<PAGE>
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 MARCH 31, 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)
DELAWARE 22-3086739
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
375 PARK AVENUE, NEW YORK, NEW YORK 10152
(Address of principal executive offices) (Zip Code)
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 MAY 13, 1997:
VOTING COMMON STOCK, $0.0001 PAR VALUE 17,191,851
NON-VOTING COMMON STOCK, $0.0001 PAR VALUE 605,454
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TABLE OF CONTENTS
PART I
PAGE
1. Financial Statements and Supplementary Data
Consolidated Condensed Balance Sheets as of March 31, 1997 and
December 31, 1996 1
Consolidated Condensed Statements of Income for the three
months ended March 31, 1997 and 1996 3
Consolidated Condensed Statements of Cash Flows for the
three months ended March 31, 1997 and 1996 4
Notes to Consolidated Condensed Financial Statements 6
2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 9
PART II
1. Legal Proceedings 12
2. Changes in Securities 12
6. Exhibits and Reports on Form 8-K 13
Signatures 23
<PAGE>
UNITED AUTO GROUP, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands)
(UNAUDITED)
MARCH 31, DECEMBER 31,
1997 1996
-------- --------
ASSETS
AUTO DEALERSHIPS
Cash and cash equivalents $ 36,083 $ 66,875
Accounts receivable, net 61,314 52,018
Inventories 213,629 168,855
Other current assets 13,673 11,823
-------- --------
Total current assets 324,699 299,571
-------- --------
Property and equipment, net 24,859 22,341
Intangible assets, net 187,428 177,194
Other assets 11,244 6,587
-------- --------
TOTAL AUTO DEALERSHIP ASSETS 548,230 505,693
AUTO FINANCE
Cash and cash equivalents 3,569 2,688
Finance assets, net 17,870 9,723
Other assets 1,995 4,846
-------- --------
TOTAL AUTO FINANCE ASSETS 23,434 17,257
-------- --------
TOTAL ASSETS $571,664 $522,950
======== ========
See Notes to Consolidated Condensed Financial Statements
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UNITED AUTO GROUP, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands)
(UNAUDITED)
MARCH 31, DECEMBER 31,
1997 1996
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
AUTO DEALERSHIPS
Floor plan notes payable $215,409 $170,170
Short-term debt 6,069 6,069
Accounts payable 21,411 22,187
Accrued expenses 18,319 17,585
Current portion of long-term debt 5,136 5,444
-------- --------
Total current liabilities 266,344 221,455
-------- --------
Long-term debt 11,777 11,121
Due to related party 1,428 1,334
Deferred income taxes 4,867 4,867
-------- --------
TOTAL AUTO DEALERSHIP LIABILITIES 284,416 238,777
-------- --------
AUTO FINANCE
Short-term debt 913 1,001
Accounts payable and other liabilities 2,872 1,704
-------- --------
TOTAL AUTO FINANCE LIABILITIES 3,785 2,705
-------- --------
Commitments and contingent liabilities
STOCKHOLDERS' EQUITY
Voting common stock 2 2
Additional paid-in capital 283,180 284,502
Retained earnings (accumulated deficit) 281 (3,036)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 283,463 281,468
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' $571,664 $522,950
======== ========
See Notes to Consolidated Condensed Financial Statements
-2-
<PAGE>
UNITED AUTO GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts)
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
1997 1996
AUTO DEALERSHIPS
Vehicle sales $340,833 $233,139
Finance and insurance 13,483 9,942
Service and parts 33,884 18,638
-------- --------
Total revenues 388,200 261,719
Cost of sales, including floor plan interest 340,588 232,502
-------- --------
Gross profit 47,612 29,217
Selling general and administrative expenses 41,756 27,618
Operating income 5,856 1,599
Other income (expense), net (172) (128)
-------- --------
INCOME BEFORE INCOME TAXES-AUTO DEALERSHIPS 5,684 1,471
-------- --------
AUTO FINANCE
Revenues 985 412
Interest expense (144) (86)
Operating and other expenses (937) (590)
-------- --------
LOSS BEFORE INCOME TAXES-AUTO FINANCE (96) (264)
-------- --------
TOTAL COMPANY
Income before minority interests and
provision for income taxes 5,588 1,207
Minority interests (36) (500)
Provision for income taxes (2,235) (536)
-------- --------
NET INCOME $ 3,317 $ 171
======== ========
NET INCOME PER COMMON SHARE $ 0.19 $ 0.02
======== ========
SHARES USED IN COMPUTING NET INCOME PER COMMON
SHARE 17,758 7,449
======== ========
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)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1997 1996
--------------------- ---------------------
AUTO AUTO AUTO AUTO
DEALERSHIPS FINANCE DEALERSHIPS FINANCE
----------- ------- ----------- -------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $3,375 $(58) $318 $(147)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in)
operating activities:
Depreciation and amortization 1,642 103 746 319
Gain on sales of loans - (361) - (206)
Loans originated - (23,417) - (19,847)
Loans repaid or sold - 19,057 - 18,758
Minority interests portion of 36 - 500 -
income
Changes in operating assets
and liabilities:
Finance assets - (654) - 40
Accounts receivable (5,412) - (9,137) -
Inventories (34,534) - (8,459) -
Floor plan notes payable 36,273 - 18,686 -
Accounts payable and accrued (1,801) 1,168 2,065 1,660
expenses
Other (2,314) 90 (409) (336)
------- ------ --- ----------- -----------
Net cash provided by (used in)
operating activities: (2,735) (4,072) 4,310 241
------- ------ ----- ---
</TABLE>
See Notes to Consolidated Condensed Financial Statements
-4-
<PAGE>
UNITED AUTO GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1997 1996
--------------------- --------------------
AUTO AUTO AUTO AUTO
DEALERSHIPS FINANCE DEALERSHIPS FINANCE
----------- ------- ----------- -------
<S> <C> <C> <C> <C>
INVESTING ACTIVITIES:
Purchase of equipment and improvements $(2,565) $(27) $(1,034) $(61)
Dealership acquisitions (7,929) - (8,142) -
Investment in auto finance subsidiary (5,000) 5,000 (3,700) 3,700
Funding for subsequent acquisition (1,881) - - -
Advances to related parties (679) - (32) -
Investment in and advances
to uncombined investee - - (245) -
------ ------ ------ ------
Net cash provided by (used in)
investing activities (18,054) 4,973 (13,153) 3,639
------ ------ ------ ------
FINANCING ACTIVITIES:
Proceeds from issuance of stock 201 - 8,606 -
Repurchase of common stock (8,821) - - -
Proceeds from borrowings of long-term debt 1,250 - 7,100 -
Deferred financing costs (1,550) - - -
Net repayments of short-term debt - - (5,990) -
Payments of long-term debt
and capitalized lease obligations (1,177) - (699) -
Advances from affiliates 94 - 42 -
Borrowings from warehouse credit line - 17,258 - 14,590
Payments of warehouse credit line - (17,278) - (17,668)
------ ------- ------ -------
Net cash provided by (used
in) financing activities (10,003) (20) 9,059 (3,078)
------- ------ ------ ------
Net increase (decrease) in
cash and cash equivalents (30,792) 881 216 802
Cash and cash equivalents, beginning of period 66,875 2,688 4,697 531
------ ------ ------ ------
Cash and cash equivalents, end of period $36,083 $3,569 $4,913 $1,333
======= ====== ====== ======
</TABLE>
See Notes to Consolidated Condensed Financial Statements
-5-
<PAGE>
UNITED AUTO GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(In Thousands, Except Per Share Amounts)
(UNAUDITED)
1. BASIS OF PRESENTATION
The information presented as of March 31, 1997 and 1996, and for the three
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 any interim
period are not necessarily indicative of the results for a full 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 are 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:
MARCH 31, DECEMBER 31,
1997 1996
---- ----
New vehicles $147,565 $109,414
Used vehicles 55,269 50,060
Parts, accessories and other 10,795 9,381
------ -----
Total inventories $213,629 $168,855
======= =======
4. BUSINESS COMBINATIONS
Effective March 1, 1997, the Company acquired a 100% interest in Shannon
Automotive Ltd., which owns two automobile dealerships located in Houston,
Texas, for a total of $7,000 in cash and 297,872 shares of common stock. The
acquisition agreement provides for an additional contingent cash payment to the
extent that such shares have an aggregate market value of less than $7,000 on
the date they become freely tradable. The acquisition has been accounted for
under the purchase method, and the accompanying financial statements reflect
the results of operations from the date of acquisition.
-6-
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UNITED AUTO GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(In Thousands, Except Per Share Amounts)
(UNAUDITED)
5. PRO FORMA RESULTS OF OPERATIONS
The following unaudited pro forma summary presents the consolidated results of
operations of the Company for the three months ended March 31, 1997 and 1996
after reflecting the pro forma adjustments that would be necessary to present
those results as if the acquisition of Shannon Automotive, Ltd. had been
consummated as of January 1, 1996. The results of operations for the three
months ended March 31, 1996 also reflect acquisitions completed in 1996 as if
these acquisitions had been consummated as of the first day of the year.
THREE MONTHS ENDED MARCH 31,
1997 1996
---- ----
Revenues $400,773 $394,197
======== ========
Income before minority interests and
provision for income taxes $6,062 $6,044
====== ======
Net income $3,601 $3,445
====== ======
Net income per common share $0.20 $0.19
===== =====
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. 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. If the reduction of the floor plan interest expense were
reflected, then pro forma net income (and net income per common share) would
have been $4,025 ($.22 per share) for the three months ended March 31, 1996.
-7-
<PAGE>
UNITED AUTO GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(In Thousands, Except Per Share Amounts)
(UNAUDITED)
6. SUPPLEMENTAL CASH FLOW INFORMATION
The following table presents certain supplementary information to the
Consolidated Condensed Statements of Cash Flows:
THREE MONTHS ENDED MARCH 31,
1997 1996
-----------------------------------------
AUTO AUTO AUTO AUTO
DEALERSHIPS FINANCE DEALERSHIPS FINANCE
----------- ------- ----------- -------
SUPPLEMENTAL INFORMATION:
Cash paid for interest $1,429 $72 2,289 $59
Cash paid for income taxes 96 12 - 2
NON-CASH FINANCING AND INVESTING
ACTIVITIES:
Dealership acquisition costs financed
by issuance of stock 7,350 - - -
Dealership acquisition costs financed
by long-term debt - - 2,100 -
Capitalized lease obligations 274 100 - -
7. RELATED PARTY TRANSACTIONS
During 1996, the Company was owed amounts by former minority shareholders and
related entities. During the three months ended March 31, 1996, the Company
recognized approximately $774 of interest thereon in the Consolidated Condensed
Statements of Income.
-8-
<PAGE>
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 March 31, 1997, UAG had revenues
of approximately $388.2 million and retailed 9,751 new and 5,949 used vehicles.
For the quarter ended March 31, 1997, vehicle sales represented 87.8% of the
Company's revenues, service and parts accounted for 8.7% of revenues, and
finance and insurance represented the remaining 3.5%.
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
its wholly-owned subsidiary, United AutoCare. Service and parts revenues
include fees paid by consumers for repair and maintenance service and the sale
of replacement parts.
Through its automobile finance subsidiary, Atlantic Auto 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, rent, insurance and utilities. Interest
expense consists of interest charges on all of the Company's interest-bearing
debt other than floor plan inventory financing. Interest expense on floor plan
debt is included in cost of sales.
The Company 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.
-9-
<PAGE>
RESULTS OF OPERATIONS
The following discussion and analysis relates to the Company's consolidated
historical results of operations for the three months ended March 31, 1997, and
1996.
THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31, 1996
Auto Dealerships
Revenues. Revenues increased by $126.5 million, or 48.3%, from $261.7 million
to $388.2 million due principally to acquisitions. Dealerships acquired
subsequent to March 31, 1996 contributed $117.0 million of revenues in the
three months ended March 31, 1997.
Sales of new and used vehicles increased by $107.7 million, or 46.2%, from
$233.1 million to $340.8 million. Dealerships acquired subsequent to March 31,
1996 contributed $100.6 million of that increase. Unit retail sales of new and
used vehicles increased by 30.2% and 47.8%, respectively, due principally to
acquisitions. For the three months ended March 31, 1997, the Company retailed
9,751 new vehicles (62.1% of total vehicle sales) and 5,949 used vehicles
(37.9% of total vehicle sales). For the three months ended March 31, 1996, the
Company retailed 7,490 new vehicles (65.0% of total vehicle sales) and 4,025
used vehicles (35.0% of total vehicle sales). The increase in the relative
proportion of used vehicle sales to new vehicle sales was due principally to
the expansion of existing used vehicle operations and the establishment of
additional retail used vehicle centers in response to the increased popularity
of used vehicles. New vehicle selling prices increased by an average of 12.3%
due primarily to changes in the mix of models sold and changes in manufacturer
pricing. Used vehicle selling prices increased by an average of 15.2% due to an
increase in consumer demand and a change in the mix of used vehicles sold.
Finance and insurance revenues (aftermarket product sales) increased by $3.6
million, or 35.6%, from $9.9 million to $13.5 million due principally to
acquisitions and the establishment of United AutoCare.
Service and parts revenues increased by $15.3 million, or 81.8%, from $18.6
million to $33.9 million due principally to acquisitions.
Gross Profit. Gross profit increased by $18.4 million, or 63.0%, from $29.2
million to $47.6 million. Gross profit as a percentage of revenues increased
from 11.2% to 12.3%. This increase was due principally to acquisitions.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $14.1 million, or 51.2%, from $27.6
million to $41.7 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 10.6% to 10.8%.
-10-
<PAGE>
Auto Finance
Loss before Income Taxes. The pretax loss from operations at Atlantic Finance
decreased by $0.2 million from a loss of $0.3 million to a loss of $0.1
million.
Total Company
Provision for Income Taxes. The 1997 provision for income taxes is $2.2 million
compared to $0.5 million in 1996. The estimated effective tax rate declined to
40.0% from 44.4% in 1996.
LIQUIDITY AND CAPITAL RESOURCES
CASH AND LIQUIDITY REQUIREMENTS
The cash requirements of the Company are primarily for the acquisition of new
dealerships, working capital and expansion of existing facilities.
Historically, these cash requirements have been met through issuances of equity
and borrowings under various credit agreements. At March 31, 1997, the
Company's dealerships had working capital of $58.4 million.
During the three months ended March 31, 1997, operating activities resulted in
net cash used by dealership operations of $2.7 million.
Net cash used for dealership financing activities during the three months ended
March 31, 1997 totaled $10.0 million due principally to the repurchase of
397,000 shares of the Company's common stock under an announced stock
repurchase program and financing costs in connection with a new borrowing
facility.
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 in favor of their floor plan lenders.
At March 31, 1997, the Company had approximately $36.1 million of cash
available to fund operations and acquisitions. In addition, on March 20, 1997,
the Company entered into a senior credit facility in the amount of $50 million
provided by a syndicate of banks led by The Bank of Nova Scotia and Morgan
Guaranty Trust Company of New York. Borrowings under this agreement are
expected to be used principally for acquisitions. 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 significant
acquisitions, it will need to raise additional capital either through the
public or private issuance of equity or debt securities or through additional
bank borrowings. Certain issuances of equity securities would require the prior
approval of certain automobile manufacturers.
-11-
<PAGE>
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.
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 March 6, 1997, the Company acquired a dealership group located in Houston,
Texas for a purchase price of $7.0 million in cash and 297,872 shares of Voting
Common Stock. In connection with such transaction, the Company issued 37,457
shares of Voting Common Stock to the party that brokered the transaction. Such
shares were issued in reliance on Section 4(2) of the Securities Act of 1933,
as amended, as a transaction not involving any public offering.
-12-
<PAGE>
ITEM 6 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Reports on Form 8-K.
The Company filed the following Current Reports on Form 8-K during the quarter
ended March 31, 1997:
1. January 23, 1997, reporting under Items 5 and 7 (announcement of new
chief financial officer).
2. March 3, 1997, reporting under Items 5 and 7 (announcement of Hanna
and Staluppi acquisitions).
3. March 10, 1997, reporting under Items 2 and 7 (announcement of new
chief executive officer and Ford acquisition).
(b) Exhibits
***3.1 Third Restated Certificate of Incorporation.
*3.2 Restated Bylaws.
*4.1 Specimen Common Stock certificate.
*10.1.1.1 Registration Rights Agreement, dated as of October 15, 1993, among
the Company and the investors listed therein.
*10.1.1.2 Amendment to Registration Rights Agreement, dated as of July 31,
1996, among the Company and the investors listed therein.
*10.1.2 Waiver, Consent and Modification Agreement, dated as of September
22, 1995, among the Company and its stockholders.
*10.1.3 Letter Agreement, dated September 22, 1996, between the Company
and J.P. Morgan Capital Corporation.
*10.1.4 Form of Warrant.
*10.1.5 Form of Additional Warrant.
*10.1.6 Employment Agreement, dated as of June 21, 1996, between the Company
and Carl Spielvogel.
*10.1.7 Severance Agreement, dated April 5, 1996, among the Company, Trace
and Ezra P. Mager.
*10.1.8 Stock Option Plan of the Company.
*10.1.9 Registration Rights Agreement, dated as of August 1, 1995, among the
company and the parties listed on Schedule I thereto.
*10.1.10 Sublease, dated August 1994, between Overseas Partners, Inc. and
the Company.
*10.1.11 Letter, dated July 24, 1996, from Chrysler Corporation to the
Company.
*10.1.12 Agreement, dated July 24, 1996, between the Company and Toyota Motor
Sales U.S.A., Inc.
*10.1.13 Non-employee Director Compensation Plan of the Company.
*10.1.14 Form of Agreement among the Company, certain of its affiliates and
American Honda Motor Co., Inc.
*10.1.15 Form of Option Certificate of the Company in favor of Samuel X.
DiFeo and Joseph C. DiFeo.
-13-
<PAGE>
*10.1.16 Form of Registration Rights Agreement among the Company and the
parties listed on Schedule U thereto.
10.1.17 Registration Rights Agreement, dated March 6, 1997, between the
Company and Kevin J. Coffey
10.1.18 Consulting Agreement, dated March 3, 1997, between the Company and
Carl Spielvogel.
10.1.19 Credit Agreement, dated as of March 20, 1997, among the Company, the
Guarantors party thereto, the Banks party thereto, The Bank of Nova
Scotia, as Administrative Agent, and Morgan Guaranty Trust Company
of New York, as Documentation Agent.
10.1.20 Pledge Agreement, dated as of March 20, 1997, among the Company, the
pledgors named therein and The Bank of Nova Scotia, as
Administrative Agent.
*10.2.1.1 Honda Automobile Dealer Sales and Service Agreement, dated October
5, 1995, between American Honda Motor Co. Inc. and Danbury Auto
Partnership.
*10.2.1.2 American Honda Motor Co. Standard Provisions.
*10.2.2.1 Lexus Dealer Agreement, dated October 5, 1992, between Lexus, a
division of Toyota Motor Sales, U.S.A., Inc, and Somerset Motors
Partnership.
*10.2.2.2 Lexus Dealer Agreement Standard Provisions.
*10.2.3.1 Mitsubishi Motor Sales of America, Inc. Dealer Sales and Service
Agreement, dated August 29, 1994, between Mitsubishi Motor Sales
of America, Inc. and Rockland Motors Partnership, as amended
August 20, 1996.
*10.2.3.2 Mitsubishi Motor Sales of America, Inc. Dealer Sales and Service
Agreement Standard Provisions.
*10.2.4.1 BMW of North America, Inc. Dealer Agreement, dated January 1,
1994, between BMW of North America, Inc. and DiFeo BMW
Partnership, as amended October 21, 1996.
*10.2.4.2 BMW of North America, Inc. Dealer Standard Provisions Applicable
to Dealer Agreement.
*10.2.5.1 Term Dealer Sales and Service Agreement, dated July 3, 1996, between
American Suzuki Motor Corporation and Fair Hyundai Partnership, as
amended September 6, 1996.
*10.2.5.2 Suzuki Dealer Sales and Service Agreement Standard Provisions.
*10.2.6.1 Toyota Dealer Agreement, dated May 5, 1995, between Toyota Motor
Distributors, Inc. and Hudson Motors Partnership.
*10.2.6.2 Toyota Dealer Agreement Standard Provisions.
*10.2.7.1 Oldsmobile Division Dealer Sales and Service Agreement, dated
October 2, 1992, between General Motors Corporation, Oldsmobile
Division and J&F Oldsmobile-Isuzu Partnership, as amended December
20, 1993 and July 23, 1996.
*10.2.7.2 General Motors Dealer Sales and Service Agreement Standard
Provisions.
*10.2.8.1 Chevrolet-Geo Dealer Sales and Service Agreement, dated November 1,
1995, between General Motors Corporation, Chevrolet Motor Division
and Fair Chevrolet-Geo Partnership.
*10.2.9.1 Nissan Dealer Term Sales and Service Agreement, between the Nissan
Division of Nissan Motor Corporation in U.S.A. and DiFeo Nissan
Partnership.
*10.2.9.2 Nissan Dealer Sales and Service Agreement Standard Provisions.
- -14-
<PAGE>
*10.2.10.1 Chrysler Corporation Term Sales and Service Agreement, dated
August 16, 1995, between Fair Chrysler Plymouth Partnership and
Chrysler Corporation.
*10.2.10.2 Chrysler Corporation Sales and Service agreement Additional Terms
and Provisions.
*10.2.11 Chrysler Corporation Eagle Sales and Service Agreement, dated
October 8, 1992, between DiFeo Jeep-Eagle Partnership and Chrysler
Corporation.
*10.2.12 Chrysler Corporation Chrysler Sales and Service Agreement, dated
August 16, 1995, between DiFeo Chrysler Plymouth Jeep Eagle
Partnership and Chrysler.
*10.2.13 Chrysler Corporation Plymouth Sales and Service Agreement, dated
November 13, 1992, between DiFeo Chrysler Plymouth Jeep Eagle
Partnership and Chrysler Corporation.
*10.2.14 Toyota Dealer Agreement, dated May 5, 1995, between Toyota Motor
Distributors, Inc. and County Auto Group Partnership.
*10.2.15.1 Hyundai Motor America Dealer Sales and Service Agreement, dated
October 12, 1992, between Hyundai Motor America and Fair Hyundai
Partnership as amended November 22, 1993, October 12, 1995, March
14, 1996 and September 18, 1996.
*10.2.15.2 Hyundai Motor America Dealer Sales and Service Agreement Standard
Provisions.
*10.2.16 Hyundai Motor America Dealer Sales and Service Agreement, dated
November 22, 1993, as amended April 1, 1994, and November 3, 1995,
between Hyundai Motor America and DiFeo Hyundai Partnership.
*10.2.17 Toyota Dealer Agreement, dated August 23, 1995, between Toyota
Motor Distributors, Inc. and OCT Partnership.
*10.2.18 Mitsubishi Motor Sales of America, Inc. Sales and Service
Agreement, dated June 30, 1994, between Mitsubishi Motor Sales of
America, Inc. and OCM Partnership.
*10.2.19 Chrysler Corporation Jeep Sales and Service Agreement, dated
October 8, 1992, between DiFeo Jeep-Eagle Partnership and Chrysler
Corporation.
*10.2.20 Chevrolet-Geo Dealer Sales and Service Agreement, dated November 1,
1995 between General Motors Corporation, Chevrolet Motor Division
and DiFeo Chevrolet-Geo Partnership.
*10.2.21 Isuzu Dealer Sales and Service Agreement, dated as of September
16, 1996 between American Isuzu Motors, Inc. and Fair
Cadillac-Oldsmobile-Isuzu Partnership.
*10.2.22 Isuzu Dealer Sales and Service Agreement Additional Provisions.
*10.2.23 Loan and Security Agreement, dated as of October 1, 1992, between
General Motors Acceptance Corporation and Hudson Motors Partnership,
as amended April 7, 1993.
*10.2.24 Unconditional, Continuing Guaranty of Payment of the Company and its
affiliates named therein, dated as of October 1, 1992, in favor of
General Motors Acceptance Corporation, as amended April 7, 1993.
*10.2.25 Term Loan and Borrowing Base Credit Line Loan Agreement, dated as
of April 7, 1993, between General Motors Acceptance Corporation
and DiFeo-EMCO Management Partnership.
*10.2.26 Settlement Agreement, dated as of October 3, 1996, among the Company
and certain of its affiliates, on the one hand, and Samuel X. DiFeo,
Joseph C. DiFeo and certain of their affiliates, on the other hand.
*10.2.27 Form of Agreement and Plan of Merger used in the Minority Exchange
of the DiFeo Group.
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<PAGE>
*10.2.28 Form of Lease of certain facilities in the DiFeo Group.
*10.2.29 Lease Agreement, dated September 27, 1990, between J&F Associates
and TJGHCC Associates.
*10.2.30 Lease Agreement, dated October 1, 1992, between Manly Chevrolet,
Inc. and County Toyota, Inc.
*10.2.31 Sublease, dated October 1, 1992, between DiFeo BMW, Inc. and DiFeo
BMW Partnership.
*10.3.1 Receivables Purchase Agreement, dated as of June 28, 1995, between
Atlantic Auto Funding Corporation and Atlantic Auto Finance
Corporation.
*10.3.2 Loan and Security Agreement, dated as of June 28, 1995, among
Atlantic Auto Funding Corporation, Atlantic Auto Finance
Corporation and Citibank, N.A.
*10.3.3 Support Agreement of the Company, dated as of June 28, 1995, in
favor of Atlantic Auto Funding Corporation.
*10.3.4 Purchase Agreement, dated as of June 14, 1996, between Atlantic
Auto Finance Corporation and Atlantic Auto Second Funding
Corporation.
*10.3.5 Transfer and Administration Agreement, dated as of June 14, 1996,
among Atlantic Auto Second Funding Corporation, Atlantic Auto
Finance Corporation and Morgan Guaranty Trust Company of New York.
*10.3.6 Support Agreement of the Company, dated as of June 18, 1996, in
favor of Atlantic Auto Second Funding Corporation.
*10.3.7 Pooling and Servicing Agreement relating to Atlantic Auto Grantor
Trust 1996-A, dated as of June 20, 1996, among Atlantic Auto Third
Funding Corporation, Atlantic Auto Finance Corporation and The Chase
Manhattan Bank.
*10.3.8 Insurance and Indemnity Agreement, dated as of June 20, 1996, among
Financial Security Assurance Inc., Atlantic Auto Third Funding
Corporation and Atlantic Auto Finance Corporation.
*10.3.9 Master Spread Account Agreement, dated as of June 20, 1996, among
Atlantic Auto Third Funding Corporation, Financial Security
Assurance Inc. and The Chase Manhattan Bank.
*10.3.10 Lease Agreement, dated as of March 18, 1994, between Perinton Hills
and the Company, including guaranty of lease of Atlantic Auto
Finance Corporation.
*10.4.1 Amended and Restated Stock Purchase Agreement, dated as of July 1,
1995, among the Company, Landers Auto Sales, Inc., Steve Landers,
John Landers and Bob Landers.
*10.4.2 Promissory Note of the Company, dated August 1, 1995, in favor of
Steve Landers and John Landers.
*10.4.3 Promissory Note of the Company, dated August 1, 1995, in favor of
Steve Landers and John Landers.
*10.4.4 Guarantee of the Company, dated as of August 1, 1995, in favor of
Steve Landers and John Landers.
*10.4.5 Employment Agreement, dated as of August 1, 1995, between Landers
Auto Sales, Inc. and Steve Landers.
*10.4.6 Lease, dated as of August 1, 1995, among Steve Landers, John
Landers, Bob Landers and Landers Auto Sales, Inc., regarding
Jeep-Eagle premises.
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<PAGE>
*10.4.7 Lease, dated as of August 1, 1995, among Steve Landers, John
Landers, Bob Landers and Landers Auto Sales, Inc., regarding
Oldsmobile-GMC premises.
*10.4.8 Shareholders' Agreement, dated as of August 1, 1995, among the
Company, United Landers, Inc., Landers Auto Sales, Inc., Steve
Landers and John Landers.
*10.4.9 Chrysler Corporation Eagle Sales and Service Agreement, dated
August 16, 1995, between United Landers Auto Sales, Inc. and
Chrysler Corporation.
*10.4.10 Chrysler Corporation Jeep Sales and Service Agreement, dated
August 16, 1995, between United Landers Auto Sales, Inc. and
Chrysler Corporation.
*10.4.11 Chrysler Corporation Dodge Sales and Service Agreement, dated
August 16, 1995, between United Landers Auto Sales, Inc. and
Chrysler Corporation.
*10.4.12 Chrysler Corporation Plymouth Sales and Service Agreement, dated
August 16, 1995, between United Landers Auto Sales, Inc. and
Chrysler Corporation.
*10.4.13 Chrysler Corporation Chrysler Sales and Service Agreement, dated
August 16, 1995, between United Landers Auto Sales, Inc. and
Chrysler Corporation.
*10.4.14 Oldsmobile Division Dealer Sales and Service Agreement, dated
November 1, 1995, between General Motors Corporation, Oldsmobile
Division and United Landers Auto Sales, Inc.
*10.4.15 GMC Truck Division Dealer Sales and Service Agreement, dated
November 1, 1995, between General Motors Corporation, GMC Truck
Division and United Landers Auto Sales, Inc.
*10.4.16 Security Agreement and Master Credit Agreement, dated October 25,
1993, between Landers Oldsmobile-GMC Inc. and Chrysler Credit
Corporation.
*10.4.17 Security Agreement and Master Credit Agreement, dated May 17,
1989, between Landers Jeep-Eagle, Inc. and Chrysler Credit
Corporation.
*10.4.18 Continuing Guaranty of United Landers, Inc., dated August 15,
1994, in favor of Chrysler Credit Corporation.
*10.4.19 Commercial Loan Agreement, dated December 5, 1994, between Landers
Oldsmobile-GMC, Inc. and The Benton State Bank.
*10.4.20 Commercial Security Agreement, dated December 5, 1994, between
Landers Oldsmobile-GMC, Inc. and The Benton State Bank.
*10.4.21 Agreement, dated July 31, 1995, between the Company and General
Motors Corporation, Oldsmobile Division.
*10.5.1 Stock Purchase Agreement, dated as of November 17, 1995, among the
Company, UAG Atlanta, Inc., Atlanta Toyota, Inc, and Carl H.
Westcott.
*10.5.2 Promissory Note of UAG Atlanta, Inc., dated January 16, 1996, in
favor of Carl H. Westcott.
*10.5.3 Guaranty of the Company, dated as of January 16, 1996, in favor of
Carl H. Westcott.
*10.5.4 Promissory Note of Atlanta Toyota, Inc., dated January 16, 1996,
in favor of First Extended Service Corporation.
*10.5.5 Guaranty of the Company, dated as of January 16, 1996, in favor of
Carl H. Westcott.
*10.5.61 Lease Agreement, dated as of January 3, 1996, between Carl Westcott
and Atlanta Toyota, Inc.
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<PAGE>
*10.5.7 Lease Guaranty of the Company, dated as of January 16, 1995, in
favor of Carl Westcott.
*10.5.8 Toyota Dealer Agreement, dated January 16, 1996, between Southeast
Toyota Motor Distributors, Inc. and Atlanta Toyota, Inc.
*10.5.9 Wholesale Floor Plan Security Agreement, dated May 24, 1996,
between World Omni Financial Corp. and Atlanta Toyota, Inc.
*10.5.10 Continuing Guaranty of the Company in favor of World Omni
Financial Corp. and certain affiliates.
*10.5.11 Inventory Financing Payment Agreement, dated May 24, 1996, among
Atlanta Toyota, Inc., Fidelity Warranty Services, Inc. and World
Omni Financial Corp.
*10.5.12 Shareholders' Agreement, dated as of July 31, 1996, among the
Company, UAG Atlanta, Inc., Atlanta Toyota and John Smith.
*10.5.13 Employment Agreement, dated as of January 16, 1996, among the
Company, UAG Atlanta, Inc. and John Smith.
*10.6.1 Stock Purchase Agreement, dated as of March 1, 1996, among the
Company, UAG Atlanta II, Inc., Steve Rayman Nissan, Inc., Steven
L. Rayman and Richard W. Keffer, Jr.
*10.6.2 Employment Agreement, dated as of May 1, 1996, among the Company,
UAG Atlanta II, In., Steve Rayman Nissan, Inc. and Bruce G. Dunker.
*10.6.3 Lease Agreement, dated as of May 1, 1996, among Steven L. Rayman,
Richard W. Keffer, Jr. and Steve Rayman Nissan, Inc.
