms and conditions as may be mutually
agreeable to the parties. If the Stockholder does not accept the First Offer
within thirty (30) days after UAG gives notice thereof, or accepts the First
Offer but does not enter into a definitive agreement within thirty (30) days
thereof, then Sub and the Company may close the Third Party Sale within one
hundred eighty (180) days after the date of the First Offer, provided that such
sale shall be made on terms not materially less favorable to UAG, Sub or the
Company than the terms contained in the First Offer.
5.15. REBATES, REFUNDS AND INCENTIVE PROGRAMS.
Sub agrees to pay to the Stockholder a pro rata portion of any
rebates, refunds or incentive payments (other than those accrued for on the
Closing Date Balance Sheet) earned by Sub either through the manufacturer's
incentive programs or otherwise described on Schedule 5.17.
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ARTICLE 6.
CONDITIONS TO THE OBLIGATIONS
OF UAG AND SUB TO EFFECT THE CLOSING
The obligations of UAG and Sub required to be performed by them at the
Closing shall be subject to the satisfaction, at or prior to the Closing, of
each of the following conditions, each of which may be waived by UAG or 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 Companies and the
Stockholder contained in this Agreement shall be true and correct as of the
date hereof and (having been deemed to have been made again at and as of the
Closing) shall be true and correct in all material respects as of the Closing.
Each of the obligations of the Companies 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, UAG shall have received a certificate, dated the Closing Date and
duly executed by the Stockholder, to the effect that the conditions set forth
in the two preceding sentences have been satisfied.
6.2. AUTHORIZATION; CONSENTS.
(a) All corporate action necessary to authorize the execution,
delivery and performance of this Agreement and the 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
manufacturers with whom the Companies have entered into franchise agreements)
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 STOCKHOLDER'S COUNSEL.
UAG and Sub shall have been furnished with the opinion of counsel for
the Companies and the Stockholder, dated the Closing Date, in form and
substance satisfactory to UAG and its counsel, which opinion shall have been
rendered with respect to those matters contained in Sections 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 Companies and by government officials and upon
such other documents and data as such counsel deem appropriate as a basis for
their opinions. Such counsel may specify the state or states in which they are
admitted to practice, that they are not admitted to the Bar in any other state
or experts in the law of any other state and that such opinions are limited to
the State of New Jersey, State of New York 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
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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, 1996 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 any of
the Companies when taken as a whole.
6.6. NET WORTH.
On the Closing Date, the Stockholder shall deliver to UAG a balance
sheet of the Companies dated as of the most recent practicable date preceding
the Closing Date, prepared in accordance with GAAP (the "Estimated Closing Date
Balance Sheet"). The Estimated Closing Date Balance Sheet shall show as of the
date thereof a Net Worth not less than Seven Million One Hundred Fifty-Five
Thousand Dollars ($7,155,000).
6.7. COMPLETION OF DUE DILIGENCE.
UAG and Sub 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 or Phase II environmental audits of the
Companies, 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, then the expenses of performing the Phase II environmental audit
shall be paid one-half by UAG and one-half by the Stockholder; provided,
however, that the Stockholder may elect not to pay any costs of the Phase II
audit but, if the Stockholder elects 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 recommended, the Stockholder shall pay the entire costs of the Phase II
audit.
6.8. BOARD APPROVAL.
The Board of Directors of UAG and Sub shall have approved the
consummation of all of the transactions contemplated by this Agreement.
6.9. CERTIFICATES.
The Stockholder and the Companies shall have furnished UAG and Sub
with a certificate, dated as of the Closing Date, executed by the Stockholder
certifying to the fulfillment of the conditions set forth in Sections 6.4, 6.5,
6.6 and 6.12 hereof and shall have furnished UAG and Sub with such any other
certificates of its officers and others as UAG and Sub may reasonably request
to evidence compliance with the conditions set forth in this Article 6.
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6.10. LEGAL MATTERS.
All certificates, instruments, opinions and other documents required
to be executed or delivered by or on behalf of the Stockholder 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 Stockholder and the
Companies in furtherance of the transactions contemplated hereby, shall be
reasonably satisfactory in form and substance to counsel for UAG and Sub.
6.11. APPROVAL OF MANUFACTURERS AND DISTRIBUTORS.
The Stockholder, the Companies, UAG and Sub shall have obtained the
consent, authorization and approval of each of the manufacturers whose consent
is required for the transfer of the Companies to Sub on terms (including any
working capital requirements of the manufacturers) no less favorable to those
imposed on the Stockholder and the Companies immediately prior to the execution
of this Agreement.
6.12. ENVIRONMENTAL LAWS.
The Companies shall be in compliance with all applicable Environmental
Laws.
6.13. NONDISTURBANCE AGREEMENTS/ESTOPPEL CERTIFICATES.
UAG shall have been provided with nondisturbance agreements and
estoppel certificates in form and substance satisfactory to UAG with respect to
the Real Property and the Leases.
6.14. TITLE INSURANCE.
UAG, at its option, shall have obtained title insurance on behalf of
the Companies with respect to the leasehold estates arising out of the Leases
in form and substance satisfactory to UAG.
6.15. SCHEDULES.
The Companies and the Stockholder 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.
6.16. MEMORANDA OF LEASE.
The appropriate parties shall have executed memoranda of lease in form
and substance satisfactory to UAG.
6.17. EMPLOYMENT AGREEMENT.
Sub, the Companies and the Stockholder shall have entered the
Employment Agreement.
6.18. LEASES.
The Companies and the Stockholder shall have entered into the Leases.
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6.19. RESIGNATION OF THE COMPANIES' DIRECTORS.
Each of the persons who is a director of any of the Companies on the
Closing Date shall have tendered to Sub in writing his or her resignation as
such in form and substance satisfactory to UAG.
ARTICLE 7.
CONDITIONS TO THE OBLIGATIONS OF
THE COMPANIES AND THE STOCKHOLDER
TO EFFECT THE CLOSING
The obligations of the Companies and the Stockholder 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 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 (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
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 UAG and 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 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
manufacturers with whom the Companies have entered into franchise agreements)
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
reasonably satisfactory to the Stockholder and its counsel, which opinion shall
have been rendered with respect to those matters contained in Sections 4.1, 4.2
and 4.3 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 the Sub and by government officials, and upon such
other documents and data as such counsel deems appropriate as a basis for its
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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, 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 the
Stockholder, in good faith and with the advice of counsel, believes makes it
undesirable to proceed with the consummation of the transactions contemplated
hereby.
7.5. 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.
7.6. LEGAL MATTERS.
All certificates, instruments, opinions and other documents required
to be executed or delivered by or on behalf of UAG or Sub under the provisions
of this Agreement, and all other actions and proceedings required to be taken
by or on behalf of UAG or Sub in furtherance of the transactions contemplated
hereby, shall be reasonably satisfactory in form and substance to counsel for
the Stockholder.
7.7. EMPLOYMENT AGREEMENT.
Sub and the Companies shall have entered into the Employment
Agreement.
7.8. LEASES.
The Companies shall have entered into the Leases.
7.9. APPROVAL OF MANUFACTURERS AND DISTRIBUTORS.
The Stockholder, the Companies, UAG and Sub shall have obtained the
consent, authorization and approval of each of the manufacturers whose consent
is required for the transfer of the Companies to Sub on terms (including
working capital requirements of the manufacturer) no less favorable to those
imposed on the Stockholder and the Companies immediately prior to the execution
of the Agreement.
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ARTICLE 8.
TERMINATION
8.1. TERMINATION.
This Agreement may be terminated at any time prior to Closing:
(i) by mutual consent of UAG and the Stockholder;
(ii) by either UAG or the Stockholder if the Closing shall not
have taken place on or prior to October 31, 1997, or such later date as
shall have been approved by UAG and the Stockholder;
(iii) by UAG or the Stockholder if any court of competent
jurisdiction in the United States or other United States governmental body
shall have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement, and such order, decree, ruling or other
action shall have become final and non-appealable;
(iv) by UAG or Sub if any of the conditions specified in Article
6 hereof have not been met or waived by UAG and Sub at such time as such
condition is no longer capable of satisfaction;
(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;
(vi) by either UAG 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 (if curable) within ten (10) Business Days following receipt by
the breaching party of written notice of such breach.
If UAG or the Stockholder 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 (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.
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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 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 9.6
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 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 Companies or the conduct of the business of the Companies prior to the
Closing Date (a "Stockholder Third Party Claim"). As used herein, "Event of
Breach" shall be and mean any one or more of the following: (i) any untruth or
inaccuracy in any representation of the Stockholder or the Companies or the
breach of any warranty of the Stockholder or the Companies 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 Companies (or
any representative of the Stockholder 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 the Stockholder or the Companies duly to perform or observe any term,
provision, covenant, agreement or condition on the part of the 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 on an after-tax basis the Stockholder and 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, (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 or relates directly to
the conduct of the business of the Companies 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 any representative of UAG) to the Stockholder or the Companies (or any
representative of the Stockholder or the Companies) and any misrepresentation
in or omission from any document furnished to the Stockholder or the Companies
in connection with the Closing, and (ii) any failure of UAG or Sub duly to
perform or observe any term, provision, covenant, agreement or condition on the
part of UAG or Sub to be performed or observed.
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9.3. PROCEDURES.
If (i) any Event of Breach occurs or is alleged and a UAG Indemnified
Party asserts that the Stockholder or the Companies have become obligated to a
UAG Indemnified Party pursuant to Section 9.1, or if any Stockholder Third
Party Claim is begun, made or instituted as a result of which the Stockholder
or the Companies 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, Sub 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 obligation to provide
indemnification hereunder, provided that any failure to so notify the
Indemnifying Party shall not relieve them from any liability that it may have
to the Indemnified Party under this Article 9. If such notice relates to a
Third Party Claim, each Indemnifying Party, jointly and severally, agrees to
defend, contest or otherwise protect such Indemnified Party against any such
Third Party Claim at its sole cost and expense. Such Indemnified Party shall
have the right, but not the obligation, to participate at its own expense in
the defense thereof by counsel of such Indemnified Party's choice and shall in
any event cooperate with and assist the Indemnifying Party to the extent
reasonably possible. If the Indemnifying Party fails timely to defend, contest
or otherwise protect against such Third Party Claim, such Indemnified Party
shall have the right to do so, including, without limitation, the right to make
any compromise or settlement thereof, and such Indemnified Party shall be
entitled to recover the entire Cost thereof from the Indemnifying Party,
including, without limitation, attorneys' fees, disbursements and amounts paid
(or of which such Indemnified Party has become obligated to pay) as the result
of such Third Party Claim. Failure by the Indemnifying Party to notify such
Indemnified Party of its or their election to defend any such Third Party Claim
within fifteen (15) days after notice thereof shall have been given to the
Indemnifying Party shall be deemed a waiver by the Indemnifying Party of its or
their right to defend such Third Party Claim. If the Indemnifying Party assumes
the defense of the particular Third Party Claim, the Indemnifying Party shall
not, in the defense of such Third Party Claim, consent to entry of any judgment
or enter into any settlement, except with the written consent of such
Indemnified Party. In addition, the Indemnifying Party shall not enter into any
settlement of any Third Party Claim except with the written consent of such
Indemnified Party, which does not include as an unconditional term thereof the
giving by the claimant or the plaintiff to such Indemnified Party a full
release from all liability in respect of such Third Party Claim.
Notwithstanding the foregoing, the Indemnifying Party shall not be entitled to
control (but shall be entitled to participate at their own expense in the
defense of), and the Indemnified Party shall be entitled to have sole control
over, the defense or settlement of any Third Party Claim to the extent the
Third Party Claim seeks an order, injunction or other equitable relief against
the Indemnified Party which, if successful, could materially interfere with the
business, operations, assets, condition (financial or otherwise) or prospects
of the Indemnified Party.
9.4. 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 any of the Documents (other than the
Leases), may be recovered by the Indemnified Party by an offset against any or
all amounts due to such other parties pursuant to this Agreement or the
Documents (provided, however,
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that such right to offset shall not take effect until such amounts are finally
determined to be due pursuant to the terms hereof).
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.
9.7. 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 or a Stockholder Third Party Claim
only to the extent the aggregate Costs incurred or sustained by all UAG
Indemnified Parties exceed One Hundred Thousand Dollars ($100,000) with
respect to a breach of any provision herein; provided, however, that
notwithstanding the 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, 2.8, 3.1 and 5.6 (to the extent specified therein) hereof.
(ii) The aggregate costs for which the Stockholder shall be
obligated to indemnify the UAG Indemnified Parties shall not exceed Thirty
Million Dollars ($30,000,000) 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, 2.8,
2.11, 2.20 and 3.1 hereof.
(b) Indemnification by UAG.
(i) A Stockholder Indemnified Party shall be entitled to
indemnification in connection with a UAG Event of Breach or a UAG Third
Party Claim only to the extent the aggregate Costs incurred or sustained by
all Stockholders Indemnified Parties exceed One Hundred Thousand Dollars
($100,000); provided, however, that, notwithstanding the preceding
limitation, a Stockholder Indemnified Party shall be entitled to
indemnification of all Costs incurred or sustained by such Stockholder
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 hereof.
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(ii) The aggregate Costs for which UAG shall be obligated to
indemnify the Stockholder Indemnified Parties shall not exceed Thirty
Million Dollars ($30,000,000) in the case of Costs incurred or sustained by
all Stockholders Indemnified Parties in connection with a UAG Event of
Brach; preovided, 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 any untruth or inaccuracy in,
or breach of, a representation, warrnaty or covenant (or failure to perform
or ob serve any term, agreement or condition) contained in Article 1 or
Section 4.5) hereof.
ARTICLE 10.
MISCELLANEOUS
10.1. SURVIVAL OF PROVISIONS.
The respective representations, warranties, covenants and agreements
of each of the parties to this Agreement (except covenants and agreements which
are expressly required to be performed and are performed in full on or before
the Closing Date) shall survive the Closing Date and the consummation of the
transactions contemplated by this Agreement. In the event of a breach of any
such representations, warranties or covenants, the party to whom such
representations, warranties or covenants have been made shall have 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.
10.2. FEES AND EXPENSES.
If the Closing does not occur and Section 5.6 hereof is breached, then
the Stockholder 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 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 for next business day delivery or
facsimile transmission (with original to follow by mail) or mailed by
registered or certified mail, postage prepaid (return receipt requested), as
follows:
If to the Companies before the Closing Date:
Mr. Thomas Hessert
10 Gwen Court
Cherry Hill, New Jersey 08012
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with a copy to:
Newman Tannenbaum Helpern
Syracuse & Hirschtritt, LLP
900 Third Avenue
New York, New York 10022
Attn: Stuart B. Newman, 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 10152
Attn: General Counsel
with a copy to:
Rogers & Hardin
2700 International Tower
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attn: Michael Rosenzweig, Esq.
If to the Stockholder:
Mr. Thomas Hessert
10 Gwen Court
Cherry Hill, New Jersey 08012
with a copy to:
Newman Tannenbaum Helpern
Syracuse & Hirschtritt, LLP
900 Third Avenue
New York, New York 10022
Attn: Stuart B. Newman, Esq.
If to UAG or Sub:
United Auto Group, Inc.
375 Park Avenue
New York, New York 10152
Attn: General Counsel
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with a copy to:
Rogers & Hardin
2700 International 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 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 its obligations hereunder to any Affiliate of UAG or Sub,
but in such event UAG shall remain fully liable for the performance of all of
such obligations in the manner prescribed in this Agreement.
10.6. ENTIRE AGREEMENT.
This Agreement (including the Schedules hereto) and the Documents
embody the entire agreement and understanding of the parties with respect to
the transactions contemplated hereby and supersede all prior written or oral
commitments, arrangements or understandings between the parties with respect
thereto and all prior drafts of this Agreement. There are no restrictions,
agreements, promises, warranties, covenants or undertakings with respect to the
transactions contemplated hereby other than those expressly set forth herein or
in the Documents. Prior drafts of this Agreement shall not be used as a basis
for interpreting this Agreement.
10.7. WAIVER AND AMENDMENTS.
Each of the Stockholder and the Companies, as one party, and UAG and
Sub, as the other party, may by written notice to the other parties (i) extend
the time for the performance of any of the obligations or other actions of the
other parties, (ii) waive any inaccuracies in the representations or warranties
of the other parties contained in this Agreement, (iii) waive compliance with
any of the covenants of the other parties contained in this Agreement, (iv)
waive performance of any of the obligations of the other parties created under
this Agreement, or (v) waive fulfillment of any of the conditions to its own
obligations under this Agreement. The waiver by any party hereto of a breach of
any provision of this Agreement shall not operate or be construed as a waiver
of any subsequent breach, whether or not similar. This Agreement may be
amended, modified or supplemented only by a written instrument executed by the
parties hereto.
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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 not be considered as disclosure pursuant to any other
provision, subprovision, section or subsection of this Agreement or Schedule to
this Agreement and shall not be deemed to limit any representations or
warranties made herein.
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 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.
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, or the payment of certain fees, costs and expenses as set
forth in Section 10.2, shall be the exclusive remedy of either party for a
breach of this Agreement. The parties hereto shall have the right to seek any
other remedy in law or equity in lieu of or in addition to any remedies
provided in this Agreement, including an action for damages for breach of
contract.
10.13. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance the
laws of the State of New York without giving effect to any choice or conflict
of law provision or rule that would cause the laws of any other jurisdiction to
apply.
10.14. TIME IS OF THE ESSENCE.
Time is of the essence for purposes of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
UNITED AUTO GROUP, INC.
By:
--------------------------------
George G. Lowrance
Executive Vice President
UAG CLASSIC, INC.
By:
--------------------------------
George G. Lowrance
Vice President
CLASSIC AUTO GROUP, INC.
By:
--------------------------------
Its:
CHERRY HILL CLASSIC CARS, INC.
By:
--------------------------------
Its:
CLASSIC ENTERPRISES, INC.
By:
--------------------------------
Its:
CLASSIC BUICK, INC.
By:
--------------------------------
Its:
CLASSIC CHEVROLET, INC.
By:
--------------------------------
Its:
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CLASSIC MANAGEMENT, INC.
By:
--------------------------------
Its:
------------------------------------
Thomas J. Hessert, Jr., Individually
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STOCK PURCHASE AGREEMENT
DATED AS OF SEPTEMBER 25, 1997
AMONG
UNITED AUTO GROUP, INC.,
UAG YOUNG, INC.,
DAN YOUNG CHEVROLET, INC.,
DAN YOUNG, INC.
PARKWAY CHEVROLET, INC.,
YOUNG MANAGEMENT GROUP, INC.,
ALAN V. YOUNG,
WILLIAM A. YOUNG,
DAN E. YOUNG,
CONWAY M. ANDERSON III,
SHIRLEY J. YOUNG IRREVOCABLE GRAT TRUST
U/A DATED 3/1/97,
DAN E. YOUNG IRREVOCABLE GRAT TRUST
U/A DATED 3/1/97,
IRREVOCABLE TRUST FOR ALAN V. YOUNG
U/A DATED 8/31/90,
AND
IRREVOCABLE TRUST FOR WILLIAM A. YOUNG
U/A DATED 8/31/90
<PAGE>
TABLE OF CONTENTS
Page
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ARTICLE 1 PURCHASE AND SALE OF SHARES.................................. 2
1.1 Certain Definitions............................................. 2
1.2 Purchase and Sale of the Shares................................. 5
1.3 Escrow Deposit.................................................. 6
1.4 Net Worth Adjustment............................................ 7
1.5 Additional Purchase Price....................................... 9
1.6 Capital Loans................................................... 9
1.7 Satisfaction of Related Party Loans............................. 9
1.8 Distributions Prior to Closing.................................. 10
1.9 New Facility.................................................... 10
1.10 Effective Date.................................................. 11
ARTICLE 2 REPRESENTATIONS AND WARRANTIES
OF THE COMPANIES AND THE STOCKHOLDERS........................ 11
2.1 Organization and Good Standing.................................. 12
2.2 Subsidiaries.................................................... 12
2.3 Capitalization.................................................. 12
2.4 Authority; Approvals and Consents............................... 12
2.5 Financial Statements............................................ 14
2.6 Absence of Undisclosed Liabilities.............................. 14
2.7 Absence of Material Adverse Effect; Conduct of Business......... 15
2.8 Taxes........................................................... 16
2.9 Legal Matters................................................... 17
2.10 Property........................................................ 18
2.11 Environmental Matters........................................... 19
2.12 Inventories..................................................... 21
2.13 Accounts Receivable............................................. 21
2.14 Insurance....................................................... 21
2.15 Contracts; etc.................................................. 22
2.16 Labor Relations................................................. 22
2.17 Employee Benefit Plans.......................................... 23
2.18 Other Benefit and Compensation Plans or Arrangements............ 26
2.19 Transactions with Insiders...................................... 27
2.20 Propriety of Past Payments...................................... 27
2.21 Interest in Competitors......................................... 28
2.22 Brokers......................................................... 28
2.23 Accounts........................................................ 28
2.24 Disclosure...................................................... 28
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ARTICLE 3 SEPARATE REPRESENTATIONS AND WARRANTIES
OF EACH STOCKHOLDER.......................................... 29
3.1 Ownership of Shares; Title...................................... 29
3.2 Authority....................................................... 29
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF UAG........................ 30
4.1 Organization and Good Standing.................................. 30
4.2 Sub............................................................. 30
4.3 Capitalization.................................................. 31
4.4 SEC Filings..................................................... 31
4.5 Authority; Approvals and Consents............................... 31
4.6 Disclosure...................................................... 32
4.7 Brokers......................................................... 32
ARTICLE 5 COVENANTS AND ADDITIONAL AGREEMENTS.......................... 33
5.1 Access; Confidentiality......................................... 33
5.2 Furnishing Information; Announcements........................... 34
5.3 Antitrust Improvements Act Compliance........................... 34
5.4 Certain Changes and Conduct of Business......................... 35
5.5 No Intercompany Payables or Receivables......................... 38
5.6 Negotiations.................................................... 38
5.7 Consents; Cooperation........................................... 38
5.8 Additional Agreements........................................... 39
5.9 Interim Financial Statements.................................... 39
5.10 Notification of Certain Matters................................. 39
5.11 Assurance by the Stockholders................................... 40
5.12 Section 338(h)(10) Election..................................... 40
5.13 Non-Interference................................................ 41
5.14 Personal Guarantees............................................. 41
5.15 Distributions................................................... 42
5.16 [Intentionally Omitted]......................................... 42
5.17 Taxes........................................................... 42
5.18 Distribution of Assets to LLC................................... 43
ARTICLE 6 CONDITIONS TO THE OBLIGATIONS
OF UAG AND SUB TO EFFECT THE CLOSING......................... 43
6.1 Representations and Warranties; Agreements; Covenants........... 43
6.2 Authorization; Consents......................................... 44
6.3 Opinions of the Companies' and the Stockholders' Counsel........ 44
6.4 Absence of Litigation........................................... 44
6.5 No Material Adverse Effect...................................... 44
6.6 Net Worth....................................................... 45
6.7 Completion of Due Diligence..................................... 45
6.8 Board Approval.................................................. 45
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6.9 Certificates.................................................... 45
6.10 Legal Matters................................................... 45
6.11 Approval of Manufacturers and Distributors...................... 45
6.12 Environmental Laws.............................................. 46
6.13 Nondisturbance Agreements/Estoppel Certificates................. 46
6.14 Title Insurance................................................. 46
6.15 Schedules....................................................... 46
6.16 Lease Termination Agreements/Memoranda of Lease................. 46
6.17 Employment Agreements........................................... 46
6.18 Leases.......................................................... 46
6.19 Resignation of the Companies' Directors......................... 47
6.20 Kissimmee Toyota, Paramount and Century......................... 47
6.21 Joint Venture Agreement......................................... 47
ARTICLE 7 CONDITIONS TO THE OBLIGATIONS OF THE COMPANIES AND
THE STOCKHOLDERS TO EFFECT THE CLOSING....................... 47
7.1 Representations and Warranties; Agreements...................... 47
7.2 Authorization of the Agreement, Consents........................ 47
7.3 Opinions of UAG's and Sub's Counsel............................. 48
7.4 Absence of Litigation........................................... 48
7.5 Satisfaction of Conditions...................................... 48
7.6 Legal Matters................................................... 48
7.7 Employment Agreement............................................ 49
7.8 Leases.......................................................... 49
7.9 Approval of Manufacturers and Distributors...................... 49
7.10 Kissimmee Toyota, Paramount and Century......................... 49
7.11 No Material Adverse Effect...................................... 49
7.12 Schedules....................................................... 49
7.13 Joint Venture Agreement......................................... 49
7.14 Certified Board Resolutions..................................... 49
ARTICLE 8 TERMINATION.................................................. 50
8.1 Termination..................................................... 50
8.2 Effect of Termination........................................... 50
ARTICLE 9 INDEMNIFICATION.............................................. 51
9.1 Indemnification by the Stockholders............................. 51
9.2 Indemnification by UAG.......................................... 52
9.3 Procedures...................................................... 53
9.4 Offset.......................................................... 55
9.5 Exclusive Monetary Remedy for Breach............................ 55
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ARTICLE 10 MISCELLANEOUS ............................................... 55
10.1 Survival of Provisions.......................................... 55
10.2 [Intentionally Omitted]......................................... 56
10.3 Headings........................................................ 56
10.4 Notices......................................................... 56
10.5 Assignment...................................................... 58
10.6 Entire Agreement................................................ 58
10.7 Waiver and Amendments........................................... 58
10.8 Counterparts.................................................... 58
10.9 Accounting Terms................................................ 59
10.10 [Intentionally Omitted] ........................................ 59
10.11 Severability ................................................... 59
10.12 [Intentionally Omitted] ........................................ 59
10.13 Governing Law .................................................. 59
10.14 Time is of the Essence ......................................... 59
10.15 Attorneys' Fees ................................................ 59
10.16 Limitation on Liability of Each Trustee ........................ 60
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of September
25, 1997, is by and among United Auto Group, Inc., a Delaware corporation
("UAG"), UAG Young, Inc., a Delaware corporation ("Sub"), Dan Young, Inc., an
Indiana corporation ("Tipton Chevrolet"), Dan Young Chevrolet, Inc., an Indiana
corporation ("Dan Young Chevrolet"), Parkway Chevrolet, Inc., an Indiana
corporation ("Parkway"), Young Management Group, Inc., an Indiana corporation
("Heritage" and, together with Tipton Chevrolet, Dan Young Chevrolet and
Parkway, the "Companies"), Alan V. Young, an individual resident of the state
of Indiana ("A. Young"), William A. Young, an individual resident of the state
of Indiana ("W. Young"), Dan E. Young, an individual resident of the state of
Florida ("D. Young"), Conway M. Anderson, III, an individual resident of the
state of South Carolina ("Anderson"), Shirley J. Young Irrevocable GRAT Trust
u/a dated 3/1/97 (the "S. Young GRAT Trust"), Dan E. Young Irrevocable GRAT
Trust u/a dated 3/1/97 (the "D. Young GRAT Trust"), Irrevocable Trust for Alan
V. Young u/a dated 8/31/90 (the "A. Young Trust") and Irrevocable Trust for
William A. Young u/a dated 8/31/90 (the "W. Young Trust" and together with A.
Young, W. Young, D. Young, Anderson, S. Young GRAT Trust, D. Young GRAT Trust
and A. Young Trust, the "Stockholders").
W I T N E S S E T H:
WHEREAS, Sub is a wholly-owned subsidiary of UAG;
WHEREAS, the Companies operate automobile dealerships and related
businesses in Indiana, North Carolina and South Carolina;
WHEREAS, the Stockholders own all of the issued and outstanding shares
of the capital stock of the Companies (the "Shares");
WHEREAS, Sub desires to purchase all of the Shares from the
Stockholders, and the Stockholders desire to sell the Shares to Sub (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, Sub will
own one hundred percent (100%) of the issued and outstanding shares of the
capital stock of the Companies;
NOW, THEREFORE, in consideration of the mutual terms, conditions and
other agreements set forth herein, the parties hereto hereby agree as follows:
<PAGE>
ARTICLE 1
PURCHASE AND SALE OF SHARES
1.1 CERTAIN DEFINITIONS.
As used in this Agreement, the following terms shall have the
following meanings:
(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 or her spouse,
issue, parents, siblings, estate, any Affiliate of such person and any trust
for the benefit of his or her spouse, parents and/or siblings.
(b) "Business Day" shall mean any day excluding Saturday, Sunday and
any day which is a legal holiday under Federal law.
(c) "CERCLA" shall mean the Comprehensive Environmental Response
Compensation and Liability Act of 1980 (42 U.S.C. 9601 et seq.), as amended by
Superfund Amendments and Reauthorization Act of 1986 (Pub. L. 99-499, 100
State, 1613), as amended.