*10.6.4 Nissan Dealer Term Sales and Service Agreement, between the Nissan
Division of Nissan Motor Corporation in U.S.A. and United Nissan,
Inc.
*10.6.5 Wholesale Floor Plan Security Agreement, dated April 29, 1996,
between World Omni Financial Corp. and United Nissan, Inc.
*10.6.6 Continuing Guaranty of the Company, dated April 29, 1996, in favor
of World Omni Financial Corp. and certain affiliates.
*10.7.1 Stock Purchase Agreement, dated as of June 7, 1996, among the
Company, UAG Atlanta III, Inc. Hickman Nissan, Inc., Lynda Jane
Hickman and Lynda Jane Hickman as Executrix under the will of James
Franklin Hickman, Jr., deceased.
*10.7.2 Nissan Dealer Term Sales and Service Agreement, between the Nissan
Division of Nissan Motor Corporation in U.S.A. and Peachtree
Nissan, Inc.
*10.7.3 Automotive Wholesale Financing and Security Agreement, dated July
12, 1996, between Nissan Motor Acceptance Corporation and
Peachtree Nissan, Inc.
*10.7.4 Guaranty of the Company and UAG Atlanta III, Inc., dated July 12,
1996, in favor of Nissan Motor Acceptance Corporation.
*10.7.5 Promissory Note of UAG Atlanta III, Inc., dated July 12, 996, in
favor of Lynda Jane Hickman, as Executrix under the will of James
Franklin Hickman, Jr.
*10.7.6 Guaranty of Note of Hickman Nissan, Inc., dated July 12, 1996, in
favor of Lynda Jane Hickman, as Executrix under the will of James
Franklin Hickman, Jr.
*10.7.7 Guaranty of Note of the Company, dated July 12, 1996, in favor of
Lynda Jane Hickman, as Executrix under the will of James Franklin
Hickman, Jr.
*10.7.8 Lease Agreement, dated July 12, 1996, between Lynda Jane Hickman, as
Executrix under the will of James Franklin Hickman, Jr., and Hickman
Nissan, Inc.
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<PAGE>
*10.7.9 Lease Agreement, dated July 12, 1996, between Argonne Enterprises,
Inc. and Hickman Nissan, Inc.
*10.7.10 Guaranty of Lease of the Company, dated July 12, 1996, in favor of
Lynda Jane Hickman, Jr.
*10.7.11 Guaranty of Lease of the Company, dated July 12, 1996, in favor of
Argonne Enterprises, Inc.
*10.8.1 Stock Purchase Agreement, dated as of June 6, 1996, among the
Company, UAG West, Inc., Scottsdale Jaguar, LTD., SA Automotive,
LTD., SL Automotive, LTD., SPA Automotive, LTD., LRP, LTD., Sun
BMW, LTD., Scottsdale Management Group, LTD., 6725 Dealership
LTD., Steven Knappenberger Revocable Trust Dated April 15, 1983,
as amended, Brochick 6725 Trust dated December 29, 1992, Beskind
6725 Trust dated December 29, 1992, Steven Knappenberger, Jay P.
Beskind December 29, 1992, Knappenberger 6725 Trust dated and
George W. Brochick, as amended on October 21, 1996 by Amendment
No. 1, Amendment No. 2 and Amendment No. 3.
*10.8.2 Purchase and Sale Agreement, 6905 E. McDowell Road, dated June 6,
1996, among Steven Knappenberger, as Trustee of the Steven
Knappenberger Revocable Trust II, Bruce Knappenberger, as Trustee
of the Bruce Knappenberger Trust and UAG West, Inc. and Steven
Knappenberger.
*10.8.3 Form of Employment Agreement between the Company, UAG West, Inc.,
and Steven Knappenberger.
*10.8.4 Form of Broker's Agreement between UAG West, Inc. and KBB, Inc.
*10.8.5.1 Form of Audi Dealer Agreement.
*10.8.5.2 Audi Standard Provisions.
*10.8.6.1 Form of Acura Automobile Dealer Sales and Service Agreement.
*10.8.6.2 Acura Standard Provisions.
*10.8.7.1 Form of BMW of North America Dealer Agreement.
*10.8.8.1 Form of Porsche Sales and Service Agreement.
*10.8.8.2 Form of Addendum to Porsche Sales and Service Agreement.
*10.8.9.1 Form of Land Rover North America, Inc. Dealer Agreement.
*10.8.9.2 Land Rover Standard Provisions.
*10.8.10 Sublease, dated June 7, 1988, between Max of Switzerland and
Scottsdale Porsche & Audi, Ltd.
*10.8.11 Lease, dated October 1990, between Lisa B. Zelinsky and R.J.
Morgan Corporation of America and Scottsdale Hyundai, Ltd.
*10.8.12 Sublease, dated July 1, 1995, between Camelback Automotive, Inc.
and LRP Ltd.
*10.8.13 Lease, dated February 27, 1995, between Lee S. Maas and Sun BMW
Ltd.
*10.8.14 Form of Shareholders' Agreement among UAG West, Inc., SK Motors,
Ltd., and the Knappenberger Revocable Trust.
*10.8.15 Form of Management Agreement among the Company, UAG West, Inc. and
Scottsdale Jaguar, Ltd.
*10.8.16 Form of Lease Agreement between 6725 Agent and Scottsdale Jaguar,
Ltd.
*10.8.17 Form of Indemnification Agreement among the Company, UAG West,
Inc., Scottsdale Jaguar, Ltd., Steven Knappenberger, and certain
other individuals and trusts.
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<PAGE>
*10.8.18 Form of Real Estate Loan and Security Agreement, made by SA
Automotive, Ltd. for the benefit of Chrysler Financial Corporation.
*10.8.19 Form of Security Agreement and Master Credit Agreement of Chrysler
Credit Corporation.
*10.8.20 Form of Continuing Guaranty of each of the Company and UAG West,
Inc. in favor of Chrysler Credit Corporation.
*10.9.1 Stock Purchase Agreement, dated August 5, 1996, among the Company,
UAG Atlanta IV, Inc., Charles Evans BMW, Inc. and Charles F. Evans.
*10.9.2 Stock Purchase Agreement, dated August 5, 1996, among the Company,
UAG Atlanta IV, Inc., Charles Evans Nissan, Inc. and Charles F.
Evans.
*10.9.3 Form of Dealer Agreement between BMW North America, Inc. and
Charles Evans BMW Inc.
*10.9.4 Form of Nissan Dealer Term Sales and Service Agreement between
Nissan Motor Corporation in U.S.A. and Charles Evans Nissan, Inc.
*10.9.5 Form of Lease Agreement between Charles F. Evans and Charles Evans
BMW, Inc.
*10.9.6 Form of Lease Guaranty of the Company in favor of Charles F. Evans.
*10.9.7 Form of Lease Agreement between Charles F. Evans and Charles Evans
Nissan, Inc.
*10.9.8 Form of Lease Guaranty of the Company in favor of Charles F. Evans.
*10.9.9 Form of Purchase and Sale Agreement for Charles Evans BMW Property
between Charles F. Evans and the Company.
*10.9.10 Form of Purchase and Sale Agreement for Charles Evans Nissan
Property between Charles F. Evans and the Company.
*10.9.11 Form of Inventory Financing and Security Agreement between BMW
Financial Services NA, Inc. and UAG Atlanta IV Motors Inc.
*10.9.12 Form of Guaranty of the Company in favor of BMW Financial Services
NA, Inc.
*10.9.13 Form of Inventory Financing and Security Agreement between BMW
Financial Services NA, Inc. and Conyers Nissan, Inc.
*10.9.14 Form of Guaranty of the Company in favor of BMW Financial Services
NA, Inc.
*10.10.1 Stock Purchase Agreement, dated September 5, 1996, among the
Company, UAG Tennessee, Inc., Standefer Motor Sales, Inc., Charles
A. Standefer and Charles A. Standefer and Karen S. Nicely, trustees
under the Irrevocable Trust Agreement of Charles B. Standefer for
the primary benefit of children, dated December 21, 1992.
*10.10.2 Form of Nissan Dealer Term Sales and Service Agreement between
Nissan Motor Corporation in U.S.A. and Conyers Nissan, Inc.
*10.10.3 Form of Lease Agreement between Standefer Investment Company and
Standefer Motor Sales, Inc.
*10.10.4 Form of Lease Guaranty of the Company in favor of Standefer
Investment Company.
*10.10.5 Form of Security Agreement and Master Credit Agreement between
Chrysler Credit Corporation and Standefer Motor Sales, Inc.
*10.10.6 Form of Continuing Guaranty of each of the Company and UAG
Tennessee, Inc. in favor of Chrysler Credit Corporation.
**10.11.1 Agreement and Plan of Merger, dated December 16, 1996, among Crown
Jeep Eagle, Inc., Berylson, Inc., Shannon Automotive, Ltd., Kevin
J. Coffey, Paul J. Rhodes, the Company, UAG Texas, Inc. and UAG
Texas II, Inc.
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<PAGE>
10.11.2 Chrysler Corporation Dodge Sales and Service Agreement, dated April
2, 1997, between Shannon Automotive, Ltd. and Chrysler Corporation
(substantially similar to exhibit 10.2.10.1 to the Company's
Registration Statement on Form S-1, Registration No.
333-09429).
10.11.3 Chrysler Corporation Jeep Sales and Service Agreement, dated April
2, 1997, between Shannon Automotive, Ltd. and Chrysler Corporation
(substantially similar to exhibit 10.2.10.1 to the Company's
Registration Statement on Form S-1, Registration No. 333-09429).
10.11.4 Chrysler Corporation Eagle Sales and Service Agreement, dated April
2, 1997, between Shannon Automotive, Ltd. and Chrysler Corporation
(substantially similar to exhibit 10.2.10.1 to the Company's
Registration Statement on Form S-1, Registration No.
333-09429).
10.11.5 Chrysler Corporation Chrysler Sales and Service Agreement, dated
April 2, 1997, between Shannon Automotive, Ltd. and Chrysler
Corporation (substantially similar to exhibit 10.2.10.1 to the
Company's Registration Statement on Form S-1, Registration No.
333-09429).
10.11.6 Chrysler Corporation Plymouth Sales and Service Agreement, dated
April 2, 1997, between Shannon Automotive, Ltd. and Chrysler
Corporation (substantially similar to exhibit 10.2.10.1 to the
Company's Registration Statement on Form S-1, Registration No.
333-09429).
10.11.7 Automobile Flooring and Security Agreement, dated as of March 6,
1997, amended as of March 26, 1997, between Bank of America National
Trust and Savings Association and Shannon Automotive, Ltd.
10.11.8 Guaranty of the Company, dated March 6, 1997, in favor of Bank of
America National Trust and Savings Association.
10.11.9 Guaranty of UAG Texas, Inc., dated March 6, 1997, in favor of Bank
of America National Trust and Savings Association.
10.11.10 Guaranty of UAG Texas II, Inc., dated March 6, 1997, in favor of
Bank of America National Trust and Savings Association.
10.12.1 Stock Purchase Agreement, dated February 7, 1997, among the
Company, UAG Nevada, Inc., Gary Hanna Nissan, Inc., The Gary W.
Hanna Family Trust Restated December 18, 1990 and Gary W. Hanna.
10.13.1 Stock Purchase Agreement, dated February 19, 1997, among the
Company, UAG East, Inc., Amity Auto Plaza Ltd., Massapequa Imports
Ltd., Westbury Nissan Ltd., Westbury Superstore Ltd., J&S Auto
Refinishing Ltd., Florida Chrysler Plymouth Jeep Eagle Inc., Palm
Auto Plaza Inc., West Palm Infiniti Inc., West Palm Nissan Inc.,
Northlake Auto Finish Inc., John A. Staluppi and John A. Staluppi,
Jr.
10.14.1 Stock Purchase Agreement, dated March 5, 1997, among the Company,
Marshal Mize Ford, Inc., Wade Ford, Inc., Wade Ford Buford, Inc.,
Marshal D. Mize, Alan K. Arnold, Lewis J. Dyer and Gary R.
Billings.
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<PAGE>
27.1 Financial Data Schedule.
- ------------------------
* 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 Current Report on Form 8-K filed on December 24, 1996,
File No. 1-12297.
*** Incorporated herein by reference to the identically numbered exhibit to
the Company's Annual Report on Form 10-K filed on March 14, 1997, File
No. 1-12297.
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<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 and
Chief Executive Officer
Date: May 15, 1997
By: /s/ James R. Davidson
----------------------------
James R. Davidson
Senior Vice President-Finance
(Principal Accounting Officer)
Date: May 15, 1997
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<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and entered
into this 6th day of March, 1997, by and among UNITED AUTO GROUP, INC., a
Delaware corporation (the "Company") and KEVIN J. COFFEY, an individual
resident of the State of Texas (the "Stockholder").
IN CONSIDERATION of the mutual promises and covenants set forth herein,
and intending to be legally bound, the parties hereto hereby agree as follows:
1. RESTRICTIONS ON TRANSFERABILITY OF SECURITIES; REGISTRATION RIGHTS
1.1. CERTAIN DEFINITIONS. The following terms shall have the meanings set
forth below:
(a) "Holder" shall mean the Stockholder and any holder of Registrable
Securities to whom the rights conferred by this Agreement have been transferred
in compliance with Section 1.2 hereof.
(b) "Other Stockholders" shall mean persons who, by virtue of agreements
with the Company other than this Agreement, are entitled to include their
securities in certain registrations hereunder.
(c) "Prior Holder" shall mean any person or entity who has previously
been granted rights pursuant to an agreement with the Company (the "Prior
Registration Rights Agreements") to have shares of UAG Stock (as defined below)
registered under the Securities Act of 1933, as amended (the "Securities Act").
(d) "Registrable Securities" shall mean shares of the Company's common
stock, $.0001 par value per share (the "UAG Stock") issued to the Stockholder
pursuant to that certain Agreement and Plan of Merger dated December 16, 1996
between and among Crown Jeep Eagle, Inc., Berylson, Inc., Shannon Automotive,
Ltd., Coffey, Rhodes, UAG, UAG Texas, Inc. and UAG Texas II, Inc. (the "Merger
Agreement"), provided that Registrable Securities shall not include any shares
of UAG Stock which have previously been registered or which have been sold to
the public or which have been sold in a private transaction in which the
transferor's rights under this Agreement are not assigned.
(e) The terms "register," "registered" and "registration" shall refer to
a registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and
<PAGE>
applicable rules and regulations thereunder and the declaration or ordering of
the effectiveness of such registration statement.
(f) "Registration Expenses" shall mean all expenses incurred in effecting
any registration pursuant to this Agreement, including, without limitation, all
registration, qualification, and filing fees, printing expenses, escrow fees,
fees and disbursements of counsel for the Company, blue sky fees and expenses,
and expenses of any regular or special audits incident to or required by any
such registration, but shall not include (i) Selling Expenses (as hereafter
defined), (ii) fees and disbursements of counsel for the Holders, (iii) the
compensation of regular employees of the Company, which shall be paid in any
event by the Company, and (iv) blue sky fees and expenses incurred in
connection with the registration or qualification of any Registrable Securities
in any state, province or other jurisdiction in a registration pursuant to
Section 1.3 hereof to the extent that the Company shall otherwise be making no
offers or sales in such state, province or other jurisdiction in connection
with such registration.
(g) "Restricted Securities" shall mean any Registrable Securities
required to bear the legend set forth in Section 1.2(c) hereof.
(h) "Rule 144" shall mean Rule 144 as promulgated by the SEC under the
Securities Act, as such Rule may be amended from time to time, or any similar
successor rule that may be promulgated by the SEC.
(i) "Rule 145" shall mean Rule 145 as promulgated by the SEC under the
Securities Act, as such Rule may be amended from time to time, or any similar
successor rule that may be promulgated by the SEC.
(j) "Selling Expenses" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the sale of Registrable
Securities.
1.2. RESTRICTIONS ON TRANSFER.
(a) Each Holder agrees not to make any disposition of all or any portion
of the Registrable Securities unless and until (i) there is then in effect a
registration statement under the Securities Act covering such proposed
disposition and such disposition is made in accordance with such registration
statement, or (ii) the transferee has agreed in writing for the benefit of the
Company to be bound by this Section 1.2 (unless waived by the Company) and (A)
such Holder shall have notified the Company of the proposed disposition and
shall have furnished the Company with a detailed statement of the circumstances
surrounding the proposed disposition and (B) if reasonably
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<PAGE>
requested by the Company, such Holder shall have furnished the Company with an
opinion of counsel, reasonably satisfactory to the Company, that such
disposition will not require registration of such shares under the Securities
Act, it being understood that the Company will not require opinions of counsel
for transactions made pursuant to Rule 144 except in unusual circumstances.
(b) Notwithstanding the provisions of subparagraphs (i) and (ii) of
paragraph (a) above, no such registration statement or opinion of counsel shall
be necessary for a transfer by a Holder which is (A) a partnership to its
partners in accordance with partnership interests, or (B) to the Holder's
family member or a trust for the benefit of an individual Holder or one or more
of his family members, provided the transferee will be subject to the terms of
this Section 1.2 to the same extent as if he were an original Holder hereunder.
(c) Each certificate representing Registrable Securities shall (unless
otherwise permitted by the provisions of this Agreement) be stamped or
otherwise imprinted with a legend substantially similar to the following (in
addition to any legend required under applicable state securities laws):
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR TRANSFERRED,
ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH
ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL OR OTHER
EVIDENCE, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH
REGISTRATION IS NOT REQUIRED.
(d) The Company shall be obligated to promptly reissue certificates
without legends at the request of any Holder thereof if the Holder shall have
obtained an opinion of counsel (which counsel may be counsel to the Company)
reasonably acceptable to the Company to the effect that the securities proposed
to be disposed of may lawfully be so disposed of in compliance with the
Securities Act without registration, qualification or legend.
(e) Any legend endorsed on an instrument pursuant to applicable state
securities laws and the stop-transfer instructions with respect to such
securities shall be removed upon receipt by the Company of an order of the
appropriate blue sky authority authorizing such removal or if the Holder shall
request such removal and shall have obtained and delivered to the Company an
opinion of counsel reasonably acceptable to the Company to the effect that such
legend and/or stop-transfer instructions are no longer required pursuant to
applicable state securities laws.
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1.3. COMPANY REGISTRATION.
(a) Right to Piggyback. If, at any time after the second anniversary of
this Agreement, the Company shall determine to register any of its securities
either for its own account or the account of a security holder or holders
exercising their respective demand registration rights, other than a
registration relating solely to employee benefit plans, or a registration
relating solely to a Rule 145 transaction, or a registration on any
registration form that does not permit secondary sales, the Company will:
(i) promptly give to each Holder written notice thereof, which notice
briefly describes the Holders' rights under this Section 1.3 (including notice
deadlines); and
(ii) use its best efforts to include in such registration (and any
related filing or qualification under applicable blue sky laws), except as set
forth in Section 1.3(b) below, and in any underwriting involved therein, all
the Registrable Securities specified in a written request or requests, made by
any Holder and received by the Company within twenty (20) days after the
written notice from the Company described in clause (i) above is mailed or
delivered by the Company, provided that such Holders shall have requested for
inclusion in such registration at least twenty-five (25%) of the aggregate
number of the Registrable Securities which have been issued to the Holder prior
to the date of such written request. Such written request may specify all or a
part of a Holder's Registrable Securities.
(b) Underwriting. If the registration of which the Company gives notice
is for a registered public offering involving an underwriting, the Company
shall so advise the Holders as a part of the written notice given pursuant to
Section 1.3(a)(i). In such event, the right of any Holder to registration
pursuant to this Section 1.3 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting
shall (together with the Company and the other holders of securities of the
Company with registration rights to participate therein distributing their
securities through such underwriting) enter into an underwriting agreement in
customary form with the representative of the underwriter or underwriters
selected by the Company.
Notwithstanding any other provision of this Section 1.3, if the representative
of the underwriters advises the Company in writing that marketing factors
require a limitation on the number of shares to be underwritten, the
representative may (subject to the limitations set forth below) exclude all
Registrable Securities from, or limit the number of Registrable Securities to
be included
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in, the registration and underwriting. The Company shall so advise all Holders
of securities requesting registration, and the number of shares of securities
that are entitled to be included in the registration and underwriting shall be
allocated first to the Company for securities being sold for its own account
and thereafter as set forth in Section 1.9. If any person does not agree to the
terms of any such underwriting, he shall be excluded therefrom by written
notice from the Company or the underwriter. Any Registrable Securities or other
securities excluded or withdrawn from such underwriting shall be withdrawn from
such registration.
If shares are so withdrawn from the registration and if the number of shares of
Registrable Securities to be included in such registration was previously
reduced as a result of marketing factors, the Company shall then offer to all
persons who have retained the right to include securities in the registration
the right to include additional securities in the registration in an aggregate
amount equal to the number of shares so withdrawn, with such shares to be
allocated among the persons requesting additional inclusion in accordance with
Section 1.9 hereof.
1.4. EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Section 1.3 hereof shall be borne by the Company. All Selling Expenses relating
to securities so registered shall be borne by the holders of such securities
pro rata on the basis of the number of shares of securities so registered on
their behalf.
1.5. REGISTRATION PROCEDURES. In the case of each registration effected
by the Company pursuant to Section 1.3 hereof, the Company will keep each
Holder advised in writing as to the initiation of each registration and as to
the completion thereof. At its expense, the Company will use its best efforts
to:
(a) keep such registration effective for a period of one hundred twenty
(120) days or until the Holder or Holders have completed the distribution
described in the registration statement relating thereto, whichever first
occurs, provided that such 120-day period shall be extended for a period of
time equal to the period the Holder refrains from selling any securities
included in such registration at the request of any underwriter;
(b) prepare and file with the SEC such amendments and supplements to such
registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by
such registration statement;
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<PAGE>
(c) furnish such number of prospectuses and other documents incident
thereto, including any amendment of or supplement to the prospectus, as a
Holder from time to time may reasonably request;
(d) notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading or incomplete in the light of the
circumstances then existing, and at the request of any such Holder, prepare and
furnish to such Holder a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading or incomplete in the light of the circumstances then
existing; provided, however, the Company shall not be obligated to prepare and
furnish any such prospectus supplements or amendments relating to any material
nonpublic information at any such time as the Board of Directors of the Company
has determined that, for good business reasons, the disclosure of such material
nonpublic information at that time is contrary to the best interests of the
Company in the circumstances and is not otherwise required under applicable law
(including applicable securities laws);
(e) cause all such Registrable Securities registered pursuant hereunder
to be listed on each securities exchange and/or included in any national
quotation system on which similar securities issued by the Company are then
listed or included;
(f) provide a transfer agent and registrar for all Registrable Securities
registered pursuant to such registration statement and a CUSIP number for all
such Registrable Securities, in each case not later than the effective date of
such registration;
(g) otherwise use its best efforts to comply with all applicable rules
and regulations of the SEC, and make available to its security holders, as soon
as reasonably practicable, an earnings statement covering the period of at
least twelve (12) months, but not more than eighteen months, beginning with the
first month after the effective date of the registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act; and
(h) in connection with any underwritten offering pursuant to a
registration statement filed pursuant to Section 1.3 hereof,
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<PAGE>
the Company will enter into an underwriting agreement reasonably necessary to
effect the offer and sale of Registrable Securities, provided such underwriting
agreement contains customary underwriting provisions and provided further that
if the underwriter so requests the underwriting agreement will contain
customary indemnity and contribution provisions.
1.6. INDEMNIFICATION.
(a) The Company will indemnify each Holder, each of its officers,
directors and partners, legal counsel, and accountants and each person
controlling such Holder within the meaning of Section 15 of the Securities Act,
with respect to which registration, qualification, or compliance has been
effected pursuant to this Section 1, and each underwriter, if any, and each
person who controls within the meaning of Section 15 of the Securities Act any
underwriter, against all expenses, claims, losses, damages, and liabilities (or
actions, proceedings, or settlements in respect thereof) arising out of or
based on any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus, offering circular, or other document (including
any related registration statement, notification, or the like) incident to any
such registration, qualification, or compliance, or based on any omission (or
alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or any
violation by the Company of the Securities Act or any rule or regulation
thereunder applicable to the Company or relating to action or inaction required
of the Company in connection with any such registration, qualification, or
compliance, and will reimburse each such Holder, each of its officers,
directors, partners, legal counsel, and accountants and each person controlling
such Holder, each such underwriter, and each person who controls any such
underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating and defending or settling any such claim, loss,
damage, liability, or action, provided that the Company will not be liable in
any such case to the extent that any such claim, loss, damage, liability, or
expense arises out of or is based on any untrue statement or omission based
upon written information furnished to the Company by such Holder or underwriter
and stated to be specifically for use therein. It is agreed that the indemnity
agreement contained in this Section 1.6(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent has
not been unreasonably withheld).
(b) Each Holder will, if Registrable Securities held by him are included
in the securities as to which such registration, qualification, or compliance
is being effected, indemnify the Company, each of its directors, officers,
partners, legal counsel, and accountants and each underwriter, if any, of the
Company's securities covered by such a registration statement,
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<PAGE>
each person who controls the Company or such underwriter within the meaning of
Section 15 of the Securities Act, each other such Holder and Other Stockholder,
and each of their officers, directors, and partners, and each person
controlling such Holder or Other Stockholder, against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any such registration statement, prospectus, offering circular, or
other document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Company and such Holders, Other
Stockholders, directors, officers, partners, legal counsel, and accountants,
persons, underwriters, or control persons for any legal or any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability, or action, in each case to the extent, but only
to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by such Holder and
stated to be specifically for use therein; provided, however, that the
obligations of such Holder hereunder shall not apply to amounts paid in
settlement of any such claims, losses, damages, or liabilities (or actions in
respect thereof) if such settlement is effected without the consent of such
Holder (which consent shall not be unreasonably withheld) and (ii) that in no
event shall any indemnity under this Section 1.6 exceed the gross proceeds from
the offering received by such Holder.
(c) Each party entitled to indemnification under this Section 1.6 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be sought,
and shall permit the Indemnifying Party to assume the defense of such claim or
any litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 1, to the extent such
failure is not prejudicial. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified of a release from all liability in respect to
such claim or litigation. Each Indemnified Party shall furnish such
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<PAGE>
information regarding itself or the claim in question as an Indemnifying Party
may reasonably request in writing and as shall be reasonably required in
connection with defense of such claim and litigation resulting therefrom.
(d) If the indemnification provided for in this Section 1.6 is held by a
court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any loss, liability, claim, damage, or expense referred to therein,
then the Indemnifying Party, in lieu of indemnifying such Indemnified Party
hereunder, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, liability, claim, damage, or expense in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and of the Indemnified Party on the other in connection
with the conduct, statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and of the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative
intent, knowledge, access to information, and opportunity to correct or prevent
such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution contained in the underwriting agreement
entered into by the Indemnifying Party and the Indemnified Party in connection
with the underwritten public offering are in conflict with the foregoing
provisions, the provisions in the underwriting agreement shall control.
1.7. INFORMATION BY HOLDER. Each Holder of Registrable Securities shall
furnish to the Company such information regarding such Holder and the
distribution proposed by such Holder as the Company may reasonably request in
writing and as shall be reasonably required in connection with any
registration, qualification, or compliance referred to in this Section 1.
1.8. RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the SEC that may permit the sale of the
Restricted Securities to the public without registration, the Company agrees to
use its best efforts to:
(a) make and keep public information regarding the Company available as
those terms are understood and defined in Rule 144 under the Securities Act;
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(b) file with the SEC in a timely manner all reports and other documents
required of the Company under the Securities Act and the Securities and
Exchange Act of 1934 (the "Exchange Act"); and
(c) so long as a Holder owns any Restricted Securities, furnish to the
Holder forthwith upon written request a written statement by the Company as to
its compliance with the reporting requirements of Rule 144 and of the
Securities Act and the Exchange Act, a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents so filed
as a Holder may reasonably request in availing itself of any rule or regulation
of the SEC allowing a Holder to sell any such securities without registration.
1.9. ALLOCATION OF REGISTRATION OPPORTUNITIES. Subject to the rights of
the Prior Holders contained in the Prior Registration Rights Agreements,
notwithstanding any other provision of this Section 1.9, in any circumstance in
which all of the Registrable Securities and other shares of the Company with
registration rights (the "Other Shares") requested to be included in a
registration on behalf of the Holders or Other Stockholders cannot be so
included as a result of limitations of the aggregate number of shares of
Registrable Securities and Other Shares that may be so included, the number of
shares of Registrable Securities and Other Shares that may be so included shall
be allocated among the Prior Holders, the Holders and the Other Stockholders
requesting inclusion of shares, first to the Prior Holders and then to the
Holders and the Other Stockholders pro rata on the basis of the number of
shares of Registrable Securities held by such Holders and Other Stockholders;
provided, however, that, if any Holder or Other Stockholder does not request
inclusion of the maximum number of shares of Registrable Securities and Other
Shares allocated to him pursuant to the above-described procedure, the
remaining portion of his allocation shall be reallocated among those requesting
Holders and Other Stockholders whose allocations did not satisfy their requests
pro rata on the basis of the number of shares of Registrable Securities and
Other Shares which would be held by such Holders and Other Stockholders,
assuming conversion, and this procedure shall be repeated until all of the
shares of Registrable Securities and Other Shares which may be included in the
registration on behalf of the Holders and Other Stockholders have been so
allocated.
1.10. DELAY OF REGISTRATION. No Holder shall have any right to take any
action to restrain, enjoin, or otherwise delay any registration as the result
of any controversy that might arise with respect to the interpretation or
implementation of this Section 1.
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2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDER
2.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Stockholder as follows:
(a) The execution, delivery and performance of this Agreement by the
Company has been duly authorized by all requisite corporate action and will not
violate any provision of law, any order of any court or other agency of
government, the Certificate of Incorporation or Bylaws of the Company, or any
provision of any material indenture, agreement or other instrument to which it
or any of its properties or assets is bound, or conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a default
under any such material indenture, agreement or other instrument, or result in
the creation or imposition of any lien, charge or encumbrance of any nature
whatsoever upon any of the properties or assets of the Company.
(b) This Agreement has been duly executed and delivered by the Company
and constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to
applicable bankruptcy, insolvency and other similar laws affecting the
enforceability of creditors' rights generally, general equitable principles,
the discretion of courts in granting equitable remedies and public policy
considerations.
2.2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER. The Stockholder
represents and warrants to the Company as follows:
(a) The execution, delivery and performance of this Agreement by the
Stockholder will not violate any provision of law, any order of any court or
any agency or government, or any provision of any material indenture or
agreement or other instrument to which he or any of his properties or assets is
bound, or conflict with, result in a breach of or constitute (with due notice
or lapse of time or both) a default under any such material indenture,
agreement or other instrument, or result in the creation or imposition of any
lien, charge, or encumbrance of any nature whatsoever upon any of the
properties or assets of the Stockholder.
(b) This Agreement has been duly executed and delivered by the
Stockholder and constitutes the legal, valid and binding obligation of the
Stockholder, enforceable against the Stockholder in accordance with its terms,
subject to applicable bankruptcy, insolvency and other similar laws affecting
the enforceability of creditors' rights generally, general equitable
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principles, the discretion of courts in granting equitable remedies and public
policy considerations.
3. MISCELLANEOUS
3.1. LOCKUP AGREEMENT. In consideration for the Company's agreeing to its
obligations under this Agreement, each Holder agrees that upon prior notice by
the Company to such Holder and effective upon the request of the underwriters
managing a public offering for sale by the Company of its securities, such
Holder shall be obligated for the lesser of 120 days or the length of time the
Company has agreed to be bound not to sell, loan, grant any option for the
purchase of, or otherwise dispose of any Registrable Securities (other than
those included in the registration and other than to any transferee which
agrees to be bound by this Section 3.1) without the prior written consent of
such underwriters.
3.2. GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the State of Delaware, as if entered into by and between Delaware
residents exclusively for performance entirely within Delaware.
3.3. SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
3.4. ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement constitutes the
full and entire understanding and agreement between the parties with regard to
the subject hereof and thereof. Neither this Agreement nor any term hereof may
be amended, waived, discharged or terminated, except by a written instrument
signed by the Company and the Holders of at least fifty-one percent (51%) of
the Registrable Securities and any such amendment, waiver, discharge or
termination shall be binding on all the Holders, but in no event shall the
obligation of any Holder hereunder be materially increased, except upon the
written consent of such Holder.
3.5. NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by United States
first-class mail, postage prepaid, or delivered personally by hand or
nationally recognized courier addressed (a) if to a Holder, as indicated in the
stock records of the Company or at such other address as such Holder shall have
furnished to the Company in writing, or (b) if to the Company, at United Auto
Group, Inc., 375 Park Avenue, Suite 2201, New York, New York 10152 or at such
other address as the Company shall have furnished to each Holder in writing.
All such notices and other
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written communications shall be effective on the date of mailing or delivery.
3.6. DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to any Holder, upon any breach or default of the
Company under this Agreement shall impair any such right, power or remedy of
such Holder nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any Holder of any breach or default under this Agreement or any
waiver on the part of any Holder of any provisions or conditions of this
Agreement must be made in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement or by law or otherwise afforded to any Holder, shall be cumulative
and not alternative.
3.7. RIGHTS; SEVERABILITY. Unless otherwise expressly provided herein, a
Holder's rights hereunder are several rights, not rights jointly held with any
of the other Holders. In case any provision of the Agreement 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.
3.8. INFORMATION CONFIDENTIAL. Each Holder acknowledges that the
information received by them pursuant hereto may be confidential and for its
use only, and it will not use such confidential information in violation of the
Exchange Act or reproduce, disclose or disseminate such information to any
other person (other than its employees or agents having a need to know the
contents of such information, and its attorneys), except in connection with the
exercise of rights under this Agreement, unless the Company has made such
information available to the public generally or such Holder is required to
disclose such information by a governmental body.
3.9. TITLES AND SUBTITLES. The titles of the paragraphs and subparagraphs
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
3.10. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
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3.11. PRIOR REGISTRATION RIGHTS AGREEMENT. To the extent that any of the
provisions herein conflict with any provisions of the Prior Registration Rights
Agreements, such conflicts shall be resolved in favor of the rights granted in
the Prior Registration Rights Agreements.
IN WITNESS WHEREOF, the parties hereto have duly executed and sealed this
Agreement or have caused this Agreement to be duly executed under seal on its
behalf by an officer or representative thereto duly authorized, all as of the
date first above written.
UNITED AUTO GROUP, INC.
By: /s/ George Lowrance
----------------------------------
Its: Executive Vice President
----------------------------------
ATTEST:
[CORPORATE SEAL]
By:
--------------------------
/s/ Kevin J. Coffey (SEAL)
----------------------------------
KEVIN J. COFFEY
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UNITED AUTO GROUP, INC.
375 Park Avenue
New York, NY 10152
March 7, 1997
Mr. Carl Spielvogel
c/o United Auto Group, Inc.
375 Park Avenue
New York, NY 10152
Re: Consulting Agreement
--------------------
Dear Carl:
This letter will set forth our mutual agreement regarding your resignation as
Chief Executive Officer of United Auto Group, Inc. (the "Company") and your
continuing to serve as a consultant to the Company.
1. Your resignation as Chief Executive Officer will be effective as of April
17, 1997 (your "Termination Date"). Until such date, you may continue to
occupy your current office and have the services of your secretary.
2. Your resignation as Chairman of the Board of Directors of the Company, as
a member of all committees thereof (including the Executive Committee),
and as an officer, employee, director and committee member of any and all
subsidiaries and affiliates of the Company will also be effective as of
April 17, 1997 (except for your resignation as a director of Foamex
International Inc., which will be effective as of the date hereof), and
you agree to execute the forms of resignation attached as Exhibit A
hereto and any additional documents necessary to effect all of the above
resignations as of such date.
3. In consideration for the covenants made by you under this letter and
subject to your execution and delivery on March 14, 1997 of your
irrevocable written confirmation that the seven-day revocation period
referenced in clause 13 below has expired and that you have elected not
to revoke the agreement set forth herein, the Company agrees to pay you
the following amounts, and to provide you with the following benefits, in
full satisfaction of all amounts required
<PAGE>
Mr. Carl Spielvogel
March 7, 1997
Page 2
to be provided to you under your Employment Agreement, dated as of June
21, 1996 (your "Employment Agreement"): (i) on April 1, 1997, a bonus in
the amount of $375,000 and, on your Termination Date, base salary earned
as of your Termination Date and not yet paid, (ii) a monthly payment,
payable in accordance with the Company's normal pay practices, for the
period commencing on your Termination Date and ending December 31, 2000
(the "Salary Continuation Period"), at the rate of $83,333 per month,
(iii) on your Termination Date, full title in the Company automobile
currently being used by you, (iv) an unaccountable monthly allowance
through December 31, 2000, payable at the time of each payment under
subclause (ii) above, in the amount of $8,333; (v) continued
participation in the Company's life insurance plan, on the same basis as
for other Company employees, in accordance with the terms and conditions
of such plan and to the extent such coverage is not prevented by
applicable law or regulation and continued reimbursement for your
coverage under your prior employer's medical and dental plans on a "tax
grossed-up basis"; provided, however, that such participation and
reimbursement will cease on the earlier of (A) December 31, 2000, and (B)
the date or dates you receive similar coverage and benefits under the
plans and programs of a subsequent employer (such coverage and benefits
to be determined on a coverage-by-coverage, or benefit-by-benefit,
basis); (vi) the accelerated vesting of all unvested stock options, and
the grant of options (as described more fully in clause 4 below) and
(vii) all reasonable attorney's fees and expenses (not to exceed $18,000)
incurred by you in connection with the negotiation of this letter.
4. Subject to your execution and delivery on March 14, 1997 of your
irrevocable written confirmation that the seven day revocation period
referenced in clause 13 below has expired and that you have elected not
to revoke the agreement set forth herein, (i) the Company confirms that
the Stock Option Committee of the Company's Board of Directors has
granted you an option under the Company's Stock Option Plan to purchase
up to 100,000 shares of the Company's common stock at an exercise price
equal to the reported closing price of such common stock on April 16,
1997 on the New York Stock Exchange, which option shall be fully vested
and exercisable from April 17, 1997 and shall have the terms and
conditions set forth in the Stock Option Agreement attached hereto as
Exhibit B and (ii) notwithstanding any prior agreements to the contrary,
all options previously granted to you and referenced
<PAGE>
Mr. Carl Spielvogel
March 7, 1997
Page 3
in Section 3.1(c) of your Employment Agreement will, as previously
contemplated, be fully vested and exercisable from April 17, 1997 through
and including April 17, 2001. To the extent any such options have not
been exercised on or prior to April 17, 2001, they will be immediately
forfeited. To the extent the issuance of shares upon exercise of any of
the options referred to in this clause 4 is not currently registered
under the Securities Act of 1933, the Company will file a registration
statement on Form S-8 on or before April 30, 1997 covering such issuance
and shall use its best efforts to keep all such registrations effective
until April 17, 2001. It is understood that the Stockholders Agreement
referred to in Section 3.1(c)(iv) of your Employment Agreement is no
longer in effect. The Company shall use commercially reasonable efforts
to obtain from J.P. Morgan Securities Inc. a release from the 180-day
lock-up agreement as of April 17, 1997, for the 26,118 shares owned by
you and the shares issuable upon exercise of your options.
5. The provisions of Section 4.3(a) of your Employment Agreement (regarding
confidentiality) shall survive the execution of this letter agreement and
continue, without time limitation. Additionally, the provisions of
Section 4.3(b) of your Employment Agreement (regarding non-competition)
shall survive the execution of this letter agreement, and continue
through April 16, 1998. You agree that the Company will suffer
irreparable damage if the terms of any such provisions are breached and,
in addition to all other remedies available to the Company, that the
Company will be entitled as a matter of right to injunctive relief in
respect of any such breach.
6. The provisions of Sections 6.1, 6.2, 6.5 and 6.8 of your Employment
Agreement will also survive the execution of this letter agreement.
7. You affirm that you will not make any statements at any time that
disparage the reputation of the Company or any of its affiliates, or any
officers, directors, employees or agents of the Company or any of its
affiliates, or, until December 31, 2000, any automobile dealers or
manufacturers. The Company, on behalf of itself and its executive
officers, agrees that it will not make any statements at any time that
disparage your reputation.
8. The form of press release confirming your resignation described in
clauses 1 and 2 herein shall be subject
<PAGE>
Mr. Carl Spielvogel
March 7, 1997
Page 4
to our mutual agreement. Any statements by the Company or you to third
parties or to employees of the Company regarding the termination of your
employment shall be consistent with such press release or subject to our
mutual agreement.
9. For the period commencing on your Termination Date and ending on December
31, 2000, subject to your other personal and business commitments, you
agree to provide such consulting services at mutually convenient times
and places as the Company may reasonably request, which requests shall be
consistent with your knowledge and responsibilities as former Chief
Executive Officer and Chairman of the Board of Directors of the Company.
Notwithstanding anything to the contrary in this letter, but without
limiting any other remedies available to the Company, a breach of this
clause 9 will not entitle the Company to withhold payments set forth in
clauses 3(ii) and (iv) or to offset any alleged damages for such breaches
against such payments.
10. In consideration for the payments set forth in this letter, you and your
heirs, executors, administrators, legal representatives, agents,
successors in interest and assigns, hereby knowingly and voluntarily
waive and unconditionally release and forever discharge, as of the date
hereof and as of your Termination Date, from all or any manner of
actions, causes and causes of actions, suits, debts, obligations,
damages, complaints, liabilities, losses, covenants, contracts,
controversies, agreements, promises, variances, trespasses, judgments,
and expenses (including attorneys' fees and costs), executions, claims
and demands whatsoever at law or in equity which you ever had, now have,
or which you hereafter can, shall or may have against the Company on or
prior to the date of this letter and your Termination Date, as the case
may be. This release and waiver includes but is not limited to any rights
or claims under United States federal, state or local law and the
national or local law of any foreign country (statutory or decisional),
for payments due or benefits required to be provided under your
Employment Agreement, for wrongful or abusive discharge, for breach of
your Employment Agreement or any other contract, or for discrimination
based upon race, color, ethnicity, sex, age, national origin, religion,
disability, sexual orientation, or any other unlawful criterion or
circumstance, including rights or claims under the Age Discrimination in
Employment Act of 1967, as amended. In this clause 10, the word "Company"
means United
<PAGE>
Mr. Carl Spielvogel
March 7, 1997
Page 5
Auto Group, Inc. and its respective subsidiaries, affiliates, employees,
officers, directors, holders of 5% or more of the Company's common stock
(and their affiliates), representatives and agents, past or present, and
any person or entity which may succeed to the rights and liabilities of
any such entities or persons by assignment or otherwise. Notwithstanding
the foregoing, nothing in this clause 10 shall be deemed to release or
waive any obligations of the Company under this letter, your stock option
agreements or the Registration Rights Agreement, dated October 15, 1993,
as amended (collectively, the "Agreements").
11. Subject to your execution and delivery on March 14, 1997 of your
irrevocable written confirmation that the seven day revocation period
referenced in clause 13 below has expired and that you have elected not
to revoke the agreement set forth herein, in consideration for your
covenants in this letter, the Company hereby unconditionally releases and
forever discharges , as of the date hereof and as of your Termination
Date, you from all or any manner of actions, causes and causes of
actions, suits, debts, obligations, damages, complaints, liabilities,
losses, covenants, contracts, controversies, agreements, promises,
variances, trespasses, judgments, and expenses (including attorneys' fees
and costs), executions, claims and demands whatsoever at law or in equity
which the Company ever had, now has, or which the Company hereafter can,
shall or may have on or prior to the date of this letter and your
Termination Date, as the case may be. Notwithstanding the foregoing,
nothing in this clause 11 shall be deemed to release or discharge any of
your obligations under any of the Agreements.
12. You affirm that, prior to the execution of this letter, you have
consulted with an attorney concerning the terms and conditions set forth
herein, and that you have been given up to 21 days to consider signing
this letter.
13. For a period of seven days following your signing of this letter, you may
revoke and cancel the agreement set forth herein.
14. You will be under no obligation to seek other employment and there shall
be no offset against amounts due you under this letter on account of any
remuneration attributable to any subsequent employment that you may
obtain except as specifically provided in
<PAGE>
Mr. Carl Spielvogel
March 7, 1997
Page 6
clause 3 above; however, during the Salary Continuation Period, you
hereby agree to inform the Company upon your participation in employee
benefit plans or programs of a subsequent employer which provide medical,
dental, hospitalization or life insurance coverage by such subsequent
employer to the extent you are provided with coverage and benefits
similar to those you are receiving from the Company.
15. You agree, for so long as this letter agreement is otherwise
confidential, that you will not disclose the fact of this letter or any
of its terms or provisions to any person without the prior written
consent of the Company; provided, however, that nothing in this clause 15
shall prohibit disclosure of such information to the extent required by
law, nor prohibit disclosure by you to any legal or financial consultant,
member of your immediate family or prospective employer, if such person
first agrees to be bound by the confidentiality provisions of this clause
15. It is acknowledged that this letter will be filed by the Company with
the Securities and Exchange Commission pursuant to applicable law.
16. This letter may be executed in any number of counterparts, each of which
when so executed and delivered shall constitute an original and which all
together shall constitute one agreement, with such counterparts being
deliverable by facsimile with the original being transmitted by overnight
courier.
17. This letter shall bind and inure to the benefit of the Company's
successors and permitted assigns.
18. Except for clauses 10 and 11 herein, if any term or provision of this
letter, or the application thereof, shall, to any extent, be invalid or
unenforceable, the remaining terms and provisions of this letter or the
application thereof shall not be invalidated thereby, and each term and
provision hereof shall be construed with all other remaining terms and
provisions hereof to effect the intent of the Company and you to the
fullest extent permitted by law. In the event clause 10 shall be invalid
or unenforceable, then this entire agreement shall become null and void
and any payments of any kind made to you hereunder shall be returned.
19. This letter may not be amended, waived or modified, in whole or in part,
except by a writing signed by each of you and the Company.
<PAGE>
Mr. Carl Spielvogel
March 7, 1997
Page 7
20. Except for clause 10 herein, nothing herein expressed or implied is
intended or shall be construed to confer upon or give to any person or
entity (other than you or your beneficiaries and the Company) any rights
or remedies under or by reason of this letter.
21. You understand that nothing contained in this letter shall be deemed or
construed as an admission of wrongdoing or liability on your part or on
the part of the Company.
22. This letter (including the provisions of your Employment Agreement
explicitly incorporated by reference herein) and the other Agreements
constitute the entire agreement between you and the Company and supersede
all other prior agreements and understandings, oral and written, between
you and the Company with respect to the subject matter hereof.
23. This letter shall be construed and enforced in accordance with, and shall
be governed by, the laws of the State of New York without giving effect
to that State's choice of law principles.
24. The payments due to you hereunder shall be subject to reduction to
satisfy all applicable Federal, State and local income and employment tax
withholding obligations. To the extent payments hereunder are not
withheld, (a) you represent and warrant to the Company that you shall pay
all taxes due thereon and (b) you shall furnish such form (but not your
income tax return) reasonably requested by the Company to evidence such
payment. You shall indemnify the Company from all taxes, interest,
penalty or other loss (including reasonable attorneys' fees) arising from
any failure by the Company to withhold any such payments.
25. Any disputes arising under or in connection with this letter shall, at
the election of either you or the Company, be resolved by binding
arbitration, to be held in New York City in accordance with the rules and
procedures of the American Arbitration Association. Judgment upon the
award rendered by the arbitrator(s) may be entered in any court having
jurisdiction thereof. Each party shall bear his or its own costs of the
arbitration or litigation. Pending the resolution of any arbitration or
court proceeding, the Company shall continue payment of all amounts due
you under this letter and all benefits to which you are entitled at the
time the dispute arises.
<PAGE>
Mr. Carl Spielvogel
March 7, 1997
Page 8
If the foregoing is acceptable to you, please sign, date and return the
attached copy of this letter to the undersigned by hand or by express mail.
Carl, I don't want the formal terms of this letter to obscure our appreciation
for your valuable service to the Company. As you begin a new phase of your
career, let me assure you that all of us wish you great success in your new
endeavors.
Very truly yours,
UNITED AUTO GROUP, INC.
By: /s/ Marshall S. Cogan
--------------------------
Marshall S. Cogan
Vice Chairman and
Chairman of the
Executive Committee
AGREED: /s/ Carl Spielvogel March 7, 1997
--------------------- ---------------
Carl Spielvogel Date
<PAGE>
EXHIBIT A
FORMS OF RESIGNATION
Board of Directors
United Auto Group, Inc.
375 Park Avenue
New York, New York 10152
I, Carl Spielvogel, hereby resign as Chief Executive Officer of United
Auto Group, Inc. ("UAG") as of April 17, 1997. Furthermore, as of that date, I
hereby resign as Chairman of the Board of Directors of UAG, as a member of all
committees thereof (including the Executive Committee), and as an officer,
employee, director and committee member of any and all subsidiaries and
affiliates of UAG.
- ------------------- ----------
Carl Spielvogel Date
<PAGE>
Board of Directors
Foamex International Inc.
1000 Columbia Avenue
Linwood, Pennsylvania 19061
I, Carl Spielvogel, hereby resign from the Board of Directors of
Foamex International Inc. and all committees thereof as of March 7, 1997.
- ------------------- ----------
Carl Spielvogel Date
<PAGE>
EXHIBIT B
STOCK OPTION AGREEMENT
----------------------
This Stock Option Agreement ("Agreement") is dated as of April 17,
1997, and is entered into between United Auto Group, Inc., a Delaware
corporation (the "Company"), and Carl Spielvogel ("Executive").
W I T N E S S E T H:
WHEREAS, the Company is a party to an employment agreement with
Executive, dated as of June 21, 1996 (as amended, supplemented or otherwise
modified from time to time, the "Employment Agreement"); and
WHEREAS, the Company is a party to a consulting agreement with
Executive, dated March 7, 1997 (the "Consulting Agreement"); and
WHEREAS, pursuant to the Employment Agreement and Consulting
Agreement, the Company is granting the Executive options to purchase shares of
voting common stock, par value $0.0001 per share (the "Common Stock"), of the
Company, on the terms and conditions set forth herein and in the Employment and
Consulting Agreements.
NOW, THEREFORE, the parties hereby agree:
1. Grant of Options. The Company hereby grants to the Executive an
option (the "Option") to purchase, at the exercise price of $_____ per share,
100,000 shares of Common Stock.
2. Exercisability of Options. The Option will be fully vested and
exercisable as of the date of this Agreement.
3. Method of Exercising Options. (a) The Executive may exercise the
Option by delivering to the Company a written notice stating the number of
shares that the Executive has elected to purchase at that time from the Company
and full payment of the purchase price of the shares then to be purchased.
Payment of the purchase price of the shares may be made (i) by certified or
bank cashier's check payable to the order of the Company, or (ii) in the
discretion of the Board of Directors of the Company or duly authorized
committee thereof, by such other method as may be approved by such board or
committee from time to time.
<PAGE>
(b) At the time of exercise, the Executive shall pay to the Company
such amount as is necessary to satisfy the Company's obligation to withhold
Federal, state or local income or other taxes incurred by reason of the
exercise or the transfer of shares thereupon.
4. Issuance of Shares. As promptly as practicable after receipt of
notification of exercise, full payment of purchase price and satisfaction of
tax withholding as provided in Section 3, the Company shall issue or transfer
to the Executive the number of shares as to which the Options have been so
exercised and shall deliver to the Executive a certificate or certificates
therefor, registered in his name.
5. Terms and Conditions of Exercise. (i) The Option shall terminate on
April 17, 2001.
(ii) The Option shall not be transferable, except by will or the
laws of descent and distribution, provided that Executive may at any time
transfer all or a portion of the Option to his spouse, any of his descendants
or trusts for the benefit of Executive, his spouse or his descendants, subject
to all of the terms and conditions of the Option.
(iii) Whenever the word "Executive" is used in any provision of
this Agreement under circumstances where the provision should logically be
construed to apply to the executors, the administrators, personal
representatives, or the person or persons to whom the Option may be transferred
pursuant to clause (ii) of this Section 5, the word "Executive" shall be deemed
to include such person or persons.
6. Rights as Stockholder. The Executive or a transferee of the Option
shall have no rights as a stockholder with respect to any shares of Common
Stock covered by the Option until he shall have become the holder of record of
such shares.
7. Recapitalizations, Reorganizations, Etc. (a) The existence of the
Option shall not affect the power of the Company or its stockholders to
accomplish adjustments, recapitalizations, reorganizations or other changes in
the Company's capital structure or its business, or any merger or consolidation
of the Company, or any issue of stock or of options, warrants or rights to
purchase stock or securities ahead of or affecting any of the shares of Common
Stock or the rights thereof or convertible into or exchangeable for shares of
Common Stock, or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of its assets or business, or any other corporate
act.
(b) Upon any change in the outstanding shares of Common Stock by
reason of any recapitalization, merger,
-2-
<PAGE>
consolidation, spin-off, combination or exchange of shares or other corporate
change, or any distributions to common shareholders other than ordinary cash
dividends, the Company shall make such substitutions or adjustments as are
appropriate and equitable, as to the number or kind of shares of Common Stock
or other securities covered by the Option and the exercise price thereof.
8. Notice. Any notice required or permitted hereunder shall be in
writing and shall be sufficiently given if personally delivered or if sent by
telegram, telex, facsimile transmission or by registered or certified mail,
postage prepaid, with return receipt requested, as follows:
(a) If to the Company:
United Auto Group, Inc.
375 Park Avenue
New York, New York 10152
Facsimile: (212) 223-5148
Attn: General Counsel
or to such other address or to the attention of such other person as the
Company shall designate by written notice to the Executive; and
(b) If to the Executive:
Mr. Carl Spielvogel
720 Park Avenue
New York, NY 10021
or to such other address as the Executive shall designate by written notice to
the Company. Any notice given hereunder shall be deemed to have been given at
the time of receipt thereof by the party to whom such notice is given.
9. Non-Qualified Option. The Option is not an "incentive stock option"
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended.
10. Any disputes arising under or in connection with this Agreement
shall be resolved as provided in clause 25 of the Consulting Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
UNITED AUTO GROUP, INC.
-3-
<PAGE>
By:
----------------------------------
Philip N. Smith, Jr.
Vice President, Secretary
and General Counsel
----------------------------------
Carl Spielvogel
-4-
<PAGE>
CONFORMED COPY
$50,000,000
CREDIT AGREEMENT
dated as of
March 20, 1997
among
United Auto Group, Inc.,
The Guarantors Party Hereto,
The Banks Listed Herein,
The Bank of Nova Scotia,
as Administrative Agent
and
Morgan Guaranty Trust Company of New York,
as Documentation Agent
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS.......................................................1
Section 1.1. Definitions.............................................1
Section 1.2. Accounting Terms and Determinations....................15
ARTICLE II. THE CREDITS.....................................................15
Section 2.1. Commitments to Lend....................................15
Section 2.2. Method of Borrowing....................................15
Section 2.3. Notes..................................................17
Section 2.4. Maturity of Loans; Mandatory Prepayments...............17
Section 2.5. Interest Rates.........................................19
Section 2.6. Fees...................................................21
Section 2.7. Optional Termination or Reduction of Commitments.......21
Section 2.8. Method of Electing Interest Rates......................21
Section 2.9. Mandatory Termination and Reduction of Commitments.....22
Section 2.10. Optional Prepayments...................................23
Section 2.11. General Provisions as to Payments......................23
Section 2.12. Funding Losses.........................................24
Section 2.13. Computation of Interest and Fees.......................24
ARTICLE III. CONDITIONS.....................................................24
Section 3.1. Initial Borrowing......................................24
Section 3.2. All Borrowings.........................................25
ARTICLE IV. REPRESENTATIONS AND WARRANTIES..................................27
Section 4.1. Existence and Power....................................27
Section 4.2. Corporate and Governmental Authorization;
No Contravention.......................................27
Section 4.3. Binding Effect.........................................27
Section 4.4. Financial Information..................................28
Section 4.5. Litigation.............................................28
Section 4.6. Compliance with ERISA..................................28
Section 4.7. Environmental Matters..................................29
Section 4.8. Taxes..................................................29
Section 4.9. Subsidiaries...........................................29
Section 4.10. Regulatory Restrictions on Borrowing...................29
Section 4.11. Full Disclosure........................................29
Section 4.12. Representations in Collateral Documents
True and Correct.......................................30
Section 4.13. Capitalization and Subsidiaries........................30
Section 4.14. Ownership of Properties; Absence of Liens
and Encumbrances.......................................31
Section 4.15. Licenses, Permits, Etc.................................31
Section 4.16. Payment of Dividends by Subsidiaries...................31
Section 4.17. Certain Agreements.....................................32
Section 4.18. Compliance with Certain Agreements.....................32
i
<PAGE>
ARTICLE V. COVENANTS........................................................32
Section 5.1. Information............................................32
Section 5.2. Payment of Obligations.................................35
Section 5.3. Maintenance of Property; Insurance.....................35
Section 5.4. Conduct of Business and Maintenance of Existence.......35
Section 5.5. Compliance with Laws...................................36
Section 5.6. Inspection of Property, Books and Records..............36
Section 5.7. Mergers and Sales of Assets............................36
Section 5.8. Use of Proceeds........................................37
Section 5.9. Negative Pledge........................................37
Section 5.10. Limitation on Debt.....................................38
Section 5.11. Leverage Ratio.........................................39
Section 5.12. Working Capital........................................39
Section 5.13. Borrower Fixed Charge Coverage Ratio...................40
Section 5.14. Consolidated Fixed Charge Coverage Ratio...............40
Section 5.15. Restricted Payments....................................40
Section 5.16. Investments............................................40
Section 5.17. Transactions with Affiliates...........................41
Section 5.18. Additional Equity......................................41
Section 5.19. Additional Guarantors and Collateral...................41
Section 5.20. Further Assurances.....................................42
Section 5.21. Limitation on Floor Plan Amendments....................42
Section 5.22. External Inventory Audits..............................42
Section 5.23. Ownership of Subsidiaries..............................43
ARTICLE VI. DEFAULTS........................................................43
Section 6.1. Events of Default......................................43
Section 6.2. Notice of Default......................................45
ARTICLE VII. THE AGENTS.....................................................46
Section 7.1. Appointment and Authorization..........................46
Section 7.2. Agents and Affiliates..................................46
Section 7.3. Action by Agents.......................................46
Section 7.4. Consultation with......................................46
Section 7.5. Liability of Agent.....................................46
Section 7.6. Indemnification........................................47
Section 7.7. Credit Decision........................................47
Section 7.8. Successor Agent........................................47
Section 7.9. Agents' Fees...........................................48
ARTICLE VIII. CHANGE IN CIRCUMSTANCES.......................................48
Section 8.1. Basis for Determining Interest Rate
Inadequate or Unfair...................................48
Section 8.2. Illegality.............................................48
Section 8.3. Increased Cost and Reduced Return......................49
Section 8.4. Taxes..................................................50
Section 8.5. Base Rate Loans Substituted for Affected
Euro-Dollar Loans......................................52
ARTICLE IX. GUARANTY........................................................53
Section 9.1. The Guaranty...........................................53
Section 9.2. Guaranty Unconditional.................................53
ii
<PAGE>
Section 9.3. Discharge Only Upon Payment In Full; Reinstatement In
Certain Circumstances..................................54
Section 9.4. Waiver by each Guarantor...............................54
Section 9.5. Subrogation and Contribution...........................54
Section 9.6. Stay of Acceleration...................................54
Section 9.7. Limit of Liability.....................................55
Section 9.8. Release Upon Sale......................................55
ARTICLE X. MISCELLANEOUS....................................................55
Section 10.1. Notices................................................55
Section 10.2. No Waivers.............................................55
Section 10.3. Expenses; Indemnification..............................56
Section 10.4. Sharing of Set-Offs....................................56
Section 10.5. Amendments and Waivers Release of
Collateral.............................................56
Section 10.6. Successors and Assigns.................................57
Section 10.7. Collateral.............................................59
Section 10.8. Governing Law; Submission to Jurisdiction..............59
Section 10.9. Counterparts; Integration; Effectiveness...............59
SECTION 10.10. WAIVER OF JURY TRIAL...................................59
Schedule 3.2(f) Subsidiaries Not Wholly-Owned
Schedule 4.5 Litigation
Schedule 4.13(a) Authorized, Issued and Outstanding Capital
Stock of the Borrower
Schedule 4.13(b) Equity Ownership of the Borrower
Schedule 4.13(c) Subsidiaries
Schedule 4.13(d) Certain Partnership Interests
Schedule 4.13(e) Outstanding Options and Warrants
Schedule 4.13(f) Encumbrances of Capital Stock of
Corporate Subsidiaries
Schedule 4.15 Certain Licenses, Permits, Etc.
Schedule 4.16 Restrictions on Payment of Dividends
by Subsidiaries
Schedule 4.17 Certain Agreements
Schedule 5.9 Existing Liens
Schedule 5.10 Existing Debt
Exhibit A Note
Exhibit B-1 Opinion of Special Counsel for the
Obligors
Exhibit B-2 Opinion of General Counsel of the
Borrower
Exhibit C Opinion of Special Counsel for the Agent
Exhibit D Assignment and Assumption Agreement
Exhibit E Pledge Agreement
iii
<PAGE>
AGREEMENT dated as of March 20, 1997 among UNITED AUTO GROUP, INC.,
the GUARANTORS party hereto, the BANKS listed on the signature pages hereof,
THE BANK OF NOVA SCOTIA, as Administrative Agent and MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as Documentation Agent.
The parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.1. Definitions. The following terms, as used herein, have
the following meanings:
"Acquisition" means an acquisition of an Automobile Dealership.
"Adjusted Consolidated Net Income" means Consolidated Net Income
adjusted to eliminate income or loss attributable to an acquisition not
included in the Borrower's Plan of Acquisitions.
"Adjusted London Interbank Offered Rate" has the meaning set forth in
Section 2.5(b).
"Adjusted Pre-Tax Income" means, at any date, the income before income
taxes of any Automobile Dealership calculated for the four consecutive fiscal
quarters of such Automobile Dealership most recently ended on or prior to such
date with pro forma adjustments consistent with reporting requirements of the
Securities and Exchange Commission.
"Administrative Agent" means The Bank of Nova Scotia in its capacity
as administrative agent for the Banks hereunder, and its successors in such
capacity.
"Affiliate" means (i) any Person that directly, or indirectly through
one or more intermediaries, controls the Borrower (a "Controlling Person") or
(ii) any Person (other than the Borrower or a Subsidiary) which is controlled
by or is under common control with a Controlling Person. As used herein, the
term "control" means possession, directly or indirectly, of the power to vote
10% or more of any class of voting securities of a Person or to direct or cause
the direction of the management or policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agent" means either the Administrative Agent or the Documentation
Agent, and "Agents" means both of them.
"Applicable Lending Office" means, with respect to any Bank, (i) in
the case of its Base Rate Loans, its Domestic Lending Office and (ii) in the
case of its Euro-Dollar Loans, its Euro-Dollar Lending Office.
1
<PAGE>
"Assignee" has the meaning set forth in Section 10.6(c).
"Automobile Dealership" means a business that operates a dealership or
dealerships for the retail sales of new and/or used automobiles or trucks and
businesses ancillary to the operation of such dealerships owned or operated by
the Borrower or its Subsidiaries, including service and parts operations, body
shops, the sale of finance, extended warranty and insurance products (including
after-market items), the financing of the purchase of new and/or used vehicles
and the purchase, sale and servicing of finance contracts for new and/or used
vehicles.
"Bank" means each lender listed on the signature pages hereof, each
Assignee which becomes a Bank pursuant to Section 10.6(c), and their respective
successors.
"Base Rate" means, for any day, a rate per annum equal to the higher
of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the
Federal Funds Rate for such day.
"Base Rate Loan" means (i) a Loan which bears interest at the Base
Rate plus the Base Rate Margin pursuant to the applicable Notice of Borrowing
or Notice of Interest Rate Election or the provisions of Article 8 or (ii) an
overdue amount which was a Base Rate Loan immediately before it became overdue.
"Base Rate Margin" has the meaning set forth in Section 2.5(a).
"Benefit Arrangement" means at any time an employee benefit plan
within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is maintained or otherwise contributed to by any
member of the ERISA Group.
"Borrower" means United Auto Group, Inc., a Delaware corporation, and
its successors.
"Borrower Fixed Charge Coverage Ratio" means, at any date, the ratio
of (i) the sum of distributions to the Borrower from Subsidiaries plus payments
to the Borrower from tax-sharing arrangements plus management fees paid to the
Borrower plus all other cash income of the Borrower, all calculated for the
four consecutive fiscal quarters most recently ended on or prior to such date
or, if four fiscal quarters have not elapsed since the IPO Closing Date, for
the period from January 1, 1997 to such date to (ii) cash operating expenses of
the Borrower (other than any nonrecurring expenses incurred in connection with
the IPO and the transactions contemplated thereby and the fees paid or payable
by the Borrower to the Agents and the Banks in connection with this Agreement
and the other Loan Documents on or prior to the Effective Date) for such period
including, but not limited to, rental expense, selling, general and
administrative expense, interest expense, cash tax payments and cash payments
made for
-2-
<PAGE>
scheduled amortization of long term Debt of the Borrower during such period,
all calculated on a cash receipts and disbursements basis.