(d) "Claim" shall mean any claim, action, suit, litigation,
investigation, inquiry, review or proceeding of any kind.
(e) "Closing Date" shall have the meaning ascribed to it in Section
1.2(b).
(f) "Closing Date Balance Sheet" shall have the meaning ascribed to it
in Section 1.4.
(g) "Code" shall mean the Internal Revenue Code of 1986, as amended
(the "Code").
(h) "Company Agreement" shall mean any mortgage, indenture note,
agreement, contract, lease, license, franchise, obligation, instrument or other
binding commitment of any kind, whether written or oral, (including all leases
and other agreements referred to on Schedule 2.10 hereto) to which any of the
Companies is a party or by which any of the Companies or any of their assets or
properties (including the owned Real Property and the owned Improvements) may
be bound or affected, including all amendments, modifications, extensions or
renewals of any of the foregoing.
(i) "Company Financial Statements" shall have the meaning ascribed to
it in Section 2.5.
(j) "Costs" shall mean all liabilities, losses, costs, damages,
expenses and claims, including reasonable attorneys' fees, experts' fees and
consultants' fees.
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(k) "Dealerships" shall mean the Companies and Kissimmee Motors, Inc.,
an Indiana corporation (d/b/a Kissimmee Toyota) ("Kissimmee Toyota"), Paramount
Chevrolet Geo, Inc., an Indiana corporation ("Paramount") and Century Chevrolet
Geo, Inc., an Indiana corporation ("Century") and after Closing shall also
include the entities into which Kissimmee Toyota, Paramount and Century may be
merged at or after Closing and the entities to which certain assets,
liabilities and businesses shall be transferred pursuant to Section 5.18.
(l) "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, release, presence,
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 amended and as in effect
from time to time (including without limitation the following statutes and all
regulations thereunder as amended and in effect from time to time: CERCLA,
RCRA, OSHA, and HMTA).
(m) "Environmental Permits" shall mean all permits, licenses,
approvals, authorizations, consents or registrations required under applicable
Environmental Laws in connection with the ownership, use and/or operation of
the Companies' businesses or the Real Property or Improvements.
(n) "Escrow Agent" shall mean Bose, McKinney & Evans.
(o) "Escrow Deposit" shall have the meaning ascribed to it in Section
1.3.
(p) "GAAP" shall mean generally accepted accounting principles which
are in effect in the United States from time to time.
(q) "H-S-R Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
(r) "HMTA" shall mean the Hazardous Materials Transportation Act, as
amended (49 U.S.C. Section 1801 et seq.)
(s) "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," "extremely hazardous substances," "toxic pollutants,"
"contaminants," "pollutants" or similar terms in or pursuant to, without
limitation, CERCLA, RCRA, OSHA, HMTA, and in the regulations promulgated
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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) lead-based paint, (D)
polychlorinated biphenyls, (E) 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), (F) flammable explosives, (G) 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.
(t) "Knowledge" (regardless of whether capitalized) shall mean, with
respect to any Stockholder, that the Stockholder knew (after reasonable
inquiry) of the particular matter referred to; with respect to any of the
Companies, that Anderson, W. Young, A. Young, Tom Schmitt or any person
responsible for overseeing the day-to-day operations of such Company, the
general manager and the office manager (or any person with similar such
responsibilities regardless of title) knew (after reasonable inquiry) of the
particular matter referred to; and with respect to UAG or Sub that the Chief
Executive Officer, President or any Vice President of UAG or Sub knew (after
reasonable inquiry) of the particular matter referred to.
(u) "Legal Requirements" shall mean any and all laws, ordinances,
codes, rules, regulations and other requirements of all governmental,
administrative or judicial entities.
(v) "Liens" shall mean any mortgages, pledges, title defects or
objections, liens, claims, security interests, prior assignments, conditional
and installment sale agreements or encumbrances of any kind.
(w) "Material Adverse Effect" shall mean, with respect to the
Companies, any material adverse change in, or material adverse effect on, the
business, operations, assets, operating results or financial condition of the
Companies, taken as a whole; and, with respect to UAG, any material adverse
change in, or material adverse effect on, the business, operations, assets,
operating results or financial condition of UAG.
(x) "OSHA" shall mean the Occupational Safety and Health Act of 1970
as amended (29 U.S.C. Section 651 et seq.).
(y) "Person" shall mean and include an individual, corporation,
partnership, limited liability company, joint venture, association, trust, any
other incorporated or unincorporated organization or entity and a governmental
entity or any department or agency thereof.
(z) "RCRA" shall mean the Resource Conservation and Recovery Act of
1976 (42 U.S.C. Section 6901 et seq.).
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(aa) "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
any Environmental Law or (v) take corrective action under sections 3004(u),
3004(v) or 3008(h) of RCRA or analogous state law.
(ab) "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.
(ac) "Trusts" shall mean the S. Young GRAT Trust, the D. Young GRAT
Trust, the A. Young Trust and the W. Young Trust.
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 Sub, and Sub shall
purchase from the Stockholders, the Shares for an aggregate purchase price (the
"Purchase Price") equal to Forty-Seven Million Three Hundred Sixty-Eight
Thousand Six Hundred Twenty-Three Dollars ($47,368,623) in cash less the amount
of the Assumed Loans (as defined in Section 1.7) (the "Base Price"), which Base
Price is subject to adjustment after the Closing as provided in Sections 1.4
and 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 the Shares representing 100% of the issued and outstanding capital
stock of the Companies and deliver the certificates representing such
Shares accompanied by stock powers duly executed in blank;
(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 Deposit by wire transfer to an account designated in
writing by the Stockholders or by certified funds;
(iii) A. Young, W. Young and Anderson shall each enter into an
Employment Agreement with an Affiliate of UAG in a form to be mutually
agreed to by the respective parties (each an "Employment Agreement and
collectively, the "Employment Agreements"); and
(iv) each of the Companies (other than Parkway and Heritage)
shall enter into a lease for the real property on which such Company
operates in a form mutually acceptable to the parties (each a "Lease" and
collectively the "Leases"). Each Lease shall be for a twenty (20) year term
commencing on the Closing Date and the
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lessee shall have the option to renew the Lease for two additional five
year terms. The initial monthly lease rate for each Lease shall be an
amount equal to the current lease rate being paid by each Company. On the
third anniversary of the Closing Date and every two years thereafter during
the initial term, the lease rate for each Lease shall increase to an amount
equal to the lease rate then in effect plus an amount equal to a percentage
of the lease rate then in effect, which percentage shall be equal to
three-fourths (3/4) of the percentage increase in the Consumer Price Index
published from time to time by the United States Department of Labor
("CPI") for All Urban Consumers (U.S. City Average) from the time of the
last adjustment. UAG will unconditionally and irrevocably guaranty the
obligations of the Companies under the Leases.
(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 as soon as practicable following the date on which all
conditions to the obligations of the parties hereunder (other than those
requiring an exchange of certificates, opinions or other documents, or the
taking of other action, at the Closing) have been satisfied or waived, but no
later than November 30, 1997; provided, however, that UAG or the Stockholders
may extend the Closing Date for a period of thirty (30) days by giving notice
to the other party prior to November 30, 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 1.2(a)(i) hereof, and any other documents that are necessary to
transfer to Sub good and marketable title to all the Shares, and (B) all
opinions, certificates and other instruments and documents required to be
delivered by the Companies and the Stockholders at or prior to the Closing
or otherwise required in connection herewith;
(ii) Sub shall (A) pay to the Stockholders funds in an amount
equal to the Base Price less the Escrow Deposit; and (B) deliver to the
Stockholders all opinions, certificates and other instruments and documents
required to be delivered by UAG or Sub at or prior to the Closing or
otherwise required in connection herewith.
1.3 ESCROW DEPOSIT.
Within three (3) Business Days of the date hereof, UAG will deposit
funds into escrow in the amount of Five Hundred Thousand Dollars ($500,000)
(together with the earnings thereon while held in escrow, the "Escrow Deposit")
by delivering such funds to the Escrow Agent which Escrow Deposit shall be held
and disbursed by the Escrow Agent pursuant to
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the terms of an Escrow Agreement between UAG, the Escrow Agent and the
Stockholders, which Escrow Agreement shall be entered into prior to delivery of
such funds.
1.4 NET WORTH ADJUSTMENT.
(a) On the Closing Date, or as soon as practicable thereafter (but no
later than 45 days after the Closing Date), the Stockholders shall prepare and
deliver to UAG a combined balance sheet of the Companies as of the close of
business on 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 accordance with GAAP applied on a basis consistent with
the accounting practices and principles set forth on Exhibit "A-1" hereto and
subject to the adjustments set forth on Exhibit "A-2" hereto. At the same time,
the Stockholders shall also prepare and deliver to UAG a schedule of Net Worth
as of the same date (as defined in Section 1.4(g)(iii) hereof ("Schedule of Net
Worth")). In connection with the preparation of the Closing Date Balance Sheet,
the Stockholders and the Companies shall permit the Reviewer (as defined below)
and other representatives of UAG to conduct a physical inventory at each
location where inventory is held by the Companies, and the Stockholders, the
Companies, and their representatives shall be permitted to observe and
participate in such inventory.
(b) Coopers & Lybrand or such other "big 6" accounting firm (the
"Reviewer") as may be selected by UAG shall audit or otherwise review the
Closing Date Balance Sheet and the Schedule of Net Worth delivered by the
Stockholders to the extent UAG and the Reviewer deem appropriate. Within
seventy-five (75) days after delivery of the Closing Date Balance Sheet and
Schedule of Net Worth, UAG shall deliver a reviewed balance sheet (the
"Reviewed Balance Sheet") and a reviewed schedule of net worth ("Reviewed
Schedule of Net Worth") to the Stockholders. The Reviewed Balance Sheet and the
Reviewed Schedule of Net Worth shall be prepared by UAG with the Reviewer's
assistance in the same manner as is provided in subparagraph (a) above for the
Closing Date Balance Sheet and the Schedule of Net Worth.
(c) 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 to examine the work
papers and schedules prepared by the Stockholders, the Companies and each of
such accountants after the preparation of the Closing Date Balance Sheet and
Schedule of Net Worth. The Stockholders and their representatives shall have
the opportunity to consult with UAG, the Companies and their accountants, the
Reviewer and other representatives and to examine the work papers and schedules
prepared by UAG and the Reviewer after preparation of the Reviewed Balance
Sheet and the Reviewed Schedule of Net Worth.
(d) The Stockholders shall have a period of forty-five (45) days after
delivery of the Reviewed Balance Sheet and the Reviewed Schedule of Net Worth
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
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within such 45-day period, the Reviewed Balance Sheet and Reviewed Schedule of
Net Worth shall be deemed accepted and approved by the Stockholders, in which
event the net worth reflected on the Reviewed Schedule of Net Worth shall be
deemed the Final Net Worth. If the Stockholders shall raise any objection
within such 45-day period, UAG and the Stockholders shall attempt to resolve
the matter or matters in dispute and, if resolved, the net worth agreed upon in
writing by UAG and the Stockholders shall be deemed the Final Net Worth.
(e) If such dispute cannot be resolved by UAG and the Stockholders
within sixty (60) days after the delivery of the Reviewed Balance Sheet and
Reviewed Schedule of Net Worth, then the specific matters in dispute shall be
submitted to a firm of independent public accountants mutually acceptable to
UAG and the Stockholders (or if agreement is not reached on such firm within
five (5) Business Days, a "big 6" accounting firm selected by lot after
excluding one firm designated by UAG and one firm designated by the
Stockholders provided that such firm has not previously been retained by UAG or
the Stockholders), which firm shall make a final and binding determination of
the Net Worth of the Companies as of the close of business on the Closing Date
in accordance with the provisions of this Section 1.4, which determination
shall be deemed the Final Net Worth. UAG and the Stockholders shall inform such
firm in writing as to their respective positions concerning the specific
matters in dispute, and shall make readily available to such firm any books,
records and work papers relevant to such firm's resolution of the disputed
matters. Such accounting firm shall send its written determination to 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.
(g) (i) If the Final Net Worth as determined through the operation of
Sections 1.4(a) through (e) hereof shall be less than the amount of the Net
Worth as of July 31, 1997 as set forth on Schedule 1.4(g)(i) (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
(as defined below), by wire transfer of immediately available funds to an
account designated in writing by UAG at least two (2) Business Days prior
to the date of the Supplemental Closing, an amount equal to the Net Worth
Deficiency.
(ii) If the Final Net Worth shall be more than the amount of the
Net Worth as of July 31, 1997 as set forth on Schedule 1.4(g)(i) (the
amount of any such excess being referred to herein as the "Net Worth
Excess"), Sub shall pay to the Stockholders at the Supplemental Closing, by
wire transfer of immediately available funds to an account designated in
writing by the Stockholders two (2) Business Days prior to the date of the
Supplemental Closing, an amount equal to the Net Worth Excess.
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(iii) "Net Worth" shall mean, as of any date, the total of all
assets minus the total of all liabilities that would be shown on the
combined balance sheet of the Companies as of the close of business on such
date prepared in accordance with GAAP applied on a basis consistent with
the accounting practices and principles set forth on Exhibit "A-1" hereto,
and subject to the adjustments set forth on Exhibit "A-2" and Schedule
1.4(g)(iii) hereto.
(iv) A supplemental closing (the "Supplemental Closing") shall
take place for purposes of this subparagraph (g) within five (5) Business
Days after the Final Net Worth is determined.
1.5 ADDITIONAL PURCHASE PRICE.
In consideration for the sale of the Shares by the Stockholders to
Sub, Sub shall make an additional payment to the Stockholders (the "Additional
Payment") in an aggregate amount equal to Seven Million Dollars ($7,000,000)
which aggregate amount includes (and shall not be increased by) interest at the
Applicable Federal Rate in accordance with Section 1274(d) of the Code. The
Additional Payment shall be due and payable in three installments (to be
applied first to accrued and unpaid interest) with One Million Dollars
($1,000,000) payable on the first anniversary of the Closing Date, One Million
Dollars ($1,000,000) payable on the second anniversary of the Closing Date and
Five Million Dollars ($5,000,000) payable on the third anniversary of the
Closing Date. In no event shall Sub be required to pay an aggregate amount in
excess of Seven Million Dollars ($7,000,000) pursuant to this Section 1.5.
1.6 CAPITAL LOANS.
On or before the Closing Date, the Stockholders shall pay the
outstanding principal and all accrued but unpaid interest on the loans set
forth on Schedule 1.6 hereof (the "Capital Loans") in full satisfaction of the
Companies' obligations arising out of or relating to the Capital Loans. If the
Companies, or any of them, have any liabilities or obligations relating to the
Capital Loans as of the Closing, then the Base Price shall be reduced by an
amount equal to any remaining outstanding principal and all accrued but unpaid
interest on the Capital Loans as of such time unless such loans are paid by the
Stockholders at the Closing.
1.7 SATISFACTION OF RELATED PARTY LOANS.
On the Closing Date, UAG shall make funds available to the Companies
in an aggregate amount equal to the unpaid balances as of the Closing Date of
the obligations of the Companies set forth on Exhibit "B" hereof (such
obligations being referred to herein as the "Assumed Loans"); which funds shall
be made available from one or more of the following sources: (i) a capital
contribution from Sub, (ii) a loan from UAG or one of its Affiliates or (iii)
additional borrowing by the Companies secured by their respective inventory.
These additional funds shall be used on the Closing Date to satisfy in full the
obligations of the Companies arising out of or relating to the Assumed Loans.
The Companies shall make all principal payments with
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respect to the Assumed Loans from the date hereof through the Closing Date
in the ordinary course of business consistent with past practice and shall pay
interest on the Assumed Loans prior to the Closing Date.
1.8 DISTRIBUTIONS PRIOR TO CLOSING.
Prior to the Closing Date, (a) the Companies shall declare cash
dividends to their respective Stockholders in the aggregate amount of Seven
Hundred Fifty Thousand Dollars ($750,000) which dividends include, but are not
limited to, undistributed retained earnings of the Companies from January 1,
1997 through July 31, 1997 and which dividends shall be paid (on or before the
Closing Date) from the Companies as set forth on Schedule 1.8 hereto; (b)
Heritage shall distribute (by quitclaim deed) to its Stockholders all of its
right, title and interest in that certain real property owned by Heritage and
located on U.S. Highway 278, Bluffton, Beaufort County, South Carolina (the
"Heritage Property") in partial redemption of its shares; (c) Heritage shall
assign to A. Young and W. Young (the "Youngs") that certain mortgage note
payable by Heritage to Richard J. Davenport in the principal amount of Seven
Hundred Fifty Thousand Dollars ($750,000), dated February 13, 1996 and secured
by the Heritage Property (the "Heritage Mortgage") and the Youngs shall assume
and agree to pay the Heritage Mortgage (provided that the Youngs shall fully
satisfy the Heritage Mortgage on or before December 31, 1999 if Heritage is not
released by the lender from any liability relating to the Heritage Mortgage at
the time it is assumed by the Youngs); (d) Heritage shall assign to the Youngs
that certain note receivable from the Youngs in the principal amount of Seven
Hundred Fifty Thousand Dollars ($750,000) dated February 13, 1996; (e) Dan
Young Chevrolet shall declare and distribute (by quitclaim deed) dividends to
its Stockholders of all of its right, title and interest in that certain
approximately 40 acre tract of real property located on 96th Street east of
Keystone Avenue, Indianapolis, Indiana, together with all rights and
obligations relating to that certain condemnation action styled Board of
Commissioners of Hamilton County v. Dan Young Chevrolet, Inc. and Bank One,
N.A., Cause No. 29DO1-9702-MI-0077, Hamilton County Superior Court (the "Dan
Young Chevrolet Property") and the Stockholders of Dan Young Chevrolet shall
satisfy the obligations of Dan Young Chevrolet under the terms of that certain
mortgage note dated July 1, 1996 by Dan Young Chevrolet to Bank One,
Indianapolis, N.A. in the approximate principal amount of One Hundred
Seventy-Four Thousand Dollars ($174,000) as of August 31, 1997 and secured by
the Dan Young Chevrolet Property (the "Dan Young Chevrolet Mortgage"); (f) the
Companies shall declare dividends to their respective Stockholders in an amount
equal to the estimated net income of the Companies from August 1, 1997 through
the Closing Date which dividends shall be paid in cash on or before the Closing
Date; and (g) Parkway shall assign to its Stockholders all of its rights under
its Third Party Lease to acquire fee simple title to the Real Property leased
thereunder.
1.9 NEW FACILITY.
D. Young and an Affiliate (the "New Lessor") are in the process of
developing a new dealership facility for use by Heritage (the "New Facility"),
which New Facility will be available to Heritage prior to the expiration of the
term of the existing facilities lease (as the
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same may be extended by New Lessor with the approval of Heritage, which
approval shall not be unreasonably conditioned, delayed or withheld). New
Lessor shall, at its sole cost and expense, complete the New Facility. Heritage
and New Lessor shall on the Closing Date agree to enter into a lease for the
New Facility in a form mutually acceptable to the parties (the "New Facility
Lease"), which shall be unconditionally and irrevocably guaranteed by UAG and
which shall provide for commencement of the term of the New Facility Lease (the
"Commencement Date") upon satisfaction of the conditions set forth in the New
Facility Lease. On the Commencement Date of the New Facility Lease, Heritage
shall no longer be responsible for any obligations arising after such date
under the current lease. The New Facility Lease shall be for a twenty-year term
and the lessee shall have the option to renew the lease for two additional
five-year terms. The New Facility Lease shall provide for annual rent equal to
twelve percent (12%) of all hard and soft costs (including but not limited to
interest and reasonable deemed interest [where interest was not charged but
money was provided]), direct and indirect, incurred by New Lessor and its
Affiliates in connection with the acquisition of the land and development and
construction of the New Facility (the "Cost Rent"). The New Facility Lease
shall provide that UAG may, at its expense, obtain an MAI appraisal (using a
methodology to be determined by the parties to insure independence in selection
of the appraiser) to determine the fair market annual rent of the New Facility
(the "Appraised Rent"). If such an appraisal is obtained, the initial annual
rent shall be the average of the Cost Rent and the Appraised Rent; provided,
however, that the initial annual rent shall not be less than the Cost Rent as
calculated by using a ten and three-quarters percent (10 3/4%) multiplier
rather than a twelve percent (12%) multiplier. The initial annual rent as so
established shall be increased on the third anniversary after the commencement
of the New Facility Lease and every two years thereafter as set forth in
Section 1.2(a)(iv).
1.10 EFFECTIVE DATE.
The obligations of the parties hereunder shall not take effect until
the date (the "Effective Date") on which the parties have notified each of the
Companies' manufacturers of the proposed transfer of ownership of the Companies
as contemplated by this Agreement. The parties agree to cooperate in giving
such notice to each of the Companies' manufacturers no later than five (5)
Business Days after the date hereof.
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 twenty-five (25) Business Days after the
date hereof, the Companies and the Stockholders hereby jointly and severally
represent and warrant to UAG and Sub as follows:
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2.1 ORGANIZATION AND GOOD STANDING.
(a) Each of the Companies is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has the corporate power and authority to own, lease and
operate the properties used in its businesses and to carry on its business as
now being conducted.
(b) 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. 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.
(c) Attached to Schedule 2.1 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 on Schedule 2.2 hereto, the Companies do not have
any interest or investment in any Person.
2.3 CAPITALIZATION.
The authorized stock of each 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 of 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 (other than options that will be terminated prior to Closing),
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. 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 (such documents, other than
the Leases, herein referred to as the "Documents") to which they are a party
and to perform their obligations
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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) The execution, delivery and performance by each of the Companies
and the Stockholders 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, except as set forth on Schedule 2.4:
(i) contravene any provisions of the Articles of Incorporation or
Bylaws (including any comparable governing instrument with a different
name) of any of the Companies;
(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 material Company Agreement
or require any consent or waiver of any party to any material Company
Agreement;
(iii) result in the creation of any security interest upon, or
any person obtaining any right to acquire, any properties, assets or rights
of any of the Companies (other than the rights of UAG to acquire the Shares
pursuant to this Agreement);
(iv) violate or conflict with any Legal Requirements applicable
to any of the Companies or any of their respective businesses or
properties; or
(v) require any authorization, consent, order, permit or approval
of, or notice to, or filing, registration or qualification with, any
governmental, administrative or judicial authority, except in connection
with or in compliance with the provisions of the H-S-R Act.
Except as set forth or referred to above, no authorization, consent, order,
permit or approval of, or notice to, or filing, registration or qualification
with, any governmental, administrative or judicial authority is necessary to be
obtained or made by 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.
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2.5 FINANCIAL STATEMENTS.
(a) Attached as Schedule 2.5(a) are true and complete copies of the
combined balance sheets of the Dealerships (except Kissimmee Toyota) as of
December 31, 1996 and December 31, 1995, and related combined statements of
operations, changes in stockholders' equity and cash flows for each of the
years in the three-year period ended December 31, 1996, together with the notes
thereto and the audit report of independent certified public accountants (the
"Company Financial Statements"). The Company Financial Statements are
consistent with and in accordance with the books and records of the Dealerships
(except Kissimmee Toyota), fairly present the financial position, results of
operations, changes in stockholders' equity and cash flows of the Dealerships
(except Kissimmee Toyota) as of the dates and for the periods indicated in
conformity with GAAP consistently applied during such periods, and can be
reconciled with the financial statements and the financial records maintained
and the accounting methods applied by the Dealerships (except Kissimmee Toyota)
for federal income tax purposes.
(b) Attached as Schedule 2.5(b) is the unaudited combined balance
sheet of the Companies as of July 31, 1997 (the "Company Balance Sheet"). The
Company Balance Sheet has been prepared in accordance with GAAP applied on a
basis consistent with the accounting practices and principles set forth on
Exhibit "A-1" and subject to the adjustments on Exhibit "A-2".
(c) Attached as Schedule 2.5(c) are the monthly and year-to-date
financial statements of the Companies provided to each of the manufacturers as
of and for the periods ended July 31, 1997 and August 31, 1997 (each a "Company
Factory Statement" and collectively the "Company Factory Statements"). Each
Company Factory Statement has been prepared on a basis consistent with the
financial statements previously delivered to the applicable manufacturer by
such Company.
Subject to normal year-end adjustments, the books and accounts of the Companies
are complete and correct in all material respects and reflect all of the
transactions, items of income and expense and all assets and liabilities of the
businesses of the Companies, except where the failure to so reflect any such
items would not be material (either individually or in the aggregate) to the
Company with respect to which such item relates.
2.6 ABSENCE OF UNDISCLOSED LIABILITIES.
The Companies do not have any liabilities 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) obligations and liabilities (other than for breach) under any Company
Agreement set forth on Schedule 2.15 hereto or under any Company Agreement
which is not required to be disclosed on such Schedule, (ii) liabilities
reflected or reserved against on the Company Balance Sheet or included or
described in the Notes to the Company Financial
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Statements, (iii) liabilities incurred in the ordinary course of business and
consistent with past practice after July 31, 1997 which, individually and in
the aggregate, do not have, and cannot reasonably be expected to have, a
Material Adverse Effect, (iv) liabilities disclosed on Schedule 2.6 hereto, and
(v) liabilities of a Company not excepted in (i) through (iv) above which,
individually and in the aggregate, are not material to such Company.
2.7 ABSENCE OF MATERIAL ADVERSE EFFECT; CONDUCT OF BUSINESS.
(a) Except as set forth on Schedule 2.7(a) hereto or as expressly
permitted herein, since December 31, 1996, each Company has operated in the
ordinary course of business consistent with past practice and there has not
been:
(i) any change in the assets, properties, business, operations,
prospects, net income or financial condition of any of the Companies, and
to the Stockholders' and the Companies' knowledge, no factor, event,
condition, circumstance or prospective development exists (other than those
generally affecting the economy and the retail automobile business in each
Company's market) which has had, or can reasonably be expected to have, a
Material Adverse Effect;
(ii) any material loss, damage, destruction or other casualty to
the property or other assets of any of the Companies, whether or not
covered by insurance;
(iii) any change in any method of accounting or accounting
practice of any of the Companies; or
(iv) any loss of the employment, services or benefits of any
general manager, office manager or any other key employee.
(b) Since December 31, 1996, except as set forth in Schedule 2.7(b)
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 when due (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 security interests granted in the
ordinary course of business consistent with past practice and mechanics
liens and liens for taxes not yet due and payable;
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(iv) sold or transferred any assets or canceled any debts or
claims or waived any rights, except in the ordinary course of business
consistent with past practice;
(v) defaulted on and not cured 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 other than (A)
such write-downs and write-offs on or before July 31, 1997 that are
reflected in the Company Financial Statements or the Company Balance Sheet,
and (B) such write-downs and write-offs after July 31, 1997 that will be
reflected on the Closing Date Balance Sheet;
(viii) granted any increase in the compensation or benefits of
employees other than increases in accordance with past practice not
exceeding 15% and one-time bonuses to certain employees in connection with
the transactions contemplated by this Agreement which bonuses shall be
reflected on the Closing Date Balance Sheet or entered into any employment
or severance agreement or arrangement with any of them;
(ix) made any individual capital expenditure in excess of
$50,000, or aggregate capital expenditures in excess of $500,000, or
additions to property, plant and equipment other than ordinary repairs and
maintenance;
(x) discontinued any franchise or the sale of any material
products or material product line or program;
(xi) incurred any obligation or liability for the payment of
severance benefits; or
(xii) entered into any agreement or made any commitment to take
any action that, if taken, would cause any of the foregoing warranties in
this Section 2.7(b) to be untrue.