"Borrower's Plan of Acquisitions" means all acquisitions consummated
or to be consummated by the Borrower on or prior to the IPO Closing Date, but
including in any event the Borrower's acquisition of each of the Sun Automotive
Group, the Evans Automotive Group and the Standefer Motor Sales, regardless of
the date of consummation thereof.
"Borrowing" means a borrowing hereunder consisting of Loans made to
the Borrower on the same day pursuant to Article 2, all of which Loans are of
the same Type (subject to Article 8) and, except in the case of Base Rate
Loans, have the same initial Interest Period. A Borrowing is a "Base Rate
Borrowing" if such Loans are Base Rate Loans or a "Euro-Dollar Borrowing" if
such Loans are Euro-Dollar Loans.
"Collateral" means collateral subject to the Collateral Documents.
"Collateral Documents" means the Pledge Agreement, any additional
pledges or security agreements required to be delivered pursuant to the Loan
Documents and any other instruments or agreements executed pursuant to the
foregoing.
"Commitment" means, with respect to each Bank, the amount set forth
opposite the name of such Bank on the signature pages hereof, as such amount
may be reduced from time to time pursuant to Section 2.7.
"Consolidated Capital Expenditures" means, for any period, the
additions to property, plant and equipment and other capital expenditures of
the Borrower and its Consolidated Subsidiaries for such period, as the same are
or would be set forth in a consolidated statement of cash flows of the Borrower
and its Consolidated Subsidiaries for such period, but excluding any such
additions which are financed by long-term Debt of the Borrower or any of its
Consolidated Subsidiaries.
"Consolidated Current Assets" means at any date the current assets of
the Borrower and its Consolidated Subsidiaries determined as of such date on a
consolidated basis.
"Consolidated Current Liabilities" means at any date (i) the current
liabilities of the Borrower and its Consolidated Subsidiaries on a consolidated
basis plus (ii) the current liabilities of any Person (other than the Borrower
or any of its Consolidated Subsidiaries) which are Guaranteed by the Borrower
or a Consolidated Subsidiary, all determined as of such date.
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"Consolidated Debt" means at any date the Debt of the Borrower and its
Consolidated Subsidiaries, determined on a consolidated basis as of such date.
"Consolidated EBITDA" means, for any period, Consolidated Net Income
for such period plus, to the extent deducted in determining Consolidated Net
Income for such period, the aggregate amount of (i) Consolidated Interest
Expense, (ii) consolidated income tax expense (excluding any income tax expense
attributable to Atlantic Auto Finance Corporation or any Encumbered Subsidiary)
and (iii) consolidated depreciation, amortization and other similar non-cash
charges (excluding any such items attributable to Atlantic Auto Finance
Corporation or any Encumbered Subsidiary).
"Consolidated Fixed Charge Coverage Ratio" means, at any date, the
ratio of (i) the sum of (A) Consolidated EBITDA for the four consecutive fiscal
quarters of the Borrower and its Consolidated Subsidiaries most recently ended
on or prior to such date or, if four fiscal quarters have not elapsed since the
IPO Closing Date, for the period from January 1, 1997 to such date plus (B)
Consolidated Rental Expense for such period minus (C) Consolidated Capital
Expenditures for such period to (ii) the sum of Consolidated Interest Expense,
consolidated cash income tax payments (excluding any cash income tax payments
attributable to Atlantic Auto Finance Corporation or any Encumbered Subsidiary)
and Consolidated Rental Expense for such period.
"Consolidated Interest Expense" means, for any period, the interest
expense (other than any interest expense with respect to any floor plan
financing, but only to the extent reflected in cost of goods sold in accordance
with generally accepted accounting principles) of the Borrower and its
Consolidated Subsidiaries determined on a consolidated basis for such period.
"Consolidated Net Income" means, for any fiscal period, the net income
of the Borrower and its Consolidated Subsidiaries, determined on a consolidated
basis for such period, exclusive of (i) any equity in any earnings or loss
attributable to Atlantic Auto Finance Corporation or any Encumbered Subsidiary
except to the extent received in cash by the Borrower or a Consolidated
Subsidiary and (ii) the effect of any extraordinary or other non-recurring gain
to the extent such gain exceeds extraordinary or other non-recurring loss.
"Consolidated Net Worth" means at any date the consolidated
stockholders' equity of the Borrower and its Consolidated Subsidiaries
determined as of such date, exclusive of any investment in Atlantic Auto
Finance Corporation or any Encumbered Subsidiary.
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"Consolidated Rental Expense" means, for any period, the rental
expense of the Borrower and its Consolidated Subsidiaries determined on a
consolidated basis for such period.
"Consolidated Subsidiary" means at any date any Subsidiary or other
entity (other than Atlantic Auto Finance Corporation, any Encumbered Subsidiary
and their respective Subsidiaries) the accounts of which would be consolidated
with those of the Borrower in its consolidated financial statements if such
statements were prepared as of such date.
"Consolidated Working Capital" means at any date the amount by which
Consolidated Current Assets exceed Consolidated Current Liabilities as of such
date.
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in the ordinary
course of business, (iv) all obligations of such Person as lessee which are
capitalized in accordance with generally accepted accounting principles, (v)
all non-contingent obligations (and, for purposes of Section 5.9 and the
definitions of Material Debt and Material Financial Obligations, all contingent
obligations) of such Person to reimburse any bank or other Person in respect of
amounts paid under a letter of credit or similar instrument, (vi) all Debt
secured by a Lien on any asset of such Person, whether or not such Debt is
otherwise an obligation of such Person and (vii) all Debt of others Guaranteed
by such Person.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Derivatives Obligations" of any Person means all obligations of such
Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction, currency
option or any other similar transaction (including any option with respect to
any of the foregoing transactions) or any combination of the foregoing
transactions.
"Documentation Agent" means Morgan Guaranty Trust Company of New York
in its capacity as documentation agent for the Banks hereunder, and its
successors in such capacity.
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"Domestic Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in New York City are authorized by law to
close.
"Domestic Lending Office" means, as to each Bank, its office located
at its address set forth on the signature pages hereof and identified as its
Domestic Lending Office or such other office as such Bank may hereafter
designate as its Domestic Lending Office by notice to the Borrower and the
Administrative Agent.
"Effective Date" means the date this Agreement becomes effective in
accordance with Section 10.9.
"Encumbered Subsidiary" means any Subsidiary whose ability to declare
or pay any dividend or make any other distribution, or to advance or loan
funds, to the Borrower is restricted (other than by Permitted Restrictions).
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, plans, injunctions, permits, concessions, grants, franchises,
licenses, agreements and other governmental restrictions relating to the
environment, the effect of the environment on human health or to emissions,
discharges or releases of pollutants, contaminants, Hazardous Substances or
wastes into the environment including, without limitation, ambient air, surface
water, ground water, or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, Hazardous Substances or wastes or the
clean-up or other remediation thereof.
"Equity Issuance" means the issuance of any equity securities by the
Borrower (other than (i) the IPO, (ii) pursuant to the exercise of employee
stock options, (iii) pursuant to stock options or warrants outstanding on the
Effective Date and set forth in Schedule 4.13(e) or (iv) in connection with an
Equity Refinancing).
"Equity Refinancing" means the redemption or other retirement of
capital stock of the Borrower exclusively with the proceeds of a substantially
simultaneous sale of capital stock of the Borrower (other than Redeemable
Stock).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA Group" means the Borrower, any Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Borrower or any
Subsidiary, are treated as a single employer under Section 414 of the Internal
Revenue Code.
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"Euro-Dollar Business Day" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London.
"Euro-Dollar Lending Office" means, as to each Bank, its office,
branch or affiliate located at its address set forth on the signature pages
hereof and identified as its Euro-Dollar Lending Office or such other office,
branch or affiliate of such Bank as it may hereafter designate as its
Euro-Dollar Lending Office by notice to the Borrower and the Administrative
Agent.
"Euro-Dollar Loan" means (i) a Loan which bears interest at a
Euro-Dollar Rate pursuant to the applicable Notice of Borrowing or Notice of
Interest Rate Election or (ii) an overdue amount which was a Euro-Dollar Loan
immediately before it became overdue.
"Euro-Dollar Margin" has the meaning set forth in Section 2.5(b).
"Euro-Dollar Rate" means a rate of interest determined pursuant to
Section 2.5(b) on the basis of an Adjusted London Interbank Offered Rate.
"Euro-Dollar Reserve Percentage" has the meaning set forth in Section
2.5(b).
"Event of Default" has the meaning set forth in Section 6.1.
"Excess Cash Flow" means, for any fiscal year the excess (if any) of
Adjusted Consolidated Net Income for such fiscal year over the amount set forth
below opposite such fiscal year:
1997 $18,000,000
1998 $18,500,000
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of
the Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Domestic Business Day
next succeeding such day, provided that (i) if such day is not a Domestic
Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Domestic Business Day as so published on the
next succeeding Domestic Business Day, and (ii) if no such rate is so published
on such next succeeding Domestic Business Day, the Federal Funds Rate for such
day shall be the average rate quoted to Morgan Guaranty Trust Company of New
York on such day on such transactions as determined by the Administrative
Agent.
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"Floor Plan Financing Provider" means each provider of floor plan
financing of inventory of the Borrower and its Subsidiaries.
"Group of Loans" means at any time a group of Loans consisting of (i)
all Loans which are Base Rate Loans at such time or (ii) all Euro-Dollar Loans
having the same Interest Period at such time, provided that, if a Loan of any
particular Bank is converted to or made as a Base Rate Loan pursuant to Article
8, such Loan shall be included in the same Group or Groups of Loans from time
to time as it would have been in if it had not been so converted or made.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or other obligation (whether arising by virtue of
partnership arrangements, by agreement to keep-well, to purchase assets, goods
or securities, or to maintain financial statement conditions or otherwise) or
(ii) entered into for the purpose of assuring in any other manner the holder of
such Debt or other obligation of the payment thereof or to protect such holder
against loss in respect thereof (in whole or in part), provided that the term
Guarantee shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning. It is understood that the obligations of the Borrower
under the Support Agreement dated as of June 28, 1995 between the Borrower and
Atlantic Auto Funding Corporation constitute a Guarantee for purposes of this
Agreement only to the extent of the liability, if any, of the Borrower for any
breach of the representations and warranties of Atlantic Auto Finance
Corporation contained in Section 4.01(g) of the Receivables Purchase Agreement
dated as of June 28, 1995 between Atlantic Auto Funding Corporation and
Atlantic Auto Finance Corporation. It also is understood that the obligations
of the Borrower under the Support Agreement dated as of June 14, 1996 between
the Borrower and Atlantic Auto Second Funding Corporation constitute a
Guarantee for purposes of this Agreement only to the extent of the liability,
if any, of the Borrower for any breach of the representations and warranties of
Atlantic Auto Finance Corporation contained in Section 3.2 of the Purchase
Agreement dated as of June 14, 1996 between Atlantic Auto Second Funding
Corporation and Atlantic Auto Finance Corporation.
"Guarantor" means, subject to Section 9.8, each Person who has
executed this Agreement as a guarantor or becomes a guarantor pursuant to
Section 5.20.
"Hazardous Substances" means any toxic, radioactive or otherwise
hazardous substance, including petroleum, its
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derivatives, by-products and other hydrocarbons, or any substance having any
constituent elements displaying any of the foregoing characteristics.
"Indemnitee" has the meaning set forth in Section 10.3(b).
(a) with respect to each Euro-Dollar Loan, the period commencing on
the date of borrowing specified in the applicable Notice of Borrowing or on
the date specified in the applicable Notice of Interest Rate Election and
ending one, two, three or six months thereafter, as the Borrower may elect
in the applicable notice; provided that:
(i) any Interest Period which would otherwise end on a day which
is not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case such Interest Period shall end on the
next preceding Euro-Dollar Business Day;
(ii) any Interest Period which begins on the last Euro-Dollar
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clause (iii) below, end on the last
Euro-Dollar Business Day of a calendar month; and
(iii) if any Interest Period includes a date on which a scheduled
payment of principal of the Loans is required to be made under Section 2.4
but does not end on such date, then (i) the principal amount (if any) of
each Euro-Dollar Loan required to be repaid on such date shall have an
Interest Period ending on such date and (ii) the remainder (if any) of each
such Euro-Dollar Loan shall have an Interest Period determined as set forth
above.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"Investment" means any investment in any Person, whether by means of
share purchase, capital contribution, loan, Guarantee, time deposit or
otherwise (but not including any demand deposit).
"IPO" means the Borrower's initial public offering of the New Voting
Stock pursuant to the Registration Statement.
"IPO Closing Date" means October 28, 1996.
"Leverage Ratio" means at any date the ratio of Consolidated Debt
(excluding floor plan financings) at such date to Consolidated EBITDA for the
period of four consecutive fiscal quarters most recently ended on or prior to
such date.
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"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind, or any other type of
preferential arrangement that has the practical effect of creating a security
interest, in respect of such asset. For the purposes of this Agreement, the
Borrower or any Subsidiary shall be deemed to own, subject to a Lien, any asset
which it has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement, capital lease or other title retention
agreement relating to such asset.
"Loan" means a Base Rate Loan or a Euro-Dollar Loan and "Loans" means
Base Rate Loans, Euro-Dollar Loans or both.
"Loan Documents" means this Agreement, the Notes and the Collateral
Documents.
"London Interbank Offered Rate" has the meaning set forth in Section
2.5(b).
"Material Adverse Effect" means (i) a material adverse effect upon the
condition (financial or otherwise), business, performance, properties,
operations, assets or prospects of the Borrower, or of the Borrower and its
Subsidiaries taken as a whole, (ii) a material adverse effect upon the ability
of the Borrower or any of its Subsidiaries to perform its obligations under the
Loan Documents or (iii) any adverse effect upon the rights or obligations of
any Agent or Bank under the Loan Documents or upon the ability of the Banks or
the Administrative Agent to enforce the Loan Documents.
"Material Debt" means Debt (other than the Notes) of the Borrower
and/or one or more of its Subsidiaries, arising in one or more related or
unrelated transactions, in an aggregate principal or face amount exceeding
$1,000,000.
"Material Financial Obligations" means a principal or face amount of
Debt and/or a net payment or collateralization obligation in respect of
Derivatives Obligations of the Borrower and/or one or more of its Subsidiaries,
arising in one or more related or unrelated transactions, exceeding in the
aggregate $1,000,000.
"Material Plan" means at any time a Plan or Plans having aggregate
Unfunded Liabilities in excess of $1,000,000.
"Multiemployer Plan" means at any time an employee pension benefit
plan within the meaning of Section 4001(a)(3) of ERISA to which any member of
the ERISA Group is then making or accruing an obligation to make contributions
or has within the preceding five plan years made contributions, including for
these purposes any Person which ceased to be a member of the ERISA Group during
such five year period.
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"Net Cash Proceeds" means, with respect to any Equity Issuance, an
amount equal to the cash proceeds received by the Borrower from or in respect
of such Equity Issuance, less any expenses reasonably incurred by the Borrower
in connection therewith.
"New Voting Stock" means the shares of the Borrower's voting common
stock, par value $0.0001 per share, issued on the IPO Closing Date and
registered under the Registration Statement.
"1933 Act" means the Securities Act of 1933, as amended.
"Non-Working Capital Borrowing" means any Borrowing the proceeds of
which are to be used by the Borrower for Acquisitions and related costs, fees
and expenses as permitted by Section 5.8 and subject to Section 3.2(b).
"Non-Working Capital Loan" means a Loan made by a Bank to the Borrower
pursuant to Section 2.1 the proceeds of which are to be used by the Borrower
for Acquisitions and related costs, fees and expenses as permitted by Section
5.8 and subject to Section 3.2(b).
"Notes" means promissory notes of the Borrower, substantially in the
form of Exhibit A hereto, evidencing the obligation of the Borrower to repay
the Loans, and "Note" means any one of such promissory notes issued hereunder.
"Notice of Borrowing" has the meaning set forth in Section 2.2.
"Notice of Interest Rate Election" has the meaning set forth in
Section 2.8.
"Obligor" means the Borrower and each Guarantor.
"Parent" means, with respect to any Bank, any Person controlling such
Bank.
"Participant" has the meaning set forth in Section 10.6(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permitted Restrictions" means restrictions on the ability of any
Subsidiary to declare or pay any dividend or make other distributions, or to
advance or loan funds, to the Borrower (i) as set forth on Schedule 4.16 on the
Effective Date, including restrictions imposed by existing floor plan financing
arrangements; (ii) pursuant to modifications to any floor plan financing
arrangement; provided that such modifications are not
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materially more restrictive; (iii) applicable to a Person at the time such
Person became a Subsidiary and not created in contemplation of such an event,
(iv) resulting from manufacturer-imposed modifications to any franchise
agreement or (v) imposed by applicable law.
"Person" means an individual, a corporation, a limited liability
company, a partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
"Plan" means at any time an employee pension benefit plan (other than
a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code and is
maintained, or contributed to, or has at any time within the preceding five
years been maintained, or contributed to, by any member of the ERISA Group for
employees of any member of the ERISA Group.
"Pledge Agreement" means each pledge agreement substantially in the
form of Exhibit E hereto between each Obligor party thereto and the
Administrative Agent entered into on or prior to the date of the initial
Borrowing hereunder and any pledge agreement entered into pursuant hereto after
the date of the initial Borrowing hereunder, in each case as amended from time
to time.
"Prime Rate" means the rate of interest publicly announced by The Bank
of Nova Scotia in New York City from time to time as its prime commercial
lending rate.
"Principal Repayment Date" has the meaning set forth in Section 2.4.
"Principal Shareholder" means any of the following principal
shareholders of the Borrower: Trace International Holdings, Inc., Apollo
Advisors, L.P., Harvard Private Capital Group, Inc., J.P. Morgan Capital
Corporation and The Equitable Life Assurance Society of the United States or if
any Principal Shareholder transfers any or all of its interest in the Borrower
to an Affiliate of such Principal Shareholder, such Affiliate.
"Quarterly Dates" means each March 31, June 30, September 30 and
December 31.
"Redeemable Stock" has the meaning set forth in Section 5.13.
"Reduction Percentage" means, (i) in respect of Excess Cash Flow, 50%,
and (ii) in respect of an Equity Issuance, 80%.
"Reference Banks" means the respective LIBOR offices of Morgan
Guaranty Trust Company of New York and The Bank of Nova
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Scotia, and "Reference Bank" means any one of such Reference Banks.
"Registration Statement" means Registration Statement No. 333-09429 on
Form S-1 in the form declared effective and the prospectus filed to Rule 424(b)
under the 1933 Act.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"Required Banks" means at any time Banks having at least a majority of
the aggregate amount of the Commitments or, if the Commitments shall have been
terminated, holding Notes evidencing at least a majority of the aggregate
unpaid principal amount of the Loans.
"Restricted Payment" means (i) any dividend or other distribution on
any shares of the Borrower's capital stock (except dividends payable solely in
shares of its capital stock which is not Redeemable Stock) or (ii) any payment
of cash or other property (other than capital stock of the Borrower which is
not Redeemable Stock) on account of the purchase, redemption, retirement or
acquisition of (a) any shares of the Borrower's capital stock or (b) any
option, warrant or other right to acquire shares of the Borrower's capital
stock (but not including payments of principal, premium (if any) or interest
made pursuant to the terms of convertible debt securities prior to conversion).
"Revolving Credit Period" means the period from and including the
Effective Date to and including the Termination Date.
"Seller Notes" means all notes issued by the Borrower or a Subsidiary
to a seller in connection with an Acquisition.
"Significant Subsidiary" means at any time a Subsidiary of the
Borrower having (together with its Subsidiaries) (i) at least 10% of the total
consolidated assets of the Borrower and its Subsidiaries (determined as of the
last day of the most recent fiscal quarter of the Borrower) or (ii) at least
10% of the consolidated revenues of the Borrower and its Subsidiaries for the
fiscal year of the Borrower then most recently ended.
"Stock Repurchase Program" means the Borrower's stock buyback program
with respect to the Borrower's common stock as described in the Borrower's
Current Report on Form 8-K dated December 23, 1996 but only to the extent that
the aggregate amount paid by the Borrower in respect of such program on or
subsequent to the Effective Date does not exceed $820,000.
"Subsidiary" means, as to any Person, any corporation or other entity
of which securities or other ownership interests
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having ordinary voting power to elect a majority of the board of directors or
other Persons
performing similar functions are at the time directly or indirectly
owned by such Person; unless otherwise specified, "Subsidiary" means a
Subsidiary of the Borrower.
"Temporary Cash Investment" means any Investment in (i) direct
obligations of the United States or any agency thereof, or obligations
guaranteed by the United States or any agency thereof, (ii) commercial paper
rated at least A-1 by Standard & Poor's Rating Group and P-1 by Moody's
Investors Service, Inc., (iii) time deposits with, including certificates of
deposit issued by, any office located in the United States of (A) any bank or
trust company which is organized under the laws of the United States or any
state thereof and has capital, surplus and undivided profits aggregating at
least $1,000,000,000 or (B) any Bank, (iv) short-term deposits with any Floor
Plan Financing Provider or (v) repurchase agreements with respect to securities
described in clause (i) above entered into with an office of a bank or trust
company meeting the criteria specified in clause (iii) above, provided in each
case that such Investment matures within one year from the date of acquisition
thereof by the Borrower or a Subsidiary.
"Termination Date" means the date 364 days after the date hereof, or,
if such day is not a Euro-Dollar Business Day, the prior Euro-Dollar Business
Day.
"Type" means the determination of whether a Loan is a Euro-Dollar Loan
or a Base Rate Loan.
"Unfunded Liabilities" means, with respect to any Plan at any time,
the amount (if any) by which (i) the value of all benefit liabilities under
such Plan, determined on a plan termination basis using the assumptions
prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the
fair market value of all Plan assets allocable to such liabilities under Title
IV of ERISA (excluding any accrued but unpaid contributions), all determined as
of the then most recent valuation date for such Plan, but only to the extent
that such excess represents a potential liability of a member of the ERISA
Group to the PBGC or any other Person under Title IV of ERISA.
"United States" means the United States of America, including the
States and the District of Columbia, but excluding its territories and
possessions.
"Working Capital Borrowing" means any Borrowing the proceeds of which
are to be used by the Borrower for working capital purposes as permitted by
Section 5.8 and subject to Section 3.2(b).
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"Working Capital Loan" means a Loan made by a Bank to the Borrower
pursuant to Section 2.1 the proceeds of which are to be used by the Borrower
for working capital purposes as permitted by Section 5.8 and subject to Section
3.2(b).
Section 1.2. Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with
generally accepted accounting principles as in effect from time to time,
applied on a basis consistent (except for changes concurred in by the
Borrower's independent public accountants) with the most recent audited
consolidated financial statements of the Borrower and its Consolidated
Subsidiaries delivered to the Banks; provided that, if the Borrower notifies
the Documentation Agent that the Borrower wishes to amend any covenant in
Article 5 to eliminate the effect of any change in generally accepted
accounting principles on the operation of such covenant (or if the
Documentation Agent notifies the Borrower that the Required Banks wish to amend
Article 5 for such purpose), then the Borrower's compliance with such covenant
shall be determined on the basis of generally accepted accounting principles in
effect immediately before the relevant change in generally accepted accounting
principles became effective, until either such notice is withdrawn or such
covenant is amended in a manner satisfactory to the Borrower and the Required
Banks.
ARTICLE II.
THE CREDITS
Section 2.1. Commitments to Lend. (a) During the Revolving Credit
Period, each Bank severally agrees, on the terms and conditions set forth in
this Agreement, to make loans to the Borrower from time to time in amounts such
that the aggregate principal amount of Loans by such Bank at any one time
outstanding shall not exceed the amount of its Commitment. Each Borrowing under
this Section shall be in an aggregate principal amount of $2,500,000 or any
larger multiple of $500,000 (except that any such Borrowing may be in the
aggregate amount of the unused Commitments) and shall be made from the several
Banks ratably in proportion to their respective Commitments. Within the
foregoing limits, the Borrower may borrow under this Section, prepay Loans to
the extent permitted by Section 2.10 and reborrow at any time during the
Revolving Credit Period under this Section.
Section 2.2. Method of Borrowing. (a) The Borrower shall give the
Administrative Agent notice (a "Notice of Borrowing") not later than 10:30 A.M.
(New York City time) on (x) the first Domestic Business Day before each Base
Rate Borrowing and (y) the third Euro-Dollar Business Day before each
Euro-Dollar Borrowing, specifying:
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(i) the date of such Borrowing, which shall be a Domestic
Business Day in the case of a Base Rate Borrowing or a Euro-Dollar Business
Day in the case of a Euro-Dollar Borrowing;
(ii) the aggregate amount of such Borrowing;
(iii) whether the Loans comprising such Borrowing are to bear
interest initially at the Base Rate or a Euro-Dollar Rate; and
(iv) in the case of a Euro-Dollar Borrowing, the duration of the
Interest Period applicable thereto, subject to the provisions of the
definition of Interest Period.
(b) Upon receipt of a Notice of Borrowing, the Administrative Agent
shall promptly notify each Bank of the contents thereof and of such Bank's
ratable share of such Borrowing and such Notice of Borrowing shall not
thereafter be revocable by the Borrower.
(c) Not later than 12:00 Noon (New York City time) on the date of each
Borrowing, each Bank shall make available its ratable share of such
Borrowing, in Federal or other funds immediately available in New York
City, to the Administrative Agent at its address referred to in Section
10.1. Unless the Administrative Agent determines that any applicable
condition specified in Article 2, 3 has not been satisfied, the
Administrative Agent will make the funds so received from the Banks
available to the Borrower at the Administrative Agent's aforesaid address.
(d) Unless the Administrative Agent shall have received notice from a
Bank prior to the date of any Borrowing that such Bank will not make
available to the Administrative Agent such Bank's share of such Borrowing,
the Administrative Agent may assume that such Bank has made such share
available to the Administrative Agent on the date of such Borrowing in
accordance with subsection (c) of this Section and the Administrative Agent
may, in reliance upon such assumption, make available to the Borrower on
such date a corresponding amount. If and to the extent that such Bank shall
not have so made such share available to the Administrative Agent, such
Bank and the Borrower severally agree to repay to the Administrative Agent
forthwith on demand such corresponding amount together with interest
thereon, for each day from the date such amount is made available to the
Borrower until the date such amount is repaid to the Administrative Agent,
at (i) in the case of the Borrower, a rate per annum equal to the higher of
the Federal Funds Rate and the interest rate applicable thereto pursuant to
Section 2.5 and (ii) in the case of such Bank, the Federal Funds Rate. If
such Bank shall repay to the Administrative Agent such corresponding
amount, such amount
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so repaid shall constitute such Bank's Loan included in such Borrowing for
purposes of this Agreement.
Section 2.3. Notes. (a) The Loans of each Bank shall be evidenced by a
single Note payable to the order of such Bank for the account of its Applicable
Lending Office in an amount equal to the aggregate unpaid principal amount of
such Bank's Loans.
(a) Each Bank may, by notice to the Borrower and the Documentation
Agent, request that its Loans of a particular Type be evidenced by a
separate Note in an amount equal to the aggregate unpaid principal amount
of such Loans. Each such Note shall be in substantially the form of Exhibit
A hereto with appropriate modifications to reflect the fact that it
evidences solely Loans of the relevant Type. Each reference in this
Agreement to the "Note" of such Bank shall be deemed to refer to and
include any or all of such Notes, as the context may require.
(b) Upon receipt of each Bank's Note pursuant to Section 3.1(a)(i),
the Documentation Agent shall forward such Note to such Bank. Each Bank
shall record the date, amount and Type of each Loan made by it and the date
and amount of each payment of principal made by the Borrower with respect
thereto, and may, if such Bank so elects in connection with any transfer or
enforcement of its Note, endorse on the schedule forming a part thereof
appropriate notations to evidence the foregoing information with respect to
each such Loan then outstanding; provided that the failure of any Bank to
make any such recordation or endorsement shall not affect the obligations
of the Borrower hereunder or under the Notes. Each Bank is hereby
irrevocably authorized by the Borrower so to endorse its Note and to attach
to and make a part of its Note a continuation of any such schedule as and
when required.
Section 2.4. Maturity of Loans; Mandatory Prepayments. The Borrower
shall repay, and there shall become due and payable, on each date set forth
below (a "Principal Repayment Date"), an aggregate principal amount of the
Loans equal to the amount set forth below with regard to such Principal
Repayment Date (or, if less, the aggregate principal amount of all outstanding
Loans); provided that in any event the outstanding Loans shall be repaid in
full not later than the last Principal Repayment Date; provided further that if
on the Termination Date the aggregate principal amount of Loans outstanding is
less than $50,000,000, the scheduled repayments of the Loans shall be reduced
in inverse order of maturity by an amount equal to the difference between
$50,000,000 and the aggregate principal amount of the Loans outstanding on the
Termination Date; provided that in the event that the aggregate principal
amount of the Loans scheduled to be repaid on the last Principal Repayment Date
shall have been so reduced to $4,000,000, the remaining amount of such
difference
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shall be applied to reduce the amount of subsequent scheduled repayments of the
Loans ratably. Each such payment shall be applied to such Group or Groups of
Loans as the Borrower may designate in the applicable Notice of Borrowing or
Notice of Interest Rate Election (or, failing such designation, as determined
by the Administrative Agent), and shall be applied to repay ratably the Loans
of the several Banks included in such Group or Groups.
Principal Amount
Repayment of
Date Repayment
- ------------------------------------------------------- -----------------
15 months after the Effective Date $4,000,000.00
18 months after the Effective Date $4,000,000.00
21 months after the Effective Date $4,000,000.00
24 months after the Effective Date $4,000,000.00
27 months after the Effective Date $4,000,000.00
30 months after the Effective Date $4,000,000.00
33 months after the Effective Date $4,000,000.00
36 months after the Effective Date $22,000,000.00
(i) In addition, the Loans shall be prepaid in the
following amounts:
(x) in the event that the Borrower or any of its Subsidiaries
shall at any time, or from time to time, receive after the
Effective Date hereof any Net Cash Proceeds of any Equity
Issuance an amount equal to the Reduction Percentage of such Net
Cash Proceeds; and
(y) an amount, for each fiscal year of the Borrower and its
Consolidated Subsidiaries ending after December 31, 1996, equal
to the Reduction Percentage of Excess Cash Flow for such fiscal
year.
(ii) The prepayments required by clause (i)(x) of this subsection
shall be made within five Domestic Business Days following receipt by the
Borrower or any of its Subsidiaries, as the case may be, of such Net Cash
Proceeds; provided that if the Reduction Percentage of the Net Cash Proceeds in
respect of any Equity Issuance is less than $1,000,000, such prepayment shall
be made upon receipt of proceeds such that, together with all other such
amounts not previously applied, the Reduction Percentage of such Net Cash
Proceeds is equal to at least $1,000,000; and provided further that if any such
prepayment would otherwise require prepayment of Euro-Dollar Loans or portions
thereof prior to the last day of the related Interest Period, such prepayment
shall, unless the Administrative Agent otherwise notifies the Borrower upon the
instructions of the Required Banks, be deferred to such last day. The
prepayments required by clause (i)(y) of this subsection shall be made on the
last Euro-Dollar Business
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Day of the first fiscal quarter following the end of the related fiscal year.
The Borrower shall give the Administrative Agent at least three Euro-Dollar
Business Days' notice of each prepayment required pursuant to this subsection.
(iii) The amount of any prepayment pursuant to this subsection or
Section 3.2(g) shall be applied to reduce the amount of subsequent scheduled
repayments of the Loans in inverse order of maturity; provided that in the
event that the aggregate principal amount of the Loans scheduled to be repaid
on the last Principal Repayment Date has been reduced to $4,000,000, the amount
of any prepayment pursuant to this subsection or Section 3.2(g) shall be
applied to reduce the amount of subsequent scheduled repayments of the Loans
ratably. If any prepayment is required under this subsection prior to the
Termination Date, the Commitments shall simultaneously be reduced in an amount
equal to the amount of such prepayment.
Section 2.5. Interest Rates. (a) Each Base Rate Loan shall bear
interest on the outstanding principal amount thereof, for each day from the
date such Loan is made until it becomes due, at a rate per annum equal to the
sum of (x) 3.00% (the "Base Rate Margin") plus (y) the Base Rate for such day.
Such interest shall be payable quarterly in arrears on each Quarterly Date and,
with respect to the principal amount of any Base Rate Loan converted to a
Euro-Dollar Loan, on each date a Base Rate Loan is so converted. Any overdue
principal of or interest on any Base Rate Loan shall bear interest, payable on
demand, for each day until paid at a rate per annum equal to the sum of 5.00%
plus the Base Rate for such day.
(a) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for each day during each Interest Period
applicable thereto, at a rate per annum equal to the sum of 4.00% (the
"Euro-Dollar Margin") plus the Adjusted London Interbank Offered Rate
applicable to such Interest Period. Such interest shall be payable for each
Interest Period on the last day thereof and, if such Interest Period is
longer than three months, at intervals of three months after the first day
thereof.
The "Adjusted London Interbank Offered Rate" applicable to any
Interest Period means a rate per annum equal to the quotient obtained (rounded
upward, if necessary, to the next higher 1/100 of 1%) by dividing (i) the
applicable London Interbank Offered Rate by (ii) 1.00 minus the Euro-Dollar
Reserve Percentage.
The "London Interbank Offered Rate" applicable to any Interest Period
means the average (rounded upward, if necessary, to the next higher 1/16 of 1%)
of the respective rates per annum at which deposits in dollars are offered to
each of the Reference Banks in the London interbank market at approximately
11:00 A.M. (London time) two Euro-Dollar Business Days before the first day
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of such Interest Period in an amount approximately equal to the principal
amount of the Euro-Dollar Loan of such Reference Bank to which such Interest
Period is to apply and for a period of time comparable to such Interest Period.
"Euro-Dollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or
other assets which includes loans by a non-United States office of any Bank to
United States residents). The Adjusted London Interbank Offered Rate shall be
adjusted automatically on and as of the effective date of any change in the
Euro-Dollar Reserve Percentage.
(b) Any overdue principal of or interest on any Euro-Dollar Loan shall
bear interest, payable on demand, for each day until paid at a rate per
annum equal to the higher of (i) the sum of 6.00% plus the quotient
obtained (rounded upward, if necessary, to the next higher 1/100 of 1%) by
dividing (x) the average (rounded upward, if necessary, to the next higher
1/16 of 1%) of the respective rates per annum at which one day (or, if such
amount due remains unpaid more than three Euro-Dollar Business Days, then
for such other period of time not longer than three months as the
Administrative Agent may select) deposits in dollars in an amount
approximately equal to such overdue payment due to each of the Reference
Banks are offered to such Reference Bank in the London interbank market for
the applicable period determined as provided above by (y) 1.00 minus the
Euro-Dollar Reserve Percentage (or, if the circumstances described in
clause (a) or (b) of Section 8.1 shall exist, at a rate per annum equal to
the sum of 5.00% plus the Base Rate for such day) and (ii) the sum of 6.00%
plus the Adjusted London Interbank Offered Rate applicable to such Loan at
the date such payment was due.
(c) The Administrative Agent shall determine each interest rate
applicable to the Loans hereunder. The Administrative Agent shall give
prompt notice to the Borrower and the Banks of each rate of interest so
determined, and its determination thereof shall be conclusive in the
absence of manifest error.
(d) Each Reference Bank agrees to use its best efforts to furnish
quotations to the Administrative Agent as contemplated by this Section.
If any Reference Bank does not furnish a timely quotation, the
Administrative Agent
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shall determine the relevant interest rate on the basis of the quotation or
quotations furnished by the remaining Reference Bank or Banks or, if none
of such quotations is available on a timely basis, the provisions of
Section 8.1 shall apply.
Section 2.6. Fees. During the Revolving Credit Period, the Borrower
shall pay to the Administrative Agent for the account of the Banks ratably in
proportion to their Commitments a commitment fee at the rate of 0.50% per annum
on the daily average amount by which the aggregate amount of the Commitments
exceeds the aggregate outstanding principal amount of the Loans. Such
commitment fee shall accrue from and including the Effective Date to but
excluding the date of termination of the Commitments in their entirety.
(a) Accrued fees under this Section shall be payable quarterly in
arrears on each Quarterly Date and on the date of termination of the
Commitments in their entirety.
Section 2.7. Optional Termination or Reduction of Commitments. During
the Revolving Credit Period, the Borrower may, upon at least three Domestic
Business Days' notice to the Administrative Agent, (i) terminate the
Commitments at any time, if no Loans are outstanding at such time or (ii)
ratably reduce from time to time by an aggregate amount of $5,000,000 or a
larger multiple of $1,000,000, the aggregate amount of the Commitments in
excess of the aggregate outstanding principal amount of the Loans.
Section 2.8. Method of Electing Interest Rates. (a) The Loans
included in each Borrowing shall bear interest initially at the type of rate
specified by the Borrower in the applicable Notice of Borrowing. Thereafter,
the Borrower may from time to time elect to change or continue the type of
interest rate borne by each Group of Loans (subject in each case to the
provisions of Article 8 and the last sentence of this subsection (a)), as
follows:
(i) if such Loans are Base Rate Loans, the Borrower may elect to
convert such Loans to Euro-Dollar Loans as of any Euro-Dollar Business Day
and
(ii) if such Loans are Euro-Dollar Loans, the Borrower may elect
to convert such Loans to Base Rate Loans or elect to continue such Loans as
Euro-Dollar Loans for an additional Interest Period, subject to Section
2.12 in the case of any such conversion or continuation effective on any
day other than the last day of the then current Interest Period applicable
to such Loans.
Each such election shall be made by delivering a notice (a "Notice of Interest
Rate Election") to the Administrative Agent not later than 10:30 A.M. (New York
City time) on the third Euro-Dollar Business
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Day before the conversion or continuation selected in such notice is to be
effective. A Notice of Interest Rate Election may, if it so specifies, apply to
only a portion of the aggregate principal amount of the relevant Group of
Loans; provided that (i) such portion is allocated ratably among the Loans
comprising such Group and (ii) the portion to which such Notice applies, and
the remaining portion to which it does not apply, are each $2,500,000 or any
larger multiple of $500,000. If no such notice is timely received prior to the
end of an Interest Period, the Borrower shall be deemed to have elected that
all Loans having such Interest Period be converted to Base Rate Loans.
Notwithstanding the foregoing, the Borrower may not elect to convert any Loan
to, or continue any Loan as, a Euro-Dollar Loan pursuant to any Notice of
Interest Rate Election if at the time such notice is delivered a Default shall
have occurred and be continuing.
(b) Each Notice of Interest Rate Election shall specify:
(i) the Group of Loans (or portion thereof) to which such notice
applies;
(ii) the date on which the conversion or continuation selected in
such notice is to be effective, which shall comply with the applicable
clause of subsection (a) above;
(iii) if the Loans comprising such Group are to be converted, the
new Type of Loans and, if the Loans being converted are to be Euro-Dollar
Loans, the duration of the next succeeding Interest Period applicable
thereto; and
(iv) if such Loans are to be continued as Euro-Dollar Loans for
an additional Interest Period, the duration of such additional Interest
Period.
Each Interest Period specified in a Notice of Interest Rate Election shall
comply with the provisions of the definition of Interest Period.
(c) Upon receipt of a Notice of Interest Rate Election from the
Borrower pursuant to subsection (a) above, the Administrative Agent shall
promptly notify each Bank of the contents thereof and such notice shall not
thereafter be revocable by the Borrower.
(d) An election by the Borrower to change or continue the rate of
interest applicable to any Group of Loans pursuant to this Section shall
not constitute a "Borrowing" subject to the provisions of Section 3.2.
Section 2.9. Mandatory Termination and Reduction of Commitments. The
Commitments shall terminate on the Termination Date or, if the conditions
precedent set forth in Section 3.1
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have not been satisfied on or prior to March 31, 1997, on such date.
Section 2.10. Optional Prepayments. (a) Subject in the case of any
Euro-Dollar Borrowing to Section 2.12, the Borrower may, upon at least one
Domestic Business Day's notice to the Administrative Agent, prepay the Group of
Base Rate Loans or upon at least three Euro-Dollar Business Days' notice to the
Agent, prepay any Group of Euro-Dollar Loans, in each case in whole at any
time, or from time to time in part in amounts aggregating $2,000,000 or any
larger multiple of $1,000,000, by paying the principal amount to be prepaid
together with accrued interest thereon to the date of prepayment. Each such
optional prepayment of a Group of Loans shall be applied to prepay ratably the
Loans of the Banks included in such Group. If such optional prepayment shall be
applied to prepay any Working Capital Loans or Non-Working Capital Loans, as
applicable, the Borrower shall specify in its notice to the Administrative
Agent the amount of such Working Capital Loans or Non-Working Capital Loans, as
applicable, to be prepaid. The amount of any prepayment pursuant to this
subsection shall be applied to reduce ratably the amount of subsequent
scheduled repayments of the Loans pursuant to Section 2.4.
(a) Upon receipt of a notice of prepayment pursuant to this Section,
the Administrative Agent shall promptly notify each Bank of the contents
thereof and of such Bank's ratable share of such prepayment and such notice
shall not thereafter be revocable by the Borrower.
Section 2.11. General Provisions as to Payments. (a) The Borrower
shall make each payment of principal of, and interest on, the Loans and of fees
hereunder, not later than 12:00 Noon (New York City time) on the date when due,
in Federal or other funds immediately available in New York City, to the
Administrative Agent at its address referred to in Section 10.1. The
Administrative Agent will promptly distribute to each Bank its ratable share of
each such payment received by the Administrative Agent for the account of the
Banks. Whenever any payment of principal of, or interest on, the Base Rate
Loans or of fees shall be due on a day which is not a Domestic Business Day,
the date for payment thereof shall be extended to the next succeeding Domestic
Business Day. Whenever any payment of principal of, or interest on, the
Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar Business
Day, the date for payment thereof shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another
calendar month, in which case the date for payment thereof shall be the next
preceding Euro-Dollar Business Day. If the date for any payment of principal is
extended by operation of law or otherwise, interest thereon shall be payable
for such extended time.
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(b) Unless the Administrative Agent shall have received notice from
the Borrower prior to the date on which any payment is due to the Banks
hereunder that the Borrower will not make such payment in full, the
Administrative Agent may assume that the Borrower has made such payment in
full to the Administrative Agent on such date and the Administrative Agent
may, in reliance upon such assumption, cause to be distributed to each Bank
on such due date an amount equal to the amount then due such Bank. If and
to the extent that the Borrower shall not have so made such payment, each
Bank shall repay to the Administrative Agent forthwith on demand such
amount distributed to such Bank together with interest thereon, for each
day from the date such amount is distributed to such Bank until the date
such Bank repays such amount to the Administrative Agent, at the Federal
Funds Rate.
Section 2.12. Funding Losses. If the Borrower makes any payment of
principal with respect to any Euro-Dollar Loan or any Euro-Dollar Loan is
converted (pursuant to Article 2, 6, 8 or otherwise) on any day other than the
last day of an Interest Period applicable thereto, or the last day of an
applicable period fixed pursuant to Section 2.5(c), or if the Borrower fails to
borrow, prepay, convert or continue any Euro-Dollar Loans after notice has been
given to any Bank in accordance with Section 2.2(b), 2.10(b) or 2.8(c) the
Borrower shall reimburse each Bank within 15 days after demand for any
resulting loss or expense incurred by it (or by an existing or prospective
Participant in the related Loan), including (without limitation) any loss
incurred in obtaining, liquidating or employing deposits from third parties,
but excluding loss of margin for the period after any such payment or
conversion or failure to borrow, prepay, convert or continue, provided that
such Bank shall have delivered to the Borrower a certificate as to the amount
of such loss or expense, which certificate shall be conclusive in the absence
of manifest error.
Section 2.13. Computation of Interest and Fees. Interest based on the
Prime Rate hereunder shall be computed on the basis of a year of 365 days (or
366 days in a leap year) and paid for the actual number of days elapsed
(including the first day but excluding the last day). All other interest and
fees shall be computed on the basis of a year of 360 days and paid for the
actual number of days elapsed (including the first day but excluding the last
day).
ARTICLE III.
CONDITIONS
Section 3.1. Initial Borrowing. The obligation of any Bank to make a
Loan on the occasion of the initial Borrowing hereunder is subject to the
satisfaction of the following conditions on or prior to the date of such
initial Borrowing:
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(a) the Documentation Agent shall have received the following, each
dated on or prior to the date of the initial Borrowing hereunder (unless
otherwise indicated below), in form and substance satisfactory to the
Documentation Agent:
(i) a duly executed Note for the account of each Bank complying
with the provisions of Section 2.3;
(ii) opinions of Willkie Farr & Gallagher, special counsel for
the Obligors and Philip N. Smith, General Counsel of the Borrower,
substantially in the respective forms of Exhibits B-1 and B-2 hereto and
covering such additional matters relating to the transactions contemplated
hereby as the Required Banks may reasonably request;
(iii) an opinion of Davis Polk & Wardwell, special counsel for
the Agents, substantially in the form of Exhibit C hereto and covering such
additional matters relating to the transactions contemplated hereby as the
Required Banks may reasonably request;
(iv) duly executed counterparts of each of the Collateral
Documents, together with evidence satisfactory to the Documentation Agent
of the effectiveness and perfection of the Liens contemplated thereby
(including the filing of UCC-1 financing statements and the delivery of any
promissory notes and stock certificates comprising the Collateral); and
(v) all documents either Agent may reasonably request relating to
the existence of the Obligors, the corporate authority for and the validity
of the Loan Documents, and any other matters relevant hereto, all in form
and substance satisfactory to such Agent;
(b) Except as set forth in Schedule 3.2(f), each Subsidiary identified
as such in Schedule 4.13(c) is wholly-owned by the Borrower or another
wholly-owned Subsidiary;
(c) all fees and expenses required to be paid hereunder on or before
the Effective Date have been, or will be, paid by the Effective Date; and
(d) the Banks shall have received such financial projections for the
Borrower and its Consolidated Subsidiaries (including Atlantic Auto Finance
Corporation and any Encumbered Subsidiary) as requested by the Agents by
the Effective Date.
Section 3.2. All Borrowings. The obligation of any Bank to make a Loan
on the occasion of any Borrowing hereunder, including the initial Borrowing, is
subject to the satisfaction of the following conditions:
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(a) receipt by the Administrative Agent of a Notice of Borrowing as
required by Section 2.2;
(b) the fact that, immediately after such Borrowing, the aggregate
outstanding principal amount of the Loans will not exceed the aggregate
amount of the Commitments and, with respect to a Working Capital Borrowing,
that immediately after such Working Capital Borrowing, the aggregate
outstanding principal amount of Working Capital Loans shall not exceed
$5,000,000 and, with respect to a Non-Working Capital Borrowing, that
immediately after such Non-Working Capital Borrowing, the aggregate
outstanding principal amount of Non-Working Capital Loans shall not exceed
$45,000,000;
(c) the fact that, immediately before and after such Borrowing, no
Default shall have occurred and be continuing;
(d) the fact that the representations and warranties of the Obligors
contained in this Agreement shall be true on and as of the date of such
Borrowing in all material respects;
(e) demonstration by the Borrower to the satisfaction of each Agent in
its sole good faith discretion that the covenants described in Sections
5.11, 5.12, 5.13 and 5.15 are satisfied, on a pro forma basis giving effect
to each Acquisition to be funded with the proceeds of such Borrowing;
(f) except as set forth in Schedule 3.2(f), the fact that, on the date
of such Borrowing, each Subsidiary identified in Schedule 4.13(c) is
wholly-owned by the Borrower or another Subsidiary and each Subsidiary
acquired by the Borrower or another Subsidiary after the Effective Date is
not less than 80.1% owned by the Borrower or such Subsidiary;
(g) the fact that immediately after giving effect to a Non-Working
Capital Borrowing hereunder to be used by the Borrower to fund an
Acquisition, such Acquisition will be consummated; provided that on the
Termination Date, a Non-Working Capital Borrowing may be made by the
Borrower to fund an Acquisition to be consummated within 60 days
thereafter; provided that the Administrative Agent has received a copy of a
signed letter of intent with respect to such Acquisition and the proceeds
of such Non-Working Capital Borrowing are deposited in an escrow account
with the Administrative Agent until the consummation of such Acquisition;
if such Acquisition is not consummated within such 60 days, the funds
deposited in such escrow account shall be applied to prepay the outstanding
Loans under this Agreement (such prepayment to be applied to scheduled
amortization as provided in Section 2.4(iii)); and
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(h) receipt by the Administrative Agent of a notice designating such
Borrowing as a Working Capital Borrowing or a Non-Working Capital
Borrowing, as applicable, and setting forth the aggregate outstanding
principal amount of Working Capital Loans or Non-Working Capital Loans, as
applicable, after giving effect to such Borrowing.
Subsections (e) and (g) hereof shall not apply to a Working Capital Borrowing.
Each Borrowing hereunder shall be deemed to be a representation and warranty by
the Borrower on the date of such Borrowing as to satisfaction of the applicable
conditions specified above.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants, and each Guarantor represents
and warrants with respect to itself only, that:
Section 4.1. Existence and Power. Each Obligor is duly incorporated or
organized (as applicable), validly existing and in good standing under the laws
of the jurisdiction of its incorporation or organization (as applicable), and
has all corporate or partnership powers (as applicable) and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted.
Section 4.2. Corporate and Governmental Authorization; No
Contravention. The execution, delivery and performance by each Obligor of the
Loan Documents to which it is a party are within the corporate or partnership
powers (as applicable) of such Obligor, have been duly authorized by all
necessary corporate or partnership action (as applicable), require no action by
or in respect of, or filing with (except as expressly contemplated by the
Collateral Documents), any governmental body, agency, official or other Person
and do not contravene, or constitute a default under, any provision of
applicable law or regulation or of the certificate of incorporation or by-laws
of such Obligor or of any agreement, judgment, injunction, order, decree or
other instrument binding upon the Borrower or any of its Subsidiaries or result
in the creation or imposition of any Lien (other than the Liens created by the
Collateral Documents) on any asset of the Borrower or any of its Subsidiaries.
Section 4.3. Binding Effect. This Agreement constitutes a valid and
binding obligation of each Obligor and each Note and Collateral Document, when
executed and delivered in accordance with this Agreement, will constitute a
valid and binding obligation of each Obligor party thereto, in each case
enforceable in accordance with its terms, subject to the effect of (a) any
applicable bankruptcy, insolvency, moratorium or similar laws affecting
creditors' rights generally and (b)
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general principles of equity (regardless of whether considered in a proceeding
in equity or at law).
Section 4.4. Financial Information. (a) The consolidated balance sheet
of the Borrower and its Subsidiaries as of December 31, 1996 and the related
consolidated statements of income, changes in shareholders' equity and cash
flows for the fiscal year then ended, reported on by Coopers & Lybrand L.L.P.,
a copy of which has been delivered to each of the Banks, fairly present, in
conformity with generally accepted accounting principles, the consolidated
financial position of the Borrower and its Subsidiaries as of such date and
their consolidated results of operations and cash flows for such fiscal year.
(a) The unaudited pro forma condensed consolidated balance sheet of
the Borrower and its Subsidiaries as of June 30, 1996 and the related
unaudited pro forma condensed consolidated statements of operations for the
six months then ended and for the year ended December 31, 1995, set forth
in the Registration Statement fairly present, in conformity with generally
accepted accounting principles applied on a basis consistent with the
financial statements referred to in subsection (a) of this Section, the
consolidated financial position of the Borrower and its Subsidiaries, with
respect to the unaudited pro forma condensed consolidated balance sheet, as
if the events set forth in the section of the Registration Statement
entitled, "Pro Forma Condensed Consolidated Financial Statements", with the
exception of several events so noted therein, had occurred as of June 30,
1996 and, with respect to the unaudited pro forma condensed consolidated
statements of operations, as if the events set forth in such section of the
Registration Statement had occurred as of January 1, 1995.
(b) Since December 31, 1996 there has been no material adverse change
in the business, financial position, results of operations or prospects of
the Borrower and its Consolidated Subsidiaries, considered as a whole.
Section 4.5. Litigation. Except as set forth in Schedule 4.5, there is
no action, suit or proceeding pending against, or to the knowledge of the
Borrower threatened against or affecting, the Borrower or any of its
Subsidiaries before any court or arbitrator or any governmental body, agency or
official in which there is a reasonable possibility of an adverse decision
which could materially adversely affect the business, consolidated financial
position or consolidated results of operations of the Borrower and its
Consolidated Subsidiaries, considered as a whole, or which in any manner draws
into question the validity or enforceability of the Loan Documents.
Section 4.6. Compliance with ERISA. Each member of the ERISA Group has
fulfilled its obligations under the minimum
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funding standards of ERISA and the Internal Revenue Code with respect to each
Plan and is in compliance in all material respects with the presently
applicable provisions of ERISA and the Internal Revenue Code with respect to
each Plan. No member of the ERISA Group has (i) sought a waiver of the minimum
funding standard under Section 412 of the Internal Revenue Code in respect of
any Plan, (ii) failed to make any contribution or payment to any Plan or
Multiemployer Plan or in respect of any Benefit Arrangement, or made any
amendment to any Plan or Benefit Arrangement, which has resulted or could
result in the imposition of a Lien or the posting of a bond or other security
under ERISA or the Internal Revenue Code or (iii) incurred any liability under
Title IV of ERISA other than a liability to the PBGC for premiums under Section
4007 of ERISA.
Section 4.7. Environmental Matters. The Borrower has reasonably
concluded that, to the best of its knowledge, the costs of compliance with
Environmental Laws are unlikely to have a Material Adverse Effect.
Section 4.8. Taxes. The Borrower and its Subsidiaries have filed all
United States Federal income tax returns and all other material tax returns
which are required to be filed by them and have paid all taxes due pursuant to
such returns or pursuant to any assessment received by the Borrower or any
Subsidiary except those being contested in good faith through appropriate
proceedings. The charges, accruals and reserves on the books of the Borrower
and its Subsidiaries in respect of taxes or other governmental charges are, in
the opinion of the Borrower, adequate.
Section 4.9. Subsidiaries. Each of the Borrower's corporate
Subsidiaries is a corporation or other legal entity duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization, and has all corporate powers and all material governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted.
Section 4.10. Regulatory Restrictions on Borrowing. The Borrower is
not an "investment company" within the meaning of the Investment Company Act of
1940, as amended, a "holding company" within the meaning of the Public Utility
Holding Company Act of 1935, as amended, or otherwise subject to any regulatory
scheme which restricts its ability to incur debt.
Section 4.11. Full Disclosure. All information heretofore furnished by
the Borrower to either Agent or any Bank in writing for purposes of or in
connection with this Agreement or any transaction contemplated hereby is, and
all such information hereafter furnished by the Borrower to either Agent or any
Bank will be, true and accurate in all material respects on the date as of
which such information is stated or certified. The Borrower has disclosed to
the Banks in writing any and all
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facts which materially and adversely affect or may affect (to the extent the
Borrower can now reasonably foresee), the business, operations or financial
condition of the Borrower and its Consolidated Subsidiaries, taken as a whole,
or the ability of the Obligors to perform their obligations under the Loan
Documents.
Section 4.12. Representations in Collateral Documents True and
Correct. Each of the representations and warranties of each Obligor contained
in the Collateral Documents is true and correct.
Section 4.13. Capitalization and Subsidiaries. Schedule 4.13(a), as
supplemented from time to time by notice from the Borrower to the
Administrative Agent, lists all of the authorized, issued and outstanding
capital stock of the Borrower. Schedule 4.13(b) lists all owners as of the
Effective Date of more than 5% of any class of the Borrower's capital stock and
the number of shares of each class owned by each such owner. Set forth on
Schedule 4.13(c) hereto, as supplemented from time to time by notice from the
Borrower to the Administrative Agent, is a complete and accurate list of all of
the Borrower's Subsidiaries, showing (as to each such Subsidiary) the
jurisdiction of its incorporation, the number of shares of each class of
capital stock authorized, the number of shares of each class of capital stock
outstanding and the direct owner of the outstanding shares of each such class
owned. Except as set forth in Schedule 4.13(d), as supplemented from time to
time by notice from the Borrower to the Administrative Agent, all of the
general and limited partnership interests of each Subsidiary that is a
partnership are owned, legally and beneficially, by the Borrower or a wholly
owned Subsidiary of the Borrower, in each case free and clear of all liens,
security interests and other charges or encumbrances other than the liens and
security interests created under the Pledge Agreement. Except as set forth in
Schedule 4.13(e), as supplemented from time to time by notice from the Borrower
to the Administrative Agent, there are no outstanding options, warrants, rights
of conversion or purchase, or similar rights to acquire capital stock or
partnership interests of the Borrower or any of its Subsidiaries or other
similar agreements of any character whatsoever relating to any shares of
capital stock or partnership interests of the Borrower or any such
Subsidiaries; all of the issued and outstanding capital stock of the Borrower
and each of its Subsidiaries that is a corporation has been duly authorized,
validly issued and is fully paid and non-assessable; all of the partnership
interests of each Subsidiary that is a partnership have been issued pursuant to
the terms of its partnership agreement; except as set forth in Schedule
4.13(f), as supplemented from time to time by notice from the Borrower to the
Administrative Agent, all of the issued and outstanding capital stock of each
Subsidiary of the Borrower that is a corporation is directly owned, legally and
beneficially, by the Borrower, in each case free and clear of all
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liens, security interests and other charges or encumbrances other than the
liens and security interests under the Pledge Agreement.
Section 4.14. Ownership of Properties; Absence of Liens and
Encumbrances. The Borrower and its Subsidiaries have good and sufficient title
to and are in lawful possession of, or have valid leasehold interests in, or
have the right to use pursuant to valid and enforceable agreements or
arrangements, all of their respective properties and other assets (real or
personal, tangible, intangible or mixed), except where the failure to have or
possess the same with respect to such properties or other assets would not, in
the aggregate, have a Material Adverse Effect. Except as disclosed on Schedule
5.9, there are no Liens on any property or asset of the Borrower or any of its
Subsidiaries except for the security interests created under the Pledge
Agreement and other Liens permitted by the provisions of Section 5.9.
Section 4.15. Licenses, Permits, Etc.
Except as disclosed in Schedule 4.15,
(a) the Borrower and its Subsidiaries own or possess all licenses,
permits, franchises, authorizations, patents, copyrights, service marks,
trademarks and trade names, or rights thereto, that individually or in the
aggregate are material, without known conflict with the rights of others;
(b) to the best knowledge of the Borrower, no product of the Borrower
infringes in any material respect any license, permit, franchise,
authorization, patent, copyright, service mark, trademark, trade name or
other right owned by any other Person; and
(c) to the best knowledge of the Borrower, there is no material
violation by any Person of any right of the Borrower or any of its
Subsidiaries with respect to any patent, copyright, service mark,
trademark, trade name or other right owned or used by the Borrower or any
of its Subsidiaries.
For purposes of this Section 4.15, "material" means material in
relation to the business, operations, financial condition, assets or properties
of the Borrower and its Subsidiaries, taken as a whole.
Section 4.16. Payment of Dividends by Subsidiaries. Except as
disclosed on Schedule 4.16, as supplemented from time to time by notice from
the Borrower to the Administrative Agent, and except for restrictions imposed
by applicable law, there are no restrictions on the ability of any Subsidiary
to declare or pay any dividend or make any other distribution, or advance or
loan funds, to the Borrower.
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Section 4.17. Certain Agreements. Each Guarantor is obligated to make
payments to the Borrower pursuant to agreements set forth in Schedule 4.17.
Section 4.18. Compliance with Certain Agreements. Each Obligor is in
compliance with the provisions of each of its financing agreements with floor
plan lenders and franchise agreements, except to the extent that failure to do
so could not reasonably be expected to have a Material Adverse Effect.
ARTICLE V.
COVENANTS
The Borrower agrees that, so long as any Bank has any Commitment
hereunder or any amount payable under any Note remains unpaid:
Section 5.1. Information. The Borrower will deliver to each of the
Banks:
(a) as soon as available and in any event within 90 days after the end
of each fiscal year of the Borrower, a consolidated balance sheet of the
Borrower and its Subsidiaries as of the end of such fiscal year and the
related consolidated statements of income, changes in shareholders' equity
and cash flows for such fiscal year, setting forth in each case in
comparative form the figures for the previous fiscal year, all reported on
in accordance with the rules and regulations promulgated by the Securities
and Exchange Commission by Coopers & Lybrand L.L.P. or other independent
public accountants of nationally recognized standing;
(b) as soon as available and in any event within 45 days after the end
of each of the first three quarters of each fiscal year of the Borrower, a
consolidated balance sheet of the Borrower and its Subsidiaries as of the
end of such quarter and the related consolidated statements of income,
changes in shareholders' equity and cash flows for such quarter and for the
portion of the Borrower's fiscal year ended at the end of such quarter,
setting forth in the case of such statements of income, changes in
shareholders' equity and cash flows, in comparative form the figures for
the corresponding quarter and the corresponding portion of the Borrower's
previous fiscal year, all certified (subject to normal year-end
adjustments) as to fairness of presentation, generally accepted accounting
principles and consistency by the chief financial officer or the chief
accounting officer of the Borrower;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of the
chief financial officer or the
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chief accounting officer of the Borrower (i) setting forth in reasonable
detail the calculations required to establish whether the Borrower was in
compliance with the requirements of Sections 5.7 to 5.15, inclusive, on the
date of such financial statements and (ii) stating whether any Default
exists on the date of such certificate and, if any Default then exists,
setting forth the details thereof and the action which the Borrower is
taking or proposes to take with respect thereto;
(d) simultaneously with the delivery of each set of financial
statements referred to in clause (a) above, a statement of the firm of
independent public accountants which reported on such statements (i)
whether anything has come to their attention to cause them to believe that
any Default existed on the date of such statements and (ii) confirming the
calculations set forth in the officer's certificate delivered
simultaneously therewith pursuant to clause (c) above;
(e) within five days after any officer of the Borrower obtains
knowledge of any Default, if such Default is then continuing, a certificate
of the chief financial officer or the chief accounting officer of the
Borrower setting forth the details thereof and the action which the
Borrower is taking or proposes to take with respect thereto;
(f) promptly upon the mailing thereof to the shareholders of the
Borrower, copies of all financial statements, reports and proxy statements
so mailed;
(g) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements
on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or
their equivalents) which the Borrower shall have filed with the Securities
and Exchange Commission;
(h) if and when any member of the ERISA Group (i) gives or is required
to give notice to the PBGC of any "reportable event" (as defined in Section
4043 of ERISA) with respect to any Plan which might constitute grounds for
a termination of such Plan under Title IV of ERISA, or knows that the plan
administrator of any Plan has given or is required to give notice of any
such reportable event, a copy of the notice of such reportable event given
or required to be given to the PBGC; (ii) receives notice of complete or
partial withdrawal liability under Title IV of ERISA or notice that any
Multiemployer Plan is in reorganization, is insolvent or has been
terminated, a copy of such notice; (iii) receives notice from the PBGC
under Title IV of ERISA of an intent to terminate, impose liability (other
than for premiums under Section 4007 of ERISA) in respect of, or appoint a
trustee to administer any Plan, a copy of such
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notice; (iv) applies for a waiver of the minimum funding standard under
Section 412 of the Internal Revenue Code, a copy of such application; (v)
gives notice of intent to terminate any Plan under Section 4041(c) of
ERISA, a copy of such notice and other information filed with the PBGC;
(vi) gives notice of withdrawal from any Plan pursuant to Section 4063 of
ERISA, a copy of such notice; or (vii) fails to make any payment or
contribution to any Plan or Multiemployer Plan or in respect of any Benefit
Arrangement or makes any amendment to any Plan or Benefit Arrangement which
has resulted or could result in the imposition of a Lien or the posting of
a bond or other security, a certificate of the chief financial officer or
the chief accounting officer of the Borrower setting forth details as to
such occurrence and action, if any, which the Borrower or applicable member
of the ERISA Group is required or proposes to take;
(i) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, (i) consolidating
financial information (including balance sheets and statements of income)
with respect to each Automobile Dealership group identified in the pro
forma consolidated statement of operations for the year ended December 31,
1995 as set forth in the Registration Statement, (ii) consolidating
financial information with respect to each Automobile Dealership group
acquired other than pursuant to the Borrower's Plan of Acquisitions, (iii)
consolidating financial information with respect to Atlantic Auto Finance
Corporation and (iv) consolidating financial statements setting forth, with
respect to the consolidating financial information referred in clauses (i),
(ii) and (iii) above, in each case in comparative form, the corresponding
figures for the corresponding period of the previous fiscal year and the
corresponding figures from the consolidating financial projections being
delivered pursuant to Section 3.1(g);
(j) simultaneously with the delivery of the financial statements
referred to in clause (a) above, commencing in 1997, a copy of the annual
business plan of the Borrower and its Subsidiaries for the next succeeding
year;
(k) promptly upon obtaining knowledge of any material change in
procedures in connection with any floor plan financing, a copy of a report
setting forth the details and the purpose thereof;
(l) promptly upon the issuance of any Seller Note (other than Seller
Notes issued in connection with the acquisition of certain Automobile
Dealerships pursuant to the Stock Purchase Agreement dated February 19,
1997 among the Borrower, UAG East, Inc., John A. Staluppi, John A.