2.8 TAXES.
The Companies have each made a valid election pursuant to Section
1362(a) of the Code, to be an "S Corporation" within the meaning of Section
1361(a)(1) of the Code and have continued to qualify as such for all taxable
years since their formation (except for Dan Young Chevrolet for which an
election was made effective January 1, 1979) and will continue to so qualify
until consummation of the transactions contemplated hereby. No Company has
acquired assets of another corporation in a transaction described in Section
381(a) of the Code and no Company has any "net unrealized built-in gain" on
which the tax imposed pursuant to Section 1374 of the Code could be imposed
upon recognition thereof, except (in each case) as
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disclosed in Schedule 2.8(a) hereto. 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 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. Copies of all tax returns for the
fiscal years ended since December 31, 1992 will be furnished or made available
to UAG or its representatives and such copies are accurate and complete as of
the date hereof. The Companies will also furnish to UAG correct and complete
copies of all material notices and correspondence sent or received since
December 31, 1994 by the Companies to or from any federal, state or local tax
authorities. Except with respect to any "net unrealized built-in gain" set
forth on Schedule 2.8(a) hereof, (i) the Companies shall have adequately
reserved for the payment of all Taxes with respect to periods ended on or prior
to the Closing Date for which tax returns have not yet been filed, (ii) except
to the extent reserves therefor are reflected on the Company Balance Sheet, or
will be reflected on the Closing Date Balance Sheet, the Companies are not
liable, or will not become liable, for any Taxes for any period ending on or
prior to the Closing Date and (iii) 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 as set forth on
Schedule 2.8(b) hereto, the Companies have not been subject to a federal or
state tax audit of any kind since December 31, 1992, and no adjustment has been
proposed by the Internal Revenue Service ("IRS") with respect to any return for
any prior or subsequent year. With respect to the audits referred to on
Schedule 2.8(b) hereto and except as indicated thereon, no such audit has
resulted in an adjustment in excess of $25,000. Neither the Companies nor the
Stockholders has knowledge of any basis for an assertion of a deficiency for
Taxes against the Companies. The Stockholders will cooperate, and will cause
their respective Affiliates to cooperate, with the Companies as reasonably
requested by UAG 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 pending against, or, to the knowledge of the Companies or the
Stockholders, threatened against or affecting, the Companies, any ERISA Plan
(as defined in Section 2.17(a) hereof) or any of their properties or rights
before or by any court, arbitrator, panel, agency or other governmental,
administrative or judicial entity, domestic or foreign, (ii) nor is any basis
known to the Stockholders or the Companies for any such Claims which would be
material individually or in the aggregate to any Company, and (iii) 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. Schedule 2.9(a) hereto identifies each
Claim and Judgment disclosed thereon which is fully covered by an insurance
policy.
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(b) Except as set forth on Schedule 2.9(b), the business of the
Companies is being conducted in compliance with all Legal Requirements
applicable to the Companies or their business or properties. The Companies
hold, and are 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 Companies own or hold all Permits material to the conduct of
their 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) Set forth on Schedule 2.10(a) hereto is a list of all interests in
real property owned by or leased to the Companies, including the Heritage
Property and all real property owned 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"). With respect to any leased Real Property owned by the Stockholders
or their Affiliates, there are no defaults by either party under and no state
of facts exist which with the giving of notice or the passage of time, or both,
would constitute a default under such leases. Except as set forth on Schedule
2.10(a), with respect to any leased Real Property not owned by the Stockholders
or any of their Affiliates (the "Third Party Leases"), neither the Companies
nor the Stockholders have (i) knowledge of any defaults under such leases, (ii)
received notice of any defaults by any parties under such leases or (iii) any
knowledge of any state of facts which with the giving of notice or the passage
of time, or both, would constitute a default under such leases. True and
correct copies of all leases relating to the Real Property, together with any
amendments and modifications thereto, are attached as Schedule 2.10(b).
(b) Except as set forth on Schedule 2.10(b), (i) to the knowledge of
the Stockholders and the Companies all improvements to the Real Property
("Improvements") and all machinery, equipment and other tangible property owned
or used by or leased to the Companies are fit for the particular purposes for
which they are used by the Companies, (ii) such tangible properties and all
Improvements owned or leased by the Companies conform in all material respects
with all applicable Legal Requirements, (iii) to the knowledge of the
Stockholders and the Companies, such Improvements do not encroach in any
respect on property of others, (iv) to the knowledge of the Companies and the
Stockholders there are no material latent defects with respect to the
Improvements, (v) to the actual knowledge of the Stockholders and the Companies
the Real Property is currently zoned to permit the conduct of the respective
businesses of the Companies as presently conducted, (vi) no certificate of
occupancy issued with respect to the Improvements contains any materially
adverse special conditions or restrictions, (vii) to the knowledge of the
Companies and the Stockholders, 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 and (viii) no written notice (and, to the knowledge of the Stockholders
and the Companies, no oral notice) of any
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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.
(c) All surveys, title binders, title policies and copies of any
exceptions to title relating to the Real Property or Improvements, copies of
certificates of occupancy with respect to the Improvements, and any written
verification from zoning authorities that the Real Property and Improvements
are currently zoned for the businesses as currently conducted by the Companies
and that any conditions to zoning have been met, which in each case are in the
possession of any Company or any Stockholder, will be furnished to UAG within
twenty-five (25) Business Days after the date hereof.
(d) To the actual knowledge of the Stockholders and the Companies, the
Real Property and Improvements owned by the Stockholders or their Affiliates
are owned in fee simple, free and clear of all Liens, claims and encumbrances,
except those disclosed in Schedule 2.10(d), none of which currently or, to the
knowledge of the Stockholders or their Affiliates, in the future will
materially affect the use of such Real Property or such Improvements for the
conduct of the respective businesses of the Companies as presently conducted.
Except as set forth on Schedule 2.10(d), (i) 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 and (ii) to the knowledge of the Stockholders and the
Companies, 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 such Real Property or Improvements other than pursuant to the existing
leases in favor of the Companies, which are to be terminated at the Closing by
agreement between the parties and pursuant to which the owners shall
acknowledge that there are no defaults under any such leases and that the
Companies have no liability arising out of or relating to such leases.
2.11 ENVIRONMENTAL MATTERS.
(a) Except as set forth on Schedule 2.11(a) hereto, (i) the Companies,
the Real Property, the Improvements and any property formerly owned, occupied
or leased by the Companies are in compliance with all Environmental Laws, (ii)
the Companies have obtained all Environmental Permits, (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.
(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 event has
occurred with respect to the Real Property, the Improvements or any property
formerly owned, occupied or leased by the Companies, 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 Companies have no
contingent liability under any Environmental Law. There are no liens under any
Environmental Law on the Real Property.
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(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 any
property formerly owned, occupied or leased by the Companies, nor, to the
knowledge of the Companies 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, to the knowledge of the Companies or the Stockholders,
migration of any Hazardous Materials on or under the Real Property that could
reasonably be expected to give rise to liability (provided, however, that
certain petroleum products and other Hazardous Materials are stored and handled
on the Real Property in the ordinary course of the Companies' business in
compliance with all Environmental Laws), (ii) none of the Real Property or any
portion thereof, the Improvements or 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 at
such property, and (iii) none of the Real Property, the Improvements or 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. (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) friable asbestos or asbestos containing materials, (iii)
polychlorinated biphenyls ("PCB") or PCB-containing equipment, including
transformers, (iv) in-ground hydraulic lifts, or (v) to the knowledge of the
Stockholders and the Companies, 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 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 and the Companies, threatened
claim, litigation, or administrative proceeding, or known prior claim,
litigation or administrative proceeding, arising under any Environmental Law
involving 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 the knowledge of the Stockholders and
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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) The Stockholders and the Companies will provide to UAG, within
twenty-five (25) Business Days after the date hereof, all environmental studies
and reports in their possession and will advise UAG of any 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 will permit the testing of the soil,
groundwater, building components, tanks, containers and equipment on the Real
Property, and the Improvements, by UAG or UAG's agents or experts as they deem
necessary or appropriate to confirm the condition of such properties, provided
that (i) such testing will not unreasonably interfere with any Company's use of
the Real Property or Improvements in the operation of the business and (ii) UAG
will indemnify the Companies from any damage or loss caused by UAG's
representatives while conducting such testing.
2.12 INVENTORIES.
Except as set forth on Schedule 2.12 and Exhibit "A-1", the values at
which inventories are carried on the Company Financial Statements reflect the
normal inventory valuation policies of the Companies, and such values are in
conformity with GAAP consistently applied. The values at which inventories will
be carried on the Closing Date Balance Sheet will be in accordance with GAAP
applied on a basis consistent with the accounting practices and principles set
forth on Exhibit "A-1" hereto, and subject to the adjustments set forth on
Exhibit "A-2" hereto.
2.13 ACCOUNTS RECEIVABLE.
Except as set forth on Schedule 2.13, all accounts receivable
reflected on the Company Financial Statements are, and all accounts receivable
that will be or will have been reflected on the Closing Date Balance Sheet will
have arisen in the ordinary course of business and are not, and will not be,
subject to any material defenses, setoffs or counterclaims other than (i)
normal cash discounts accrued in the ordinary course of business and (ii) any
allowances for bad debts reflected on such statements.
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 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
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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 underwritten by financially secure
insurers, and are sufficient for all applicable requirements of law. 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.
Set forth on Schedule 2.15 hereto is a complete and accurate list of
each Company Agreement which is material to the business, operations, assets or
financial condition of any 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 or will be delivered or made available to UAG, and the Companies have
provided or will provide 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 Companies
and the Stockholders is, any other party thereto, in breach of or default under
any Company Agreement, and no event has occurred which (after notice or lapse
of time or both) would become a breach or default under, or would permit
modification, cancellation, acceleration or termination of, any Company
Agreement or result in the creation of any Lien upon, or any Person obtaining
any right to acquire, any properties, assets or rights of the Companies. There
are no material unresolved disputes involving 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 set forth on Schedule 2.16(b) hereto, (i) none of the
Companies is a party to any (A) 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, (B) 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), or (C) collective bargaining
agreement or other labor union contract applicable to persons employed by the
Companies, (ii) neither the Stockholders nor the Companies have any knowledge
of any activities or proceedings of any labor union to organize any such
employees and (iii) the Companies have not breached or otherwise failed to
comply with any such agreements (the "Employment or Labor
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Agreements"). Within twenty-five (25) Business Days after the date hereof, the
Companies will furnish to UAG complete and correct copies of all the Employment
and Labor Agreements.
(c) Except as set forth on Schedule 2.16(c), (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
Companies' 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 during the two-year period preceding the date
hereof, (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 any unresolved claim involving the
Companies and, to the knowledge of the Companies, 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. " 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").
Within twenty-five (25) Business Days after the date hereof, true and complete
copies of all Pension Benefit Plans and Welfare Benefit Plans (collectively,
"ERISA Plans") will be delivered to or made available to UAG together with, as
applicable with respect to each such ERISA Plan, copies of 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 Code, and valuation or actuarial reports,
accountant's opinions, financial
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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 Companies
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 since its inception has complied in all
material respects with the reporting and disclosure requirements imposed
under ERISA and the Code and has timely filed Form 5500s (or 5500-C or
5500-R) and predecessors thereof; and
(iv) no ERISA Plan is liable for any federal, state, local or
foreign Taxes.
(c) Except as set forth on Schedule 2.17(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 and (to the knowledge of the Companies and the Stockholders) no
such action is contemplated or under consideration and the IRS has not
asserted that any such Pension Benefit Plan is not qualified under Section
401(a) of the Code or that any trust established under such a Pension
Benefit Plan is not exempt under Section 501(a) of the Code.
(d) Except as set forth on Schedule 2.17(d), with respect to each
Pension Benefit Plan which is a defined benefit plan under Section 414(j) and
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
Companies since the effective date of ERISA and all premiums due and owing
to the PBGC have been timely paid;
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(ii) the PBGC has not notified the Companies 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 Companies 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 Companies 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 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 for the current fiscal year 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 Financial Statements 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 each such
Company Financial Statement.
(g) With respect to any Multiemployer Plan (1) the Companies have not,
since their 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 Companies under any
Multiemployer Plan, computed as if a "complete withdrawal" by the Companies had
occurred under each such Plan as of December 31, 1996; and (3) the Companies
have 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:
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(i) there are no 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) no material 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 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, 1996 exceeded $75,000. Within
twenty-five (25) Business Days after the date hereof, there will be
provided or made available to UAG (A) true and complete copies of all of
the written plans, arrangements and agreements referred to on Schedule
2.18(a) ("Compensation Commitments") 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 Commit ment for
the last three years and (B) an accurate and complete written summary with
respect to any Compensation Commitment which is unwritten.
(b) Except as set forth on Schedule 2.18(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
Companies or the Stockholders) no such action is contemplated or under
consideration;
(iii) has no liability for any federal, state, local or foreign
Taxes;
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(iv) has no claims subject to dispute or litigation;
(v) complies in all respects with 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 Companies or any ERISA
Plan, on the one hand, and any Insider, on the other hand, that have occurred
since January 1, 1996. For purposes of this Agreement:
(i) the term "Insider" shall mean the Stockholders, any director
or officer of any of the Companies, and any Affiliate, Associate or
Relative of any of the foregoing persons;
(ii) the term "Associate" with respect to any person means (A)
any corporation, partnership, joint venture or other entity of which such
person is an officer or partner or is, directly or indirectly, through one
or more intermediaries, the beneficial owner of 30% or more of (1) any
class or type of equity securities or other profits interest or (2) the
combined voting power of interests ordinarily entitled to vote for
management or otherwise, and (B) any trust or other estate in which such
person has a substantial beneficial interest or as to which such person
serves as trustee or in a similar fiduciary capacity; and
(iii) a "Relative" of a person shall mean such person's spouse,
such person's parents, sisters, brothers, children and the spouses of the
foregoing, and any member of the immediate household of such person.
2.20 PROPRIETY OF PAST PAYMENTS.
Except as provided in Schedule 2.20, 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
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any political party or candidate, either domestic or foreign. Except as
provided in Schedule 2.20, 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 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 Companies that is engaged
in the retail sale or servicing of automobiles or light duty trucks.
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.
To the knowledge of the Stockholders or the Companies, neither the
Companies nor the Stockholders have made any material misrepresentation to UAG
relating to the Companies or the Shares or the Real Property or Improvements
and neither the Companies nor the Stockholders have omitted to state to UAG any
material fact relating to the Companies or the Shares or the Real Property or
Improvements which is necessary in order to make the information given by or on
behalf of the Companies or the Stockholders to UAG not misleading. To the
knowledge of the Companies and the Stockholders, no fact, event, condition or
contingency exists or has occurred which has, or in the future can reasonably
be expected to have, a Material Adverse Effect, which has not been disclosed in
the Company Financial Statements or the Schedules to this Agreement (other than
those generally affecting the economy and the retail automobile business in
each Company's market).
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ARTICLE 3
SEPARATE REPRESENTATIONS AND WARRANTIES
OF EACH STOCKHOLDER
Subject to the parties' agreement and acknowledgment that the
Schedules referred to in this Article 3 are to be delivered by the Stockholders
no later than twenty-five (25) Business Days after the date hereof, each
Stockholder hereby represents and warrants to UAG and Sub as follows:
3.1 OWNERSHIP OF SHARES; TITLE.
Such Stockholder is the owner of record and beneficially of the number
of Shares indicated on Schedule 3.1 hereof and has, and shall transfer to Sub
at the Closing, good and marketable title to such Shares, free and clear of any
and all security interests, pledge agreements, Liens, proxies and voting or
other agreements except restrictions on transfer imposed by applicable federal
and state securities laws and under the Company Agreements with manufacturers
set forth on Schedule 2.4 hereto.
3.2 AUTHORITY.
(a) Such Stockholder has all requisite power and authority and full
legal capacity and is competent to execute, deliver and perform this Agreement
and the Documents to which such Stockholder is a party and to consummate the
transactions contemplated hereby and thereby (including the disposition of such
Stockholder's Shares to Sub as contemplated by this Agreement). This Agreement
has been duly executed and delivered by such Stockholder and constitutes, and
each of the Documents to which such Stockholder is a party when executed and
delivered by such Stockholder will constitute, a valid and binding obligation
of such Stockholder, enforceable against such Stockholder in accordance with
its terms.
(b) Except as set forth on Schedule 3.2, the execution, delivery and
performance of this Agreement and the Documents by such 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 such
Stockholder is a party or to which such Stockholder or any of such
Stockholder's assets are subject;
(ii) violate or conflict with any Legal Requirements applicable
to such Stockholder or any of such Stockholder's businesses or properties;
or
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(iii) require any authorization, consent, order, permit or
approval of, or notice to, or filing, registration or qualification with,
any governmental, administrative or judicial authority, except in
connection with or in compliance with the provisions of the H-S-R Act.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF UAG
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 twenty-five (25) Business Days after the date hereof, UAG and Sub
hereby jointly and severally represent and warrant to the Companies and the
Stockholders as follows:
4.1 ORGANIZATION AND GOOD STANDING.
(a) UAG is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has the corporate power
and authority to own, lease and operate the properties used in its business and
to carry on its business as now being conducted.
(b) UAG 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 the Sub would not, or could not reasonably be expected to,
in the aggregate have a Material Adverse Effect on UAG.
(c) UAG has made available to the Stockholders complete and correct
copies of its charter and bylaws, as amended and presently in effect.
4.2 SUB.
Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, has the corporate power and
authority to own, lease and operate the properties and assets used in its
business and to carry on its business as now being conducted, and is duly
qualified to do business and in good standing as a foreign corporation in each
jurisdiction where qualification as a foreign corporation is required. All of
the outstanding shares of capital stock of the Sub have been validly authorized
and issued, are fully paid and non-assessable, have not been issued in
violation of any preemptive rights or of any federal or state securities law.
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4.3 CAPITALIZATION.
The authorized stock of UAG and the number of shares of capital stock
which are issued and outstanding are set forth on Schedule 4.3 hereto. The
shares listed on Schedule 4.3 hereto constitute all the issued and outstanding
shares of capital stock of UAG and have been validly authorized and issued, are
fully paid and nonassessable, have not been issued in violation of any
preemptive rights or of any federal or state securities law and no personal
liability attaches to the ownership thereof.
4.4 SEC FILINGS.
UAG has heretofore made available to the Stockholders UAG's Form 10-K
for the period ending December 31, 1996 and UAG's Form 10-Q for the period
ending June 30, 1997 (the "SEC Filings"). As of their respective dates, the SEC
Filings did not (and any filings by UAG pursuant to the Securities Exchange Act
of 1934, as amended, between the date hereof and the Closing Date will not)
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,
in light of the circumstances under which they were made, not misleading.
4.5 AUTHORITY; APPROVALS AND CONSENTS.
(a) UAG and Sub have the corporate power and authority to enter into
this Agreement and the Documents to which they are a party and to perform their
obligations hereunder and thereunder. At the time of the Closing, 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 Sub and no other corporate proceedings on the part of UAG
or Sub 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 a valid and binding obligation of, UAG and Sub,
enforceable against UAG and Sub in accordance with their respective terms.
(b) Except as set forth on Schedule 4.5 hereto, the execution,
delivery and performance by UAG and Sub of this Agreement and the Documents to
which they are a party and the consummation of the transactions contemplated
hereby and thereby do not and will not:
(i) contravene any provisions of the Certificate of Incorporation
or Bylaws 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
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UAG Agreement (as defined below) or require any consent or waiver of any
party to any UAG Agreement;
(iii) result in the creation of any security interest upon, or
any person obtaining any right to acquire, any properties, assets or rights
of UAG or Sub;
(iv) violate or conflict in any material respect with any Legal
Requirements applicable to UAG or Sub or their respective businesses or
properties; or
(v) require any authorization, consent, order, permit or approval
of, or notice to, or filing, registration or qualification with, any
governmental, administrative or judicial authority, except in connection
with or in compliance with the provisions of the H-S-R Act.
As used in this Agreement, the term "UAG Agreement" shall mean all mortgages,
indenture notes, agreements, contracts, leases, licenses, franchises,
obligations, instruments or other commitments, arrangements or understandings
of any kind, whether written or oral, binding or non-binding, to which UAG or
the UAG Subsidiaries is a party or by which UAG or the UAG Subsidiaries or any
of their assets or properties may be bound or affected, including all
amendments, modifications, extensions or renewals of any of the foregoing, and
which involve receipts or payments by UAG or UAG Subsidiaries which exceed
$500,000 per year. "UAG Subsidiary" shall mean any corporation or other entity
in which UAG, directly or indirectly, owns beneficially securities representing
50% or more of (i) the aggregate equity or profit interests or (ii) the
combined voting power of voting interests ordinarily entitled to vote for
management or otherwise.
4.6 DISCLOSURE.
To the knowledge of UAG, neither UAG nor Sub has made any material
misrepresentation to the Companies or the Stockholders relating to this
Agreement and neither UAG nor the Sub has omitted to state to the Companies or
the Stockholders any material fact relating to this Agreement which is
necessary in order to make the information given by or on behalf of UAG or Sub
to the Companies or the Stockholders or their representatives at or prior to
Closing not misleading. To the knowledge of UAG, no fact, event, condition or
contingency exists or has occurred which has, or in the future can reasonably
be expected to have, a Material Adverse Effect on UAG, which has not been
disclosed to the Stockholders or disclosed in the SEC Filings.
4.7 BROKERS.
Neither UAG nor any UAG Subsidiary, nor any director, officer or
employee thereof, has employed any broker or finder or has incurred or will
incur any broker's, finder's or similar fees, commissions or expenses, in each
case in connection with the transactions contemplated by this Agreement or the
Documents; except that Sub has agreed to pay Ben Hicks
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and Associates a broker's fee equal to Seven Hundred Fifty Thousand Dollars
($750,000) in full satisfaction of any obligations of UAG or any of its
Affiliates (or any other Person) arising out of any of the transactions
contemplated by this Agreement or the Documents.
ARTICLE 5
COVENANTS AND ADDITIONAL AGREEMENTS
5.1 ACCESS; CONFIDENTIALITY.
(a) Between the date hereof and the earlier of termination of this
Agreement or the Closing Date, the Stockholders and the Companies 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 Companies and
will cause their officers to furnish to UAG and Sub and their authorized
representatives any and all financial, technical and operating data and other
information pertaining to the businesses and properties of the Companies, 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 officers, directors, employees and 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, but only if each third party agrees to be bound by the
restrictions in this Section 5.1. If this Agreement is terminated, UAG and Sub
will promptly return to the Companies, upon the request of the Companies, all
Confidential Information furnished by the Companies and the Stockholders to UAG
or Sub, including all copies thereof. As used herein, "Confidential
Information" shall mean all information concerning the Companies obtained by
UAG or Sub from the Companies 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 or (z) which is or becomes known to the public,
other than through a breach by UAG or Sub of this Agreement.
(b) After the Closing, UAG shall provide the Stockholders and their
authorized representatives access during normal business hours to the books,
records and other information relating to the Companies and their businesses to
the extent reasonably requested by the Stockholders in connection with the Net
Worth Adjustment under Section 1.4 and the tax returns, audits and examinations
referenced in Section 5.17. The Stockholders and the Companies will hold in
confidence (unless and to the extent compelled to disclose by judicial or
administrative process, or, in the opinion of their counsel, by other
requirements of law) all UAG Confidential Information (as defined below) and
will not disclose the same to any third party except as may reasonably be
necessary to carry out this Agreement and the transactions
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contemplated hereby. If this Agreement is terminated, the Stockholders will
promptly return to UAG, upon the reasonable request of UAG, all UAG
Confidential Information furnished by UAG and held by the Stockholders,
including all copies thereof. As used herein, "UAG Confidential Information"
shall mean all information concerning UAG or any of its Affiliates (including
the Dealerships after the Closing Date) obtained by the Stockholders and the
Companies in connection with the transactions contemplated by this Agreement or
pursuant to the provisions hereof, except information (x) ascertained or
obtained from public information, (y) received from a third party not employed
or otherwise affiliated with UAG or (z) which is or becomes known to the
public, other than through a breach by the Stockholders and the Companies of
this Agreement.
5.2 FURNISHING INFORMATION; ANNOUNCEMENTS.
The Stockholders and the Companies, 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 Companies or UAG and Sub, 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 Sub, on the other
hand, or any representative thereof, shall issue any press releases or
otherwise make any public statement with respect to the transactions
contemplated hereby without the prior consent of the other, except as may be
required by law (including federal or state securities laws) as determined by
such party's counsel in its sole discretion.
5.3 ANTITRUST IMPROVEMENTS ACT COMPLIANCE.
UAG and Sub 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 H-S-R Act, and the rules
and regulations promulgated thereunder, with respect to the transactions
contemplated herein. The parties shall use their best efforts to make such
filings promptly, to respond to any requests for additional information made by
either of such agencies, to cause the waiting periods under the H-S-R Act to
terminate or expire at the earliest possible date and to resist vigorously, at
their respective cost and expense (including, without limitation, the
institution or defense of legal proceedings), any assertion that the
transactions contemplated herein constitute a violation of the antitrust laws,
all to the end of expediting consummation of the transactions contemplated
herein; provided, however, that if UAG or the Stockholders shall determine
after issuance of any preliminary injunction that continuing such resistance is
not in its or their best interests, UAG or the Stockholders, as the case may
be, may, by written notice to the other party, terminate this Agreement with
the effect set forth in Section 8.2 hereof. UAG shall be responsible for paying
all filing fees under the H-S-R Act arising as a result of the acquisitions of
the Dealerships; provided, however, that in the event that the acquisitions of
the Dealerships require payment of more than two (2) H-S-R Act filing fees, UAG
and the
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Stockholders shall each be responsible for one-half of the costs of any filing
fees in excess of two (2).
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 businesses 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, permit any of the
Companies to:
(i) make any material change in the conduct of its business 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
(including any comparable governing instrument with a different name),
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 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 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 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 which will not
have, or cannot reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect;
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(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 its capital stock (other than distributions
pursuant to Section 1.8 hereof) or redeem (other than as permitted pursuant
to Section 1.8 hereof), retire, purchase or otherwise acquire, directly or
indirectly, any shares of its capital stock;
(vii) acquire any assets, raw materials or properties, or enter
into any other transaction, other than in the ordinary course of business
consistent with past practices;
(viii) enter into any new (or amend any existing) employee
benefit plan, program or arrangement or any new (or amend any existing)
employment, severance or consulting agreement, grant any general increase
in the compensation of officers or employees (including any such increase
pursuant to any bonus, pension, profit-sharing or other plan or commitment)
or grant any increase in the compensation payable or to become payable to
any employee, except, in each case, in accordance with pre-existing
contractual provisions or consistent with past practices;
(ix) make or commit to make any individual capital expenditure in
excess of $50,000, or aggregate capital expenditures in excess of $150,000;
(x) pay, loan or advance (other than in the ordinary course of
business consistent with past practices) 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;
(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;
(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;
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(xvi) make, enter into, modify or amend in any material respect
or terminate any material commitment, 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 any of the Companies or the
Stockholders in this Agreement not to remain materially true and correct;
or
(xviii) commit to take any action that, if taken, would cause any
of the foregoing covenants in this Section 5.4(a) to be violated.
(b) From and after the date hereof and until the Closing Date, the
Stockholders and the Companies will cause each of the Companies to use its
reasonable best efforts to:
(i) continue to maintain, in all material respects, its
properties in accordance with present practices in a condition suitable for
their current use;
(ii) comply with all applicable Environmental Laws;
(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 Company 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.
(c) From and after the date of this Agreement and until the Closing
Date, the Stockholders shall not, except with the prior written consent of UAG
(which consent shall not be unreasonably withheld) and except as required or
permitted pursuant to the terms hereof:
(i) make any material change to the Real Property or the
Improvements;
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(ii) subject the Real Property or the Improvements, or any part
thereof, to any new Lien or suffer such to be imposed other than Liens for
real estate Taxes and assessments not yet due;
(iii) take any other action that would cause any of the
representations or warranties made by the Stockholders or the Companies in
this Agreement not to remain materially true and correct; or
(iv) commit to take any action that, if taken, would cause any of
the foregoing covenants in this Section 5.4(c) to be violated.
5.5 NO INTERCOMPANY PAYABLES OR RECEIVABLES.
Except as set forth on Schedule 5.5, 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 (except for the loans set forth on Exhibit
"B" hereof which loans shall be satisfied in full on the Closing Date pursuant
to Section 1.7 hereof) and amounts due or to become due under the Leases.
5.6 NEGOTIATIONS.
Until the earlier of 120 days from the date hereof or the termination
of this Agreement, neither the Stockholders, nor the Companies, nor their
officers, directors, employees, advisors, agents, representatives or Affiliates
nor 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 merger, sale of assets
(other than in the ordinary course of business), liquidation, purchase or sale
of shares of capital stock or similar transaction involving any of the
Companies. 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 Companies or the
Stockholders may receive or of which any of such parties may become aware.
5.7 CONSENTS; COOPERATION.
Subject to the terms and conditions hereof, the Stockholders and the
Companies and UAG and Sub will use their respective commercially reasonable
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 respec-
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tive 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 of 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 commercially reasonable 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 to satisfy any condition
hereunder in its power to satisfy and to consummate and make effective as soon
as practicable the transactions contemplated by this Agreement. The
Stockholders and the Companies agree to execute and deliver any and all
documents that the respective manufacturers typically require a selling dealer
to execute in connection with the transfer of a dealership. In case at any time
after the Closing any further action is reasonably necessary or desirable to
carry out the purposes of this Agreement, the Stockholders and the proper
officers of the Companies shall take all such reasonably necessary action.