Staluppi, Jr. and certain of their affiliates), a certificate of Coopers &
Lybrand L.L.P. or other independent
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public accountants of nationally recognized standing setting forth in
reasonable detail the calculations of the Adjusted Pre-Tax Income of the
relevant Automobile Dealership; and
(m) from time to time such additional information regarding the
financial position or business of the Borrower and its Subsidiaries or any
Guarantor as the Administrative Agent, at the request of any Bank, may
reasonably request.
Section 5.2. Payment of Obligations. The Borrower will pay and
discharge, and will cause each Subsidiary to pay and discharge, at or before
maturity, all their respective material obligations and liabilities (including,
without limitation, tax liabilities and claims of materialmen, warehousemen and
the like which if unpaid might by law give rise to a Lien), except where the
same may be contested in good faith by appropriate proceedings, and will
maintain, and will cause each Subsidiary to maintain, in accordance with
generally accepted accounting principles, appropriate reserves for the accrual
of any of the same.
Section 5.3. Maintenance of Property; Insurance. (a) The Borrower will
keep, and will cause each Subsidiary to keep, all property useful and necessary
in its business in good working order and condition, ordinary wear and tear
excepted; provided that this Section shall not prevent the Borrower or any
Subsidiary from discontinuing the operation and the maintenance of any of its
properties if such discontinuance is desirable in the conduct of its business
and the Borrower has concluded that such discontinuance could not have a
Material Adverse Effect.
(b) The Borrower will, and will cause each of its Subsidiaries to,
maintain (either in the name of the Borrower or in such Subsidiary's own name)
with financially sound and responsible insurance companies, insurance on all
their respective properties in at least such amounts, against at least such
risks and with such risk retention as are usually maintained, insured against
or retained, as the case may be, in the same general area by companies of
established repute engaged in the same or a similar business; and will furnish
to the Banks, upon request from the Administrative Agent, information presented
in reasonable detail as to the insurance so carried.
Section 5.4. Conduct of Business and Maintenance of Existence. Subject
to Section 5.7, the Borrower will continue, and will cause each Subsidiary to
continue, to engage, directly or indirectly, in the business of an Automobile
Dealership, and will preserve, renew and keep in full force and effect, and
will cause each Subsidiary to preserve, renew and keep in full force and effect
their respective corporate existence and their respective rights, privileges
and franchises necessary or desirable in the normal conduct of business;
provided that nothing in this Section 5.4 shall prohibit (i) the merger of a
Subsidiary into the Borrower or the merger or consolidation of a
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Subsidiary with or into another Person if the corporation surviving such
consolidation or merger is a Subsidiary and if, in each case, after giving
effect thereto, no Default shall have occurred and be continuing or (ii) if the
Borrower gives notice to the Banks requesting the consent of the Banks to the
termination of the corporate existence of a Subsidiary by the tenth Domestic
Business Day prior to such scheduled termination and the Required Banks do not
respond negatively to such request by the fifth Domestic Business Day prior to
such scheduled termination, the termination of the corporate existence of any
Subsidiary if the Borrower in good faith determines that such termination is in
the best interest of the Borrower and is not materially disadvantageous to the
Banks. Notwithstanding the foregoing, at all times the Borrower will continue,
and will cause each Subsidiary to continue, to engage, directly or indirectly,
in the business of owning and operating Automobile Dealerships.
Section 5.5. Compliance with Laws. The Borrower will comply, and cause
each Subsidiary to comply, in all material respects with all applicable laws,
ordinances, rules, regulations, and requirements of governmental authorities
(including, without limitation, Environmental Laws and ERISA and the rules and
regulations thereunder) except where the necessity of compliance therewith is
contested in good faith by appropriate proceedings.
Section 5.6. Inspection of Property, Books and Records. The Borrower
will keep, and will cause each Subsidiary to keep, proper books of record and
account in which full, true and correct entries shall be made of all dealings
and transactions in relation to its business and activities; and will permit,
and will cause each Subsidiary to permit, representatives of any Bank at such
Bank's expense to visit and inspect any of their respective properties, to
examine and make abstracts from any of their respective books and records and
to discuss their respective affairs, finances and accounts with their
respective officers, employees and independent public accountants, all at such
reasonable times and as often as may reasonably be desired.
Section 5.7. Mergers and Sales of Assets. (a) The Borrower will not
(i) consolidate or merge with or into any other Person or (ii) sell, lease or
otherwise dispose of all or substantially all of its assets to any other
Person; provided that the Borrower may merge with another Person if (x) the
Borrower is the corporation surviving such merger and (y) after giving effect
to such merger, no Default shall have occurred and be continuing.
(a)
(b) The Borrower will not make any Substantial Asset Disposition
unless (i) such Substantial Asset Disposition is for cash in an amount not less
than the fair market value of the
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assets disposed of (as determined in good faith by the board of directors of
the Borrower) and (ii) the proceeds of such Substantial Asset Disposition, net
of reasonable expenses incurred in connection therewith and provision for taxes
payable by reason thereof, are applied to the prepayment of the Loans (and if
the Commitments are still in existence, to an equivalent reduction of the
Commitments) within five Domestic Business Days of the consummation of such
Substantial Asset Disposition.
For this purpose, "Substantial Asset Disposition" means the sale,
lease or other disposition, in a single transaction or a series of related
transactions, of assets comprising more than 15% of the consolidated assets of
the Borrower and its Subsidiaries, determined as of the last day of the fiscal
quarter most recently ended on or prior to the date of such disposition.
Section 5.8. Use of Proceeds. The proceeds of the Loans made under
this Agreement will be used by the Borrower and its Subsidiaries, with respect
to not more than $5,000,000 of such proceeds, for working capital purposes and,
with respect to not more than $45,000,000 of such proceeds, for Acquisitions
and related costs, fees and expenses. None of such proceeds will be used,
directly or indirectly, for the purpose, whether immediate, incidental or
ultimate, of buying or carrying any "margin stock" within the meaning of
Regulation U.
Section 5.9. Negative Pledge. Neither the Borrower nor any Subsidiary
will create, assume or suffer to exist any Lien on any asset now owned or
hereafter acquired by it, except:
(a) Liens existing on the Effective Date and set forth in Schedule
5.9;;
(b) any Lien existing on any asset of any Person at the time such
Person becomes a Subsidiary and not created in contemplation of such event;
(c) any Lien on any asset securing Debt incurred or assumed for the
purpose of financing all or any part of the cost of acquiring or improving
such asset (it being understood that, for this purpose, the acquisition of
a Person is also an acquisition of the assets of such Person); provided
that such Lien attaches to such asset concurrently with or within 180 days
after the acquisition thereof;
(d) any Lien on any asset of any Person existing at the time such
Person is merged or consolidated with or into the Borrower or a Subsidiary
and not created in contemplation of such event;
(e) any Lien existing on any asset prior to the acquisition thereof by
the Borrower or a Subsidiary and not created in contemplation of such
acquisition;
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<PAGE>
(f) any Lien arising out of the refinancing, extension, renewal or
refunding of any Debt secured by any Lien permitted by any of the foregoing
clauses of this Section, provided that such Debt is not increased and is
not secured by any additional assets;
(g) Liens arising in the ordinary course of its business which (i) do
not secure Debt or Derivatives Obligations, (ii) do not secure any
obligation in an amount exceeding $5,000,000 and (iii) do not in the
aggregate materially detract from the value of the assets of the Borrower
and its Subsidiaries, taken as a whole, or materially impair the use
thereof in the operation of their business;
(h) Liens on (i) any asset of an Automobile Dealership securing floor
plan indebtedness or (ii) any retail installment receivables of Atlantic
Auto Finance Corporation to be sold in a securitization transaction;
(i) Liens created by the Collateral Documents;
(j) a Lien on the real property of Sun Automotive Group; provided that
so long as such Lien exists, upon the request of either Agent, the Borrower
shall use commercially reasonable efforts to grant a second mortgage on
such real property to the Agents and the Banks pursuant to documentation in
form and substance satisfactory to the Agents; and
(k) Liens securing Debt owed by a Subsidiary to the Borrower or
another Subsidiary.
Notwithstanding the foregoing, no Obligor will create, assume or suffer to
exist any Lien on any Collateral other than Liens described in clause (a), (b),
(c), (d), (e) or (i) above, or Liens described in clause (f) above relating to
a Lien described in clause (a), (b), (c), (d), (e) or (i) above, which do not
in the aggregate materially detract from the value of the Collateral.
Section 5.10. Limitation on Debt. The Borrower will not, and will not
permit any of its Subsidiaries to, incur or at any time be liable with respect
to any Debt except:
(a) Debt under this Agreement;
(b) Debt secured by Liens permitted by Section 5.9;
(c) Debt incurred for the purpose of financing all or any part of the
cost of an Acquisition; provided that (i) the amount of any Seller Note
will not exceed three times the Adjusted Pre-Tax Income of the Automobile
Dealership to be acquired by the Borrower or a Subsidiary for the four
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consecutive fiscal quarters of such Automobile Dealership then most
recently ended for which financial statements are available in connection
with such Acquisition and (ii) no payment of principal with respect to any
Seller Note may be made on or prior to the last Principal Repayment Date;
(d) Debt of any Person existing at the time such Person became a
Subsidiary and not created in contemplation of such event;
(e) Debt with respect to any floor plan financing of any Automobile
Dealership or retail installment receivables-backed financing of Atlantic
Auto Finance Corporation;
(f) Debt set forth on Schedule 5.10 hereto;
(g) Debt owing to the Borrower by a Subsidiary or Debt owing to a
Subsidiary by the Borrower or another Subsidiary; and
(h) Debt of the Borrower and its Subsidiaries not otherwise permitted
by this Section incurred after the Effective Date in an aggregate principal
amount at any time outstanding not to exceed $10,000,000, of which no more
than $5,000,000 in aggregate principal amount shall constitute Debt of
Subsidiaries.
Section 5.11. Leverage Ratio. The Leverage Ratio will not exceed
during any period set forth below the applicable ratio set forth below for such
period:
Period Ratio
------ -----
Effective Date - 06/29/97 2.75:1
06/30/97 - 12/30/97 2.50:1
12/31/97 - 03/30/98 2.25:1
03/31/98 - 09/29/98 2.10:1
09/30/98 - 12/30/98 2.00:1
Thereafter 1.75:1
Section 5.12. Working Capital. (a) Consolidated Working Capital will
at all times be greater than $0.
(a)
(b) The Borrower will cause each Subsidiary to maintain such level of
working capital as is necessary to satisfy the requirements of such
Subsidiary's franchise agreements (if any).
. Minimum Consolidated Net Worth. Consolidated Net Worth will at no
time be less than the sum of (i) $260,000,000 and (ii) an amount equal to 50%
of Consolidated Net Income for each fiscal quarter of the Borrower ending after
December 31,
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1996 but prior to the date of determination, in each case, for which
Consolidated Net Income is positive (but with no deduction on account of
negative Consolidated Net Income for any fiscal quarter of the Borrower) plus
(iii) 80% of the aggregate net proceeds, including the fair market value of
property other than cash (as determined in good faith by the Board of Directors
of the Borrower), received by the Borrower from the issuance and sale after
December 31, 1996 of any capital stock of the Borrower (other than the proceeds
of any issuance and sale of any capital stock (x) to a Subsidiary of the
Borrower, (y) which is required to be redeemed, or is redeemable at the option
of the holder, if certain events or conditions occur or exist or otherwise
("Redeemable Stock") or (z) if and to the extent such proceeds are used
substantially simultaneously to redeem other capital stock of the Borrower
(other than Redeemable Stock) or in connection with the conversion or exchange
of any Debt of the Borrower into capital stock of the Borrower).
Section 5.13. Borrower Fixed Charge Coverage Ratio. As of the last day
of each fiscal quarter of the Borrower, the Borrower Fixed Charge Coverage
Ratio will not be less than 1.05:1.
Section 5.14. Consolidated Fixed Charge Coverage Ratio. As of the last
day of each fiscal quarter of the Borrower, the Consolidated Fixed Charge
Coverage Ratio will not be less than 1.35:1
Section 5.15. Restricted Payments. The Borrower will not declare or
make and will not permit any Subsidiary to make any Restricted Payment other
than in connection with (i) an Equity Refinancing or (ii) the Stock Repurchase
Program.
Section 5.16. Investments. Neither the Borrower nor any16 Subsidiary
will hold, make or acquire any Investment in any Person other than:
(a) Investments pursuant to the Borrower's Plan of Acquisition or in
Automobile Dealerships that are owned; directly or indirectly, by the
Borrower on the date hereof;
(b) Temporary Cash Investments;
(c) any Investment in a Consolidated Subsidiary or other Person
operating an Automobile Dealership who, concurrently with the making of
such Investment, becomes a Subsidiary;
(d) Investments made by the Borrower in Atlantic Auto Finance
Corporation, the aggregate unrecovered amount of which shall at no time
exceed $28,000,000;
(e) loans by Atlantic Auto Finance Corporation to the Borrower;
provided that any such loan shall be due not later
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than the Domestic Business Day following the day such loan was made;
(f) Investments held by any Person at the time such Person becomes a
Subsidiary and not acquired in anticipation of such event;
(g) Investments made by Atlantic Auto Finance Corporation in the
ordinary course of business in Persons other than the Borrower and its
Consolidated Subsidiaries;
(h) Investments made by any Consolidated Subsidiary in the Borrower or
another Consolidated Subsidiary; and
(i) Investments in the form of non-cash consideration for a sale of
assets permitted under Section 5.7.
Section 5.17. Transactions with Affiliates. The Borrower will not, and
will not permit any Subsidiary to, directly or indirectly, pay any funds to or
for the account of, make any investment (whether by acquisition of stock or
indebtedness, by loan, advance, transfer of property, guarantee or other
agreement to pay, purchase or service, directly or indirectly, any Debt, or
otherwise) in, lease, sell, transfer or otherwise dispose of any assets
(tangible or intangible) to or effect any transaction with, any Affiliate
except on an arm's-length basis on terms at least as favorable to the Borrower
or such Subsidiary as could have been obtained from a third party who was not
an Affiliate; provided that the foregoing provisions of this Section shall not
prohibit any such Person from declaring or paying any lawful dividend or other
payment ratably in respect of all of its capital stock of the relevant class or
making any other payment permitted under Section 5.16 so long as, after giving
effect thereto, no Default shall have occurred and be continuing.
Section 5.18. Additional Equity. In the event that equity securities
of the Borrower are sold (i) by the Principal Shareholders and/or (ii) in
connection with one or more Equity Refinancings, by the Borrower, through
offerings registered under the 1933 Act or made pursuant to Rule 144A under the
1933 Act for an aggregate gross purchase price of more than $50,000,000, the
Borrower will within 60 days of such event prepay an aggregate principal amount
of the Loans equal to 80% of the aggregate gross purchase price received in
connection with such offerings (or, if less, the aggregate principal amount of
all outstanding Loans).
Section 5.19. Additional Guarantors and Collateral. The Borrower
agrees, within ten days after any Person hereafter becomes a Subsidiary, (a) to
cause such Person to become a Guarantor hereunder, to the extent immediately
prior to becoming a Subsidiary such Person was permitted so to become a
Guarantor and (b) to pledge such Person's stock to the Agents and the Banks
pursuant to a Pledge Agreement to the extent the Borrower is
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permitted to do so, and in connection with the foregoing to deliver such
opinions of counsel and other documents related to such Guarantor and its
obligations hereunder or under such pledge agreement as the Administrative
Agent may reasonably request. The Borrower will use commercially reasonable
efforts to lift any applicable restrictions with respect to the foregoing;
provided that any Subsidiary created in contemplation of an Acquisition shall
not be required to become a Guarantor hereunder or have its stock pledged to
the Agents and the Banks in accordance with this Section 5.20 until the tenth
day after the consummation of such Acquisition.
Section 5.20. Further Assurances. (a) The Borrower will, and will
cause each of the other Obligors to, at the Borrower's sole cost and expense,
do, execute, acknowledge and deliver all such further acts, deeds, conveyances,
mortgages, assignments, notices of assignment and transfers as the
Administrative Agent shall from time to time request, which may be necessary in
the reasonable judgment of the Administrative Agent from time to time to
assure, perfect, convey, assign and transfer to the Administrative Agent the
property and rights conveyed or assigned pursuant to the Collateral Documents,
or which may facilitate the performance of the terms of the Collateral
Documents, or the filing, registering or recording of the Collateral Documents.
(b) All costs and expenses in connection with the grant of any
security interests under the Collateral Documents, including without limitation
reasonable legal fees and other reasonable costs and expenses in connection
with the granting, perfecting and maintenance of any security interests under
the Collateral Documents or the preparation, execution, delivery, recordation
or filing of documents and any other acts as the Administrative Agent may
reasonably request in connection with the grant of such security interests
shall be paid by the Borrower promptly upon demand.
(c) The Borrower will not, and will not permit any of its Subsidiaries
to, enter into or become subject to any agreement which would impair their
ability to comply, or which would purport to prohibit them from complying, with
the provisions of this Section (unless, with respect to any Person, such an
agreement was in effect at the time such Person became a Subsidiary and was not
entered into in anticipation of such event).
Section 5.21. Limitation on Floor Plan Amendments. There shall be no
modification to any floor plan financing arrangement which would have a
Material Adverse Effect.
Section 5.22. External Inventory Audits. The Borrower will cause a
minimum of six floor plan audits to be performed annually by Floor Plan
Providers (or other external auditors)
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with respect to each Automobile Dealership presently owned or hereafter
acquired by the Borrower and its Subsidiaries.
Section 5.23. Ownership of Subsidiaries. Each Subsidiary identified as
a wholly-owned Subsidiary of the Borrower or another Subsidiary in Section
4.13(c) on the Effective Date, as modified in accordance with Section 4.13 from
time to time, will be wholly-owned by the Borrower or another Subsidiary at all
times and each Subsidiary acquired by the Borrower, directly or indirectly,
after the Effective Date will at no time be less than 80.1% owned, directly or
indirectly, by the Borrower.
ARTICLE VI.
DEFAULTS
Section 6.1. Events of Default. If one or more of the following events
("Events of Default") shall have occurred and be continuing:
(a) the Borrower shall fail to pay when due any principal of any Loan
or shall fail to pay within five Domestic Business Days of the due date
thereof any interest, any fees or any other amount payable hereunder;
(b) the Borrower shall fail to observe or perform any covenant
contained in Article 5, other than those contained in Sections 5.1 through
5.6; provided that in the case of Sections 5.12 and 5.13, such failure
shall have continued uncured for 10 days;
(c) any Obligor shall fail to observe or perform any covenant or
agreement (including those contained in Sections 5.1 through 5.6) contained
in the Loan Documents (other than those covered by clause (a) or (b) above)
for 30 days after notice thereof has been given to the Borrower by the
Documentation Agent at the request of any Bank;
(d) any representation, warranty, certification or statement made by
any Obligor in any Loan Document or in any certificate, financial statement
or other document delivered pursuant to any Loan Document shall prove to
have been incorrect in any material respect when made (or deemed made);
(e) the Borrower or any Subsidiary shall fail to make any payment in
respect of any Material Financial Obligations when due or within any
applicable grace period;
(f) any event or condition shall occur which results in the
acceleration of the maturity of any Material Debt or enables (or, with the
giving of notice or lapse of time or
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both, would enable) the holder of such Debt or any Person acting on such
holder's behalf to accelerate the maturity thereof;
(g) the Borrower or any Significant Subsidiary shall commence a
voluntary case or other proceeding seeking liquidation, reorganization or
other relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, or shall consent to
any such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against it,
or shall make a general assignment for the benefit of creditors, or shall
fail generally to pay its debts as they become due, or shall take any
corporate action to authorize any of the foregoing;
(h) an involuntary case or other proceeding shall be commenced against
the Borrower or any Significant Subsidiary seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its property, and
such involuntary case or other proceeding shall remain undismissed and
unstayed for a period of 60 days; or an order for relief shall be entered
against the Borrower or any Subsidiary under the federal bankruptcy laws as
now or hereafter in effect;
(i) any member of the ERISA Group shall fail to pay when due an amount
or amounts aggregating in excess of $1,000,000 which it shall have become
liable to pay under Title IV of ERISA; or notice of intent to terminate a
Material Plan shall be filed under Title IV of ERISA by any member of the
ERISA Group, any plan administrator or any combination of the foregoing; or
the PBGC shall institute proceedings under Title IV of ERISA to terminate,
to impose liability (other than for premiums under Section 4007 of ERISA)
in respect of, or to cause a trustee to be appointed to administer any
Material Plan; or a condition shall exist by reason of which the PBGC would
be entitled to obtain a decree adjudicating that any Material Plan must be
terminated; or there shall occur a complete or partial withdrawal from, or
a default, within the meaning of Section 4219(c)(5) of ERISA, with respect
to, one or more Multiemployer Plans which causes one or more members of the
ERISA Group to incur a current payment obligation in excess of $1,000,000;
(j) judgments or orders for the payment of money in excess of
$1,000,000 shall be rendered against the Borrower
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or any Subsidiary and such judgments or orders shall continue unsatisfied
and unstayed for a period of 30 days;
(k) any Lien created by any of the Collateral Documents shall at any
time fail to constitute a valid and (to the extent required by the
Collateral Documents) perfected Lien on all of the Collateral purported to
be subject thereto, securing the obligations purported to be secured
thereby, with the priority required by the Loan Documents, or any Obligor
shall so assert in writing;
(l) any Person or group of Persons (within the meaning of Section 13
or 14 of the Securities Exchange Act of 1934, as amended), other than any
Principal Shareholder, shall have acquired beneficial ownership (within the
meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission
under said Act) of 30% or more of the outstanding shares of common stock of
the Borrower; or, during any period of 12 consecutive calendar months,
individuals who were directors of the Borrower on the first day of such
period (together with any new directors whose election by the board of
directors of the Borrower or whose nomination for election by the
stockholders of the Borrower was approved by a vote of a majority of the
directors then still in office who were either directors at the beginning
of such period or whose election or nomination for election was previously
so approved) shall cease to constitute a majority of the board of directors
of the Borrower; or
(m) the obligations of any Guarantor which is a Significant Subsidiary
under Article 9 shall be invalid or unenforceable, or any Obligor shall so
assert in writing;
then, and in every such event, the Documentation Agent shall (i) if requested
by Banks having more than 50% in aggregate amount of the Commitments, by notice
to the Borrower terminate the Commitments and they shall thereupon terminate,
and (ii) if requested by Banks holding more than 50% of the aggregate principal
amount of the Loans, by notice to the Borrower declare the Loans (together with
accrued interest thereon) to be, and the Loans shall thereupon become,
immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the Borrower; provided
that in the case of any of the Events of Default specified in clause 6.1(g) or
6.1(h) above with respect to the Borrower, without any notice to the Borrower
or any other act by the Documentation Agent or the Banks, the Commitments shall
thereupon terminate and the Loans (together with accrued interest thereon)
shall become immediately due and payable without presentment, demand, protest
or other notice of any kind, all of which are hereby waived by the Borrower.
Section 6.2. Notice of Default. The Documentation Agent shall give
notice to the Borrower under Section 6.1(c)
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promptly upon being requested to do so by any Bank and shall thereupon notify
all the Banks thereof.
ARTICLE VII.
THE AGENTS
Section 7.1. Appointment and Authorization. Each Bank irrevocably
appoints and authorizes each Agent to enter into and act as its agent in
connection with the Collateral Documents and to take such action as agent on
its behalf and to exercise such powers under the Loan Documents as are
delegated to such Agent by the terms hereof or thereof, together with all such
powers as are reasonably incidental thereto.
Section 7.2. Agents and Affiliates. The Bank of Nova Scotia and Morgan
Guaranty Trust Company of New York shall each have the same rights and powers
under the Loan Documents as any other Bank and may exercise or refrain from
exercising the same as though it were not an Agent, and The Bank of Nova Scotia
and Morgan Guaranty Trust Company of New York and their respective affiliates
may accept deposits from, lend money to, and generally engage in any kind of
business with the Borrower or any Subsidiary or affiliate of the Borrower as if
it were not an Agent.
Section 7.3. Action by Agents. The obligations of the Agents hereunder
are only those expressly set forth herein. Without limiting the generality of
the foregoing, neither Agent shall be required to take any action with respect
to any Default, except as expressly provided in Article 6.
Section 7.4. Consultation with Experts. Each Agent may consult with
legal counsel (who may be counsel for any Obligor), independent public
accountants and other experts selected by it and shall not be liable to any
Bank or Agent for any action taken or omitted to be taken by it in good faith
in accordance with the advice of such counsel, accountants or experts.
Section 7.5. Liability of Agent. Neither Agent nor any of their
respective affiliates nor any of the respective directors, officers, agents or
employees of any of the foregoing shall be liable for any action taken or not
taken by it in connection herewith (i) with the consent or at the request of
the Required Banks (or all the Banks in any case where the relevant event
requires the consent of all the Banks in accordance with the terms and
provisions of the Loan Documents) or (ii) in the absence of its own gross
negligence or willful misconduct. Neither Agent nor any of their respective
affiliates nor any of the respective directors, officers, agents or employees
of any of the foregoing shall be responsible for or have any duty to ascertain,
inquire into or verify (i) any statement, warranty or representation made in
connection with the Loan Documents or any borrowing hereunder; (ii) the
performance or observance of any of
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the covenants or agreements of any Obligor; (iii) the satisfaction of any
condition specified in Article 2, 3, except in the case of the Documentation
Agent receipt of items required to be delivered to it; or (iv) the validity,
effectiveness or genuineness of the Loan Documents or any other instrument or
writing furnished in connection herewith. Neither Agent shall incur any
liability by acting in reliance upon any notice, consent, certificate,
statement, or other writing (which may be a bank wire, telex, facsimile
transmission or similar writing) believed by it to be genuine or to be signed
by the proper party or parties.
Section 7.6. Indemnification. Each Bank shall, ratably in accordance
with its Commitment, indemnify each Agent, its affiliates and their respective
directors, officers, agents and employees (to the extent not reimbursed by the
Borrower and without limiting the obligation of the Borrower to do so) against
any cost, expense (including counsel fees and disbursements), claim, demand,
action, loss or liability (except such as result from such indemnitees' gross
negligence or willful misconduct) that such indemnitees may suffer or incur in
connection with the Loan Documents or any action taken or omitted by such
indemnitees thereunder.
Section 7.7. Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon either Agent or any other Bank, and
based on such documents and information as it has deemed appropriate, made its
own credit analysis and decision to enter into this Agreement. Each Bank also
acknowledges that it will, independently and without reliance upon either Agent
or any other Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking any action under the Loan Documents.
Section 7.8. Successor Agent. Either Agent may resign at any time by
giving notice thereof to the Banks and the Borrower. Upon any such resignation,
the Required Banks shall have the right to appoint a successor Agent. If no
successor Agent shall have been so appointed by the Required Banks, and shall
have accepted such appointment, within 30 days after the retiring Agent gives
notice of resignation, then the retiring Agent may, on behalf of the Banks,
appoint a successor Agent, which shall be a commercial bank organized or
licensed under the laws of the United States of America or of any State thereof
and having a combined capital and surplus of at least $50,000,000. Upon the
acceptance of its appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations hereunder. After any retiring
Agent's resignation hereunder as Agent, the provisions of this Article shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Agent.
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Section 7.9. Agents' Fees. The Borrower shall pay to each Agent for
its own account fees in the amounts and at the times previously agreed upon
between the Borrower and such Agent.
ARTICLE VIII.
CHANGE IN CIRCUMSTANCES
Section 8.1. Basis for Determining Interest Rate Inadequate or Unfair.
If at least two Euro-Dollar Business Days prior to the first day of any
Interest Period for any Euro-Dollar Loan:
(a) the Administrative Agent is advised by the Reference Banks that
deposits in dollars (in the applicable amounts) are not being offered to
the Reference Banks in the London interbank market for such Interest
Period, or
(b) Banks having 50% or more of the aggregate principal amount of the
affected Loans advise the Administrative Agent that the Adjusted London
Interbank Offered Rate as determined by the Administrative Agent will not
adequately and fairly reflect the cost to such Banks of funding their
Euro-Dollar Loans for such Interest Period,
the Administrative Agent shall immediately give notice thereof to the Borrower
and the Banks, whereupon until the Administrative Agent notifies the Borrower
that the circumstances giving rise to such suspension no longer exist, (i) the
obligations of the Banks to make Euro-Dollar Loans or to continue or convert
outstanding Loans as or into Euro-Dollar Loans shall be suspended and (ii) each
outstanding Euro-Dollar Loan shall be converted into a Base Rate Loan on the
last day of the then current Interest Period applicable thereto. Unless the
Borrower notifies the Administrative Agent at least one Domestic Business Day
before the date of any Euro-Dollar Borrowing for which a Notice of Borrowing
has previously been given that it elects not to borrow on such date, such
Borrowing shall instead be made as a Base Rate Borrowing.
Section 8.2. Illegality. If, on or after the date of this Agreement,
the adoption of any applicable law, rule or regulation, or any change in any
applicable law, rule or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
compliance by any Bank (or its Euro-Dollar Lending Office) with any request or
directive (whether or not having the force of law) of any such authority,
central bank or comparable agency issued after the date of this Agreement shall
make it unlawful or impossible for any Bank (or its Euro-Dollar Lending Office)
to make, maintain or fund its Euro-Dollar Loans and such Bank shall so notify
the Administrative Agent (which notice shall specify in reasonable detail the
basis upon which it is being given), the Administrative Agent shall forthwith
forward such notice to the
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other Banks and the Borrower, whereupon until such Bank notifies the Borrower
and the Administrative Agent that the circumstances giving rise to such
suspension no longer exist, the obligation of such Bank to make Euro-Dollar
Loans, or to convert outstanding Loans into Euro-Dollar Loans, shall be
suspended. Before giving any notice to the Administrative Agent pursuant to
this Section, such Bank shall designate a different Euro-Dollar Lending Office
if such designation will avoid the need for giving such notice and will not, in
the judgment of such Bank, be otherwise disadvantageous to such Bank. If such
notice is given, each Euro-Dollar Loan of such Bank then outstanding shall be
converted to a Base Rate Loan either (a) on the last day of the then current
Interest Period applicable to such Euro-Dollar Loan if such Bank may lawfully
continue to maintain and fund such Loan to such day or (b) immediately if such
Bank shall determine that it may not lawfully continue to maintain and fund
such Loan to such day.
Section 8.3. Increased Cost and Reduced Return. (a) If on or after the
date hereof, the adoption of any applicable law, rule or regulation, or any
change in any applicable law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Bank (or its Applicable Lending Office) with any
request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency issued after the date of this
Agreement shall impose, modify or deem applicable any reserve (including,
without limitation, any such requirement imposed by the Board of Governors of
the Federal Reserve System, but excluding any such requirement included in an
applicable Euro-Dollar Reserve Percentage), special deposit, insurance
assessment or similar requirement against assets of, deposits with or for the
account of, or credit extended by, any Bank (or its Applicable Lending Office)
or shall impose on any Bank (or its Applicable Lending Office) or the London
interbank market any other condition affecting its Euro-Dollar Loans, its Note
or its obligation to make Euro-Dollar Loans and the result of any of the
foregoing is to increase the cost to such Bank (or its Applicable Lending
Office) of making or maintaining any Euro-Dollar Loan, or to reduce the amount
of any sum received or receivable by such Bank (or its Applicable Lending
Office) under this Agreement or under its Note with respect thereto, by an
amount deemed by such Bank to be material, then, within 15 days after demand by
such Bank (with a copy to the Administrative Agent), the Borrower shall pay to
such Bank such additional amount or amounts as will compensate such Bank for
such increased cost or reduction.
(a) If any Bank shall have determined that, after the date hereof, the
adoption of any applicable law, rule or regulation regarding capital adequacy,
or any change in any such law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority, central
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bank or comparable agency charged with the interpretation or administration
thereof, or any request or directive regarding capital adequacy (whether or not
having the force of law) of any such authority, central bank or comparable
agency, (including any determination by any such authority, central bank or
comparable agency that, for purposes of capital adequacy requirements, the
Commitments hereunder do not constitute commitments with an original maturity
of one year or less) has or would have the effect of reducing the rate of
return on capital of such Bank (or its Parent) as a consequence of such Bank's
obligations hereunder to a level below that which such Bank (or its Parent)
could have achieved but for such adoption, change, request or directive (taking
into consideration its policies with respect to capital adequacy) by an amount
deemed by such Bank to be material, then from time to time, within 15 days
after demand by such Bank (with a copy to the Administrative Agent), the
Borrower shall pay to such Bank such additional amount or amounts as will
compensate such Bank (or its Parent) for such reduction.
(b) Each Bank will promptly notify the Borrower and the Administrative
Agent of any event of which it has knowledge, occurring after the date hereof,
which will entitle such Bank to compensation pursuant to this Section and will
designate a different Lending Office if such designation will avoid the need
for, or reduce the amount of, such compensation and will not, in the judgment
of such Bank, be otherwise disadvantageous to such Bank. A certificate of any
Bank claiming compensation under this Section and setting forth in reasonable
detail the basis for such claim and the calculation of the additional amount or
amounts to be paid to it hereunder shall be conclusive in the absence of
manifest error. In determining such amount, such Bank may use any reasonable
averaging and attribution methods.
Section 8.4. Taxes. (a) For the purposes of this Section 8.4, the
following terms have the following meanings:
"Taxes" means any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings with respect to any payment by the
Borrower or any Guarantor, as the case may be, pursuant to this Agreement or
under any Note, and all liabilities with respect thereto, excluding (i) in the
case of each Bank and either Agent, taxes imposed on its income, and franchise
or similar taxes imposed on it, by a jurisdiction or any political subdivision
thereof under the laws of which such Bank or either Agent (as the case may be)
is organized or in which its principal executive office is located or, in the
case of each Bank, in which its Applicable Lending Office is located and (ii)
in the case of each Bank, any United States withholding tax imposed on such
payments but only to the extent that such Bank is subject to United States
withholding tax at the time such Bank first becomes a party to this Agreement.
"Other Taxes" means any present or future stamp or documentary taxes
and any other excise or property taxes, or
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similar charges or levies, which arise from any payment made pursuant to this
Agreement or under any Note or from the execution or delivery of, or otherwise
with respect to, any Loan Document.
(b) Any and all payments by the Borrower or any Guarantor to or for
the account of any Bank or either Agent hereunder or under any Note shall be
made without deduction for any Taxes or Other Taxes; provided that, if the
Borrower or any Guarantor shall be required by law to deduct any Taxes or Other
Taxes from any such payments, (i) the sum payable shall be increased as
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section) such Bank or either
Agent (as the case may be) receives an amount equal to the sum it would have
received had no such deductions been made, (ii) the Borrower or any Guarantor,
as the case may be, shall make such deductions, (iii) the Borrower or such
Guarantor, as the case may be, shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with applicable
law and (iv) the Borrower shall furnish to the Administrative Agent, at its
address referred to in Section 10.1, the original or a certified copy of a
receipt evidencing payment thereof.
(c) The Borrower agrees to indemnify each Bank and either Agent for
the full amount of Taxes or Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable
under this Section) paid by such Bank or either Agent (as the case may be) and
any liability (including penalties, interest and expenses) arising therefrom or
with respect thereto. This indemnification shall be paid within 15 days after
such Bank or either Agent (as the case may be) makes demand therefor.
(d) Each Bank organized under the laws of a jurisdiction outside the
United States, on or prior to the date of its execution and delivery of this
Agreement in the case of each Bank listed on the signature pages hereof and on
or prior to the date on which it becomes a Bank in the case of each other Bank,
and from time to time thereafter if requested in writing by the Borrower (but
only so long as such Bank remains lawfully able to do so), shall provide the
Borrower and the Administrative Agent with Internal Revenue Service form 1001
or 4224, as appropriate, or any successor form prescribed by the Internal
Revenue Service, certifying that such Bank is entitled to benefits under an
income tax treaty to which the United States is a party which exempts the Bank
from United States withholding tax or reduces the rate of withholding tax on
payments of interest for the account of such Bank or certifying that the income
receivable pursuant to this Agreement is effectively connected with the conduct
of a trade or business in the United States. Such forms shall be delivered by
each such Bank on or before the date it becomes a party to this Agreement (or,
in the case of an Assignee, Participant or other transferee under Section 10.6
of
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this Agreement, on or before the date such person becomes an Assignee,
Participant or other transferee) and on or before the date, if any, such Bank
changes its Applicable Lending Office by designating a different jurisdiction
of such Office under Section 8.4(f) hereof. In addition, each such Bank shall
deliver such forms promptly upon the obsolescence or invalidity of any form
previously delivered by such Bank.
(e) For any period with respect to which a Bank has failed to provide
the Borrower or the Administrative Agent with the appropriate form pursuant to
Section 8.4(d) (unless such failure is due to a change in treaty, law or
regulation occurring subsequent to the date on which such form originally was
required to be provided), such Bank shall not be entitled to indemnification
under Section 8.4(b) or (c) with respect to Taxes imposed by the United States;
provided that if a Bank, which is otherwise exempt from or subject to a reduced
rate of withholding tax, becomes subject to Taxes because of its failure to
deliver a form required hereunder, the Borrower shall take such steps as such
Bank shall reasonably request to assist such Bank to recover such Taxes.
(f) If the Borrower or any Guarantor is required to pay additional
amounts to or for the account of any Bank pursuant to this Section, then such
Bank will change the jurisdiction of its Applicable Lending Office if, in the
judgment of such Bank, such change (i) will eliminate or reduce any such
additional payment which may thereafter accrue and (ii) is not otherwise
disadvantageous to such Bank.
Section 8.5. Base Rate Loans Substituted for Affected Euro-Dollar
Section 8.10. Base Rate Loans Substituted for Affected Euro-Dollar Loans. If
(i) the obligation of any Bank to make, or convert outstanding Loans to,
Euro-Dollar Loans has been suspended pursuant to Section 8.2 or (ii) any Bank
has demanded compensation under Section 8.3 or 8.4 with respect to its
Euro-Dollar Loans and the Borrower shall, by at least one Domestic Business
Day's prior notice to such Bank through the Administrative Agent, have elected
that the provisions of this Section shall apply to such Bank, then, unless and
until such Bank notifies the Borrower that the circumstances giving rise to
such suspension or demand for compensation no longer exist:
(a) all Loans which would otherwise be made by such Bank as (or
continued as or converted into) Euro-Dollar Loans shall instead be Base
Rate Loans (on which interest and principal shall be payable
contemporaneously with the related Euro-Dollar Loans of the other Banks);
and
(b) after each of its Euro-Dollar Loans has been repaid (or converted
to a Base Rate Loan), all payments of principal which would otherwise be
applied to repay such Euro-Dollar Loans shall be applied to repay its Base
Rate Loans instead.
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<PAGE>
If such Bank notifies the Borrower that the circumstances giving rise to such
notice no longer apply, the principal amount of each such Base Rate Loan shall
be converted into a Euro-Dollar Loan on the first day of the next succeeding
Interest Period applicable to the related Euro-Dollar Loans of the other Banks.
ARTICLE IX.
GUARANTY
Section 9.1. The Guaranty. Each Guarantor hereby unconditionally
guarantees the full and punctual payment (whether at stated maturity, upon
acceleration or otherwise) of the principal of and interest on each Note issued
by the Borrower pursuant to this Agreement, and the full and punctual payment
of all other amounts payable by the Borrower or any other Guarantor under the
Loan Documents. Upon failure by the Borrower to pay punctually any such amount,
the Guarantors shall be jointly and severally obligated forthwith on demand to
pay the amount not so paid at the place and in the manner specified in this
Agreement or the other Loan Documents.
Section 9.2. Guaranty Unconditional. The obligations of each Guarantor
hereunder shall be unconditional and absolute and, without limiting the
generality of the foregoing, shall not be released, discharged or otherwise
affected by:
(a) any extension, renewal, settlement, compromise, waiver or release
in respect of any obligation of the Borrower or any other Guarantor under
the Loan Documents, by operation of law or otherwise;
(b) any modification or amendment of or supplement to the Loan
Documents;
(c) any release, impairment, non-perfection or invalidity of any
direct or indirect security for any obligation of the Borrower or any other
Guarantor under the Loan Documents;
(d) any change in the corporate existence, structure or ownership of
the Borrower or any other Guarantor, or any insolvency, bankruptcy,
reorganization or other similar proceeding affecting the Borrower, any
other Guarantor or their respective assets or any resulting release or
discharge of any obligation of the Borrower or any other Guarantor
contained in the Loan Documents;
(e) the existence of any claim, set-off or other rights which the
Guarantor may have at any time against the Borrower, any other Guarantor,
either Agent, any Bank or any other Person, whether in connection herewith
or any unrelated transactions, provided that nothing herein shall prevent
the assertion of any such claim by separate suit or compulsory
counterclaim;
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<PAGE>
(f) any invalidity or unenforceability relating to or against the
Borrower or any other Guarantor for any reason of the Loan Documents, or
any provision of applicable law or regulation purporting to prohibit the
payment by the Borrower or any other Guarantor of the principal of or
interest on any Note or any other amount payable by the Borrower or any
other Guarantor under the Loan Documents; or
(g) any other act or omission to act or delay of any kind by the
Borrower, any other Guarantor, either Agent, any Bank or any other Person
or any other circumstance whatsoever which might, but for the provisions of
this paragraph, constitute a legal or equitable discharge of the
Guarantor's obligations hereunder (other than, in each case, the payment of
the Obligations in full).
Section 9.3. Discharge Only Upon Payment In Full; Reinstatement In
Certain Circumstances. Each Guarantor's obligations hereunder shall remain in
full force and effect until the Commitments shall have terminated and the
principal of and interest on the Notes and all other amounts payable by the
Obligors under the Loan Documents shall have been paid in full. If at any time
any payment of the principal of or interest on any Note or any other amount
payable by the Obligors under the Loan Documents is rescinded or must be
otherwise restored or returned upon the insolvency, bankruptcy or
reorganization of any Obligor or otherwise, each Guarantor's obligations
hereunder with respect to such payment shall be reinstated at such time as
though such payment had been due but not made at such time.
Section 9.4. Waiver by each Guarantor. Each Guarantor irrevocably
waives acceptance hereof, presentment, demand, protest and any notice not
provided for herein, as well as any requirement that at any time any action be
taken by any Person against the Borrower or any other Guarantor or any other
Person.
Section 9.5. Subrogation and Contribution. Each Guarantor irrevocably
waives, until such time as the Commitments shall have terminated and the
principal of and interest on the Notes and all other amounts payable by the
Obligors under the Loan Documents shall have been paid in full, any and all
rights to which it may be entitled, by operation of law or otherwise, upon
making any payment hereunder (i) to be subrogated to the rights of the payee
against the Borrower with respect to such payment or against any direct or
indirect security therefor, or otherwise to be reimbursed, indemnified or
exonerated by or for the account of the Borrower in respect thereof or (ii) to
receive any payment, in the nature of contribution or for any other reason,
from any other Guarantor with respect to such payment.
Section 9.6. Stay of Acceleration. If acceleration of the time for
payment of any amount payable by any Obligor under the Loan Documents is stayed
upon insolvency, bankruptcy or reorganization of the Borrower, all such amounts
otherwise
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subject to acceleration under the terms of this Agreement shall nonetheless be
payable by each Guarantor hereunder forthwith on demand by the Documentation
Agent made at the request of the requisite proportion of the Banks specified in
Article 6 of the Agreement.
Section 9.7. Limit of Liability. The obligations of each Guarantor
hereunder shall be limited to an aggregate amount equal to the largest amount
that would not render its obligations hereunder subject to avoidance under
Section 548 of the United States Bankruptcy Code or any comparable provisions
of any applicable state law.
Section 9.8. Release Upon Sale. Upon any sale by the Borrower of a
Subsidiary permitted by this Agreement, such Subsidiary shall automatically and
without further action by any Bank or either Agent be released from its
obligations, if any, as a Guarantor hereunder.
ARTICLE X.
MISCELLANEOUS
Section 10.1. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including bank wire, telex,
facsimile transmission or similar writing) and shall be given to such party:
(a) in the case of the Borrower or either Agent, at its address, facsimile
number or telex number set forth on the signature pages hereof, (b) in the case
of any Guarantor, in care of the Borrower, (c) in the case of any Bank, at its
address, facsimile number or telex number set forth on the signature pages
hereof or (d) in the case of any party, such other address, facsimile number or
telex number as such party may hereafter specify for the purpose by notice to
the Administrative Agent and the Borrower. Each such notice, request or other
communication shall be effective (i) if given by telex, when such telex is
transmitted to the telex number specified in this Section and the appropriate
answerback is received, (ii) if given by facsimile transmission, when
transmitted to the facsimile number specified in this Section and confirmation
of receipt is received, (iii) if given by mail, 72 hours after such
communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid or (iv) if given by any other means, when delivered at
the address specified in this Section; provided that notices to the
Administrative Agent under Article 2 or Article 8 shall not be effective until
received.
Section 10.2. No Waivers. No failure or delay by either Agent or any
Bank in exercising any right, power or privilege hereunder or under any Note
shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein
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provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
Section 10.3. Expenses; Indemnification. (a) The Borrower shall pay
(i) all out-of-pocket expenses of the Agents, including reasonable fees and
disbursements of special counsel for the Agents, in connection with the
preparation and administration of the Loan Documents, any waiver or consent
thereunder or any amendment thereof or any Default or alleged Default
thereunder and (ii) if an Event of Default occurs, all out-of-pocket expenses
incurred by the Documentation Agent, the Administrative Agent or any Bank,
including the fees and disbursements of counsel, in connection with such Event
of Default and collection, bankruptcy, insolvency and other enforcement
proceedings resulting therefrom.
(a) The Borrower agrees to indemnify each Agent and each Bank, their
respective affiliates and the respective directors, officers, agents and
employees of the foregoing (each an "Indemnitee") and hold each Indemnitee
harmless from and against any and all liabilities, losses, damages, costs and
expenses of any kind, including, without limitation, the reasonable fees and
disbursements of counsel, which may be incurred by such Indemnitee in
connection with any investigative, administrative or judicial proceeding
(whether or not such Indemnitee shall be designated a party thereto) brought or
threatened relating to or arising out of the Loan Documents or any actual or
proposed use of proceeds of Loans hereunder; provided that no Indemnitee shall
have the right to be indemnified hereunder for such Indemnitee's own gross
negligence or willful misconduct.
Section 10.4. Sharing of Set-Offs. Each Bank agrees that if it shall,
by exercising any right of set-off or counterclaim or otherwise, receive
payment of a proportion of the aggregate amount of principal and interest due
with respect to any Note held by it which is greater than the proportion
received by any other Bank in respect of the aggregate amount of principal and
interest due with respect to any Note held by such other Bank, the Bank
receiving such proportionately greater payment shall purchase such
participations in the Notes held by the other Banks, and such other adjustments
shall be made, as may be required so that all such payments of principal and
interest with respect to the Notes held by the Banks shall be shared by the
Banks pro rata; provided that nothing in this Section shall impair the right of
any Bank to exercise any right of set-off or counterclaim it may have and to
apply the amount subject to such exercise to the payment of indebtedness of any
Obligor other than its indebtedness hereunder.
Section 10.5. Amendments and Waivers Release of Collateral. Any
provision of this Agreement or the Notes may be amended or waived if, but only
if, such amendment or waiver is in writing and is signed by the Borrower and
the Required Banks
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<PAGE>
(and, if the rights or duties of either Agent are affected thereby, by such
Agent); provided that no such amendment or waiver shall, unless signed by all
the Banks, (i) increase or decrease the Commitment of any Bank (except for a
ratable decrease in the Commitments of all Banks) or subject any Bank to any
additional obligation, (ii) reduce the principal of or rate of interest on any
Loan or any fees hereunder, (iii) postpone the date fixed for any payment of
principal of or interest on any Loan or any fees hereunder or for any scheduled
reduction or termination of any Commitment, (iv) change the aggregate amount of
Loans required to be repaid on any Principal Repayment Date, (v) release any
Guarantor from its obligations hereunder, (vi) change the percentage of the
Commitments or of the aggregate unpaid principal amount of the Notes which
shall be required for the Banks or any of them to take any action under this
Section or any other provision of this Agreement or (vii) change Section 2.12,
8.3 or 8.4. Notwithstanding the foregoing, Article 9 may not be amended with
respect to any Guarantor without the consent of such Guarantor. Any provision
of the Collateral Documents may be amended or waived if, but only if, such
amendment or waiver is in writing and is signed by the relevant Obligor and the
Administrative Agent with the consent of the Required Banks; provided that no
such amendment or waiver shall, unless signed by all the Banks, effect or
permit a release of Collateral. Notwithstanding the foregoing, Collateral shall
be released from the Lien of the Collateral Documents from time to time as
necessary to effect any sale or pledge of assets permitted by the Loan
Documents, and the Administrative Agent shall execute and deliver all release
documents reasonably requested to evidence such release.
Section 10.6. Successors and Assigns. (a) Subject to the further
provisions of this Section 10.6 below, the provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that the Borrower may not assign or
otherwise transfer any of its rights under this Agreement without the prior
written consent of all Banks.
(a) Any Bank may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in its Commitment
or any or all of its Loans. In the event of any such grant by a Bank of a
participating interest to a Participant, whether or not upon notice to the
Borrower and the Administrative Agent, such Bank shall remain responsible for
the performance of its obligations hereunder, and the Borrower and the
Administrative Agent shall continue to deal solely and directly with such Bank
in connection with such Bank's rights and obligations under this Agreement. Any
agreement pursuant to which any Bank may grant such a participating interest
shall provide that such Bank shall retain the sole right and responsibility to
enforce the obligations of the Borrower hereunder including, without
limitation, the right to approve any amendment, modification or waiver of any
provision of this
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<PAGE>
Agreement; provided that such participation agreement may provide that such
Bank will not agree to any modification, amendment or waiver of this Agreement
described in clause (i), (ii), (iii), (iv) or (vi) of, or in the proviso in the
penultimate sentence of, Section 10.5 without the consent of the Participant.
The Borrower agrees that each Participant shall, to the extent provided in its
participation agreement, be entitled to the benefits of Article 8 with respect
to its participating interest. An assignment or other transfer which is not
permitted by subsection (c) or (d) below shall be given effect for purposes of
this Agreement only to the extent of a participating interest granted in
accordance with this subsection (b).
(b) Any Bank may at any time assign to one or more banks or other
institutions (each an "Assignee") all, or a proportionate part (equivalent to
an initial Commitment of not less than $5,000,000 or less if such amount
represents the remaining amount of such Bank's Commitment) of all, of its
rights and obligations under this Agreement and the Notes, and such Assignee
shall assume such rights and obligations, pursuant to an Assignment and
Assumption Agreement in substantially the form of Exhibit D hereto executed by
such Assignee and such transferor Bank, with (and subject to) the subscribed
consent of the Borrower, which shall not be unreasonably withheld, and the
Administrative Agent; provided that if an Assignee is an affiliate of such
transferor Bank or was a Bank immediately prior to such assignment, no such
consent shall be required. Upon execution and delivery of such instrument and
payment by such Assignee to such transferor Bank of an amount equal to the
purchase price agreed between such transferor Bank and such Assignee, such
Assignee shall be a Bank party to this Agreement and shall have all the rights
and obligations of a Bank with a Commitment as set forth in such instrument of
assumption, and the transferor Bank shall be released from its obligations
hereunder to a corresponding extent, and no further consent or action by any
party shall be required. Upon the consummation of any assignment pursuant to
this subsection (c), the transferor Bank, the Administrative Agent and the
Borrower shall make appropriate arrangements so that, if required, a new Note
is issued to the Assignee. In connection with any such assignment, the
transferor Bank shall pay to the Administrative Agent an administrative fee for
processing such assignment in the amount of $3,500. If the Assignee is not
incorporated under the laws of the United States of America or a state thereof,
it shall deliver to the Borrower and the Administrative Agent certification as
to exemption from deduction or withholding of any United States federal income
taxes in accordance with Section 8.4.
(c) Any Bank may at any time assign all or any portion of its rights
under this Agreement and its Note to a Federal Reserve Bank. No such assignment
shall release the transferor Bank from its obligations hereunder.
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<PAGE>
(d) No Assignee, Participant or other transferee of any Bank's rights
(including, without limitation, any successor Applicable Lending Office) shall
be entitled to receive any greater payment under Section 8.3 or 8.4 than such
Bank would have been entitled to receive with respect to the rights
transferred, unless such transfer is made with the Borrower's prior written
consent or by reason of the provisions of Section 8.2, 8.3 or 8.4 requiring
such Bank to designate a different Applicable Lending Office under certain
circumstances or at a time when the circumstances giving rise to such greater
payment did not exist.
Section 10.7. Collateral. Each of the Banks represents to each Agent
and each of the other Banks that it in good faith is not relying upon any
"margin stock" (as defined in Regulation U) as collateral in the extension or
maintenance of the credit provided for in this Agreement.
Section 10.8. Governing Law; Submission to Jurisdiction. This
Agreement and each Note shall be governed by and construed in accordance with
the laws of the State of New York. Each Obligor hereby submits to the
nonexclusive jurisdiction of the United States District Court for the Southern
District of New York and of any New York State court sitting in New York City
for purposes of all legal proceedings arising out of or relating to this
Agreement or the transactions contemplated hereby. Each Obligor irrevocably
waives, to the fullest extent permitted by law, any objection which it may now
or hereafter have to the laying of the venue of any such proceeding brought in
such a court and any claim that any such proceeding brought in such a court has
been brought in an inconvenient forum.
Section 10.9. Counterparts; Integration; Effectiveness. This Agreement
may be signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were
upon the same instrument. This Agreement constitutes the entire agreement and
understanding among the parties hereto and supersedes any and all prior
agreements and understandings, oral or written, relating to the subject matter
hereof. This Agreement shall become effective upon receipt by the Documentation
Agent of counterparts hereof signed by each of the parties hereto (or, in the
case of any party as to which an executed counterpart shall not have been
received, receipt by the Documentation Agent in form satisfactory to it of
telegraphic, telex, facsimile or other written confirmation from such party of
execution of a counterpart hereof by such party).
Section 10.10. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE AGENTS
AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN
ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
UNITED AUTO GROUP, INC.
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
Address:
Facsimile:
DIFEO PARTNERSHIP, INC.
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
DIFEO PARTNERSHIP RCT, INC.
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
DIFEO PARTNERSHIP RCM, INC.
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
DIFEO PARTNERSHIP HCT, INC.
By /s/ Philip N. Smith,Jr.
-----------------------------------
Title: Vice President
DIFEO PARTNERSHIP SCT, INC.
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
DIFEO PARTNERSHIP VIII, INC.
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
DIFEO PARTNERSHIP IX, INC.
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
DIFEO PARTNERSHIP X, INC.
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
UAG NORTHEAST, INC.
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<PAGE>
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
UAG NORTHEAST (NY), INC.
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
HUDSON TOYOTA, INC.
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
SOMERSET MOTORS, INC.
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
FAIR HYUNDAI PARTNERSHIP
By DIFEO PARTNERSHIP, INC.
a general partner
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
FAIR CHEVROLET-GEO PARTNERSHIP
By DIFEO PARTNERSHIP, INC.
a general partner
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
DANBURY AUTO PARTNERSHIP
By DIFEO PARTNERSHIP, INC.
a general partner
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
DANBURY CHRYSLER PLYMOUTH
PARTNERSHIP
By DIFEO PARTNERSHIP, INC.
a general partner
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
HUDSON MOTORS PARTNERSHIP
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<PAGE>
By DIFEO PARTNERSHIP HCT, INC.
a general partner
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
DIFEO HYUNDAI PARTNERSHIP
By DIFEO PARTNERSHIP, INC.
a general partner
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
J&F OLDMOBILE PARTNERSHIP
By DIFEO PARTNERSHIP, INC.
a general partner
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
DIFEO NISSAN PARTNERSHIP
By DIFEO PARTNERSHIP, INC.
a general partner
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
DIFEO CHEVROLET-GEO
PARTNERSHIP
By DIFEO PARTNERSHIP, INC.
a general partner
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
DIFEO CHRYSLER PLYMOUTH JEEP
EAGLE PARTNERSHIP
By DIFEO PARTNERSHIP, INC.
a general partner
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
OCT PARTNERSHIP
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<PAGE>
By DIFEO PARTNERSHIP VIII, INC.
a general partner
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
OCM PARTNERSHIP
By DIFEO PARTNERSHIP IX, INC.
a general partner
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
SOMERSET MOTORS PARTNERSHIP
By DIFEO PARTNERSHIP SCT, INC.
a general partner
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
DIFEO BMW PARTNERSHIP
By DIFEO PARTNERSHIP, INC.
a general partner
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
COUNTY AUTO GROUP PARTNERSHIP
By DIFEO PARTNERSHIP RCT, INC.
a general partner
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
ROCKLAND MOTORS PARTNERSHIP
By DIFEO PARTNERSHIP RCM, INC.
a general partner
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
UAG WEST, INC.
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
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<PAGE>
SA AUTOMOTIVE, LTD.
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
SL AUTOMOTIVE, LTD.
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
SPA AUTOMOTIVE, LTD.
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
LRP, LTD.
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
SUN BMW, LTD.
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
672 5 DEALERSHIP, LTD.
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
6725 AGENT PARTNERSHIP
By SCOTTSDALE AUDI, LTD.
a general partner
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
SCOTTSDALE MANAGEMENT GROUP, LTD.
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
SK MOTORS, LTD.
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
SCOTTSDALE AUDI, LTD.
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
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UNITED LANDERS, INC.
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
LANDERS AUTO SALES, INC.
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
LANDERS UNITED AUTO GROUP, INC.
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
LANDERS UNITED AUTO GROUP NO. 2,
INC.
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
LANDERS UNITED AUTO GROUP NO. 3, INC.
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
UAG ATLANTA, INC.
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
ATLANTA TOYOTA, INC.
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
UAG ATLANTA II, INC.
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
UNITED NISSAN, INC.,
a Georgia corporation
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
UAG ATLANTA III, INC.
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
PEACHTREE NISSAN, INC.
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<PAGE>
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
UAG ATLANTA IV, INC.
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
UAG ATLANTA IV MOTORS, INC.
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
UAG ATLANTA V, INC.
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
CONYERS NISSAN, INC.
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
UAG TENNESSEE, INC.
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
UNITED NISSAN, INC.,
a Tennessee corporation
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
UAG TEXAS, INC.
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
UAG TEXAS II, INC.
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
SHANNON AUTOMOTIVE, LTD.
By UAG TEXAS II, INC.
its general partner
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
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<PAGE>
UAG EAST, INC.
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
UAG NEVADA, INC.
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
UNITED AUTOCARE, INC.
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
UNITED AUTOCARE PRODUCTS, INC.
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
UAG CAPITAL MANAGEMENT, INC.
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
DIFEO LEASING PARTNERSHIP
By DIFEO PARTNERSHIP, INC.
its general partner
By /s/ Philip N. Smith, Jr.
-----------------------------------
Title: Vice President
THE BANK OF NOVA SCOTIA,
as Administrative Agent
By /s/ Brian S. Allen
-----------------------------------
Title: Senior Relationship Officer
Address: One Liberty Plaza
Facsimile: 212-225-5090/91
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<PAGE>
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as
Documentation Agent
By /s/ James E. Condon
-----------------------------------
Title: Vice President
Address: 60 Wall Street
New York, NY 10260
Facsimile: (212) 648-5018
Commitments
- -----------
$10,000,000 THE BANK OF NOVA SCOTIA
By /s/ Brian S. Allen
-----------------------------------
Title: Sr. Relationship Manager
$10,000,000 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ James E. Condon
-----------------------------------
Title: Vice President
$10,000,000 THE CHASE MANHATTAN BANK
By /s/ Elizabeth Edmunds
-----------------------------------
Title: Vice President
$10,000,000 COMERICA, INC.
By /s/ Joseph A. Moran
-----------------------------------
Title: Senior Vice President
$10,000,000 CREDIT LYONNAIS NEW YORK BRANCH
By /s/ Attila Koc
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Title: Vice President
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Total Commitments
$50,000,000
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<PAGE>
Exhibits
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<PAGE>
EXHIBIT A - Note
NOTE
New York, New York
___________ __, 199_
For value received, United Auto Group, Inc., a Delaware corporation
(the "Borrower"), promises to pay to the order of ______________________ (the
"Bank"), for the account of its Applicable Lending Office, the unpaid principal
amount of each Loan made by the Bank to the Borrower pursuant to the Credit
Agreement referred to below on the third anniversary of the Effective Date of
the Credit Agreement. The Borrower promises to pay interest on the unpaid
principal amount of each such Loan on the dates and at the rate or rates
provided for in the Credit Agreement. All such payments of principal and
interest shall be made in lawful money of the United States in Federal or other
immediately available funds at the office of Morgan Guaranty Trust Company of
New York, 60 Wall Street, New York, New York.
All Loans made by the Bank, the respective Types thereof and all
repayments of the principal thereof shall be recorded by the Bank and, if the
Bank so elects in connection with any transfer or enforcement hereof,
appropriate notations to evidence the foregoing information with respect to
each such Loan then outstanding may be endorsed by the Bank on the schedule
attached hereto, or on a continuation of such schedule attached to and made a
part hereof; provided that the failure of the Bank to make any such recordation
or endorsement shall not affect the obligations of the Borrower hereunder or
under the Credit Agreement.
This note is one of the Notes referred to in the Credit Agreement
dated as of March 20, 1997 among United Auto Group, Inc., the Guarantors party
thereto, the banks listed on the signature pages thereof, The Bank of Nova
Scotia, as Administrative Agent, and Morgan Guaranty Trust Company of New York,
as Documentation Agent (as the same may be amended from time to time, the
"Credit Agreement"). Terms defined in the Credit Agreement are used herein with
the same meanings. Reference is made to the Credit Agreement for provisions for
the prepayment hereof and the acceleration of the maturity hereof.
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<PAGE>
The payment in full of the principal and interest on this note has,
pursuant to the provisions of the Credit Agreement, been unconditionally
guaranteed by certain Guarantors.
UNITED AUTO GROUP, INC.
By
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Name:
Title:
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<PAGE>
LOANS AND PAYMENTS OF PRINCIPAL
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Date Loan Loan Repaid Made By
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<PAGE>
EXHIBIT B-1 - Opinion of Counsel for the Borrower
<PAGE>
EXHIBIT C - Opinion of Special Counsel for the Agents
OPINION OF
DAVIS POLK & WARDWELL, SPECIAL COUNSEL
FOR THE AGENTS
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________________, 199_
To the Banks and the Agents
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Documentation Agent
60 Wall Street
New York, New York 10260
Ladies and Gentlemen:
We have participated in the preparation of the Credit Agreement (the
"Credit Agreement") dated as of March 20, 1997 among United Auto Group, Inc., a
Delaware corporation (the "Borrower"), the Guarantors party thereto, the banks
listed on the signature pages thereof (the "Banks"), The Bank of Nova Scotia,
as Administrative Agent and Morgan Guaranty Trust Company of New York, as
Documentation Agent (collectively, the "Agents"), and have acted as special
counsel for the Agents for the purpose of rendering this opinion pursuant to
Section 3.1(a)(iii) of the Credit Agreement. Terms defined in the Credit
Agreement are used herein as therein defined.
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted such
other investigations of fact and law as we have deemed necessary or advisable
for purposes of Upon the basis of the foregoing, we are of the opinion that:
1. The execution, delivery and performance by the Borrower of the
Credit Agreement and the Notes are within the Borrower's corporate powers and
have been duly authorized by all necessary corporate action.
2. The Credit Agreement constitutes a valid and binding agreement of
the Borrower and each Note constitutes a valid and binding obligation of the
Borrower, in each case enforceable in accordance with its terms except as the
same may
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<PAGE>
be limited by bankruptcy, insolvency or similar laws affecting creditors'
rights generally and by general principles of equity.
We are members of the Bar of the State of New York and the foregoing
opinion is limited to the laws of the State of New York, the federal laws of
the United States of America and the General Corporation Law of the State of
Delaware. In giving the foregoing opinion, we express no opinion as to the
effect (if any) of any law of any jurisdiction (except the State of New York)
in which any Bank is located which limits the rate of interest that such Bank
may charge or collect.
This opinion is rendered solely to you in connection with the above
matter. This opinion may not be relied upon by you for any other purpose or
relied upon by any other person without our prior written consent.