5.9 INTERIM FINANCIAL STATEMENTS.
Within fifteen (15) days after the end of each calendar month after
the date of this Agreement and continuing until the Closing Date, the Companies
will deliver to UAG the most recent monthly and year-to-date financial
statements provided to their respective manufacturers. All such statements
shall present the financial position and results of operations of the Companies
as of the date and for the periods indicated and shall be prepared on a basis
consistent with the Company Factory Statements.
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 parties 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, (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
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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 material Company Agreement. Each
of D. Young, A. Young, W. Young and Anderson shall (x) promptly advise UAG of
any event of which he has knowledge that has, or could reasonably be expected
to have, a Material Adverse Effect, (y) confer on a regular 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 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 the Companies or any of
their assets or operations, 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 the Stockholder (including, without
limitation, any threat to commence, or notice of the commencement of any action
or other proceeding with respect to any of such Shares) or the occurrence of
any other event of which the Stockholder has knowledge which could result in
any failure to consummate the sale of the Stockholder's Shares as contemplated
hereby.
5.11 ASSURANCE BY THE STOCKHOLDERS.
Each Stockholder agrees to comply with the Stockholder's covenants set
forth in this Agreement, and each Stockholder (other than the Trusts) shall, to
the extent feasible, use the Stockholder's commercially reasonable efforts to
cause each Company in which the Stockholder holds shares to comply with its
covenants set forth in this Agreement.
5.12 SECTION 338(H)(10) ELECTION.
(a) Each Stockholder agrees to join with Sub, if Sub so requests, in
making a timely election with respect to any of the Companies to treat the
purchase and sale of the Shares relating to such Company pursuant to this
Agreement as a sale of all of the assets under Section 338(h)(10) of the Code
as permitted pursuant to Section 1.338(h)(10)-1(a) of the Treasury Regulations
promulgated thereunder. Each Stockholder agrees to cooperate with UAG to cause
the Companies to timely file for federal and/or state income tax purposes, with
respect to the Companies' final short period as an S corporation under the
Code, any return or extension of the due date thereof as required under the
Code to effect or reflect any such election under Section 338(h)(10) of the
Code. The parties acknowledge that the total Taxes imposed on each Stockholder
resulting from such an election and the Stockholder's sale of Shares pursuant
to this Agreement may exceed the total Taxes that would be imposed on the
Stockholder as a result of the sale of Shares pursuant to this Agreement if
such election were not made. Accordingly, if such an election is made, UAG
agrees (i) to cause the Sub to pay each Stockholder the amount of any such
excess Taxes ("Excess Taxes") the Stockholder will be required to pay (which
amount shall be agreed to by the parties) and (ii) to "gross up" such payment
to the Stockholder
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to include any additional Taxes imposed on the Stockholder as a result of
additional taxable income of the Stockholder arising from receipt of any
payment under this Section 5.12. Any such elections shall be executed by the
respective Stockholders, and the corresponding payments shall be made to the
Stockholders, at Closing; provided, however, that Sub, in its discretion, may
defer any such execution and payment until any time up to the date such
election is due provided such execution and payment are concurrent. In the
event the amount initially paid by Sub to any Stockholder pursuant to this
Section 5.12(a) is less than the sum of such Stockholder's actual Excess Taxes
plus such Stockholder's actual Taxes on the payments received pursuant to this
Section 5.12(a), UAG shall cause Sub to pay the Stockholder such excess (as
"grossed up" to include any additional Taxes imposed on the Stockholder as a
result of such additional payment) promptly after receipt from such Stockholder
of reasonably detailed written evidence of the additional amount owed by Sub
under this Section 5.12(a). The parties agree that any claim asserted by the
Internal Revenue Service or any other taxing authority for which Sub may be
liable pursuant to the immediately preceding sentence shall constitute a Third
Party Claim for purposes of Section 9.3 hereof and thus the specific procedures
for the defense of any such claim set forth therein shall be applicable.
(b) In the event that an election under Section 338(h)(10) of the Code
results in a corporate level Tax liability to any Company due to built-in gains
under Section 1374 of the Code, the Purchase Price shall not be reduced by the
amount of any such liability, and the Stockholders shall not otherwise have any
obligation to reimburse any Company, UAG or Sub for any such liability;
provided that (i) in the event any such corporate level tax is imposed on any
Company with respect to which such exposure is not disclosed on Schedule 2.8
hereto, then the Stockholders of such Company shall reimburse Sub, in
proportion to their respective stockholdings in such Company immediately prior
to Closing, in the amount of such tax promptly upon notice thereof from the
Company, UAG or Sub and (ii) any Claim by the Internal Revenue Service or any
other taxing authority against any Company for such a corporate level tax with
respect to which exposure is not disclosed on Schedule 2.8 hereto shall
constitute a Third Party Claim subject to the indemnification provisions of
Article 9 hereof.
5.13 NON-INTERFERENCE.
After the Closing Date and for a period of five (5) years thereafter,
each Stockholder agrees, and each Stockholder shall cause its Affiliates, not
to knowingly interfere with or disrupt, or attempt to interfere with or
disrupt, the relationship, contractual or otherwise, between the Companies or
any customer, supplier, manufacturer, distributor, consultant, independent
contractor or employee of the Companies and not to solicit or hire any employee
of the Companies unless such employee has already terminated his or her
employment with the Companies.
5.14 PERSONAL GUARANTEES.
UAG will use commercially reasonable efforts to cause the Stockholders
to be released as of the Closing Date from any and all personal guarantees of
any loans, leases or
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other indebtedness of the Companies and any personal guarantees of the
obligations of the Companies under the Third Party Leases set forth on Schedule
2.10 hereof (collectively, the "Personal Guarantees"). In the event that any of
the Personal Guarantees are not released by the Closing Date, UAG will
indemnify and hold the Stockholders harmless from any loss with respect to the
Personal Guarantees which arises after the Closing Date. Notwithstanding
anything in this Section 5.14 to the contrary, UAG shall not be required to
cause the Stockholders to be released from or indemnify the Stockholders for
any loss with respect to any Personal Guarantees for any loans or other
indebtedness relating to the Real Property owned by the Stockholders or their
Affiliates as of the Closing Date.
5.15 DISTRIBUTIONS.
The distributions to be made by the Companies pursuant to Section 1.8
hereof shall be made prior to the Closing Date, except for distributions of
cash which may be made on or before the Closing Date.
5.16 [INTENTIONALLY OMITTED].
5.17 TAXES.
(a) The parties hereto acknowledge that at Closing each Company's
status as an S corporation for federal income tax purposes shall cease and that
the taxable year of the Company in which the Closing occurs shall be divided
into two (2) short taxable years (i.e., an S short year and a C short year).
Each of the parties hereto covenants and agrees to make all elections,
consents, statements and filings that may be required by the Code (and any
state and local taxing authority) to close the Company's books on the last
applicable day of the S short year (the "S Short Year").
(b) The federal, state and local tax returns of each Company for the S
Short Year (the "S Tax Returns") shall be prepared by KPMG Peat Marwick or
another firm of independent public accountants selected by the Stockholders and
approved by UAG. Each Company, UAG and Sub covenant and agree to cooperate
fully with the Stockholders and such accounting firm(s) in the preparation of
the S Tax Returns and to make available during normal business hours all books,
records and information that such accounting firm may reasonably request to
complete the preparation of the S Tax Returns in a prompt, timely and complete
manner. The S Tax Returns shall be prepared in accordance with the principles,
methods and practices used in preparing the Company's previous income tax
returns. Upon delivery of the completed S Tax Returns to the respective
Company, which delivery shall be no less than 30 days prior to the due date
thereof, in form and substance reasonably satisfactory to the Company, the
Company covenants and agrees to execute and file, and UAG and Sub covenant and
agree to cause the Company to execute and file, such S Tax Returns with the
appropriate taxing authorities on a timely basis.
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(c) After Closing, UAG shall promptly notify the Stockholders in
writing upon receipt by UAG or any of its Affiliates of notice of any pending
or threatened federal, state or local Tax audit or assessment which may affect
the Tax liability of any of the Companies or the Stockholders for any taxable
year or period ending on or before the Closing Date. The Stockholders shall
have the sole right to represent their and the Companies' interests in any such
Tax audit or related administrative or court proceeding, and to select and
employ counsel for this purpose at their expense. The Stockholders, however,
shall not be entitled to settle, either administratively or after commencement
of litigation, any claim for Taxes which would adversely affect the Tax
liability of any Company for any period after the Closing Date without the
prior written consent of UAG which will not be unreasonably withheld. UAG
agrees, and shall cause each of its Affiliates, not to take any action
(including, but not limited to, the filing of amended tax returns) which would
cause the Taxes of any of the Companies, or the Taxes of any of the
Stockholders on income of the Companies attributable to the Stockholders, for
any taxable year or period ending on or before the Closing Date to be increased
or decreased without the prior written consent of all of the affected
Stockholders.
5.18 DISTRIBUTION OF ASSETS TO LLC.
At the Closing, if UAG so elects in its sole discretion, the parties
agree to cause Dan Young Chevrolet to contribute its assets to a newly formed
limited liability company in exchange for an interest therein and to cause
Tipton Chevrolet to contribute its assets to a newly formed limited liability
company in exchange for an interest therein.
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 or 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 Companies and the
Stockholders contained in this Agreement shall be true and correct in all
material respects as of the date hereof and shall be true and correct in all
material respects as of the Closing as if made at such time except for any
changes expressly permitted hereunder. 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 each Stockholder, to
the effect that the conditions set forth in the two preceding sentences have
been satisfied.
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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
manufacturers with whom the Companies have entered into franchise agreements)
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 Sub 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 and its counsel. In rendering the
foregoing opinion, such counsel may rely as to factual matters upon
certificates or other documents furnished by officers and directors of the
Companies and by government officials and upon such other documents and data as
such counsel deem appropriate as a basis for their opinions.
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
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, 1996 to the Closing Date, no
Material Adverse Effect shall have occurred with respect to the Companies.
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6.6 NET WORTH.
On the Closing Date, the Net Worth of the Companies shall not be
materially less than the Net Worth set forth on Schedule 1.4(g)(i).
6.7 COMPLETION OF DUE DILIGENCE.
UAG and Sub 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 or Phase II environmental audits of the
Companies, 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, then the expenses of performing 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
estimated to cost more than Ten Thousand Dollars ($10,000) for any Company is
recommended, the Stockholders who own Shares in such Company shall pay the
entire costs of the Phase II audit.
6.8 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 this condition shall be deemed waived after October 31,
1997 unless on or before October 31, 1997, UAG notifies the Stockholders that
this condition has not been met.
6.9 CERTIFICATES.
UAG and Sub shall have received such evidence as UAG and Sub
reasonably determine is necessary to demonstrate satisfaction of the conditions
set forth in this Article 6.
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 Sub.
6.11 APPROVAL OF MANUFACTURERS AND DISTRIBUTORS.
The consent, authorization and approval of each of the manufacturers
whose consent is required for the transfer of the Companies to Sub shall have
been obtained on terms
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no less favorable to those granted to the Stockholders and the Companies
immediately prior to the execution of this Agreement.
6.12 ENVIRONMENTAL LAWS.
The Companies shall be in compliance in all material respects with all
applicable Environmental Laws and Environmental Permits.
6.13 NONDISTURBANCE AGREEMENTS/ESTOPPEL CERTIFICATES.
UAG shall have been provided with nondisturbance agreements and
estoppel certificates in form and substance satisfactory to UAG with respect to
the properties that are the subject of the Leases and the Third Party Leases.
6.14 TITLE INSURANCE.
UAG, at its option, shall have obtained title insurance on behalf of
the Companies with respect to the leasehold estates arising out of the Leases
and the Third Party Leases in form and substance satisfactory to UAG.
6.15 SCHEDULES.
The Companies and the Stockholders shall have delivered to UAG and Sub
all Schedules referred to in Articles 1, 2 and 3, and such Schedules and all
Exhibits hereto shall be acceptable in form and substance to UAG and Sub.
6.16 LEASE TERMINATION AGREEMENTS/MEMORANDA OF LEASE.
The appropriate parties shall have executed lease termination
agreements and memoranda of lease in form and substance satisfactory to UAG.
6.17 EMPLOYMENT AGREEMENTS.
The appropriate parties shall have executed the Employment Agreements.
6.18 LEASES.
The Companies and the applicable Stockholders (or their Affiliates)
shall have executed the Leases and the New Facility Lease.
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6.19 RESIGNATION OF THE COMPANIES' DIRECTORS.
Each of the persons who is a director of any of the Companies on the
Closing Date shall have tendered to Sub in writing his or her resignation as
such in form and substance satisfactory to UAG.
6.20 KISSIMMEE TOYOTA, PARAMOUNT AND CENTURY.
The mergers of Kissimmee Toyota, Paramount and Century shall have been
consummated.
6.21 JOINT VENTURE AGREEMENT.
A joint venture agreement between UAG and certain of the Stockholders
or their Affiliates shall have been executed in form and substance satisfactory
to the parties hereto.
ARTICLE 7
CONDITIONS TO THE OBLIGATIONS OF
THE COMPANIES AND THE STOCKHOLDERS
TO EFFECT THE CLOSING
The obligations of the Companies and the Stockholders required to be
performed by them at the Closing shall be subject to the satisfaction, at or
prior to the Closing, of each of the following conditions, each of which may be
waived by 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 Sub 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 Sub required by this Agreement to be
performed by them at or prior to the Closing shall have been duly performed and
complied with as of the Closing. At the Closing, the Stockholders shall have
received a certificate, dated the Closing Date and duly executed by UAG and 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 transactions contemplated hereby shall have been made and
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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
manufacturers with whom the Companies have entered into franchise agreements)
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
reasonably satisfactory to the Stockholders and their respective counsel. In
rendering the foregoing opinions, such counsel may rely as to factual matters
upon certificates or other documents furnished by officers and directors of UAG
and the Sub and by government officials, and upon such other documents and data
as such counsel deems appropriate as a basis for its opinion.
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 the
Stockholders, in good faith and with the advice of counsel, believe makes it
undesirable to proceed with the consummation of the transactions contemplated
hereby.
7.5 SATISFACTION OF CONDITIONS.
The Stockholders shall have received such evidence as they reasonably
determine is necessary to demonstrate satisfaction of the conditions set forth
in this Article 7.
7.6 LEGAL MATTERS.
All certificates, instruments, opinions and other documents required
to be executed or delivered by or on behalf of UAG or Sub under the provisions
of this Agreement, and all other actions and proceedings required to be taken
by or on behalf of UAG or Sub in furtherance of the transactions contemplated
hereby, shall be reasonably satisfactory in form and substance to counsel for
the Stockholders.
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7.7 EMPLOYMENT AGREEMENT.
The appropriate parties shall have entered into the Employment
Agreements.
7.8 LEASES.
The Companies and the applicable Stockholders (or their Affiliates)
shall have executed the Leases and the New Facility Lease and UAG shall have
executed lease guaranties in a form mutually acceptable to the parties.
7.9 APPROVAL OF MANUFACTURERS AND DISTRIBUTORS.
The consent, authorization and approval of each of the manufacturers
whose consent is required for the transfer of the Companies to Sub shall have
been obtained on terms no less favorable to those granted to the Stockholders
and the Companies immediately prior to execution of this Agreement.
7.10 KISSIMMEE TOYOTA, PARAMOUNT AND CENTURY.
The mergers of Kissimmee Toyota, Paramount and Century shall have been
consummated.
7.11 NO MATERIAL ADVERSE EFFECT.
During the period from December 31, 1996 to the Closing Date, no
Material Adverse Effect shall have occurred with respect to UAG.
7.12 SCHEDULES.
UAG shall have delivered to the Stockholders all schedules referred to
in Article 4, and such Schedules and all Exhibits hereto shall be acceptable in
form and substance to the Stockholders.
7.13 JOINT VENTURE AGREEMENT.
A joint venture agreement between UAG and certain of the Stockholders
or their Affiliates shall have been executed in form and substance satisfactory
to the parties hereto.
7.14 CERTIFIED BOARD RESOLUTIONS.
On or before October 31, 1997, UAG shall have delivered to the
Stockholders certified resolutions of the Board of Directors of UAG and Sub
authorizing and approving all of the transactions contemplated by this
Agreement.
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ARTICLE 8
TERMINATION
8.1 TERMINATION.
This Agreement may be terminated at any time prior to Closing:
(i) by mutual consent of UAG and the Stockholders;
(ii) by either UAG or the Stockholders if the Closing shall not
have taken place on or prior to December 31, 1997, or such later date as
shall have been approved by UAG and the Stockholders;
(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 Sub if any of the conditions specified in Article
6 hereof have not been met or waived by UAG and Sub on or prior to December
31, 1997;
(v) by the Stockholders if the condition specified in Section
7.14 hereof is not met on or before October 31, 1997;
(vi) by the Stockholders if any of the other conditions specified
in Article 7 hereof have not been met or waived by the Stockholders on or
prior to December 31, 1997; and
(vii) 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 (if curable) within twenty (20) 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.
(a) Except for (i) liability for any breach of this Agreement prior to
its termination, (ii) the confidentiality covenants in Section 5.1 hereof and
(iii) the provisions of this Section 8.2 and Article 9 hereof, upon the
termination of this Agreement, this Agreement shall
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forthwith become null and void and none of the parties hereto or any of their
respective officers, directors, employees, agents, Affiliates, consultants,
stockholders or principals shall have any liability or obligation hereunder or
with respect hereto.
(b) Upon termination of this Agreement, (i) the Stockholders shall be
entitled to recover from the Escrow Deposit the amount, if any, to which the
Stockholders are entitled to indemnification under Article 9 and shall be
entitled to recover from UAG any such indemnifiable amounts in excess of the
Escrow Deposit, (ii) UAG shall be entitled to any balance of the Escrow Deposit
after any recovery therefrom to which the Stockholders are entitled as provided
in foregoing clause (i), and (iii) UAG and Sub shall be entitled to recover
from the Stockholders the amount, if any, to which UAG and Sub are entitled to
indemnification under Article 9. The parties agree to promptly sign such
instructions and take such other actions as necessary or appropriate to cause
the distribution of the Escrow Deposit as provided in this Section 8.2(b)
following termination of this Agreement.
ARTICLE 9
INDEMNIFICATION
9.1 INDEMNIFICATION BY THE STOCKHOLDERS.
(a) Subject to Sections 9.1(b) and 10.16 hereof and 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
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
arising, directly or indirectly, out of or resulting from, or shall pay or
become obligated to pay any sum on account of, (i) any and all Events of Breach
(as defined below) or (ii) any Claim before or by any court, arbitrator, panel,
agency or other governmental, administrative or judicial entity, which Claim
involves, arises out of or relates to the conduct of the business of the
Companies prior to the Closing Date (each a "Stockholders Third Party Claim"),
provided that the foregoing provisions of this clause (ii) shall not apply to,
and a Stockholders Third Party Claim shall not include, (A) any Tax liability
for which the Stockholders are relieved from liability pursuant to Section
5.12(b) hereof, (B) any liability reflected or reserved against on the Company
Balance Sheet or included or described in the Notes to the Company Financial
Statements, (C) any liability reflected or reserved against on the Closing Date
Balance Sheet, (D) any liability disclosed on Schedule 2.6 hereto, (E) any
liability for any Claim disclosed on Schedule 2.9(a) hereto or (F) any
liability for any Claims arising in the ordinary course of the business of any
Company which, individually and in the aggregate, are not material to such
Company. 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 any
Stockholder or any of the Companies or the breach of any warranty of any
Stockholder or any of the Companies contained in this Agreement or in any
Schedule or Exhibit hereto and (ii) any failure of any Stockholder
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or the Companies duly to perform or observe any term, provision, covenant,
agreement or condition on the part of the Stockholders or the Companies to be
performed or observed pursuant to this Agreement. Subject to Sections 9.1(b)
and 10.16, any indemnification to which any UAG Indemnified Party is entitled
under this Section 9.1(a) may be enforced against one or more Stockholders for
any portion of such Costs.
(b) Indemnification under foregoing Section 9.1(a) is subject to the
following limitations:
(i) No UAG Indemnified Party shall be entitled to indemnification
unless written notice describing the claim to indemnification as prescribed
in Section 9.3 is given within the applicable Survival Period (as defined
in Section 10.1 hereof).
(ii) A claim for indemnification of Costs arising out of or
resulting from any breach of a representation or warranty under this
Agreement or in any Schedule or Exhibit hereto or arising out of any
Stockholders Third Party Claim shall not be payable until, and shall only
be payable to the extent that, the aggregate amount of all such Costs
incurred or suffered by the UAG Indemnified Parties exceeds Three Hundred
Thousand Dollars ($300,000) (the "Threshold Amount"), provided that the UAG
Indemnified Parties shall be entitled to indemnification without regard to
the Threshold Amount for Costs arising out of or resulting from a breach of
Section 2.1(a) (Organization), Section 2.3 (Capitalization), Section 2.4(a)
(Authority), Section 2.8 (Taxes), or Article 3 hereof or arising out of
fraud by any of the Stockholders.
(iii) The aggregate indemnification obligation of all
Stockholders for Costs arising out of or resulting from the breach of any
representation or warranty under this Agreement or in any Schedule or
Exhibit hereto or arising out of or resulting from any Stockholders Third
Party Claim shall not exceed Sixteen Million Five Hundred Thousand Dollars
($16,500,000) (the "Cap"), provided that Costs arising out of or resulting
from the breach of Section 2.1(a) (Organization), Section 2.3
(Capitalization), Section 2.4(a) (Authority), Section 2.8 (Taxes) or
Article 3 hereof or arising out of fraud by the Stockholders shall not be
subject to or counted against the Cap.
9.2 INDEMNIFICATION BY UAG.
(a) Subject to Section 9.2(b) hereof, notwithstanding the Closing, UAG
indemnifies and agrees to fully defend, save and hold harmless on an after-tax
basis the Stockholders and the Companies (prior to Closing) and any of their
respective officers, directors, employees, stockholders, advisors,
representatives, agents and Affiliates (each a "Stockholders Indemnified
Party"), if a Stockholders Indemnified Party shall at any time or from time to
time suffer any Costs arising, directly or indirectly, out of or resulting
from, or shall pay or become obligated to pay any sum on account of, (i) any
and all UAG Events of Breach (as defined below) or (ii) any Claim before or by
any court, arbitrator, panel, agency or other governmental, administrative or
judicial entity, which Claim involves or relates to the conduct of the business
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of the Companies after the Closing Date, provided that the foregoing provisions
of this clause (ii) shall not apply to any Claim arising out of any intentional
misconduct or gross negligence of any of the Stockholders (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 or in any Schedule or Exhibit hereto, (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 pursuant to
this Agreement.
(b) Indemnification under foregoing Section 9.2(b) is subject to the
following limitations:
(i) No Stockholders Indemnified Party shall be entitled to
indemnification unless written notice describing a claim to indemnification
as prescribed in Section 9.3 is given within the applicable Survival Period
(as defined in Section 10.1 hereof).
(ii) A claim for indemnification of Costs arising out of or
resulting from any breach of a representation or warranty under this
Agreement or in any Schedule or Exhibit hereto arising out of any UAG Third
Party Claim (as defined in this Agreement and the Merger Agreement) shall
not be payable until, and shall only be payable to the extent that, the
aggregate amount of all such Costs incurred or suffered by the Stockholders
Indemnified Parties exceeds Three Hundred Thousand Dollars ($300,000) (the
"Stockholders Threshold Amount"), provided that the Stockholders
Indemnified Parties shall be entitled to indemnification without regard to
the Stockholders Threshold Amount for Costs arising out of or resulting
from a breach of Section 4.1(a) (Organization), Section 4.2 (Sub), Section
4.3 (Capitalization) or Section 4.5(a) (Authority) or arising out of fraud
or intentional misrepresentation by UAG.
(iii) The aggregate indemnification obligation of UAG for Costs
arising out of or resulting from the breach of any representation or
warranty under this Agreement or in any Schedule or Exhibit hereto arising
out of or resulting from any UAG Third Party Claim (as defined in this
Agreement) shall not exceed Sixteen Million Five Hundred Thousand Dollars
($16,500,000) (the "Stockholders Cap"), provided that Costs arising out of
or resulting from the breach of Section 4.1(a) (Organization), Section 4.2
(Sub), Section 4.3 (Capitalization) or Section 4.5(a) (Authority) or
arising out of fraud or intentional misrepresentation by UAG shall not be
subject to or counted against the Stockholders Cap.
9.3 PROCEDURES.
If (i) any 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 Stockholders Third Party Claim is
begun, made or instituted as a result of which the
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Stockholders or the Companies may become obligated to a UAG Indemnified Party
hereunder, or (ii) a UAG Event of Breach occurs or is alleged and a
Stockholders Indemnified Party asserts that UAG has become obligated to a
Stockholders 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 Stockholders Indemnified Party hereunder (for purposes of this
Article 9, any UAG Indemnified Party and any Stockholders Indemnified Party is
sometimes referred to as an "Indemnified Party" and each party having an
indemnity obligation under this Article 9 is 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 reasonably prompt
written notice to the Indemnifying Party stating the basis of the Indemnifying
Party's obligation to provide indemnification to the Indemnified Party under
this Article 9 and setting forth in reasonable detail the facts, to the extent
then available, concerning the Event of Breach, UAG Event of Breach or Third
Party Claim, as the case may be, and the basis upon which the Indemnified Party
is claiming indemnification. Subject to Sections 9.1(b)(i) and 9.2(b)(i), a
failure or delay by an Indemnified Party to give a reasonably prompt notice of
any claim for indemnification shall not release an Indemnifying Party's
obligations with respect to the claim, except to the extent that the
Indemnifying Party can demonstrate actual loss as a result of such failure or
delay. If such notice relates to a Third Party Claim, each Indemnifying Party,
jointly and severally, agrees to defend such Indemnified Party against any such
Third Party Claim at 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 against
such Third Party Claim, such Indemnified Party shall have the right to do so,
including, without limitation, the right to make any compromise or settlement
thereof, and such Indemnified Party shall be entitled to recover the entire
Cost thereof from the Indemnifying Party, including, without limitation,
reasonable attorneys' fees, disbursements and amounts paid (or of which such
Indemnified Party has become obligated to pay) as the result of such Third
Party Claim. Failure by the Indemnifying Party to notify such Indemnified Party
of its or their election to defend any such Third Party Claim within fifteen
(15) days after notice thereof shall have been given to the Indemnifying Party
shall be deemed a waiver by the Indemnifying Party of its or their right to
defend such Third Party Claim. If the Indemnifying Party assumes the defense of
the particular Third Party Claim, the Indemnifying Party shall not, in the
defense of such Third Party Claim, consent to entry of any judgment or enter
into any settlement, except with the written consent of such Indemnified Party
which 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 consent shall not be
unreasonably withheld, that 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 its or 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
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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 may be recovered
by the Indemnified Party by an offset against any or all amounts due to such
other parties pursuant to this Agreement.
9.5 EXCLUSIVE MONETARY REMEDY FOR BREACH.
The rights to indemnification set forth in this Article 9 shall be
exclusive of all other rights to monetary damages that any party (or such
party's successors or assigns) would otherwise have by statute or common law
for breach of any provision of this Agreement, except to the extent such claim
arises out of any party's fraud. Notwithstanding the above, the parties hereto
shall have the right to seek any non-monetary remedy in lieu of or in addition
to the rights to indemnification set forth in this Article 9 for breach of any
provision of this Agreement.
ARTICLE 10
MISCELLANEOUS
10.1 SURVIVAL OF PROVISIONS.
The respective representations, warranties, covenants and agreements
of each of the parties to this Agreement shall survive the Closing Date and the
consummation of the transactions contemplated by this Agreement, regardless of
any disclosure to, or investigation made by or on behalf of, any other party on
or before the Closing Date; provided that the period of survival shall, (i)
with respect to each representation or warranty pertaining to Taxes under
Section 2.8 hereof, end for each Tax upon expiration of the statute of
limitations applicable to the Tax, (ii) with respect to the representations and
warranties in Section 2.11 (Environmental Matters), end five (5) years after
the Closing Date, (iii) with respect to the representations and warranties in
Section 2.1(a) (Organization), Section 2.3 (Capitalization), Section 2.4(a)
(Authority), Section 3.1 (Title to Shares), Section 3.2(a) (Authority), Section
4.1 (Organization), Section 4.2 (Sub), Section 4.3 (Capitalization) and Section
4.5(a) (Authority), and with respect to covenants and agreements in this
Agreement, continue indefinitely, and (iii) in any other case, end three (3)
years after the Closing Date (in each case, the "Survival Period").
Notwithstanding anything herein to the contrary, each of the representations
and warranties herein shall survive 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 until the
date such claim is finally liquidated or otherwise resolved.
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10.2 [INTENTIONALLY OMITTED]
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 for next business day delivery or
facsimile transmission (with original to follow by mail) or mailed by
registered or certified mail, postage prepaid (return receipt requested), as
follows:
If to the Companies before the Closing Date:
9190 Priority Way, West Drive
Suite 216
Indianapolis, Indiana 46240
with a copy to:
Bose, McKinney & Evans
2700 First Indiana Plaza
135 North Pennsylvania Street
Indianapolis, Indiana 46204
Attn: Robert P. Kassing, 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 10152
Attn: General Counsel
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with a copy to:
Rogers & Hardin
2700 International Tower
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attn: Michael Rosenzweig, Esq.
If to the Stockholders:
9190 Priority Way, West Drive
Suite 216
Indianapolis, Indiana 46240
with a copy to:
Bose, McKinney & Evans
2700 First Indiana Plaza
135 North Pennsylvania Street
Indianapolis, Indiana 46204
Attn: Robert P. Kassing, Esq.
If to UAG or Sub:
United Auto Group, Inc.
375 Park Avenue
New York, New York 10152
Attn: General Counsel
with a copy to:
Rogers & Hardin
2700 International 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.
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10.5 ASSIGNMENT.
This Agreement and all of the provisions hereof shall be binding upon
and inure to the benefit of the parties hereto and their respective 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 its obligations hereunder to any Affiliate of UAG or Sub,
but in such event UAG shall remain fully liable for the performance of all such
obligations in accordance with the terms and conditions of this Agreement.
10.6 ENTIRE AGREEMENT.
This Agreement (including the Schedules hereto) and the Documents
embody the entire agreement and understanding of the parties with respect to
the transactions contemplated hereby and supersede all prior written or oral
commitments, arrangements or understandings between the parties with respect
thereto and all prior drafts of this Agreement. There are no restrictions,
agreements, promises, warranties, covenants or undertakings with respect to the
transactions contemplated hereby other than those expressly set forth herein or
in the Documents. Prior drafts of this Agreement shall not be used as a basis
for interpreting this Agreement.
10.7 WAIVER AND AMENDMENTS.
Each of the Stockholders and the Companies, as one party, and UAG and
Sub, as the other party, may by written notice to the other parties (i) extend
the time for the performance of any of the obligations or other actions of the
other parties, (ii) waive any inaccuracies in the representations or warranties
of the other parties contained in this Agreement, (iii) waive compliance with
any of the covenants of the other parties contained in this Agreement, (iv)
waive performance of any of the obligations of the other parties created under
this Agreement, or (v) waive fulfillment of any of the conditions to its own
obligations under this Agreement. The waiver by any party hereto of a breach of
any provision of this Agreement shall not operate or be construed as a waiver
of any subsequent breach, whether or not similar. This Agreement may be
amended, modified or supplemented only by a written instrument executed by the
parties hereto.
10.8 COUNTERPARTS.
This Agreement may be executed by facsimile signature(s) and in any
number of counterparts, all of which shall be considered one and the same
agreement and each of which shall be deemed an original.
58
<PAGE>
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 [INTENTIONALLY OMITTED].
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 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 [INTENTIONALLY OMITTED].
10.13 GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Indiana without giving effect to any choice or
conflict of law provision or rule that would cause the laws of any other
jurisdiction to apply.
10.14 TIME IS OF THE ESSENCE.
Time is of the essence for purposes of this Agreement.
10.15 ATTORNEYS' FEES.
If any party hereto brings suit against another party to this
Agreement in connection with the transactions contemplated by this Agreement
and the party against whom suit is brought (the "Defendant") is successful in
denying substantially all the relief sought by the claimant, then the Defendant
shall be entitled to recover from the claimant the reasonable attorneys= fees
and other costs and expenses incurred by the Defendant in connection with such
suit regardless of whether the suit is prosecuted to judgment. If any party
hereto brings suit against another party to this Agreement in connection with
the transactions contemplated by this Agreement and such party (the
"Plaintiff") is successful in obtaining substantially all the relief sought by
the claimant, then the Plaintiff shall be entitled to recover from the claimant
the reasonable attorneys= fees and other costs and expenses incurred by the
Plaintiff in connection with such suit regardless of whether the suit is
prosecuted to judgment.
59
<PAGE>
10.16 LIMITATION ON LIABILITY OF EACH TRUSTEE.
UAG and Sub acknowledge and agree that the liability of each Trust and
each trustee thereunder in connection with the transactions contemplated by
this Agreement shall only be enforceable against the property of the Trust
itself, and UAG and Sub waive any right to proceed for enforcement of any such
liability against any such trustee in its personal capacity.
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:
--------------------------------
George G. Lowrance
Executive Vice President
UAG YOUNG, INC.,
By:
--------------------------------
George G. Lowrance
Executive Vice President
DAN YOUNG, INC.
By:
--------------------------------
Its:
DAN YOUNG CHEVROLET, INC.
By:
--------------------------------
Its:
[Signatures continued on following pages]
60
<PAGE>
PARKWAY CHEVROLET, INC.
By:
--------------------------------
Its:
YOUNG MANAGEMENT GROUP, INC.
By:
--------------------------------
Its:
-----------------------------------
ALAN V. YOUNG, individually
-----------------------------------
WILLIAM A. YOUNG, individually
-----------------------------------
DAN E. YOUNG, individually
-----------------------------------
CONWAY M. ANDERSON, III,
individually
[Signatures continued on following pages]
61
<PAGE>
SHIRLEY J. YOUNG IRREVOCABLE GRAT
TRUST U/A DATED 3/1/97
-----------------------------------
ALAN V. YOUNG, TRUSTEE
-----------------------------------
WILLIAM A. YOUNG, TRUSTEE
DAN E. YOUNG IRREVOCABLE GRAT TRUST
U/A DATED 3/1/97
-----------------------------------
ALAN V. YOUNG, TRUSTEE
-----------------------------------
WILLIAM A. YOUNG, TRUSTEE
IRREVOCABLE TRUST FOR ALAN V.
YOUNG U/A DATED 8/31/90
-----------------------------------
ROBERT P. KASSING, TRUSTEE
-----------------------------------
JAN CHENOWETH, TRUSTEE
[Signatures continued on following page]
62
<PAGE>
IRREVOCABLE TRUST FOR WILLIAM A.
YOUNG U/A DATED 8/31/90
-----------------------------------
ROBERT P. KASSING, TRUSTEE
-----------------------------------
JAN CHENOWETH, TRUSTEE
63
<PAGE>
AGREEMENT AND PLAN OF MERGER
DATED AS OF SEPTEMBER 25, 1997
AMONG
UNITED AUTO GROUP, INC.,
UAG KISSIMMEE MOTORS, INC.,
UAG PARAMOUNT MOTORS, INC.,
UAG CENTURY MOTORS, INC.
KISSIMMEE MOTORS, INC., D/B/A KISSIMMEE TOYOTA,
PARAMOUNT CHEVROLET GEO, INC.,
CENTURY CHEVROLET GEO, INC.
ALAN V. YOUNG,
WILLIAM A. YOUNG,
JENNIFER Y. TAGGART,
CATHY Y. DYER,
YOUNG/AVY II IRREVOCABLE TRUST
U/A DATED 12/31/96 FBO LARA A. YOUNG,
YOUNG/AVY II IRREVOCABLE TRUST
U/A DATED 12/31/96 FBO COURTNEY E. YOUNG,
YOUNG/AVY II IRREVOCABLE TRUST
U/A DATED 12/31/96 FBO DANIEL A. YOUNG
YOUNG/WAY II IRREVOCABLE TRUST
U/A DATED 12/31/96
YOUNG/TAGGART II IRREVOCABLE TRUST
U/A DATED 12/31/96 FBO WILLIAM E. TAGGART
YOUNG/TAGGART II IRREVOCABLE TRUST
U/A DATED 12/31/96 FBO MARY K. TAGGART
YOUNG/DYER II IRREVOCABLE TRUST
U/A DATED 12/31/96
SHIRLEY J. YOUNG IRREVOCABLE GRAT TRUST
U/A DATED 3/1/97
AND
DAN E. YOUNG IRREVOCABLE GRAT TRUST
U/A DATED 3/1/97
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1 THE MERGERS.................................................. 2
1.1 Certain Definitions............................................. 2
1.2 Surviving Corporation........................................... 5
1.3 Certificate of Incorporation.................................... 6
1.4 Bylaws.......................................................... 6
1.5 Directors and Officers.......................................... 6
1.6 Closing......................................................... 6
1.7 Effective Time.................................................. 7
1.8 Conversion of Companies' Stock.................................. 7
1.9 Treasury Stock.................................................. 7
1.10 Fractional Shares............................................... 7
1.11 Exchange of Companies' Stock.................................... 7
1.12 Stock Price Adjustment.......................................... 8
1.13 Leases.......................................................... 9
1.14 Registration Rights Agreement................................... 9
1.15 Net Worth Adjustment............................................ 9
1.16 Capital Loans................................................... 11
1.17 Distributions Prior to Closing.................................. 12
1.18 Satisfaction of Related Party Loans............................. 12
1.19 Effective Date.................................................. 12
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANIES AND THE
STOCKHOLDERS................................................. 12
2.1 Organization and Good Standing.................................. 13
2.2 Subsidiaries.................................................... 13
2.3 Capitalization.................................................. 13
2.4 Authority; Approvals and Consents............................... 14
2.5 Financial Statements............................................ 15
2.6 Absence of Undisclosed Liabilities.............................. 15
2.7 Absence of Material Adverse Effect; Conduct of Business......... 16
2.8 Taxes........................................................... 17
2.9 Legal Matters................................................... 18
2.10 Property........................................................ 19
2.11 Environmental Matters........................................... 20
2.12 Inventories..................................................... 22
2.13 Accounts Receivable............................................. 22
2.14 Insurance....................................................... 22
2.15 Contracts; etc.................................................. 23
2.16 Labor Relations................................................. 23
2.17 Employee Benefit Plans.......................................... 24
2.18 Other Benefit and Compensation Plans or Arrangements............ 27
2.19 Transactions with Insiders...................................... 28
<PAGE>
2.20 Propriety of Past Payments...................................... 28
2.21 Interest in Competitors......................................... 29
2.22 Brokers......................................................... 29
2.23 Accounts........................................................ 29
2.24 Disclosure...................................................... 29
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS........... 30
3.1 Ownership of Shares; Title...................................... 30
3.2 Authority....................................................... 30
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF UAG AND THE MERGER SUBS.... 31
4.1 Organization and Good Standing.................................. 31
4.2 Merger Subs..................................................... 31
4.3 Capitalization.................................................. 32
4.4 SEC Filings..................................................... 32
4.5 Authority; Approvals and Consents............................... 32
4.6 Disclosure...................................................... 33
4.7 Brokers......................................................... 34
4.8 Reorganization Classification; Certain Tax Representations...... 34
ARTICLE 5 COVENANTS AND ADDITIONAL AGREEMENTS.......................... 34
5.1 Access; Confidentiality......................................... 34
5.2 Furnishing Information; Announcements........................... 36
5.3 Antitrust Improvements Act Compliance........................... 36
5.4 Certain Changes and Conduct of Business......................... 36
5.5 No Intercompany Payables or Receivables......................... 39
5.6 Negotiations.................................................... 40
5.7 Consents; Cooperation........................................... 40
5.8 Additional Agreements........................................... 41
5.9 Interim Financial Statements.................................... 41
5.10 Notification of Certain Matters................................. 41
5.11 Assurance by the Stockholders................................... 42
5.12 Stockholder Vote; No Appraisal Rights........................... 42
5.13 Non-Interference................................................ 42
5.14 Personal Guarantees............................................. 42
5.15 Distributions................................................... 43
5.16 Taxes........................................................... 43
5.17 Continuity of Stockholder Interest.............................. 44
<PAGE>
ARTICLE 6 CONDITIONS TO THE OBLIGATIONS OF UAG AND THE MERGER SUBS
TO EFFECT THE CLOSING........................................ 44
6.1 Representations and Warranties; Agreements; Covenants........... 44
6.2 Authorization; Consents......................................... 44
6.3 Opinions of the Companies' and the Stockholders' Counsel........ 45
6.4 Absence of Litigation........................................... 45
6.5 No Material Adverse Effect...................................... 45
6.6 Net Worth....................................................... 45
6.7 Completion of Due Diligence..................................... 46
6.8 Board Approval.................................................. 46
6.9 Certificates.................................................... 46
6.10 Legal Matters................................................... 46
6.11 Approval of Manufacturers and Distributors...................... 46
6.12 Environmental Laws.............................................. 47
6.13 Nondisturbance Agreements/Estoppel Certificates................. 47
6.14 Title Insurance................................................. 47
6.15 Schedules....................................................... 47
6.16 Lease Termination Agreements/Memoranda of Lease................. 47
6.17 Employment Agreements........................................... 47
6.18 Leases.......................................................... 47
6.19 Resignation of the Companies' Directors......................... 47
6.20 Acquisition of Other Companies.................................. 48
6.21 Joint Venture Agreement......................................... 48
ARTICLE 7 CONDITIONS TO THE OBLIGATIONS OF THE COMPANIES AND THE
STOCKHOLDERS TO EFFECT THE CLOSING........................... 48
7.1 Representations and Warranties; Agreements...................... 48
7.2 Authorization of the Agreement, Consents........................ 48
7.3 Opinions of UAG's and the Merger Subs' Counsel.................. 49
7.4 Absence of Litigation........................................... 49
7.5 Satisfaction of Conditions...................................... 49
7.6 Legal Matters................................................... 49
7.7 Employment Agreement............................................ 49
7.8 Lease........................................................... 50
7.9 Approval of Manufacturers and Distributors...................... 50
7.10 Acquisition of Other Companies.................................. 50
7.11 No Material Adverse Effect...................................... 50
7.12 Schedules....................................................... 50
7.13 Joint Venture Agreement......................................... 50
7.14 Certified Board Resolutions..................................... 50
ARTICLE 8 TERMINATION.................................................. 51
8.1 Termination..................................................... 51
8.2 Effect of Termination........................................... 51
<PAGE>
ARTICLE 9 INDEMNIFICATION.............................................. 52
9.1 Indemnification by the Stockholders............................. 52
9.2 Indemnification by UAG.......................................... 53
9.3 Procedures...................................................... 54
9.4 Offset.......................................................... 56
9.5 Exclusive Monetary Remedy for Breach............................ 56
ARTICLE 10 MISCELLANEOUS ............................................... 56
10.1 Survival of Provisions.......................................... 56
10.2 [Intentionally Omitted]......................................... 57
10.3 Headings........................................................ 57
10.4 Notices......................................................... 57
10.5 Assignment...................................................... 59
10.6 Entire Agreement................................................ 59
10.7 Waiver and Amendments........................................... 59
10.8 Counterparts.................................................... 59
10.9 Accounting Terms................................................ 60
10.10 [Intentionally Omitted] ........................................ 60
10.11 Severability ................................................... 60
10.12 [Intentionally Omitted] ........................................ 60
10.13 Governing Law .................................................. 60
10.14 Time is of the Essence ......................................... 60
10.15 Attorneys' Fees ................................................ 60
10.16 Limitation on Liability of Each Trustee ........................ 61
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of
September 25, 1997, is between and among United Auto Group, Inc., a Delaware
corporation ("UAG"), UAG Kissimmee Motors, Inc., a Delaware corporation ("UAG
Kissimmee"), UAG Paramount Motors, Inc., a Delaware corporation ("UAG
Paramount"), UAG Century Motors, Inc., a Delaware corporation ("UAG Century"
and, together with UAG Kissimmee and UAG Paramount, the "Merger Subs" and
individually, a "Merger Sub"), Kissimmee Motors, Inc., d/b/a Kissimmee Toyota,
an Indiana corporation ("Kissimmee Toyota"), Paramount Chevrolet Geo, Inc., an
Indiana corporation ("Paramount"), Century Chevrolet Geo, Inc., a Indiana
corporation ("Century" and, together with Kissimmee Toyota and Paramount, the
"Companies"), Alan V. Young, an individual resident of the state of Indiana
("A. Young"), William A. Young, an individual resident of the state of Indiana
("W. Young"), Jennifer Y. Taggart, an individual resident of the state of
Indiana ("Taggart"), Cathy Y. Dyer, an individual resident of the state of
Indiana ("Dyer"), Young/AVY II Irrevocable Trust u/a dated 12/31/96 fbo Lara A.
Young (the "L. Young Trust"), Young/AVY II Irrevocable Trust u/a dated 12/31/96
fbo Courtney E. Young (the "C. Young Trust"), Young/AVY II Irrevocable Trust
u/a dated 12/31/96 fbo Daniel A. Young (the "D. Young Trust"), Young/Way II
Irrevocable Trust u/a dated 12/31/96 (the "Young/Way Trust"), Young/Taggart II
Irrevocable Trust u/a dated 12/31/96 fbo William E. Taggart (the "W. Taggart
Trust"), Young/Taggart II Irrevocable Trust u/a dated 12/31/96 fbo Mary K.
Taggart (the "M. Taggart Trust"), Young/Dyer II Irrevocable Trust u/a dated
12/31/96 (the "Young/Dyer Trust"), Shirley J. Young Irrevocable GRAT Trust u/a
dated 3/1/97 (the "Shirley Young Trust") and Dan E. Young Irrevocable GRAT
Trust u/a dated 3/1/97 (the "Dan Young Trust and, together with A. Young, W.
Young, Taggart, Dyer, L. Young Trust, C. Young Trust, D. Young Trust, Young/Way
Trust, W. Taggart Trust, M. Taggart Trust, Young/Dyer Trust and Shirley Young
Trust, the "Stockholders").
W I T N E S S E T H:
WHEREAS, the Companies operate automobile dealerships and related
businesses in North Carolina, Illinois and Florida;
WHEREAS, the Stockholders own one hundred percent (100%) of the issued
and outstanding shares of capital stock of Kissimmee Toyota (the "Kissimmee
Shares");
WHEREAS, the Stockholders own one hundred percent (100%) of the issued
and outstanding capital stock of Century (the "Century Shares");
WHEREAS, the Stockholders own one hundred percent (100%) of the issued
and outstanding shares of capital stock of Paramount (the "Paramount Shares"
and, together with the Kissimmee Shares and the Century Shares, the "Shares");
WHEREAS, UAG owns all of the issued and outstanding capital stock of
each of the Merger Subs;
<PAGE>
WHEREAS, each of the respective Stockholders of each of the Companies
has approved this Agreement, and the transactions contemplated hereby, pursuant
to action taken by unanimous written consent in accordance with the
requirements of applicable law and the articles or certificate of incorporation
and the bylaws of each such Company; and
WHEREAS, UAG desires to acquire by merger the businesses of the
Companies upon the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto hereby agree as follows:
ARTICLE 1
THE MERGERS
1.1 CERTAIN DEFINITIONS.
As used in this Agreement, the following terms shall have the
following meanings:
(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 or her spouse,
issue, parents, siblings, estate, any Affiliate of such person and any trust
for the benefit of his or her spouse, parents and/or siblings.
(b) "Business Day" shall mean any day excluding Saturday, Sunday and
any day which is a legal holiday under Federal law.
(c) "CERCLA" shall mean the Comprehensive Environmental Response
Compensation and Liability Act of 1980 (42 U.S.C. 9601 et seq.), as amended by
Superfund Amendments and Reauthorization Act of 1986 (Pub. L. 99-499, 100
State, 1613), as amended.
(d) "Claim" shall mean any claim, action, suit, litigation,
investigation, inquiry, review or proceeding of any kind.
(e) "Closing Date" shall have the meaning ascribed to it in Section
1.6.
(f) "Closing Date Balance Sheet" shall have the meaning ascribed to it
in Section 1.15.
(g) "Code" shall mean the Internal Revenue Code of 1986, as amended
(the "Code").
2
<PAGE>
(h) "Company Agreement" shall mean any mortgage, indenture note,
agreement, contract, lease, license, franchise, obligation, instrument or other
binding commitment of any kind, whether written or oral, (including all leases
and other agreements referred to on Schedule 2.10 hereto) to which any of the
Companies is a party or by which any of the Companies or any of their assets or
properties (including the owned Real Property and the owned Improvements) may
be bound or affected, including all amendments, modifications, extensions or
renewals of any of the foregoing.
(i) "Company Financial Statements" shall have the meaning ascribed to
it in Section 2.5.
(j) "Costs" shall mean all liabilities, losses, costs, damages,
expenses and claims, including reasonable attorneys' fees, experts' fees and
consultants' fees.
(k) "Dealerships" shall mean the Companies and Dan Young Chevrolet,
Inc., an Indiana corporation, Dan Young, Inc., an Indiana corporation, Young
Management Group, Inc., an Indiana corporation and Parkway Chevrolet, Inc., an
Indiana corporation.
(l) "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, release, presence,
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 amended and as in effect
from time to time (including without limitation the following statutes and all
regulations thereunder as amended and in effect from time to time: CERCLA,
RCRA, OSHA, and HMTA).
(m) "Environmental Permits" shall mean all permits, licenses,
approvals, authorizations, consents or registrations required under applicable
Environmental Laws in connection with the ownership, use and/or operation of
the Companies' businesses or the Real Property or Improvements.
(n) "GAAP" shall mean generally accepted accounting principles which
are in effect in the United States from time to time.
(o) "H-S-R Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
3
<PAGE>
(p) "HMTA" shall mean the Hazardous Materials Transportation Act, as
amended (49 U.S.C. Section 1801 et seq.)
(q) "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," "extremely hazardous substances," "toxic pollutants,"
"contaminants," "pollutants" or similar terms in or pursuant to, without
limitation, CERCLA, RCRA, OSHA, 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) lead-based paint, (D)
polychlorinated biphenyls, (E) 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), (F) flammable explosives, (G) 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.
(r) "Knowledge" (regardless of whether capitalized) shall mean, with
respect to any Stockholder, that the Stockholder knew (after reasonable
inquiry) of the particular matter referred to; with respect to any of the
Companies, that Anderson, W. Young, A. Young, Tom Schmitt or any person
responsible for overseeing the day-to-day operations of such Company, the
general manager and the office manager (or any person with similar such
responsibilities regardless of title) knew (after reasonable inquiry) of the
particular matter referred to; and with respect to UAG or the Merger Subs that
the Chief Executive Officer, President or any Vice President of UAG or the
Merger Subs knew (after reasonable inquiry) of the particular matter referred
to.
(s) "Legal Requirements" shall mean any and all laws, ordinances,
codes, rules, regulations and other requirements of all governmental,
administrative or judicial entities.
(t) "Liens" shall mean any mortgages, pledges, title defects or
objections, liens, claims, security interests, prior assignments, conditional
and installment sale agreements or encumbrances of any kind.
(u) "Material Adverse Effect" shall mean, with respect to the
Companies, any material adverse change in, or material adverse effect on, the
business, operations, assets, operating results or financial condition of the
Companies, taken as a whole; and, with respect to UAG, any material adverse
change in, or material adverse effect on, the business, operations, assets,
operating results or financial condition of UAG.
4
<PAGE>
(v) "OSHA" shall mean the Occupational Safety and Health Act of 1970
as amended (29 U.S.C. Section 651 et seq.).
(w) "Person" shall mean and include an individual, corporation,
partnership, limited liability company, joint venture, association, trust, any
other incorporated or unincorporated organization or entity and a governmental
entity or any department or agency thereof.
(x) "RCRA" shall mean the Resource Conservation and Recovery Act of
1976 (42 U.S.C. Section 6901 et seq.).
(y) "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
any Environmental Law or (v) take corrective action under sections 3004(u),
3004(v) or 3008(h) of RCRA or analogous state law.
(z) "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.
(aa) "Trusts" shall mean the L. Young Trust, C. Young Trust, D. Young
Trust, Young/Way Trust, W. Taggart Trust, M. Taggart Trust, Young/Dyer Trust,
Shirley Young Trust and Dan Young Trust.
(bb) "UAG Common Stock" shall mean the shares of common stock, par
value $.0001 per share of UAG.
(cc) "UAG Market Value" shall mean the arithmetic average of the daily
closing price per share of UAG Common Stock, rounded to four decimal places, as
reported on the New York Stock Exchange Composite Tape for each of the ten (10)
consecutive trading days ending (and including) the trading day that occurs one
trading day prior to the date on which the UAG Market Value is to be
determined.
1.2 SURVIVING CORPORATION.
Subject to the terms and conditions of this Agreement, the Indiana
Business Corporation Law (the "IBCL") and the Delaware General Corporation Law
(the "DGCL"), at the Effective Time (as defined in Section 1.7), Kissimmee
Toyota shall be merged with and into UAG Kissimmee (the "Toyota Merger"),
Paramount shall be merged with and into UAG Paramount (the "Paramount Merger")
and Century shall be merged with and into UAG Century (the "Century Merger"
and, together with the Toyota Merger and the Paramount Merger, the
5
<PAGE>
"Mergers") and the separate corporate existences of Kissimmee Toyota, Paramount
and Century shall cease. UAG Kissimmee, UAG Paramount and UAG Century shall be
the surviving corporations in the Mergers (hereinafter sometimes referred to as
the "Surviving Corporations") and shall continue their corporate existences
under the laws of the State of Delaware.
1.3 CERTIFICATE OF INCORPORATION.
The certificate of incorporation of the respective Merger Subs shall
be the certificate of incorporation of the respective Surviving Corporations
until thereafter duly amended in accordance with their terms and the DGCL.
1.4 BYLAWS.
The bylaws of the respective Merger Subs shall be the bylaws of the
respective Surviving Corporations until thereafter duly amended in accordance
with their terms and the DGCL.
1.5 DIRECTORS AND OFFICERS.
The directors of the respective Surviving Corporations shall consist
of the persons who are the directors of the Merger Subs immediately prior to
the Effective Time, such directors to hold office from the Effective Time until
their respective successors are duly elected and qualified. The officers of the
respective Surviving Corporations shall be the officers of the respective
Merger Subs immediately prior to the Effective Time, such officers to hold
office from the Effective Time until their respective successors are duly
elected and qualified.
1.6 CLOSING.
(a) The Closing shall take place on or before November 30, 1997 at a
time and place to be agreed to by the parties; provided, however, that UAG or
the Stockholders may extend the Closing Date for a period of thirty (30) days
by giving notice to the other party prior to November 30, 1997. The date on
which the Closing occurs is herein referred to as the "Closing Date". If, on or
before the Closing Date, all of the conditions set forth herein shall have been
fulfilled or waived in accordance with the terms hereof and this Agreement
shall not have been terminated in accordance with Article 8, then the Mergers
shall be consummated (the "Merger Closings") on the Closing Date.
(b) Subject to the conditions set forth in this Agreement, at the time
of the Merger Closings the Stockholders shall execute and deliver to UAG
certificates representing the Kissimmee Shares, the Paramount Shares and the
Century Shares, duly endorsed in blank, or with separate notarized stock powers
attached thereto and signed in blank, free and clear of all Liens, security
interests, claims, restrictions, and any other encumbrances whatsoever, in
exchange for the delivery by UAG to the Stockholders of certificates
representing UAG Common Stock and cash as set forth in Sections 1.8-1.11
hereof.
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1.7 EFFECTIVE TIME.
At the time of the Merger Closings as determined in accordance with
Section 1.6, the parties hereto shall cause certificates of merger meeting the
requirements of the DGCL and articles of merger meeting the requirements of the
IBCL (collectively, the "Merger Certificates") to be properly executed and
filed with the Secretaries of State of the States of Indiana and Delaware, as
applicable. The Mergers shall become effective at the time specified in each of
the Merger Certificates, which shall be on the date of the Merger Closings as
determined pursuant to Section 1.6. The date and time when the Mergers become
effective is hereinafter referred to as the "Effective Time".
1.8 CONVERSION OF COMPANIES' STOCK.
As of the Effective Time, by virtue of the Mergers and without any
action on the part of any holder thereof all of the Shares issued and
outstanding immediately prior to the Effective Time shall be converted into the
right to receive (i) shares of UAG Common Stock having an aggregate UAG Market
Value on the date hereof equal to Twenty-Five Million Dollars ($25,000,000)
(the "UAG Shares"); and (ii) cash in the aggregate amount of Two Million Six
Hundred Thirty-One Thousand Three Hundred Seventy-Seven Dollars ($2,631,377)
less the amount of the Assumed Loans (as defined in Section 1.18).
1.9 TREASURY STOCK.
Each share of the Companies' stock issued and outstanding immediately
prior to the Effective Time that is then held in the treasury of any of the
Companies shall be retired, without any conversion thereof or payment of any
consideration therefor.
1.10 FRACTIONAL SHARES.
No scrip or fractional shares of UAG Common Stock shall be issued in
the Mergers. All shares of UAG Common Stock to which a Stockholder would
otherwise be entitled shall be aggregated. If a fractional share results from
such aggregation, then the number of shares of UAG Common Stock to which such
Stockholder shall be entitled shall be rounded up or down to the nearest whole
share of UAG Common Stock.
1.11 EXCHANGE OF COMPANIES' STOCK.
(a) Exchange. At the time of the Merger Closings, subject to the terms
and conditions hereof, upon surrender by each Stockholder of all certificates
that, immediately prior to the Effective Time, represented shares of the
Companies' stock held by each Stockholder ("Certificates"), UAG shall deliver
to such Stockholder (i) stock certificates (properly issued, executed and
countersigned, as appropriate) bearing the restrictive legend customarily
placed on securities of UAG that have not been registered under applicable
federal and state securities laws and representing the aggregate number of
whole shares of unregistered UAG Common Stock to
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which such Stockholder shall have become entitled as set forth on Schedule 1.11
hereto and (ii) cash, if any, to which such Stockholder shall have become
entitled as set forth on Schedule 1.11. From the Effective Time until surrender
in accordance with the provisions of this Section 1.11, each Certificate shall
represent for all purposes only the right to receive the consideration provided
for herein.
(b) No Transfers After Effective Time. After the Effective Time, there
shall be no transfers on the stock transfer books of the Surviving Corporation
of the shares of Companies' stock that were outstanding immediately prior to
the Effective Time.
1.12 STOCK PRICE ADJUSTMENT.
If, on any Adjustment Date, the UAG Market Value as of such Adjustment
Date is less than Twenty-Four and 0375/100 Dollars ($24.0375) (the amount of
any such deficiency as of an Adjustment Date being referred to herein as the
"Stock Price Deficiency"), then no later than ten (10) Business Days thereafter
and as additional consideration for the stock of the Companies, UAG shall make
a cash payment to each Stockholder equal to the number of the Stockholder's
Transition UAG Shares for such Adjustment Date, multiplied by the Stock Price
Deficiency as of such Adjustment Date. Each such payment shall include (but not
be increased by) interest at the Applicable Federal Rate in accordance with
Section 1274(d) of the Code. For purposes of this Agreement, the following
terms shall have the meanings defined below:
(i) "Adjustment Date" with respect to any Stockholder shall mean
each date on which any additional UAG Shares of the Stockholder become
Unrestricted UAG Shares;
(ii) "Transition UAG Shares" with respect to any Stockholder
shall mean as of any Adjustment Date the portion of the Stockholder's UAG
Shares that first become Unrestricted UAG Shares on such Adjustment Date;
and
(iii) "Unrestricted UAG Shares" with respect to any Stockholder
shall mean as of any date (A) the portion, if any, of such Stockholder's
UAG Shares that have been registered on or before such date pursuant to the
Registration Rights Agreement (as defined in Section 1.14 hereof), plus (B)
the portion, if any, of such Stockholder's other UAG Shares that could have
been or could be sold by the Stockholder on or before such date pursuant to
Rule 144 of the Securities and Exchange Commission,determined for purposes
of this clause (B) as if (1) the maximum number of such Stockholder's other
UAG Shares that could have been sold pursuant to Rule 144 during the three
(3) month period immediately preceding such date (and all prior three (3)
month periods) were in fact sold on the first day of each such three (3)
month period and (2) all of such Stockholder's UAG Shares (other than those
registered pursuant to the Registration Rights Agreement or otherwise
registered with the consent of such Stockholder) are unregistered for
purposes of applying Rule 144. The parties acknowledge that UAG may be
required to make more than one cash payment to a particular Stockholder
pursuant to this Section 1.12 in the event that all of the Stockholder's
UAG Shares as of an Adjustment Date for the Stockholder are not
Unrestricted UAG Shares as of such Adjustment Date, but that in no event
shall UAG be required to make more than one cash payment with respect to
each UAG Share.
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1.13 LEASES.
On the Closing Date, UAG Century shall enter into a lease for the real
property on which it operates in a form mutually acceptable to the parties (the
"Lease"). The Lease shall be for a twenty (20) year term commencing on the
Closing Date and the lessee shall have the option to renew the Lease for two
additional five year terms. The initial monthly lease rate for each Lease shall
be an amount equal to the current lease rate being paid by Century. On the
third anniversary of the Closing Date and every two years thereafter during the
initial term, the lease rate for the Lease shall increase to an amount equal to
the lease rate then in effect plus an amount equal to a percentage of the lease
rate then in effect, which percentage shall be equal to three-fourths (3/4) of
the percentage increase in the Consumer Price Index published from time to time
by the United States Department of Labor ("CPI") for All Urban Consumers (U.S.
City Average) from the time of the last adjustment. UAG will unconditionally
and irrevocably guarantee the obligations of UAG Century under the Lease.
1.14 REGISTRATION RIGHTS AGREEMENT.
At the time of the Merger Closings, UAG and the Stockholders shall
execute a piggyback registration rights agreement in a form to be agreed to by
the parties which agreement shall be subject to any existing contractual rights
of third parties (the "Registration Rights Agreement").
1.15 NET WORTH ADJUSTMENT.
(a) On the Closing Date, or as soon as practicable thereafter (but no
later than 45 days after the Closing Date), the Stockholders shall prepare and
deliver to UAG a combined balance sheet of the Companies as of the close of
business on 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 accordance with GAAP applied on a basis consistent with
the accounting practices and principles set forth on Exhibit "A-1" hereto and
subject to the adjustments set forth on Exhibit "A-2" hereto. At the same time,
the Stockholders shall also prepare and deliver to UAG a schedule of Net Worth
as of the same date (as defined in Section 1.15(g)(iii) hereof ("Schedule of
Net Worth")). In connection with the preparation of the Closing Date Balance
Sheet, the Stockholders and the Companies shall permit the Reviewer (as defined
below) and other representatives of UAG to conduct a physical inventory at each
location where inventory is held by the Companies, and the Stockholders, the
Companies, and their representatives shall be permitted to observe and
participate in such inventory.
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(b) Coopers & Lybrand or such other "big 6" accounting firm (the
"Reviewer") as may be selected by UAG shall audit or otherwise review the
Closing Date Balance Sheet and the Schedule of Net Worth delivered by the
Stockholders to the extent UAG and the Reviewer deem appropriate. Within
seventy-five (75) days after delivery of the Closing Date Balance Sheet and
Schedule of Net Worth, UAG shall deliver a reviewed balance sheet (the
"Reviewed Balance Sheet") and a reviewed schedule of net worth ("Reviewed
Schedule of Net Worth") to the Stockholders. The Reviewed Balance Sheet and the
Reviewed Schedule of Net Worth shall be prepared by UAG with the Reviewer's
assistance in the same manner as is provided in subparagraph (a) above for the
Closing Date Balance Sheet and the Schedule of Net Worth.
(c) 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 to examine the work
papers and schedules prepared by the Stockholders, the Companies and each of
such accountants after the preparation of the Closing Date Balance Sheet and
Schedule of Net Worth. The Stockholders and their representatives shall have
the opportunity to consult with UAG, the Companies and their accountants, the
Reviewer and other representatives and to examine the work papers and schedules
prepared by UAG and the Reviewer after preparation of the Reviewed Balance
Sheet and the Reviewed Schedule of Net Worth.
(d) The Stockholders shall have a period of forty-five (45) days after
delivery of the Reviewed Balance Sheet and the Reviewed Schedule of Net Worth
to present in writing to UAG all objections the Stockholders may have to any of
the matters set forth or reflected therein, which objections shall be set forth
in reasonable detail. If no objections are raised within such 45-day period,
the Reviewed Balance Sheet and Reviewed Schedule of Net Worth shall be deemed
accepted and approved by the Stockholders, in which event the net worth
reflected on the Reviewed Schedule of Net Worth shall be deemed the Final Net
Worth. If the Stockholders shall raise any objection within such 45-day period,
UAG and the Stockholders shall attempt to resolve the matter or matters in
dispute and, if resolved, the net worth agreed upon in writing by UAG and the
Stockholders shall be deemed the Final Net Worth.
(e) If such dispute cannot be resolved by UAG and the Stockholders
within sixty (60) days after the delivery of the Reviewed Balance Sheet and
Reviewed Schedule of Net Worth, then the specific matters in dispute shall be
submitted to a firm of independent public accountants mutually acceptable to
UAG and the Stockholders (or if agreement is not reached on such firm within
five (5) Business Days, a "big 6" accounting firm selected by lot after
excluding one firm designated by UAG and one firm designated by the
Stockholders provided that such firm has not previously been retained by UAG or
the Stockholders), which firm shall make a final and binding determination of
the Net Worth of the Companies as of the close of business on the Closing Date
in accordance with the provisions of this Section 1.15, which determination
shall be deemed the Final Net Worth. UAG and the Stockholders shall inform such
firm in writing as to their respective positions concerning the specific
matters in dispute, and shall make readily available to such firm any books,
records and work papers relevant to
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such firm's resolution of the disputed matters. Such accounting firm shall send
its written determination to UAG and the Stockholders. The fees and expenses of
the accounting firm referred to in this Section 1.15(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 1.15(e) hereof in order that
any and all matters in dispute shall be resolved as soon as practicable.
(g) (i) If the Final Net Worth as determined through the operation of
Sections 1.15(a) through (e) hereof shall be less than the amount of the
Net Worth as of July 31, 1997 as set forth on Schedule 1.15(g)(i) (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
(as defined below), by wire transfer of immediately available funds to an
account designated in writing by UAG at least two (2) Business Days prior
to the date of the Supplemental Closing, an amount equal to the Net Worth
Deficiency.
(ii) If the Final Net Worth shall be more than the amount of the
Net Worth as of July 31, 1997 as set forth on Schedule 1.15(g)(i) (the
amount of any such excess being referred to herein as the "Net Worth
Excess"), the Merger Subs 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.
(iii) "Net Worth" shall mean, as of any date, the total of all
assets minus the total of all liabilities that would be shown on the
combined balance sheet of the Companies as of the close of business on such
date prepared in accordance with GAAP applied on a basis consistent with
the accounting practices and principles set forth on Exhibit "A-1" hereto,
and subject to the adjustments set forth on Exhibit "A-2" and Schedule
1.15(g)(iii) hereto.
(iv) A supplemental closing (the "Supplemental Closing") shall
take place for purposes of this subparagraph (g) within five (5) Business
Days after the Final Net Worth is determined.
1.16 CAPITAL LOANS.
On or before the Closing Date, the Stockholders shall pay the
outstanding principal and all accrued but unpaid interest on the loans set
forth on Schedule 1.16 hereof (the "Capital Loans") in full satisfaction of the
Companies' obligations arising out of or relating to the Capital Loans. If the
Companies, or any of them, have any liabilities or obligations relating
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to the Capital Loans as of the Closing, then the Base Price shall be reduced by
an amount equal to any remaining outstanding principal and all accrued but
unpaid interest on the Capital Loans as of such time unless such loans are paid
by the Stockholders at the Closing.
1.17 DISTRIBUTIONS PRIOR TO CLOSING.
Prior to the Closing Date, (a) the Companies shall declare cash
dividends to their respective Stockholders in the aggregate amount of Two
Million Two Hundred Fifty Thousand Dollars ($2,250,000) which dividends
include, but are not limited to, undistributed retained earnings of the
Companies from January 1, 1997 through July 31, 1997 and which dividends shall
be paid (on or before the Closing Date) from the Companies as set forth on
Schedule 1.17 hereto; (b) the Companies shall declare dividends to their
respective Stockholders in an amount equal to the estimated net income of the
Companies from August 1, 1997 through the Closing Date which dividends shall be
paid in cash on or before the Closing Date; (c) Kissimmee Toyota shall assign
to its Stockholders all of its rights under its Third Party Lease (as defined
in Section 2.10 hereof) to acquire fee simple title to the Real Property leased
thereunder and (d) Paramount shall assign to its Stockholders all of its rights
under its Third Party Lease to acquire fee simple title to the Real Property
leased thereunder.
1.18 SATISFACTION OF RELATED PARTY LOANS.
On the Closing Date, UAG shall make funds available to the Companies
in an aggregate amount equal to the unpaid balances as of the Closing Date of
the obligations of the Companies set forth on Exhibit "B" hereof (such
obligations being referred to herein as the "Assumed Loans"); which funds shall
be made available from one or more of the following sources: (i) a capital
contribution from Sub, (ii) a loan from UAG or one of its Affiliates or (iii)
additional borrowing by the Companies secured by their respective inventory.
These additional funds shall be used on the Closing Date to satisfy in full the
obligations of the Companies arising out of or relating to the Assumed Loans.
The Companies shall make all principal payments with respect to the Assumed
Loans from the date hereof through the Closing Date in the ordinary course of
business consistent with past practice and shall pay interest on the Assumed
Loans prior to the Closing Date.
1.19 EFFECTIVE DATE.
The obligations of the parties hereunder shall not take effect until
the date (the "Effective Date") on which the parties have notified each of the
Companies' manufacturers of the proposed transfer of ownership of the Companies
as contemplated by this Agreement. The parties agree to cooperate in giving
such notice to each of the Companies' manufacturers no later than five (5)
Business Days after the date hereof.
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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 twenty-five (25) Business Days after the
date hereof, the Companies and the Stockholders hereby jointly and severally
represent and warrant to UAG and the Merger Subs as follows:
2.1 ORGANIZATION AND GOOD STANDING.
(a) Each of the Companies is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has the corporate power and authority to own, lease and
operate the properties used in its businesses and to carry on its business as
now being conducted.
(b) 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. 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.
(c) Attached to Schedule 2.1 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 on Schedule 2.2 hereto, the Companies do not have
any interest or investment in any Person.
2.3 CAPITALIZATION.
The authorized stock of each 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 of 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 (other than options that will be terminated prior to Closing),
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
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or rights, except as set forth on Schedule 2.3 hereto. 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 (such documents, other than
the Leases, herein referred to as 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) The execution, delivery and performance by each of the Companies
and the Stockholders 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, except as set forth on Schedule 2.4:
(i) contravene any provisions of the Articles of Incorporation or
Bylaws (including any comparable governing instrument with a different
name) of any of the Companies;
(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 material Company Agreement
or require any consent or waiver of any party to any material Company
Agreement;
(iii) result in the creation of any security interest upon, or
any person obtaining any right to acquire, any properties, assets or rights
of any of the Companies (other than the rights of UAG to acquire the Shares
pursuant to this Agreement);
(iv) violate or conflict with any Legal Requirements applicable
to any of the Companies or any of their respective businesses or
properties; or
(v) require any authorization, consent, order, permit or approval
of, or notice to, or filing, registration or qualification with, any
governmental, administrative or judicial authority, except in connection
with or in compliance with the provisions of the H-S-R Act.
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Except as set forth or referred to above, no authorization, consent, order,
permit or approval of, or notice to, or filing, registration or qualification
with, any governmental, administrative or judicial authority is necessary to be
obtained or made by the 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.
(a) Attached as Schedule 2.5(a) are true and complete copies of the
combined balance sheets of the Dealerships (except Kissimmee Toyota) as of
December 31, 1996 and December 31, 1995, and related combined statements of
operations, changes in stockholders' equity and cash flows for each of the
years in the three-year period ended December 31, 1996, together with the notes
thereto and the audit report of independent certified public accountants (the
"Company Financial Statements"). The Company Financial Statements are
consistent with and in accordance with the books and records of the Dealerships
(except Kissimmee Toyota), fairly present the financial position, results of
operations, changes in stockholders' equity and cash flows of the Dealerships
(except Kissimmee Toyota) as of the dates and for the periods indicated in
conformity with GAAP consistently applied during such periods, and can be
reconciled with the financial statements and the financial records maintained
and the accounting methods applied by the Dealerships (except Kissimmee Toyota)
for federal income tax purposes.
(b) Attached as Schedule 2.5(b) is the unaudited combined balance
sheet of the Companies as of July 31, 1997 (the "Company Balance Sheet"). The
Company Balance Sheet has been prepared in accordance with GAAP applied on a
basis consistent with the accounting practices and principles set forth on
Exhibit "A-1" and subject to the adjustments on Exhibit "A-2".
(c) Attached as Schedule 2.5(c) are the monthly and year-to-date
financial statements of the Companies provided to each of the manufacturers as
of and for the periods ended July 31, 1997 and August 31, 1997 (each a "Company
Factory Statement" and collectively the "Company Factory Statements"). Each
Company Factory Statement has been prepared on a basis consistent with the
financial statements previously delivered to the applicable manufacturer by
such Company.
Subject to normal year-end adjustments, the books and accounts of the Companies
are complete and correct in all material respects and reflect all of the
transactions, items of income and expense and all assets and liabilities of the
businesses of the Companies, except where the failure to so reflect any such
items would not be material (either individually or in the aggregate) to the
Company with respect to which such item relates.
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2.6 ABSENCE OF UNDISCLOSED LIABILITIES.
The Companies do not have any liabilities 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) obligations and liabilities (other than for breach) under any Company
Agreement set forth on Schedule 2.15 hereto or under any Company Agreement
which is not required to be disclosed on such Schedule, (ii) liabilities
reflected or reserved against on the Company Balance Sheet or included or
described in the Notes to the Company Financial Statements, (iii) liabilities
incurred in the ordinary course of business and consistent with past practice
after July 31, 1997 which, individually and in the aggregate, do not have, and
cannot reasonably be expected to have, a Material Adverse Effect, (iv)
liabilities disclosed on Schedule 2.6 hereto, and (v) liabilities of a Company
not excepted in (i) through (iv) above which, individually and in the
aggregate, are not material to such Company.
2.7 ABSENCE OF MATERIAL ADVERSE EFFECT; CONDUCT OF BUSINESS.
(a) Except as set forth on Schedule 2.7(a) hereto or as expressly
permitted herein, since December 31, 1996, each Company has operated in the
ordinary course of business consistent with past practice and there has not
been:
(i) any change in the assets, properties, business, operations,
prospects, net income or financial condition of any of the Companies, and
to the Stockholders' and the Companies' knowledge, no factor, event,
condition, circumstance or prospective development exists (other than those
generally affecting the economy and the retail automobile business in each
Company's market) which has had, or can reasonably be expected to have, a
Material Adverse Effect;
(ii) any material loss, damage, destruction or other casualty to
the property or other assets of any of the Companies, whether or not
covered by insurance;
(iii) any change in any method of accounting or accounting
practice of any of the Companies; or
(iv) any loss of the employment, services or benefits of any
general manager, office manager or any other key employee.
(b) Since December 31, 1996, except as set forth in Schedule 2.7(b)
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;
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(ii) failed to discharge or satisfy any lien or pay or satisfy
any obligation or liability when due (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 security interests granted in the
ordinary course of business consistent with past practice and mechanics
liens and liens for taxes not yet due and payable;
(iv) sold or transferred any assets or canceled any debts or
claims or waived any rights, except in the ordinary course of business
consistent with past practice;
(v) defaulted on and not cured 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 other than (A)
such write-downs and write-offs on or before July 31, 1997 that are
reflected in the Company Financial Statements or the Company Balance Sheet,
and (B) such write-downs and write-offs after July 31, 1997 that will be
reflected on the Closing Date Balance Sheet;
(viii) granted any increase in the compensation or benefits of
employees other than increases in accordance with past practice not
exceeding 15% and one-time bonuses to certain employees in connection with
the transactions contemplated by this Agreement which bonuses shall be
reflected on the Closing Date Balance Sheet or entered into any employment
or severance agreement or arrangement with any of them;
(ix) made any individual capital expenditure in excess of
$50,000, or aggregate capital expenditures in excess of $500,000, or
additions to property, plant and equipment other than ordinary repairs and
maintenance;
(x) discontinued any franchise or the sale of any material
products or material product line or program;
(xi) incurred any obligation or liability for the payment of
severance benefits; or
(xii) entered into any agreement or made any commitment to take
any action that, if taken, would cause any of the foregoing warranties in
this Section 2.7(b) to be untrue.
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2.8 TAXES.
The Companies have each made a valid election pursuant to Section
1362(a) of the Code, to be an "S Corporation" within the meaning of Section
1361(a)(1) of the Code and have continued to qualify as such for all taxable
years since their formation and will continue to so qualify until consummation
of the transactions contemplated hereby. No Company has acquired assets of
another corporation in a transaction described in Section 381(a) of the Code
and no Company has any "net unrealized built-in gain" on which the tax imposed
pursuant to Section 1374 of the Code could be imposed upon recognition thereof,
except (in each case) as disclosed in Schedule 2.8(a) hereto. 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 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. Copies of all tax
returns for the fiscal years ended since December 31, 1992 will be furnished or
made available to UAG or its representatives and such copies are accurate and
complete as of the date hereof. The Companies will also furnish to UAG correct
and complete copies of all material notices and correspondence sent or received
since December 31, 1994 by the Companies to or from any federal, state or local
tax authorities. Except with respect to any "net unrealized built-in gain" set
forth on Schedule 2.8(a) hereof, (i) the Companies shall have adequately
reserved for the payment of all Taxes with respect to periods ended on or prior
to the Closing Date for which tax returns have not yet been filed, (ii) except
to the extent reserves therefor are reflected on the Company Balance Sheet, or
will be reflected on the Closing Date Balance Sheet, the Companies are not
liable, or will not become liable, for any Taxes for any period ending on or
prior to the Closing Date and (iii) 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 as set forth on
Schedule 2.8(b) hereto, the Companies have not been subject to a federal or
state tax audit of any kind since December 31, 1992, and no adjustment has been
proposed by the Internal Revenue Service ("IRS") with respect to any return for
any prior or subsequent year. With respect to the audits referred to on
Schedule 2.8(b) hereto and except as indicated thereon, no such audit has
resulted in an adjustment in excess of $25,000. Neither the Companies nor the
Stockholders has knowledge of any basis for an assertion of a deficiency for
Taxes against the Companies. The Stockholders will cooperate, and will cause
their respective Affiliates to cooperate, with the Companies as reasonably
requested by UAG 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 pending against, or, to the knowledge of the Companies or the
Stockholders, threatened against or
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affecting, the Companies, any ERISA Plan (as defined in Section 2.17(a) hereof)
or any of their properties or rights before or by any court, arbitrator, panel,
agency or other governmental, administrative or judicial entity, domestic or
foreign, (ii) nor is any basis known to the Stockholders or the Companies for
any such Claims which would be material individually or in the aggregate to any
Company, and (iii) 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. Schedule 2.9(a)
hereto identifies each Claim and Judgment disclosed thereon which is fully
covered by an insurance policy.
(b) Except as set forth on Schedule 2.9(b), the business of the
Companies is being conducted in compliance with all Legal Requirements
applicable to the Companies or their business or properties. The Companies
hold, and are 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 Companies own or hold all Permits material to the conduct of
their 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) Set forth on Schedule 2.10(a) hereto is a list of all interests in
real property owned by or leased to the Companies, including all real property
owned 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"). With respect to any
leased Real Property owned by the Stockholders or their Affiliates, there are
no defaults by either party under and no state of facts exist which with the
giving of notice or the passage of time, or both, would constitute a default
under such leases. Except as set forth on Schedule 2.10(a), with respect to any
leased Real Property not owned by the Stockholders or any of their Affiliates
(the "Third Party Leases"), neither the Companies nor the Stockholders have (i)
knowledge of any defaults under such leases, (ii) received notice of any
defaults by any parties under such leases or (iii) any knowledge of any state
of facts which with the giving of notice or the passage of time, or both, would
constitute a default under such leases. True and correct copies of all leases
relating to the Real Property, together with any amendments and modifications
thereto, are attached as Schedule 2.10(b).
(b) Except as set forth on Schedule 2.10(b), (i) to the knowledge of
the Stockholders and the Companies all improvements to the Real Property
("Improvements") and all machinery, equipment and other tangible property owned
or used by or leased to the Companies are fit for the particular purposes for
which they are used by the Companies, (ii) such tangible properties and all
Improvements owned or leased by the Companies conform in all material respects
with all applicable Legal Requirements, (iii) to the knowledge of the
Stockholders and the Companies, such Improvements do not encroach in any
respect on property
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of others, (iv) to the knowledge of the Companies and the Stockholders there
are no material latent defects with respect to the Improvements, (v) to the
actual knowledge of the Stockholders and the Companies the Real Property is
currently zoned to permit the conduct of the respective businesses of the
Companies as presently conducted, (vi) no certificate of occupancy issued with
respect to the Improvements contains any materially adverse special conditions
or restrictions, (vii) to the knowledge of the Companies and the Stockholders,
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 and (viii) no written notice
(and, to the knowledge of the Stockholders and the Companies, no 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.
(c) All surveys, title binders, title policies and copies of any
exceptions to title relating to the Real Property or Improvements, copies of
certificates of occupancy with respect to the Improvements, and any written
verification from zoning authorities that the Real Property and Improvements
are currently zoned for the businesses as currently conducted by the Companies
and that any conditions to zoning have been met, which in each case are in the
possession of any Company or any Stockholder, will be furnished to UAG within
twenty-five (25) Business Days after the date hereof.
(d) To the actual knowledge of the Stockholders and the Companies, the
Real Property and Improvements owned by the Stockholders or their Affiliates
are owned in fee simple, free and clear of all Liens, claims and encumbrances,
except those disclosed in Schedule 2.10(d), none of which currently or, to the
knowledge of the Stockholders or their Affiliates, in the future will
materially affect the use of such Real Property or such Improvements for the
conduct of the respective businesses of the Companies as presently conducted.
Except as set forth on Schedule 2.10(d), (i) 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 and (ii) to the knowledge of the Stockholders and the
Companies, 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 such Real Property or Improvements other than pursuant to the existing
leases in favor of the Companies, which are to be terminated at the Closing by
agreement between the parties and pursuant to which the owners shall
acknowledge that there are no defaults under any such leases and that the
Companies have no liability arising out of or relating to such leases.
2.11 ENVIRONMENTAL MATTERS.
(a) Except as set forth on Schedule 2.11(a) hereto, (i) the Companies,
the Real Property, the Improvements and any property formerly owned, occupied
or leased by the Companies are in compliance with all Environmental Laws, (ii)
the Companies have obtained all Environmental Permits, (iii) such Environmental
Permits are in full force and effect, and (iv) the Companies are in compliance
with all terms and conditions of such Environmental Permits.
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(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 event has
occurred with respect to the Real Property, the Improvements or any property
formerly owned, occupied or leased by the Companies, 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 Companies have 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
Companies, the Real Property or any portion thereof, the Improvements or any
property formerly owned, occupied or leased by the Companies, nor, to the
knowledge of the Companies 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, to the knowledge of the Companies or the Stockholders,
migration of any Hazardous Materials on or under the Real Property that could
reasonably be expected to give rise to liability (provided, however, that
certain petroleum products and other Hazardous Materials are stored and handled
on the Real Property in the ordinary course of the Companies' business in
compliance with all Environmental Laws), (ii) none of the Real Property or any
portion thereof, the Improvements or 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 at
such property, and (iii) none of the Real Property, the Improvements or 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.
(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) friable asbestos or asbestos containing
materials, (iii) polychlorinated biphenyls ("PCB") or PCB-containing equipment,
including transformers, (iv) in-ground hydraulic lifts, or (v) to the knowledge
of the Stockholders and the Companies, 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 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 and the Companies, threatened
claim, litigation, or administrative proceeding, or known prior claim,
litigation or administrative proceeding, arising under any Environmental Law
involving the Companies, the Real Property, the Improvements,
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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 the 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) The Stockholders and the Companies will provide to UAG, within
twenty-five (25) Business Days after the date hereof, all environmental studies
and reports in their possession and will advise UAG of any 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 will permit the testing of the soil,
groundwater, building components, tanks, containers and equipment on the Real
Property, and the Improvements, by UAG or UAG's agents or experts as they deem
necessary or appropriate to confirm the condition of such properties, provided
that (i) such testing will not unreasonably interfere with any Company's use of
the Real Property or Improvements in the operation of the business and (ii) UAG
will indemnify the Companies from any damage or loss caused by UAG's
representatives while conducting such testing.
2.12 INVENTORIES.
Except as set forth on Schedule 2.12 and Exhibit "A-1", the values at
which inventories are carried on the Company Financial Statements reflect the
normal inventory valuation policies of the Companies, and such values are in
conformity with GAAP consistently applied. The values at which inventories will
be carried on the Closing Date Balance Sheet will be in accordance with GAAP
applied on a basis consistent with the accounting practices and principles set
forth on Exhibit "A-1" hereto, and subject to the adjustments set forth on
Exhibit "A-2" hereto.
2.13 ACCOUNTS RECEIVABLE.
Except as set forth on Schedule 2.13, all accounts receivable
reflected on the Company Financial Statements are, and all accounts receivable
that will be or will have been reflected on the Closing Date Balance Sheet will
have arisen in the ordinary course of business and are not, and will not be,
subject to any material defenses, setoffs or counterclaims other than (i)
normal cash discounts accrued in the ordinary course of business and (ii) any
allowances for bad debts reflected on such statements.
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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 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 underwritten by
financially secure insurers, and are sufficient for all applicable requirements
of law. 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.
Set forth on Schedule 2.15 hereto is a complete and accurate list of
each Company Agreement which is material to the business, operations, assets or
financial condition of any 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 or will be delivered or made available to UAG, and the Companies have
provided or will provide 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 Companies
and the Stockholders is, any other party thereto, in breach of or default under
any Company Agreement, and no event has occurred which (after notice or lapse
of time or both) would become a breach or default under, or would permit
modification, cancellation, acceleration or termination of, any Company
Agreement or result in the creation of any Lien upon, or any Person obtaining
any right to acquire, any properties, assets or rights of the Companies. There
are no material unresolved disputes involving 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.
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(b) Except as set forth on Schedule 2.16(b) hereto, (i) none of the
Companies is a party to any (A) 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, (B) 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), or (C) collective bargaining
agreement or other labor union contract applicable to persons employed by the
Companies, (ii) neither the Stockholders nor the Companies have any knowledge
of any activities or proceedings of any labor union to organize any such
employees and (iii) the Companies have not breached or otherwise failed to
comply with any such agreements (the "Employment or Labor Agreements"). Within
twenty-five (25) Business Days after the date hereof, the Companies will
furnish to UAG complete and correct copies of all the Employment and Labor
Agreements.
(c) Except as set forth on Schedule 2.16(c), (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
Companies' 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 during the two-year period preceding the date
hereof, (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 any unresolved claim involving the
Companies and, to the knowledge of the Companies, 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. " 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
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(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").
Within twenty-five (25) Business Days after the date hereof, true and complete
copies of all Pension Benefit Plans and Welfare Benefit Plans (collectively,
"ERISA Plans") will be delivered to or made available to UAG together with, as
applicable with respect to each such ERISA Plan, copies of 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 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 Companies
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 since its inception has complied in all
material respects with the reporting and disclosure requirements imposed
under ERISA and the Code and has timely filed Form 5500s (or 5500-C or
5500-R) and predecessors thereof; and
(iv) no ERISA Plan is liable for any federal, state, local or
foreign Taxes.
(c) Except as set forth on Schedule 2.17(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 and (to the knowledge of the Companies and the Stockholders) no
such action is contemplated or under consideration and the IRS has not
asserted that any such Pension Benefit Plan
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is not qualified under Section 401(a) of the Code or that any trust
established under such a Pension Benefit Plan is not exempt under Section
501(a) of the Code.
(d) Except as set forth on Schedule 2.17(d), with respect to each
Pension Benefit Plan which is a defined benefit plan under Section 414(j) and
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
Companies 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 Companies 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 Companies 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 Companies 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 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 for the current fiscal year 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 Financial Statements 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 each such
Company Financial Statement.
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(g) With respect to any Multiemployer Plan (1) the Companies have not,
since their 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 Companies under any
Multiemployer Plan, computed as if a "complete withdrawal" by the Companies had
occurred under each such Plan as of December 31, 1996; and (3) the Companies
have 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 Companies under Welfare
Benefit Plans with respect to any condition which relates to a claim filed
on or before the Closing Date.
(ii) no material 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 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, 1996 exceeded $75,000. Within
twenty-five (25) Business Days after the date hereof, there will be
provided or made available to UAG (A) true and complete copies of all of
the written plans, arrangements and agreements referred to on Schedule
2.18(a) ("Compensation Commitments") 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 Commit ment for
the last three years and (B) an accurate and complete written summary with
respect to any Compensation Commitment which is unwritten.
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(b) Except as set forth on Schedule 2.18(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
Companies 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) complies in all respects with 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 Companies or any ERISA
Plan, on the one hand, and any Insider, on the other hand, that have occurred
since January 1, 1996. For purposes of this Agreement:
(i) the term "Insider" shall mean the Stockholders, any director
or officer of any of the Companies, and any Affiliate, Associate or
Relative of any of the foregoing persons;
(ii) the term "Associate" with respect to any person means (A)
any corporation, partnership, joint venture or other entity of which such
person is an officer or partner or is, directly or indirectly, through one
or more intermediaries, the beneficial owner of 30% or more of (1) any
class or type of equity securities or other profits interest or (2) the
combined voting power of interests ordinarily entitled to vote for
management or otherwise, and (B) any trust or other estate in which such
person has a substantial beneficial interest or as to which such person
serves as trustee or in a similar fiduciary capacity; and
(iii) a "Relative" of a person shall mean such person's spouse,
such person's parents, sisters, brothers, children and the spouses of the
foregoing, and any member of the immediate household of such person.
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2.20 PROPRIETY OF PAST PAYMENTS.
Except as provided in Schedule 2.20, 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. Except as provided in
Schedule 2.20, 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 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 Companies that is engaged
in the retail sale or servicing of automobiles or light duty trucks.
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.
To the knowledge of the Stockholders or the Companies, neither the
Companies nor the Stockholders have made any material misrepresentation to UAG
relating to the Companies or the Shares or the Real Property or Improvements
and neither the Companies nor
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the Stockholders have omitted to state to UAG any material fact relating to the
Companies or the Shares or the Real Property or Improvements which is necessary
in order to make the information given by or on behalf of the Companies or the
Stockholders to UAG not misleading. To the knowledge of the Companies and the
Stockholders, no fact, event, condition or contingency exists or has occurred
which has, or in the future can reasonably be expected to have, a Material
Adverse Effect, which has not been disclosed in the Company Financial
Statements or the Schedules to this Agreement (other than those generally
affecting the economy and the retail automobile business in each Company's
market).
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 Stockholders
no later than twenty-five (25) Business Days after the date hereof, each
Stockholder hereby represents and warrants to UAG and the Merger Subs as
follows:
3.1 OWNERSHIP OF SHARES; TITLE.
Such Stockholder is the owner of record and beneficially of the number
of Shares indicated on Schedule 3.1 hereof and has, and shall transfer to the
Merger Subs at the Closing, good and marketable title to such Shares, free and
clear of any and all security interests, pledge agreements, Liens, proxies and
voting or other agreements except restrictions on transfer imposed by
applicable federal and state securities laws and under the Company Agreements
with manufacturers set forth on Schedule 2.4.
3.2 AUTHORITY.
(a) Such Stockholder has all requisite power and authority and full
legal capacity and is competent to execute, deliver and perform this Agreement
and the Documents to which such Stockholder is a party and to consummate the
transactions contemplated hereby and thereby (including the disposition of such
Stockholder's Shares to the Merger Subs as contemplated by this Agreement).
This Agreement has been duly executed and delivered by such Stockholder and
constitutes, and each of the Documents to which such Stockholder is a party
when executed and delivered by such Stockholder will constitute, a valid and
binding obligation of such Stockholder, enforceable against such Stockholder in
accordance with its terms.
(b) Except as set forth on Schedule 3.2, the execution, delivery and
performance of this Agreement and the Documents by such Stockholder and the
consummation of the transactions contemplated hereby and thereby do not and
will not:
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(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 such
Stockholder is a party or to which such Stockholder or any of such
Stockholder's assets are subject;
(ii) violate or conflict with any Legal Requirements applicable
to such Stockholder or any of such Stockholder's businesses or properties;
or
(iii) require any authorization, consent, order, permit or
approval of, or notice to, or filing, registration or qualification with,
any governmental, administrative or judicial authority, except in
connection with or in compliance with the provisions of the H-S-R Act.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF UAG AND THE MERGER SUBS
Subject to the parties' agreement and acknowledgment that the
Schedules referred to in this Article 4 are to be delivered by UAG and the
Merger Subs no later than twenty-five (25) Business Days after the date hereof,
UAG and the Merger Subs hereby jointly and severally represent and warrant to
the Companies and the Stockholders as follows:
4.1 ORGANIZATION AND GOOD STANDING.
(a) UAG is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has the corporate power
and authority to own, lease and operate the properties used in its business and
to carry on its business as now being conducted.
(b) UAG 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 the Merger Subs would not, or could not reasonably be
expected to, in the aggregate have a Material Adverse Effect on UAG.
(c) UAG has made available to the Stockholders complete and correct
copies of its charter and bylaws, as amended and presently in effect.
4.2 MERGER SUBS.
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Each Merger Sub is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, has the corporate
power and authority to own, lease and operate the properties and assets used in
its business and to carry on its business as now being conducted, and is duly
qualified to do business and in good standing as a foreign corporation in each
jurisdiction where qualification as a foreign corporation is required. All of
the outstanding shares of capital stock of each of the Merger Subs have been
validly authorized and issued, are fully paid and non-assessable, have not been
issued in violation of any preemptive rights or of any federal or state
securities law.
4.3 CAPITALIZATION.
The authorized stock of UAG and the number of shares of capital stock
which are issued and outstanding are set forth on Schedule 4.3 hereto. The
shares listed on Schedule 4.3 hereto constitute all the issued and outstanding
shares of capital stock of UAG and have been validly authorized and issued, are
fully paid and nonassessable, have not been issued in violation of any
preemptive rights or of any federal or state securities law and no personal
liability attaches to the ownership thereof.
4.4 SEC FILINGS.
UAG has heretofore made available to the Stockholders UAG's Form 10-K
for the period ending December 31, 1996 and UAG's Form 10-Q for the period
ending June 30, 1997 (the "SEC Filings"). As of their respective dates, the SEC
Filings did not (and any filings by UAG pursuant to the Securities Exchange Act
of 1934, as amended, between the date hereof and the Closing Date will not)
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,
in light of the circumstances under which they were made, not misleading.
4.5 AUTHORITY; APPROVALS AND CONSENTS.
(a) UAG and the Merger Subs have the corporate power and authority to
enter into this Agreement and the Documents to which they are a party and to
perform their obligations hereunder and thereunder. At the time of the Closing,
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 the Merger Subs and no other corporate proceedings on the
part of UAG or the Merger Subs 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 a valid and binding
obligation of, UAG and the Merger Subs, enforceable against UAG and the Merger
Subs in accordance with their respective terms.
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(b) Except as set forth on Schedule 4.5 hereto, the execution,
delivery and performance by UAG and the Merger Subs of this Agreement and the
Documents to which they are a party and the consummation of the transactions
contemplated hereby and thereby do not and will not:
(i) contravene any provisions of the Certificate of Incorporation
or Bylaws of UAG or the Merger Subs;
(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;
(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 the Merger Subs;
(iv) violate or conflict in any material respect with any Legal
Requirements applicable to UAG or the Merger Subs or their respective
businesses or properties; or
(v) require any authorization, consent, order, permit or approval
of, or notice to, or filing, registration or qualification with, any
governmental, administrative or judicial authority, except in connection
with or in compliance with the provisions of the H-S-R Act.
As used in this Agreement, the term "UAG Agreement" shall mean all mortgages,
indenture notes, agreements, contracts, leases, licenses, franchises,
obligations, instruments or other commitments, arrangements or understandings
of any kind, whether written or oral, binding or non-binding, to which UAG or
the UAG Subsidiaries is a party or by which UAG or the UAG Subsidiaries or any
of their assets or properties may be bound or affected, including all
amendments, modifications, extensions or renewals of any of the foregoing, and
which involve receipts or payments by UAG or UAG Subsidiaries which exceed
$500,000 per year. "UAG Subsidiary" shall mean any corporation or other entity
in which UAG, directly or indirectly, owns beneficially securities representing
50% or more of (i) the aggregate equity or profit interests or (ii) the
combined voting power of voting interests ordinarily entitled to vote for
management or otherwise.
4.6 DISCLOSURE.
To the knowledge of UAG, neither UAG nor the Merger Subs has made any
material misrepresentation to the Companies or the Stockholders relating to
this Agreement and neither UAG nor the Merger Subs has omitted to state to the
Companies or the Stockholders any
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material fact relating to this Agreement which is necessary in order to make
the information given by or on behalf of UAG or the Merger Subs to the
Companies or the Stockholders or their representatives at or prior to Closing
not misleading. To the knowledge of UAG, no fact, event, condition or
contingency exists or has occurred which has, or in the future can reasonably
be expected to have, a Material Adverse Effect on UAG, which has not been
disclosed to the Stockholders or disclosed in the SEC Filings.
4.7 BROKERS.
Neither UAG nor any UAG Subsidiary, nor any director, officer or
employee thereof, has employed any broker or finder or has incurred or will
incur any broker's, finder's or similar fees, commissions or expenses, in each
case in connection with the transactions contemplated by this Agreement or the
Documents.
4.8 REORGANIZATION CLASSIFICATION; CERTAIN TAX REPRESENTATIONS.
UAG represents and warrants to the Stockholders as follows:
(a) at the Effective Time, UAG will own all the stock of each Merger
Sub. No Merger Sub will issue any of its stock in the Mergers;
(b) at the Effective Time, UAG will have no plan or intention to lose
control, within the meaning of Section 368(c) of the Code, of any Merger Sub
after the Mergers occur;
(c) at the Effective time, UAG will have no plan or intention to (i)
liquidate any Merger sub, (ii) merger any Merger Sub with or into another
corporation, (iii) sell or otherwise dispose of the stock of any Merger Sub,
(iv) cause any Merger Sub to sell or otherwise dispose of any of its assets,
including assets of the Companies acquired in the Mergers, except for
dispositions in the ordinary course of business and transfers described in
Section 368(a)(2)(C) of the Code or (v) reacquire any UAG Common Stock issued
in the Mergers;
(d) neither UAG nor any Merger Sub is an investment company as defined
by Section 368(a)(2)(F)(iii) and (iv) of the Code;
(e) the acquisition of the Companies and the use of UAG Common Stock
in the acquisition have a valid business purpose; and
(f) at the Effective Time, UAG and Merger Subs plan to continue the
historic business of each Company, or to use a significant portion of each
Company's business assets in a business, following the Mergers.
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ARTICLE 5
COVENANTS AND ADDITIONAL AGREEMENTS
5.1 ACCESS; CONFIDENTIALITY.
(a) Between the date hereof and the earlier of termination of this
Agreement or the Closing Date, the Stockholders and the Companies will (i)
provide to the officers and other authorized representatives of UAG and the
Merger Subs 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 the Merger Subs
and their authorized representatives any and all financial, technical and
operating data and other information pertaining to the businesses and
properties of the Companies, and (ii) make available for inspection and copying
by UAG and the Merger Subs true and complete copies of any documents relating
to the foregoing. UAG and the Merger Subs will hold (and will cause their
officers, directors, employees and 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 the Merger Subs, but only if each third party agrees to be bound by the
restrictions in this Section 5.1. If this Agreement is terminated, UAG and the
Merger Subs will promptly return to the Companies, upon the request of the
Companies, all Confidential Information furnished by the Companies and the
Stockholders to UAG or the Merger Subs, including all copies thereof. As used
herein, "Confidential Information" shall mean all information concerning the
Companies obtained by UAG or the Merger Subs from the Companies 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 or (z) which
is or becomes known to the public, other than through a breach by UAG or the
Merger Subs of this Agreement.
(b) After the Closing, UAG shall provide the Stockholders and their
authorized representatives access during normal business hours to the books,
records and other information relating to the Companies and their businesses to
the extent reasonably requested by the Stockholders in connection with the Net
Worth Adjustment under Section 1.15 and the tax returns, audits and
examinations referenced in Section 5.16. The Stockholders and the Companies
will hold in confidence (unless and to the extent compelled to disclose by
judicial or administrative process, or, in the opinion of their counsel, by
other requirements of law) all UAG Confidential Information (as defined below)
and will not disclose the same to any third party except as may reasonably be
necessary to carry out this Agreement and the transactions contemplated hereby.
If this Agreement is terminated, the Stockholders will promptly return to UAG,
upon the reasonable request of UAG, all UAG Confidential Information furnished
by UAG and held by the Stockholders, including all copies thereof. As used
herein, "UAG Confidential Information" shall mean all information concerning
UAG or any of its Affiliates
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(including the Dealerships after the Closing Date) obtained by the Stockholders
and the Companies in connection with the transactions contemplated by this
Agreement or pursuant to the provisions hereof, except information (x)
ascertained or obtained from public information, (y) received from a third
party not employed or otherwise affiliated with UAG or (z) which is or becomes
known to the public, other than through a breach by the Stockholders and the
Companies of this Agreement.
5.2 FURNISHING INFORMATION; ANNOUNCEMENTS.
The Stockholders and the Companies, on the one hand, and UAG and the
Merger Subs, 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 the Merger Subs, 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 the Merger Subs, 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 (including
federal or state securities laws) as determined by such party's counsel in its
sole discretion.
5.3 ANTITRUST IMPROVEMENTS ACT COMPLIANCE.
UAG and the Merger Subs 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
H-S-R Act, and the rules and regulations promulgated thereunder, with respect
to the transactions contemplated herein. The parties shall use their best
efforts to make such filings promptly, to respond to any requests for
additional information made by either of such agencies, to cause the waiting
periods under the H-S-R Act to terminate or expire at the earliest possible
date and to resist vigorously, at their respective cost and expense (including,
without limitation, the institution or defense of legal proceedings), any
assertion that the transactions contemplated herein constitute a violation of
the antitrust laws, all to the end of expediting consummation of the
transactions contemplated herein; provided, however, that if UAG or the
Stockholders shall determine after issuance of any preliminary injunction that
continuing such resistance is not in its or their best interests, UAG or the
Stockholders, as the case may be, may, by written notice to the other party,
terminate this Agreement with the effect set forth in Section 8.2 hereof.
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 businesses in the ordinary course consistent with past practices
and, without the prior written consent of
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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, permit any of the Companies to:
(i) make any material change in the conduct of its business 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
(including any comparable governing instrument with a different name),
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 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 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 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 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 its capital stock (other than distributions
pursuant to Section 1.17 hereof) or redeem (other than as permitted
pursuant to Section 1.17 hereof), retire, purchase or otherwise acquire,
directly or indirectly, any shares of its capital stock;
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(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 each case, in accordance with pre-existing
contractual provisions or consistent with past practices;
(ix) make or commit to make any individual capital expenditure in
excess of $50,000, or aggregate capital expenditures in excess of $150,000;
(x) pay, loan or advance (other than in the ordinary course of
business consistent with past practices) 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;
(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;
(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 or amend in any material respect
or terminate any material commitment, other than in the ordinary course of
business consistent with past practice;
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(xvii) take any other action that would cause any of the
representations and warranties made by any of the Companies or the
Stockholders in this Agreement not to remain materially true and correct;
or
(xviii) commit to take any action that, if taken, would cause any
of the foregoing covenants in this Section 5.4(a) to be violated.
(b) From and after the date hereof and until the Closing Date, the
Stockholders and the Companies will cause each of the Companies to use its
reasonable best efforts to:
(i) continue to maintain, in all material respects, its
properties in accordance with present practices in a condition suitable for
their current use;
(ii) comply with all applicable Environmental Laws;
(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 Company 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.
(c) From and after the date of this Agreement and until the Closing
Date, the Stockholders shall not, except with the prior written consent of UAG
(which consent shall not be unreasonably withheld) and except as required or
permitted pursuant to the terms hereof:
(i) make any material change to the Real Property or the
Improvements;
(ii) subject the Real Property or the Improvements, or any part
thereof, to any new Lien or suffer such to be imposed other than Liens for
real estate Taxes and assessments not yet due;
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(iii) take any other action that would cause any of the
representations or warranties made by the Stockholders or the Companies in
this Agreement not to remain materially true and correct; or
(iv) commit to take any action that, if taken, would cause any of
the foregoing covenants in this Section 5.4(c) to be violated.
5.5 NO INTERCOMPANY PAYABLES OR RECEIVABLES.
Except as set forth on Schedule 5.5, 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 (except for the loans set forth on Exhibit
"B" hereto which loans shall be satisfied in full on the Closing Date pursuant
to Section 1.18 hereof) and amounts due or to become due under the Lease.
5.6 NEGOTIATIONS.
Until the earlier of 120 days from the date hereof or the termination
of this Agreement, neither the Stockholders, nor the Companies, nor their
officers, directors, employees, advisors, agents, representatives or Affiliates
nor 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 merger, sale of assets
(other than in the ordinary course of business), liquidation, purchase or sale
of shares of capital stock or similar transaction involving any of the
Companies. 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 Companies or the
Stockholders may receive or of which any of such parties may become aware.
5.7 CONSENTS; COOPERATION.
Subject to the terms and conditions hereof, the Stockholders and the
Companies and UAG and the Merger Subs will use their respective commercially
reasonable 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 of 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;
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(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 commercially reasonable 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 to satisfy any condition
hereunder in its power to satisfy and to consummate and make effective as soon
as practicable the transactions contemplated by this Agreement. The
Stockholders and the Companies agree to execute and deliver any and all
documents that the respective manufacturers typically require a selling dealer
to execute in connection with the transfer of a dealership. In case at any time
after the Closing any further action is reasonably necessary or desirable to
carry out the purposes of this Agreement, the Stockholders and the proper
officers of the Companies shall take all such reasonably necessary action.
5.9 INTERIM FINANCIAL STATEMENTS.
Within fifteen (15) days after the end of each calendar month after
the date of this Agreement and continuing until the Closing Date, the Companies
will deliver to UAG the most recent monthly and year-to-date financial
statements provided to their respective manufacturers. All such statements
shall present the financial position and results of operations of the Companies
as of the date and for the periods indicated and shall be prepared on a basis
consistent with the Company Factory Statements.
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 parties 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, (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 connec tion 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 material Company Agreement. Each of D. Young, A. Young, W. Young and
Anderson shall (x) promptly advise UAG of any event of which he has knowledge
that has, or could reasonably be
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expected to have, a Material Adverse Effect, (y) confer on a regular 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 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 the Companies or any of
their assets or operations, 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 the Stockholder (including, without
limitation, any threat to commence, or notice of the commencement of any action
or other proceeding with respect to any of such Shares) or the occurrence of
any other event of which the Stockholder has knowledge which could result in
any failure to consummate the sale of the Stockholder's Shares as contemplated
hereby.
5.11 ASSURANCE BY THE STOCKHOLDERS.
Each Stockholder agrees to comply with the Stockholder's covenants set
forth in this Agreement, and each Stockholder (other than the Trusts) shall, to
the extent feasible, use the Stockholder's commercially reasonable efforts to
cause each Company in which the Stockholder holds shares to comply with its
covenants set forth in this Agreement.
5.12 STOCKHOLDER VOTE; NO APPRAISAL RIGHTS.
Each Stockholder covenants and agrees (a) to vote all of the stock of
the Companies held by him in favor of the Mergers and the other transactions
contemplated by this Agreement; (b) that such Stockholder shall not demand
appraisal of the fair value of any of his or its shares of Companies' stock or
otherwise exercise any dissenter's rights pursuant to Sections 23-1-44-1 to
23-1-44-20 of the IBCL or any other applicable statute; and (c) that such
Stockholder shall not, without the prior written consent of UAG, transfer any
of such Stockholder's shares of the Companies' stock.
5.13 NON-INTERFERENCE.
After the Closing Date and for a period of five (5) years thereafter,
each Stockholder agrees, and each Stockholder shall cause its Affiliates, not
to knowingly interfere with or disrupt, or attempt to interfere with or
disrupt, the relationship, contractual or otherwise, between the Companies or
any customer, supplier, manufacturer, distributor, consultant, independent
contractor or employee of the Companies or the Merger Subs and not to solicit
or hire any employee of the Companies or the Merger Subs unless such employee
has already terminated his or her employment with the Companies or the Merger
Subs.
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5.14 PERSONAL GUARANTEES.
UAG will use commercially reasonable efforts to cause the Stockholders
to be released as of the Closing Date from any and all personal guarantees of
any loans, leases or other indebtedness of the Companies and any personal
guarantees of the obligations of the Companies under the Third Party Leases set
forth on Schedule 2.10 hereof (collectively, the "Personal Guarantees"). In the
event that any of the Personal Guarantees are not released by the Closing Date,
UAG will indemnify and hold the Stockholders harmless from any loss with
respect to the Personal Guarantees which arises after the Closing Date.
Notwithstanding anything in this Section 5.14 to the contrary, UAG shall not be
required to cause the Stockholders to be released from or indemnify the
Stockholders for any loss with respect to any Personal Guarantees for any loans
or other indebtedness relating to the Real Property owned by the Stockholders
or their Affiliates as of the Closing Date.
5.15 DISTRIBUTIONS.
The distributions to be made by the Companies pursuant to Section 1.17
hereof shall be made prior to the Closing Date, except for distributions of
cash which may be made on or before the Closing Date.
5.16 TAXES.
(a) The parties hereto acknowledge that (i) at Closing each Company's
existence for federal income tax purposes shall cease, (ii) a final federal
income tax return for the short taxable year of each Company ending on (and
including) the Closing Date shall be due on the fifteenth (15th) day of the
third full month following the month in which the Closing occurs, and (iii)
each Company shall file such final return as an S corporation. UAG agrees to
(i) indemnify each Stockholder for the amount, if any, by which the actual or
deemed termination of the LIFO election by each Company on the Closing Date
causes the Taxes payable by the Stockholder to exceed the Taxes that would have
been payable by the Stockholder if the actual or deemed termination of the LIFO
elections did not occur until after the Closing Date, and (ii) "gross up" such
indemnification of each Stockholder to include any additional Taxes imposed on
the Stockholder as a result of additional taxable income of the Stockholder
arising from receipt of any payment under this Section 5.16(a).
(b) The federal, state and local tax returns of each Company for the
short taxable year ending on the Closing Date (the "Final Tax Returns") shall
be prepared by KPMG Peat Marwick or another firm of independent public
accountants selected by the Stockholders and approved by UAG. Each Company, UAG
and the Merger Subs covenant and agree to cooperate fully with the Stockholders
and such accounting firm(s) in the preparation of the Final Tax Returns and to
make available during normal business hours all books, records and information
that such accounting firm may reasonably request to complete the preparation of
the Final Tax Returns in a prompt, timely and complete manner. The Final Tax
Returns shall be prepared in accordance with the principles, methods and
practices used in preparing the
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Company's previous income tax returns. Upon obtaining written approval of the
respective Merger Sub regarding each particular Final Tax Return (which
approval shall not be unreasonably withheld), the respective Company shall file
such Final Tax Return with the appropriate taxing authorities on a timely
basis.
(c) After Closing, UAG shall promptly notify the Stockholders in
writing upon receipt by UAG or any of its Affiliates of notice of any pending
or threatened federal, state or local Tax audit or assessment which may affect
the Tax liability of any of the Companies or the Stockholders for any taxable
year or period ending on or before the Closing Date. The Stockholders shall
have the sole right to represent their and the Companies' interests in any such
Tax audit or related administrative or court proceeding, and to select and
employ counsel for this purpose at their expense. The Stockholders, however,
shall not be entitled to settle, either administratively or after commencement
of litigation, any claim for Taxes which would adversely affect the Tax
liability of any Company for any period after the Closing Date without the
prior written consent of UAG which will not be unreasonably withheld. UAG
agrees, and shall cause each of its Affiliates, not to take any action
(including, but not limited to, the filing of amended tax returns) which would
cause the Taxes of any of the Companies, or the Taxes of any of the
Stockholders on income of the Companies attributable to the Stockholders, for
any taxable year or period ending on or before the Closing Date to be increased
or decreased without the prior written consent of all of the affected
Stockholders.
5.17 CONTINUITY OF STOCKHOLDER INTEREST.
The Stockholders have no present plan, intention or arrangement to
dispose of any UAG Common Stock received in the Mergers in a manner that would
cause the Mergers, or any of them, to violate the continuity of shareholder
interest requirement set forth in Treasury Regulation Section 1.368-1.
ARTICLE 6
CONDITIONS TO THE OBLIGATIONS
OF UAG AND THE MERGER SUBS
TO EFFECT THE CLOSING
The obligations of UAG and the Merger Subs 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 the Merger Subs 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 shall be true and correct in all
material respects as of the Closing as if made at such
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time except for any changes expressly permitted hereunder. 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 each Stockholder, to the effect that the conditions set forth in the two
preceding sentences have been satisfied.
6.2 AUTHORIZATION; CONSENTS.
(a) All corporate action necessary to authorize the execution,
delivery and performance of this Agreement and the 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
manufacturers with whom the Companies have entered into franchise agreements)
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 the Merger Subs 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 and its counsel. In rendering the
foregoing opinion, such counsel may rely as to factual matters upon
certificates or other documents furnished by officers and directors of the
Companies and by government officials and upon such other documents and data as
such counsel deem appropriate as a basis for their opinions.
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 the Merger Subs
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 the
Merger Subs, in good faith and with the advice of counsel, believes makes it
undesirable to proceed with the consummation of the transactions contemplated
hereby.
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6.5 NO MATERIAL ADVERSE EFFECT.
During the period from December 31, 1996 to the Closing Date, no
Material Adverse Effect shall have occurred with respect to the Companies.
6.6 NET WORTH.
On the Closing Date, the Net Worth of the Companies shall not be
materially less than the Net Worth set forth on Schedule 1.15(g)(i).
6.7 COMPLETION OF DUE DILIGENCE.
UAG and the Merger Subs 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 or Phase II environmental
audits of the Companies, shall be satisfactory to UAG and the Merger Subs. 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, then the expenses of performing 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 estimated to cost more than Ten Thousand Dollars
($10,000) for any Company is recommended, the Stockholders who own Shares in
such Company shall pay the entire costs of the Phase II audit.
6.8 BOARD APPROVAL.
The Board of Directors of UAG and the Merger Subs shall have approved
the consummation of all of the transactions contemplated by this Agreement;
provided, however, that this condition shall be deemed waived after October 31,
1997 unless on or before October 31, 1997, UAG notifies the Stockholders that
this condition has not been met.
6.9 CERTIFICATES.
UAG and the Merger Subs shall have received such evidence as UAG and
the Merger Subs reasonably determine is necessary to demonstrate satisfaction
of the conditions set forth in this Article 6.
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
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Stockholders and the Companies in furtherance of the transactions contemplated
hereby, shall be reasonably satisfactory in form and substance to counsel for
UAG and the Merger Subs.
6.11 APPROVAL OF MANUFACTURERS AND DISTRIBUTORS.
The consent, authorization and approval of each of the manufacturers
whose consent is required for the transfer of the Companies to the Merger Subs
shall have been obtained on terms no less favorable to those granted to the
Stockholders and the Companies immediately prior to the execution of this
Agreement.
6.12 ENVIRONMENTAL LAWS.
The Companies shall be in compliance in all material respects with all
applicable Environmental Laws and Environmental Permits.
6.13 NONDISTURBANCE AGREEMENTS/ESTOPPEL CERTIFICATES.
UAG shall have been provided with nondisturbance agreements and
estoppel certificates in form and substance satisfactory to UAG with respect to
the properties that are the subject of the Lease and the Third Party Leases.
6.14 TITLE INSURANCE.
UAG, at its option, shall have obtained title insurance on behalf of
the Companies with respect to the leasehold estates arising out of the Lease
and the Third Party Leases in form and substance satisfactory to UAG.
6.15 SCHEDULES.
The Companies and the Stockholders shall have delivered to UAG and the
Merger Subs all Schedules referred to in Articles 1, 2 and 3, and such
Schedules and all Exhibits hereto shall be acceptable in form and substance to
UAG and the Merger Subs.
6.16 LEASE TERMINATION AGREEMENTS/MEMORANDA OF LEASE.
The appropriate parties shall have executed lease termination
agreements and memoranda of lease in form and substance satisfactory to UAG.
6.17 EMPLOYMENT AGREEMENTS.
The appropriate parties shall have executed the Employment Agreements.
6.18 LEASES.
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The Companies and the applicable Stockholders (or their Affiliates)
shall have executed the Lease.
6.19 RESIGNATION OF THE COMPANIES' DIRECTORS.
Each of the persons who is a director of any of the Companies on the
Closing Date shall have tendered to the Merger Subs in writing his or her
resignation as such in form and substance satisfactory to UAG.
6.20 ACQUISITION OF OTHER COMPANIES.
The acquisition of Dan Young Chevrolet, Inc. ("DYC"), Dan Young, Inc.
("DYI"), Young Management Group, Inc. ("YMG") and Parkway Chevrolet, Inc.
("Parkway") shall have been consummated.
6.21 JOINT VENTURE AGREEMENT.
A joint venture agreement between UAG and certain of the Stockholders
or their Affiliates shall have been executed in form and substance satisfactory
to the parties hereto.
ARTICLE 7
CONDITIONS TO THE OBLIGATIONS OF
THE COMPANIES AND THE STOCKHOLDERS
TO EFFECT THE CLOSING
The obligations of the Companies and the Stockholders required to be
performed by them at the Closing shall be subject to the satisfaction, at or
prior to the Closing, of each of the following conditions, each of which may be
waived by 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 the Merger Subs
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 the Merger Subs required by
this Agreement to be performed by them at or prior to the Closing shall have
been duly performed and complied with as of the Closing. At the Closing, the
Stockholders shall have received a certificate, dated the Closing Date and duly
executed by UAG and the Merger Subs to the effect that the conditions set forth
in the preceding two sentences have been satisfied.
7.2 AUTHORIZATION OF THE AGREEMENT, CONSENTS.
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(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 the Merger Subs. 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
manufacturers with whom the Companies have entered into franchise agreements)
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 THE MERGER SUBS' COUNSEL.
The Stockholders shall have been furnished with the opinion of Rogers
& Hardin, counsel to UAG and the Merger Subs, dated the Closing Date, in form
and substance reasonably satisfactory to the Stockholders and their respective
counsel. In rendering the foregoing opinions, such counsel may rely as to
factual matters upon certificates or other documents furnished by officers and
directors of UAG and the Merger Subs and by government officials, and upon such
other documents and data as such counsel deems appropriate as a basis for its
opinion.
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 the
Stockholders, in good faith and with the advice of counsel, believe makes it
undesirable to proceed with the consummation of the transactions contemplated
hereby.
7.5 SATISFACTION OF CONDITIONS.
The Stockholders shall have received such evidence as they reasonably
determine is necessary to demonstrate satisfaction of the conditions set forth
in this Article 7.
7.6 LEGAL MATTERS.
All certificates, instruments, opinions and other documents required
to be executed or delivered by or on behalf of UAG or the Merger Subs under the
provisions of this
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Agreement, and all other actions and proceedings required to be taken by or on
behalf of UAG or the Merger Subs in furtherance of the transactions
contemplated hereby, shall be reasonably satisfactory in form and substance to
counsel for the Stockholders.
7.7 EMPLOYMENT AGREEMENT.
The appropriate parties shall have entered into the Employment
Agreements.
7.8 LEASE.
The Companies and the applicable Stockholders (or their Affiliates)
shall have executed the Lease and UAG shall have executed lease guaranties in a
form mutually acceptable to the parties.
7.9 APPROVAL OF MANUFACTURERS AND DISTRIBUTORS.
The consent, authorization and approval of each of the manufacturers
whose consent is required for the transfer of the Companies to the Merger Subs
shall have been obtained on terms no less favorable to those granted to the
Stockholders and the Companies immediately prior to execution of this
Agreement.
7.10 ACQUISITION OF OTHER COMPANIES.
The acquisition of DYC, DYI, YMG and Parkway shall have been
consummated.
7.11 NO MATERIAL ADVERSE EFFECT.
During the period from December 31, 1996 to the Closing Date, no
Material Adverse Effect shall have occurred with respect to UAG.
7.12 SCHEDULES.
UAG shall have delivered to the Stockholders all schedules referred to
in Article 4, and such Schedules and all Exhibits hereto shall be acceptable in
form and substance to the Stockholders.
7.13 JOINT VENTURE AGREEMENT.
A joint venture agreement between UAG and certain of the Stockholders
or their Affiliates shall have been executed in form and substance satisfactory
to the parties hereto.
7.14 CERTIFIED BOARD RESOLUTIONS.
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On or before October 31, 1997, UAG shall have delivered to the
Stockholders certified resolutions of the Board of Directors of UAG and the
Merger Subs authorizing and approving all of the transactions contemplated by
this Agreement.
ARTICLE 8
TERMINATION
8.1 TERMINATION.
This Agreement may be terminated at any time prior to Closing:
(i) by mutual consent of UAG and the Stockholders;
(ii) by either UAG or the Stockholders if the Closing shall not
have taken place on or prior to December 31, 1997, or such later date as
shall have been approved by UAG and the Stockholders;
(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 the Merger Subs if any of the conditions specified
in Article 6 hereof have not been met or waived by UAG and the Merger Subs
on or prior to December 31, 1997;
(v) by the Stockholders if the condition specified in Section
7.14 hereof is not met on or before October 31, 1997;
(vi) by the Stockholders if any of the other conditions specified
in Article 7 hereof have not been met or waived by the Stockholders on or
prior to December 31, 1997; and
(vii) 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 (if curable) within twenty (20) Business Days following receipt
by the breaching party of written notice of such breach.
If UAG or the Stockholders shall terminate this Agreement pursuant to the
provisions hereof, such termination shall be effected by notice to the other
party specifying the provision hereof pursuant to which such termination is
made.
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8.2 EFFECT OF TERMINATION.
(a) Except for (i) liability for any breach of this Agreement prior to
its termination, (ii) the confidentiality covenants in Section 5.1 hereof and
(iii) the provisions of this Section 8.2 and Article 9 hereof, upon the
termination of this Agreement, this Agreement shall forthwith become null and
void and none of the parties hereto or any of their respective officers,
directors, employees, agents, Affiliates, consultants, stockholders or
principals shall have any liability or obligation hereunder or with respect
hereto.
(b) Upon termination of this Agreement, (i) the Stockholders shall be
entitled to recover from the Escrow Deposit the amount, if any, to which the
Stockholders are entitled to indemnification under Article 9 and shall be
entitled to recover from UAG any such indemnifiable amounts in excess of the
Escrow Deposit, (ii) UAG shall be entitled to any balance of the Escrow Deposit
after any recovery therefrom to which the Stockholders are entitled as provided
in foregoing clause (i), and (iii) UAG and the Merger Subs shall be entitled to
recover from the Stockholders the amount, if any, to which UAG and the Merger
Subs are entitled to indemnification under Article 9. The parties agree to
promptly sign such instructions and take such other actions as necessary or
appropriate to cause the distribution of the Escrow Deposit as provided in this
Section 8.2(b) following termination of this Agreement.
ARTICLE 9
INDEMNIFICATION
9.1 INDEMNIFICATION BY THE STOCKHOLDERS.
(a) Subject to Sections 9.1(b) and 10.16 hereof and 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, the Merger
Subs, 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 arising, directly or indirectly, out of or resulting
from, or shall pay or become obligated to pay any sum on account of, (i) any
and all Events of Breach (as defined below) or (ii) any Claim before or by any
court, arbitrator, panel, agency or other governmental, administrative or
judicial entity, which Claim involves, arises out of or relates to the conduct
of the business of the Companies prior to the Closing Date (each a
"Stockholders Third Party Claim"), provided that the foregoing provisions of
this clause (ii) shall not apply to, and a Stockholders Third Party Claim shall
not include, (A) any liability reflected or reserved against on the Company
Balance Sheet or included or described in the Notes to the Company Financial
Statements, (B) any liability reflected or reserved against on the Closing Date
Balance Sheet, (C) any liability disclosed on Schedule 2.6 hereto, (D) any
liability for any Claim disclosed on Schedule 2.9(a) hereto or (E) any
liability for any Claims arising in the ordinary course of business of any
Company which, individually and in the aggregate, are not material to such
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Company. 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 any
Stockholder or any of the Companies or the breach of any warranty of any
Stockholder or any of the Companies contained in this Agreement or in any
Schedule or Exhibit hereto 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 the Stockholders or the Companies to be performed
or observed pursuant to this Agreement. Subject to Sections 9.1(b) and 10.16,
any indemnification to which any UAG Indemnified Party is entitled under this
Section 9.1(a) may be enforced against one or more Stockholders for any portion
of such Costs.
(b) Indemnification under foregoing Section 9.1(a) is subject to the
following limitations:
(i) No UAG Indemnified Party shall be entitled to indemnification
unless written notice describing the claim to indemnification as prescribed
in Section 9.3 is given within the applicable Survival Period (as defined
in Section 10.1 hereof).
(ii) A claim for indemnification of Costs arising out of or
resulting from any breach of a representation or warranty under this
Agreement or in any Schedule or Exhibit hereto or arising out of any
Stockholders Third Party Claim shall not be payable until, and shall only
be payable to the extent that, the aggregate amount of all such Costs
incurred or suffered by the UAG Indemnified Parties exceeds Three Hundred
Thousand Dollars ($300,000) (the "Threshold Amount"), provided that the UAG
Indemnified Parties shall be entitled to indemnification without regard to
the Threshold Amount for Costs arising out of or resulting from a breach of
Section 2.1(a) (Organization), Section 2.3 (Capitalization), Section 2.4(a)
(Authority), Section 2.8 (Taxes), or Article 3 hereof or arising out of
fraud by any of the Stockholders.
(iii) The aggregate indemnification obligation of all
Stockholders for Costs arising out of or resulting from the breach of any
representation or warranty under this Agreement or in any Schedule or
Exhibit hereto or arising out of or resulting from any Stockholders Third
Party Claim shall not exceed Eight Million Five Hundred Thousand Dollars
($8,500,000) (the "Cap"), provided that Costs arising out of or resulting
from the breach of Section 2.1(a) (Organization), Section 2.3
(Capitalization), Section 2.4(a) (Authority), Section 2.8 (Taxes) or
Article 3 hereof or arising out of fraud by the Stockholders shall not be
subject to or counted against the Cap.
9.2 INDEMNIFICATION BY UAG.
(a) Subject to Section 9.2(b) hereof, notwithstanding the Closing, UAG
indemnifies and agrees to fully defend, save and hold harmless on an after-tax
basis the Stockholders and the Companies (prior to Closing) and any of their
respective officers, directors, employees, stockholders, advisors,
representatives, agents and Affiliates (each a "Stockholders Indemnified
Party"), if a Stockholders Indemnified Party shall at any time or from time to
time
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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 or relates to the conduct of the business of the
Companies after the Closing Date, provided that the foregoing provisions of
this clause (ii) shall not apply to any Claim arising out of any intentional
misconduct or gross negligence of any of the Stockholders (a "UAG Third Party
Claim"). As used herein, "UAG Event of Breach" shall be and mean any one or
more of the following: (i) any untruth or inaccuracy in any representation of
UAG or the Merger Subs or the breach of any warranty of UAG or the Merger Subs
contained in this Agreement or in any Schedule or Exhibit hereto, (ii) any
failure of UAG or the Merger Subs duly to perform or observe any term,
provision, covenant, agreement or condition on the part of UAG or the Merger
Subs to be performed or observed pursuant to this Agreement.
(b) Indemnification under foregoing Section 9.2(b) is subject to the
following limitations:
(i) No Stockholders Indemnified Party shall be entitled to
indemnification unless written notice describing a claim to indemnification
as prescribed in Section 9.3 is given within the applicable Survival Period
(as defined in Section 10.1 hereof).
(ii) A claim for indemnification of Costs arising out of or
resulting from any breach of a representation or warranty under this
Agreement or in any Schedule or Exhibit hereto arising out of any UAG Third
Party Claim (as defined in this Agreement and the Merger Agreement) shall
not be payable until, and shall only be payable to the extent that, the
aggregate amount of all such Costs incurred or suffered by the Stockholders
Indemnified Parties exceeds Three Hundred Thousand Dollars ($300,000) (the
"Stockholders Threshold Amount"), provided that the Stockholders
Indemnified Parties shall be entitled to indemnification without regard to
the Stockholders Threshold Amount for Costs arising out of or resulting
from a breach of Section 4.1(a) (Organization), Section 4.2 (Merger Subs),
Section 4.3 (Capitalization) or Section 4.5(a) (Authority) or arising out
of fraud or intentional misrepresentation by UAG.
(iii) The aggregate indemnification obligation of UAG for Costs
arising out of or resulting from the breach of any representation or
warranty under this Agreement or in any Schedule or Exhibit hereto arising
out of or resulting from any UAG Third Party Claim (as defined in this
Agreement) shall not exceed Eight Million Five Hundred Thousand Dollars
($8,500,000) (the "Stockholders Cap"), provided that Costs arising out of
or resulting from the breach of Section 4.1(a) (Organization), Section 4.2
(Merger Subs), Section 4.3 (Capitalization) or Section 4.5(a) (Authority)
or arising out of fraud or intentional misrepresentation by UAG shall not
be subject to or counted against the Stockholders Cap.
54
<PAGE>
9.3 PROCEDURES.
If (i) any 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 Stockholders Third Party Claim is
begun, made or instituted as a result of which the Stockholders or the
Companies may become obligated to a UAG Indemnified Party hereunder, or (ii) a
UAG Event of Breach occurs or is alleged and a Stockholders Indemnified Party
asserts that UAG has become obligated to a Stockholders 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 Stockholders
Indemnified Party hereunder (for purposes of this Article 9, any UAG
Indemnified Party and any Stockholders Indemnified Party is sometimes referred
to as an "Indemnified Party" and each party having an indemnity obligation
under this Article 9 is 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 reasonably prompt written notice to the
Indemnifying Party stating the basis of the Indemnifying Party's obligation to
provide indemnification to the Indemnified Party under this Article 9 and
setting forth in reasonable detail the facts, to the extent then available,
concerning the Event of Breach, UAG Event of Breach or Third Party Claim, as
the case may be, and the basis upon which the Indemnified Party is claiming
indemnification. Subject to Sections 9.1(b)(i) and 9.2(b)(i), a failure or
delay by an Indemnified Party to give a reasonably prompt notice of any claim
for indemnification shall not release an Indemnifying Party's obligations with
respect to the claim, except to the extent that the Indemnifying Party can
demonstrate actual loss as a result of such failure or delay. If such notice
relates to a Third Party Claim, each Indemnifying Party, jointly and severally,
agrees to defend such Indemnified Party against any such Third Party Claim at
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 against such Third Party Claim,
such Indemnified Party shall have the right to do so, including, without
limitation, the right to make any compromise or settlement thereof, and such
Indemnified Party shall be entitled to recover the entire Cost thereof from the
Indemnifying Party, including, without limitation, reasonable attorneys' fees,
disbursements and amounts paid (or of which such Indemnified Party has become
obligated to pay) as the result of such Third Party Claim. Failure by the
Indemnifying Party to notify such Indemnified Party of its or their election to
defend any such Third Party Claim within fifteen (15) days after notice thereof
shall have been given to the Indemnifying Party shall be deemed a waiver by the
Indemnifying Party of its or their right to defend such Third Party Claim. If
the Indemnifying Party assumes the defense of the particular Third Party Claim,
the Indemnifying Party shall not, in the defense of such Third Party Claim,
consent to entry of any judgment or enter into any settlement, except with the
written consent of such Indemnified Party which 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 consent shall not be unreasonably withheld, that does
not include as an unconditional term thereof the giving by the claimant or the
plaintiff
55
<PAGE>
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 its or
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 may be recovered
by the Indemnified Party by an offset against any or all amounts due to such
other parties pursuant to this Agreement.
9.5 EXCLUSIVE MONETARY REMEDY FOR BREACH.
The rights to indemnification set forth in this Article 9 shall be
exclusive of all other rights to monetary damages that any party (or such
party's successors or assigns) would otherwise have by statute or common law
for breach of any provision of this Agreement, except to the extent such claim
arises out of any party's fraud. Notwithstanding the above, the parties hereto
shall have the right to seek any non-monetary remedy in lieu of or in addition
to the rights to indemnification set forth in this Article 9 for breach of any
provision of this Agreement.
ARTICLE 10
MISCELLANEOUS
10.1 SURVIVAL OF PROVISIONS.
The respective representations, warranties, covenants and agreements
of each of the parties to this Agreement shall survive the Closing Date and the
consummation of the transactions contemplated by this Agreement, regardless of
any disclosure to, or investigation made by or on behalf of, any other party on
or before the Closing Date; provided that the period of survival shall, (i)
with respect to each representation or warranty pertaining to Taxes under
Section 2.8 hereof, end for each Tax upon expiration of the statute of
limitations applicable to the Tax, (ii) with respect to the representations and
warranties in Section 2.11 (Environmental Matters), end five (5) years after
the Closing Date, (iii) with respect to the representations and warranties in
Section 2.1(a) (Organization), Section 2.3 (Capitalization), Section 2.4(a)
(Authority), Section 3.1 (Title to Shares), Section 3.2(a) (Authority), Section
4.1 (Organization), Section 4.2 (Merger Subs), Section 4.3 (Capitalization) and
Section 4.5(a) (Authority), and with respect to covenants and agreements in
this Agreement, continue indefinitely, and (iii) in any
56
<PAGE>
other case, end three (3) years after the Closing Date (in each case, the
"Survival Period"). Notwithstanding anything herein to the contrary, each of
the representations and warranties herein shall survive 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 until the date such claim is finally liquidated or otherwise resolved.
10.2 [INTENTIONALLY OMITTED]
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 for next business day delivery or
facsimile transmission (with original to follow by mail) or mailed by
registered or certified mail, postage prepaid (return receipt requested), as
follows:
If to the Companies before the Closing Date:
9190 Priority Way, West Drive
Suite 216
Indianapolis, Indiana 46240
with a copy to:
Bose, McKinney & Evans
2700 First Indiana Plaza
135 North Pennsylvania Street
Indianapolis, Indiana 46204
Attn: Robert P. Kassing, 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 10152
Attn: General Counsel
57
<PAGE>
with a copy to:
Rogers & Hardin
2700 International Tower
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attn: Michael Rosenzweig, Esq.
If to the Stockholders:
9190 Priority Way, West Drive
Suite 216
Indianapolis, Indiana 46240
with a copy to:
Bose, McKinney & Evans
2700 First Indiana Plaza
135 North Pennsylvania Street
Indianapolis, Indiana 46204
Attn: Robert P. Kassing, Esq.
If to UAG or the Merger Subs:
United Auto Group, Inc.
375 Park Avenue
New York, New York 10152
Attn: General Counsel
with a copy to:
Rogers & Hardin
2700 International 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.
58
<PAGE>
10.5 ASSIGNMENT.
This Agreement and all of the provisions hereof shall be binding upon
and inure to the benefit of the parties hereto and their respective 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
the Merger Subs 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 or the Merger Subs, but in such event UAG shall remain fully liable for the
performance of all such obligations in accordance with the terms and conditions
of this Agreement.
10.6 ENTIRE AGREEMENT.
This Agreement (including the Schedules hereto) and the Documents
embody the entire agreement and understanding of the parties with respect to
the transactions contemplated hereby and supersede all prior written or oral
commitments, arrangements or understandings between the parties with respect
thereto and all prior drafts of this Agreement. There are no restrictions,
agreements, promises, warranties, covenants or undertakings with respect to the
transactions contemplated hereby other than those expressly set forth herein or
in the Documents. Prior drafts of this Agreement shall not be used as a basis
for interpreting this Agreement.
10.7 WAIVER AND AMENDMENTS.
Each of the Stockholders and the Companies, as one party, and UAG and
the Merger Subs, 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.
59
<PAGE>
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 [INTENTIONALLY OMITTED].
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 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 [INTENTIONALLY OMITTED].
10.13 GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Indiana without giving effect to any choice or
conflict of law provision or rule that would cause the laws of any other
jurisdiction to apply.
10.14 TIME IS OF THE ESSENCE.
Time is of the essence for purposes of this Agreement.
10.15 ATTORNEYS' FEES.
If any party hereto brings suit against another party to this
Agreement in connection with the transactions contemplated by this Agreement
and the party against whom suit is brought (the "Defendant") is successful in
denying substantially all the relief sought by the claimant, then the Defendant
shall be entitled to recover from the claimant the reasonable attorneys= fees
and other costs and expenses incurred by the Defendant in connection with such
suit regardless of whether the suit is prosecuted to judgment. If any party
hereto brings suit against another party to this Agreement in connection with
the transactions contemplated by this Agreement and such party (the
"Plaintiff") is successful in obtaining substantially all the relief sought by
the claimant, then the Plaintiff shall be entitled to recover from the claimant
the reasonable attorneys= fees and other costs and expenses incurred by the
Plaintiff in connection with such suit regardless of whether the suit is
prosecuted to judgment.
60
<PAGE>
10.16 LIMITATION ON LIABILITY OF EACH TRUSTEE.
UAG and the Merger Subs acknowledge and agree that the liability of
each Trust and each trustee thereunder in connection with the transactions
contemplated by this Agreement shall only be enforceable against the property
of the Trust itself, and UAG and the Merger Subs waive any right to proceed for
enforcement of any such liability against any such trustee in its personal
capacity.
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:
-------------------------------
Its:
UAG KISSIMMEE MOTORS, INC.
By:
-------------------------------
Its:
UAG PARAMOUNT MOTORS, INC.
By:
-------------------------------
Its:
UAG CENTURY MOTORS, INC.
By:
-------------------------------
Its:
[Signatures continued on following pages]
61
<PAGE>
KISSIMMEE MOTORS, INC., D/B/A
KISSIMMEE TOYOTA
By:
-------------------------------
Its:
PARAMOUNT CHEVROLET GEO, INC.
By:
-------------------------------
Its:
CENTURY CHEVROLET GEO, INC.
By:
-------------------------------
Its:
----------------------------------
ALAN V. YOUNG, individually
----------------------------------
WILLIAM A. YOUNG, individually
----------------------------------
JENNIFER Y. TAGGART, individually
----------------------------------
CATHY Y. DYER, individually
[Signatures continued on following pages]
62
<PAGE>
YOUNG/AVY II IRREVOCABLE
TRUST U/A DATED 12/31/96 FBO LARA A.
YOUNG
----------------------------------
ALAN V. YOUNG, TRUSTEE
YOUNG/AVY II IRREVOCABLE
TRUST U/A DATED 12/31/96 FBO
COURTNEY E. YOUNG
----------------------------------
ALAN V. YOUNG, TRUSTEE
YOUNG/AVY II IRREVOCABLE
TRUST U/A DATED 12/31/96 FBO
DANIEL A. YOUNG
----------------------------------
ALAN V. YOUNG, TRUSTEE
YOUNG/WAY II IRREVOCABLE
TRUST U/A DATED 12/31/96
----------------------------------
WILLIAM A. YOUNG, TRUSTEE
[Signatures continued on following pages]
63
<PAGE>
YOUNG/TAGGART II IRREVOCABLE TRUST
U/A DATED 12/31/96 FBO WILLIAM E.
TAGGART
----------------------------------
JENNIFER Y. TAGGART, TRUSTEE
YOUNG/TAGGART II IRREVOCABLE TRUST
U/A DATED 12/31/96 FBO MARY K.
TAGGART
----------------------------------
JENNIFER Y. TAGGART, TRUSTEE
YOUNG/DYER II IRREVOCABLE
TRUST U/A DATED 12/31/96
----------------------------------
CATHY Y. DYER, TRUSTEE
SHIRLEY J. YOUNG IRREVOCABLE GRAT
TRUST U/A DATED 3/1/97
----------------------------------
ALAN V. YOUNG, TRUSTEE
----------------------------------
WILLIAM A. YOUNG, TRUSTEE
[Signatures continued on following pages]
64
<PAGE>
DAN E. YOUNG IRREVOCABLE GRAT TRUST
U/A DATED 3/1/97
----------------------------------
ALAN V. YOUNG, TRUSTEE
----------------------------------
WILLIAM A. YOUNG, TRUSTEE
65
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0001019849
<NAME> UNITED AUTO GROUP, INC.
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-01-1996
<PERIOD-START> JAN-01-1997 JAN-01-1996
<PERIOD-END> SEP-30-1997 DEC-31-1996
<CASH> 172,638 66,875
<SECURITIES> 0 0
<RECEIVABLES> 84,842 53,241
<ALLOWANCES> 2,472 1,223
<INVENTORY> 248,555 168,855
<CURRENT-ASSETS> 511,192 299,571
<PP&E> 39,427 25,967
<DEPRECIATION> 4,949 3,626
<TOTAL-ASSETS> 887,603 522,950
<CURRENT-LIABILITIES> 314,453 221,455
<BONDS> 237,356 11,121
0 0
0 0
<COMMON> 2 2
<OTHER-SE> 323,719 281,466
<TOTAL-LIABILITY-AND-EQUITY> 887,603 522,950
<SALES> 1,541,133 1,302,031
<TOTAL-REVENUES> 1,543,605 1,303,829
<CGS> 1,344,730 1,157,368
<TOTAL-COSTS> 1,508,535 1,284,479
<OTHER-EXPENSES> 297 103
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 7,657 4,716
<INCOME-PRETAX> 27,710 13,731
<INCOME-TAX> 11,106 6,270
<INCOME-CONTINUING> 16,486 7,461
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 4,987
<CHANGES> 0 0
<NET-INCOME> 16,486 2,474
<EPS-PRIMARY> 0.89 0.23
<EPS-DILUTED> 0.89 0.23
</TABLE>