Very truly yours,
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<PAGE>
EXHIBIT D - Assignment and Assumption Agreement
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of _________, 19__ among (NAME OF ASSIGNOR) (the
"Assignor"), [ASSIGNEE] (the "Assignee"), UNITED AUTO GROUP, INC. (the
"Borrower") and The Bank of Nova Scotia, as Administrative Agent.
WHEREAS, this Assignment and Assumption Agreement (the "Agreement")
relates to the Credit Agreement dated as of March 20, 1997 among the Borrower,
the Guarantors party thereto, the Assignor and the other Banks party thereto,
as Banks, The Bank of Nova Scotia, as Administrative Agent and Morgan Guaranty
Trust Company of New York, as Documentation Agent (the "Credit Agreement");
WHEREAS, as provided under the Credit Agreement, the Assignor has a
Commitment to make Loans to the Borrower in an aggregate principal amount at
any time outstanding not to exceed $__________;
WHEREAS, Loans made to the Borrower by the Assignor under the Credit
Agreement in the aggregate principal amount of $__________ are outstanding at
the date hereof; and
WHEREAS, the Assignor proposes to assign to the Assignee all of the
rights of the Assignor under the Credit Agreement in respect of a portion of
its Commitment thereunder in an amount equal to $__________ (the "Assigned
Amount"), together with a corresponding portion of its outstanding Loans, and
the Assignee proposes to accept assignment of such rights and assume the
corresponding obligations from the Assignor on such terms;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
SECTION 1. Definitions. All capitalized terms not otherwise defined
herein shall have the respective meanings set forth in the Credit Agreement.
SECTION 2. Assignment. The Assignor hereby assigns and sells to the
Assignee all of the rights of the Assignor under the Credit Agreement to the
extent of the Assigned Amount, and the Assignee hereby accepts such assignment
from the Assignor and assumes all of the obligations of the Assignor under the
Credit Agreement to the extent of the Assigned Amount, including the purchase
from the Assignor of the corresponding portion of the principal amount of the
Loans made by the Assignor outstanding at the date hereof. Upon the execution
and delivery hereof by the Assignor, the Assignee, [the Borrower and the
Administrative Agent] and the payment of the amounts specified in Section 3
<PAGE>
required to be paid on the date hereof (i) the Assignee shall, as of the date
hereof, succeed to the rights and be obligated to perform the obligations of a
Bank under the Credit Agreement with a Commitment in an amount equal to the
Assigned Amount, and (ii) the Commitment of the Assignor shall, as of the date
hereof, be reduced by a like amount and the Assignor released from its
obligations under the Credit Agreement to the extent such obligations have been
assumed by the Assignee. The assignment provided for herein shall be without
recourse to the Assignor.
SECTION 3. Payments. As consideration for the assignment and sale
contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the
date hereof in Federal funds the amount heretofore agreed between them.1 It is
understood that commitment and/or facility fees accrued to the date hereof are
for the account of the Assignor and such fees accruing from and including the
date hereof are for the account of the Assignee. Each of the Assignor and the
Assignee hereby agrees that if it receives any amount under the Credit
Agreement which is for the account of the other party hereto, it shall receive
the same for the account of such other party to the extent of such other
party's interest therein and shall promptly pay the same to such other party.
[SECTION 4. Consent of the Borrower and the Administrative Agent. This
Agreement is conditioned upon the consent of the Borrower and the
Administrative Agent pursuant to Section 10.6(c) of the Credit Agreement. The
execution of this Agreement by the Borrower and the Administrative Agent is
evidence of this consent. Pursuant to Section 10.6(c), the Borrower agrees to
execute and deliver a Note payable to the order of the Assignee to evidence the
assignment and assumption provided for herein.]
SECTION 5. Non-Reliance on Assignor. The Assignor makes no
representation or warranty in connection with, and shall have no responsibility
with respect to, the solvency, financial condition, or statements of any
Obligor, or the validity and enforceability of the obligations of any Obligor
in respect of the Credit Agreement or any Note. The Assignee acknowledges that
it has, independently and without reliance on the Assignor, and based on such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement and will continue to be
responsible for making its own independent appraisal of the business, affairs
and financial condition of the Obligors.
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1 Amount should combine principal together with accrued interest and
breakage compensation, if any, to be paid by the Assignee, net of any portion
of any upfront fee to be paid by the Assignor to the Assignee. If may be
preferable in an appropriate case to specify these amounts generically or by
formula rather that as a fixed sum.
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<PAGE>
SECTION 6. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 7. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.
[ASSIGNOR]
By
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Name:
Title:
[ASSIGNEE]
By
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Name:
Title:
UNITED AUTO GROUP, INC.
By
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Name:
Title:
THE BANK OF NOVA SCOTIA
By
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Name:
Title:
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<PAGE>
EXHIBIT E - Pledge Agreement
PLEDGE AGREEMENT
AGREEMENT dated as of March 20, 1997 among UNITED AUTO GROUP, INC., a
Delaware corporation (together with its successors, the "Borrower"), UNITED
LANDERS, INC., a Delaware corporation ("ULI") and DIFEO PARTNERSHIP, INC., a
Delaware corporation ("DPI"), UAG WEST, INC., a Delaware corporation ("UAG
West"), LANDERS AUTO SALES, INC., an Arkansas corporation ("LAS"), UAG ATLANTA,
INC., a Delaware corporation ("UAG Atlanta"), UAG ATLANTA IV, INC., a Delaware
corporation ("UAG Atlanta IV"), UAG NORTHEAST, INC., a Delaware corporation
("UAG Northeast"), DIFEO PARTNERSHIP HCT, INC., a Delaware corporation ("DPI
HCT"), HUDSON TOYOTA, INC., a New Jersey corporation ("Hudson Toyota"), DIFEO
PARTNERSHIP VIII, INC., a Delaware corporation ("DPI VIII"), DIFEO PARTNERSHIP
IX, INC., a Delaware corporation ("DPI IX"), DIFEO PARTNERSHIP SCT, INC., a
Delaware corporation ("DPI SCT"), SOMERSET MOTORS, INC., a New Jersey
corporation ("Somerset Motors), DIFEO PARTNERSHIP RCT, INC., a Delaware
corporation ("DPI RCT"), UAG NORTHEAST (NY), INC., a New York corporation ("UAG
Northeast (NY)"), DIFEO PARTNERSHIP RCM, INC., a Delaware corporation ("DPI
RCM"), SCOTTSDALE AUDI, LTD., an Arizona corporation ("SA"), SK MOTORS, LTD.,
an Arizona corporation ("SK Motors"), UAG Texas, Inc., a Delaware corporation
("UAG Texas"), UAG Texas II, Inc., a Delaware corporation ("UAG Texas II")
(each together with its successors, a "Pledgor" and collectively the
"Pledgors") and THE BANK OF NOVA SCOTIA, as Administrative Agent.
WHEREAS, the Borrower, the Guarantors party thereto, certain banks,
The Bank of Nova Scotia, as administrative agent for such banks and Morgan
Guaranty Trust Company of New York, as documentation agent for such banks are
parties to a Credit Agreement of even date herewith (as the same may be amended
from time to time, the "Credit Agreement"); and
WHEREAS, in order to induce said banks, The Bank of Nova Scotia, as
administrative agent for such banks and Morgan Guaranty Trust Company of New
York, as documentation agent for such banks, to enter into the Credit
Agreement, the Pledgors have agreed to grant a continuing security interest in
and to the Collateral (as hereafter defined) to secure their obligations under
the Credit Agreement and the Notes issued pursuant thereto;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
<PAGE>
SECTION 1. Definitions
Terms defined in the Credit Agreement and not otherwise defined herein
have, as used herein, the respective meanings provided for therein. The
following additional terms, as used herein, have the following respective
meanings:
"Collateral" has the meaning assigned to such term in Section 3(A).
"Issuer" means any of the companies identified on Schedule I as the
issuers of the Pledged Stock.
"Partnership" means any of the partnerships listed on Schedule II.
"Partnership Interests" means, as to each Pledgor, the reference to
the partnership interest in each Partnership listed opposite such Pledgor's
name on Schedule II attached hereto.
"Pledged Instruments" means, as to each Pledgor, (i) the Subsidiary
Notes of such Pledgor and (ii) any instrument required to be pledged by such
Pledgor to the Administrative Agent pursuant to Section 3(B).
"Pledged Interest" means, as to each Pledgor, the Partnership
Interests of such Pledgor and any other equity interest required to be pledged
by such Pledgor.
"Pledged Securities" means, as to each Pledgor, the Pledged
Instruments, the Pledged Interests and the Pledged Stock of such Pledgor.
"Pledged Stock" means, as to each Pledgor, (i) the Subsidiary Shares
of such Pledgor and (ii) any other capital stock required to be pledged by such
Pledgor to the Administrative Agent pursuant to Section 3(B).
"Secured Obligations" means the obligations secured under this
Agreement which include: (a) with respect to the Borrower, (i) all principal of
and interest (including, without limitation, any interest which accrues after
the commencement of any case, proceeding or other action relating to the
bankruptcy, insolvency or reorganization of the Borrower, whether or not
allowed or allowable as a claim in any such proceeding) on any loan under, or
any note issued pursuant to, the Credit Agreement, (ii) all other amounts
payable by the Borrower hereunder or under the Credit Agreement and (iii) any
renewals, extensions or modifications of any of the foregoing; and (b) with
respect to each other Pledgor, (i) all obligations of such Pledgor under the
Credit Agreement (including without limitation Article 9 thereof) and (ii) any
renewals, extensions or modifications of any of the foregoing.
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<PAGE>
"Security Interests" means, as to each Pledgor, the security interests
in its Collateral granted hereunder securing its Secured Obligations.
"Subsidiary Notes" means, as to each Pledgor, any debt of an Issuer
owing to such Pledgor, whether now existing or hereafter arising, including
without limitation the instruments evidencing obligations owed to such Pledgor
listed on Schedule I hereto.
"Subsidiary Shares" means, as to each Pledgor, the collective
reference to the shares of capital stock of each Issuer listed opposite such
Pledgor's name on Schedule I attached hereto, together with all shares, stocks,
stock certificates, options or rights of any nature whatsoever that currently
exist or which may be issued or granted in respect thereof (or in substitution
for the same) by any Issuer while this Agreement is in effect.
Unless otherwise defined herein, or unless the context otherwise
requires, all terms used herein which are defined in the New York Uniform
Commercial Code as in effect on the date hereof shall have the meanings therein
stated.
SECTION 2. Representations and Warranties
Each Pledgor represents and warrants as follows:
(A) Title to Pledged Securities. Such Pledgor owns all of the Pledged
Securities listed on Schedule I and Schedule II across from its name, free and
clear of any Liens other than the Security Interests. Except as set forth on
Schedule I, the Pledged Stock includes all of the issued and outstanding
capital stock of each Issuer. All of the Pledged Stock has been duly authorized
and validly issued, and is fully paid and non-assessable, and is subject to no
options to purchase or similar rights of any Person. Such Pledgor is not and
will not become a party to or otherwise bound by any agreement, other than this
Agreement or various franchise agreements between such Pledgor and automobile
franchisors, which restricts in any manner the rights of any present or future
holder of any of the Pledged Securities with respect thereto.
(B) Validity, Perfection and Priority of Security Interests. Upon the
delivery of its Pledged Instruments and certificates representing its Pledged
Stock to the Administrative Agent in accordance with Section 4 hereof and
assuming that the Administrative Agent will at no time relinquish possession of
such Pledged Instruments and certificates, the Administrative Agent will have
valid and perfected security interests in the Collateral pledged by such
Pledgor hereunder (other than the Collateral described in the immediately
succeeding sentence) subject to no prior Lien. When in addition appropriately
completed UCC financing statements shall have been filed as
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<PAGE>
specified in Schedule III hereto, the Security Interests shall constitute
perfected security interests in the Collateral pledged by such Pledgor
hereunder consisting of all right, title and interest of such Pledgor in Debt
of a Subsidiary owing to such Pledgor and not evidenced by an instrument and
the Partnership Interests (and all proceeds thereof). Except for the filing of
such UCC financing statements, no registration, recordation or filing with any
governmental body, agency or official is required in connection with the
execution or delivery of this Agreement or necessary for the validity or
enforceability hereof or for the perfection or enforcement of the Security
Interests. Neither such Pledgor nor any of its Subsidiaries has performed or
will perform any acts which might prevent the Administrative Agent from
enforcing any of the terms and conditions of this Agreement or which would
limit the Administrative Agent in any such enforcement. On the date hereof, the
Pledged Interests pledged by such Pledgor are not evidenced by any
certificates.
(C) UCC Filing Locations. The chief executive office of such Pledgor
is located at its address set forth on the signature pages of the Credit
Agreement.
SECTION 3. The Security Interests
In order to secure the full and punctual payment of the Secured
Obligations in accordance with the terms thereof, and to secure the performance
of all the obligations of each Pledgor hereunder:
(A) Each Pledgor hereby assigns and pledges to and with the
Administrative Agent for the benefit of the Banks and the Agents and grants to
the Administrative Agent for the benefit of the Banks and the Agents a security
interest in its Pledged Securities, and all of its rights and privileges with
respect to its Pledged Securities, and all income and profits thereon, and all
interest, dividends and other payments and distributions with respect thereto,
all Debt of a Subsidiary owing to such Pledgor from time to time whether or not
evidenced by a Pledged Instrument and all proceeds of the foregoing (the
"Collateral"). Contemporaneously with the execution and delivery hereof, each
Pledgor is delivering its Subsidiary Notes and certificates representing its
Subsidiary Shares in pledge hereunder.
(B) In the event that any Issuer at any time issues to any Pledgor any
additional or substitute shares of capital stock of any class or any substitute
note, or any Partnership issues to any Pledgor any additional or substitute
equity interests of any class or issues certificates representing the Pledged
Interests or any portion thereof, or owes any other Debt to any Pledgor, such
Pledgor will immediately pledge and deposit with the Administrative Agent
certificates (if any) representing all such shares and such note or any
instrument evidencing such other Debt as additional security for such Pledgor's
Secured Obligations. All such shares, notes, interests and instruments
constitute
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<PAGE>
Pledged Securities and are subject to all provisions of this Agreement.
(C) The Security Interests granted by each Pledgor are granted as
security only and shall not subject either Agent or any Bank to, or transfer or
in any way affect or modify, any obligation or liability of such Pledgor or any
of its Subsidiaries with respect to any of the Collateral pledged by such
Pledgor hereunder or any transaction in connection therewith.
SECTION 4. Delivery of Pledged Securities
All Pledged Instruments delivered to the Administrative Agent by any
Pledgor pursuant hereto shall be endorsed to the order of the Administrative
Agent, and accompanied by any required transfer tax stamps, all in form and
substance satisfactory to the Administrative Agent. All certificates
representing Pledged Stock or Pledged Interests (if any) delivered to the
Administrative Agent by any Pledgor pursuant hereto shall be in suitable form
for transfer by delivery, or shall be accompanied by duly executed instruments
of transfer or assignment in blank, with signatures appropriately guaranteed,
and accompanied by any required transfer tax stamps, all in form and substance
satisfactory to the Administrative Agent.
SECTION 5. Further Assurances
(A) Each Pledgor agrees that it will, at its expense and in such
manner and form as the Administrative Agent may require, execute, deliver, file
and record any financing statement, specific assignment or other paper and take
any other action that may be necessary or desirable, or that the Administrative
Agent may request, in order to create, preserve, perfect or validate any
Security Interest or to enable the Administrative Agent to exercise and enforce
its rights hereunder with respect to any of the Collateral. To the extent
permitted by applicable law, each Pledgor hereby authorizes the Administrative
Agent to execute and file, in the name of such Pledgor or otherwise, Uniform
Commercial Code financing statements (which may be carbon, photographic,
photostatic or other reproductions of this Agreement or of a financing
statement relating to this Agreement) which the Administrative Agent in its
sole discretion may deem necessary or appropriate to further perfect the
Security Interests.
(B) Each Pledgor agrees that it will not change (i) its name, identity
or corporate structure in any manner or (ii) the location of its chief
executive office unless it shall have given the Administrative Agent not less
than 30 days' prior notice thereof.
(C) The Borrower agrees that it will cause any Subsidiary which is
owed (i) Debt evidenced by an instrument,
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<PAGE>
(ii) long-term Debt or (iii) Debt secured by a Lien by the Borrower or another
Subsidiary to immediately assign and pledge to and with the Administrative
Agent for the benefit of the Banks and the Agents and grant to the
Administrative Agent for the benefit of the Banks and the Administrative Agent
a security interest in such Debt and all proceeds of such Debt, in each case as
security for such Subsidiary's obligations under the Credit Agreement.
SECTION 6. Record Ownership of Pledged Stock and Pledged Interests.
Subject to the provisions of the final paragraph of Section 10, the
Administrative Agent may at any time or from time to time, in its sole
discretion, cause any or all of (i) the Pledged Stock or (ii) the Pledged
Interests to be transferred of record into the name of the Administrative Agent
or its nominee. Each Pledgor will promptly give to the Administrative Agent
copies of any notices or other communications received by it with respect to
Pledged Stock or Pledged Interests registered in the name of such Pledgor and
the Administrative Agent will promptly give to each Pledgor copies of any
notices and communications received by the Administrative Agent with respect to
its Pledged Stock registered in the name of the Administrative Agent or its
nominee.
SECTION 7. Right to Receive Distributions on Collateral.
Unless an Event of Default shall have occurred and be continuing, each
Pledgor shall have the right to receive all dividends, interest and other
payments and distributions made upon or with respect to Collateral pledged by
it hereunder.
If an Event of Default shall have occurred and be continuing, the
Administrative Agent shall have the right receive and to retain as Collateral
hereunder all dividends, interest and other payments and distributions made
upon or with respect to the Collateral and each Pledgor shall take all such
action as the Administrative Agent may deem necessary or appropriate to give
effect to such right. All such dividends, interest and other payments and
distributions which are received by any Pledgor shall be received in trust for
the benefit of the Agents and the Banks and, if the Administrative Agent so
directs shall be segregated from other funds of such Pledgor and shall,
forthwith upon demand by the Administrative Agent, be paid over to the
Administrative Agent as Collateral in the same form as received (with any
necessary endorsement). After all Events of Defaults have been cured, the
Administrative Agent's right to retain dividends, interest and other payments
and distributions under this Section 7 shall cease and the Administrative Agent
shall pay over to each Pledgor any such Collateral pledged by such Pledgor
hereunder retained by the Administrative Agent during the continuance of an
Event of Default.
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<PAGE>
SECTION 8. Right to Vote Pledged Stock and Pledged Interests.
Unless an Event of Default shall have occurred and be continuing, each
Pledgor shall have the right, from time to time, to vote its Pledged Stock and
Pledged Interests and to give consents, ratifications and waivers with respect
to its Pledged Stock and Pledged Interests, and the Administrative Agent shall,
upon receiving a written request from such Pledgor accompanied by a certificate
signed by its principal financial officer stating that no Event of Default has
occurred and is continuing, deliver to such Pledgor or as specified in such
request such proxies, powers of attorney, consents, ratifications and waivers
in respect of any of its Pledged Stock or Pledged Interests which is registered
in the name of the Administrative Agent or its nominee as shall be specified in
such request and be in form and substance satisfactory to the Administrative
Agent.
If an Event of Default shall have occurred and be continuing, the
Administrative Agent shall have the right to the extent permitted by law and
each Pledgor shall take all such action as may be necessary or appropriate to
give effect to such right, to vote and to give consents, ratifications and
waivers, and take any other action with respect to any or all of the Pledged
Stock or Pledged Interests with the same force and effect as if the
Administrative Agent were the absolute and sole owner thereof.
SECTION 9. General Authority
Each Pledgor hereby irrevocably appoints the Administrative Agent its
true and lawful attorney, with full power of substitution, in the name of such
Pledgor, the Agents, the Banks or otherwise, for the sole use and benefit of
the Agents and Banks, but at the expense of such Pledgor, to the extent
permitted by law to exercise, at any time and from time to time while an Event
of Default has occurred and is continuing, all or any of the following powers
with respect to all or any of the Collateral:
(i) to demand, sue for, collect, receive and give acquittance for
any and all monies due or to become due upon or by virtue thereof,
(ii) to settle, compromise, compound, prosecute or defend any
action or proceeding with respect thereto,
(iii) to sell, transfer, assign or otherwise deal in or with the
same or the proceeds or avails thereof, as fully and effectually as if the
Administrative Agent were the absolute owner thereof, and
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<PAGE>
(iv) to extend the time of payment of any or all thereof and to
make any allowance and other adjustments with reference thereto;
provided that the Administrative Agent shall give each Pledgor not less than
ten days' prior notice of the time and place of any sale or other intended
disposition of any of the Collateral pledged by such Pledgor hereunder except
any Collateral which threatens to decline speedily in value or is of a type
customarily sold on a recognized market. The Administrative Agent and each
Pledgor agree that such notice constitutes "reasonable notification" within the
meaning of Section 9-504(3) of the Uniform Commercial Code.
SECTION 10. Remedies upon Event of Default
If any Event of Default shall have occurred and be continuing, the
Administrative Agent may exercise on behalf of the Banks and the Agents all the
rights of a secured party under the Uniform Commercial Code (whether or not in
effect in the jurisdiction where such rights are exercised) and, in addition,
the Administrative Agent may, without being required to give any notice, except
as herein provided or as may be required by mandatory provisions of law, (i)
apply the cash, if any, then held by it as Collateral as specified in Section
13 and (ii) if there shall be no such cash or if such cash shall be
insufficient to pay all the Secured Obligations in full, sell the Collateral or
any part thereof at public or private sale or at any broker's board or on any
securities exchange, for cash, upon credit or for future delivery, and at such
price or prices as the Administrative Agent may deem satisfactory. Any Bank or
Agent may be the purchaser of any or all of the Collateral so sold at any
public sale (or, if the Collateral is of a type customarily sold in a
recognized market or is of a type which is the subject of widely distributed
standard price quotations, at any private sale). The Administrative Agent is
authorized, in connection with any such sale, if it deems it advisable so to
do, (i) to restrict the prospective bidders on or purchasers of any of the
Pledged Securities to a limited number of sophisticated investors who will
represent and agree that they are purchasing for their own account for
investment and not with a view to the distribution or sale of any of such
Pledged Securities, (ii) to cause to be placed on certificates for any or all
of the Pledged Securities or on any other securities pledged hereunder a legend
to the effect that such security has not been registered under the Securities
Act of 1933 and may not be disposed of in violation of the provision of said
Act, and (iii) to impose such other limitations or conditions in connection
with any such sale as the Administrative Agent deems necessary or advisable in
order to comply with said Act or any other law. Each Pledgor will execute and
deliver such documents and take such other action as the Administrative Agent
deems necessary or advisable in order that any such sale may be made in
compliance with law. Upon any such sale the Administrative Agent shall have the
right to
-8-
<PAGE>
deliver, assign and transfer to the purchaser thereof the Collateral so sold.
Each purchaser at any such sale shall hold the Collateral so sold absolutely
and free from any claim or right of whatsoever kind, including any equity or
right of redemption of any Pledgor which may be waived, and each Pledgor, to
the extent permitted by law, hereby specifically waives all rights of
redemption, stay or appraisal which it has or may have under any law now
existing or hereafter adopted. The notice (if any) of such sale required by
Section 9 shall (1) in the case of a public sale, state the time and place
fixed for such sale, (2) in the case of a sale at a broker's board or on a
securities exchange, state the board or exchange at which such sale is to be
made and the day on which the Collateral, or the portion thereof so being sold,
will first be offered for sale at such board or exchange, and (3) in the case
of a private sale, state the day after which such sale may be consummated. Any
such public sale shall be held at such time or times within ordinary business
hours and at such place or places as the Administrative Agent may fix in the
notice of such sale. At any such sale the Collateral may be sold in one lot as
an entirety or in separate parcels, as the Administrative Agent may determine.
The Administrative Agent shall not be obligated to make any such sale pursuant
to any such notice. The Administrative Agent may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for the
sale, and such sale may be made at any time or place to which the same may be
so adjourned. In the case of any sale of all or any part of the Collateral on
credit or for future delivery, the Collateral so sold may be retained by the
Administrative Agent until the selling price is paid by the purchaser thereof,
but the Administrative Agent shall not incur any liability in the case of the
failure of such purchaser to take up and pay for the Collateral so sold and, in
the case of any such failure, such Collateral may again be sold upon like
notice. The Administrative Agent, instead of exercising the power of sale
herein conferred upon it, may proceed by a suit or suits at law or in equity to
foreclose the Security Interests and sell the Collateral, or any portion
thereof, under a judgment or decree of a court or courts of competent
jurisdiction.
Notwithstanding any provision of this Agreement to the contrary, (i)
enforcement of the security interest granted hereby in the Pledged Securities
and the exercise of any right or remedy with respect to any of the shares of
Pledged Securities and the grant of any pledge pursuant to Section 5(c) shall
be subject to prior approval of the various automobile franchisors with whom
the Pledgor or any of its Affiliates has franchise agreements pursuant to which
such enforcement, or exercise of any remedy or right, or grant, without prior
approval from such automobile franchisors may result in the termination of one
or more of such franchise agreements and (ii) the enforcement of the security
interest granted hereby in the shares of Atlantic Auto Finance Corporation
pledged hereunder and the exercise of any right or remedy with respect thereto
shall be subject to the prior consent
-9-
<PAGE>
of the requisite financing parties with whom Atlantic Auto Finance Corporation
has financing agreements set forth on Schedule IV hereto to the extent such
enforcement or exercise of any remedy or right without prior approval from such
financing parties may result in a default under one or more of such agreements.
SECTION 11. Expenses
Each Pledgor agrees that it will forthwith upon demand pay to the
Administrative Agent:
(i) the amount of any taxes which the Administrative Agent may
have been required to pay by reason of the Security Interests or to free
any of the Collateral of such Pledgor from any Lien thereon, and
(ii) the amount of any and all out-of-pocket expenses, including
the reasonable fees and disbursements of counsel and of any other experts,
which the Administrative Agent may incur in connection with (w) the
administration or enforcement of this Agreement, including such expenses as
are incurred to preserve the value of the Collateral and the validity,
perfection, rank and value of any Security Interest, (x) the collection,
sale or other disposition of any of the Collateral, (y) the exercise by the
Administrative Agent of any of the rights conferred upon it hereunder or
(z) any Default or Event of Default.
Any such amount not paid on demand shall bear interest at the rate applicable
to Base Rate Loans plus 2% and shall be an additional Secured Obligation
hereunder.
SECTION 12. Limitation on Duty of Administrative Agent in
Respect of Collateral.
Beyond the exercise of reasonable care in the custody thereof, the
Administrative Agent shall have no duty as to any Collateral in its possession
or control or in the possession or control of any agent or bailee or any income
thereon or as to the preservation of rights against prior parties or any other
rights pertaining thereto. The Administrative Agent shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral in
its possession if the Collateral is accorded treatment substantially equal to
that which it accords its own property, and shall not be liable or responsible
for any loss or damage to any of the Collateral, or for any diminution in the
value thereof, by reason of the act or omission of any agent or bailee selected
by the Administrative Agent in good faith and with reasonable care.
SECTION 13. Application of Proceeds
-10-
<PAGE>
Upon the occurrence and during the continuance of an Event of Default,
the proceeds of any sale of, or other realization upon, all or any part of the
Collateral pledged by any Pledgor hereunder and any cash held shall be applied
by the Administrative Agent in the following order of priorities:
first, to payment of the expenses of such sale or other realization,
including reasonable compensation to agents and counsel for the
Administrative Agent, and all expenses, liabilities and advances incurred
or made by the Administrative Agent in connection therewith, and any other
unreimbursed expenses for which the Agents or any Bank is to be reimbursed
by such Pledgor pursuant to Section 10.3 and Article 9 of the Credit
Agreement or Section 11 hereof;
second, to the ratable payment of unpaid principal of the Secured
Obligations of such Pledgor;
third, to the ratable payment of accrued but unpaid interest on the
Secured Obligations of such Pledgor in accordance with the provisions of
the Credit Agreement;
fourth, to the ratable payment of all other Secured Obligations of
such Pledgor, until all Secured Obligations of such Pledgor shall have been
paid in full; and
finally, to payment to such Pledgor, or as a court of competent
jurisdiction may direct, of any surplus then remaining from such proceeds.
The Administrative Agent may make distributions hereunder in cash or in kind
or, on a ratable basis, in any combination thereof.
SECTION 14. Concerning the Administrative Agent
The provisions of Article VII of the Credit Agreement shall inure to
the benefit of the Administrative Agent in respect of this Agreement and shall
be binding upon the parties to the Credit Agreement in such respect. In
furtherance and not in derogation of the rights, privileges and immunities of
the Administrative Agent therein set forth:
(A) The Administrative Agent is authorized to take all such action as is
provided to be taken by it as Administrative Agent hereunder and all other
action reasonably incidental thereto. As to any matters not expressly provided
for herein (including, without limitation, the timing and methods of
realization upon the Collateral) the Administrative Agent shall act or refrain
from acting (i) in accordance with the request of the Required Banks or (ii) if
the Loans have been declared due and payable by the Documentation Agent in
accordance with Section 6.1 of the Credit Agreement, in accordance with written
instructions from the Required Banks or, in the absence of such instructions,
in accordance with its discretion.
-11-
<PAGE>
(B) The Administrative Agent shall not be responsible for the
existence, genuineness or value of any of the Collateral or for the validity,
perfection, priority or enforceability of the Security Interests in any of the
Collateral, whether impaired by operation of law or by reason of any action or
omission to act on its part hereunder. The Administrative Agent shall have no
duty to ascertain or inquire as to the performance or observance of any of the
terms of this Agreement by any Pledgor.
SECTION 15. Appointment of Co-Administrative Agents
At any time or times, in order to comply with any legal requirement in
any jurisdiction, the Administrative Agent may appoint another bank or trust
company or one or more other persons, either to act as co-agent or co-agents,
jointly with the Administrative Agent, or to act as separate agent or agents on
behalf of the Agents and the Banks with such power and authority as may be
necessary for the effectual operation of the provisions hereof and may be
specified in the instrument of appointment (which may, in the discretion of the
Administrative Agent, include provisions for the protection of such co-agent or
separate agent similar to the provisions of Section 14).
SECTION 16. Termination of Security Interests; Release of Collateral
Upon the repayment in full of all Secured Obligations and the
termination of the Commitments under the Credit Agreement, the Security
Interests shall terminate and all rights to the Collateral pledged by each
Pledgor hereunder shall revert to such Pledgor. At any time and from time to
time prior to such termination of the Security Interests, the Administrative
Agent may release any of the Collateral upon the terms set forth in Section
10.5 of the Credit Agreement. Upon any such termination of the Security
Interests or release of Collateral, the Administrative Agent will, at the
expense of the respective Pledgor, execute and deliver to such Pledgor such
documents as such Pledgor shall reasonably request to evidence the termination
of the Security Interests or the release of such Collateral, as the case may
be.
SECTION 17. Notices
All notices hereunder shall be given in accordance with Section 10.1
of the Credit Agreement.
SECTION 18. Waivers, Non-Exclusive Remedies
No failure on the part of the Administrative Agent to exercise, and no
delay in exercising and no course of dealing with respect to, any right under
this Agreement shall operate as a waiver thereof; nor shall any single or
partial exercise by the Administrative Agent of any right under the Credit
Agreement or this Agreement preclude any other or further exercise thereof or
-12-
<PAGE>
the exercise of any other right. The rights in this Agreement and the Credit
Agreement are cumulative and are not exclusive of any other remedies provided
by law.
SECTION 19. Successors and Assigns
This Agreement is for the benefit of the Agents and the Banks and
their permitted successors and assigns, and in the event of an assignment of
all or any of the Secured Obligations, the rights hereunder, to the extent
applicable to the indebtedness so assigned, shall be transferred with such
indebtedness. This Agreement shall be binding on each Pledgor and its
successors and assigns.
SECTION 20. Changes in Writing
Neither this Agreement nor any provision hereof may be changed,
waived, discharged or terminated orally, but only in writing signed by each
Pledgor to be bound thereby and the Administrative Agent with the consent of
the Required Banks.
SECTION 21. New York Law
This Agreement shall be construed in accordance with and governed by
the laws of the State of New York, except as otherwise required by mandatory
provisions of law and except to the extent that remedies provided by the laws
of any jurisdiction other than New York are governed by the laws of such
jurisdiction.
SECTION 22. Severability
If any provision hereof is invalid or unenforceable in any
jurisdiction, then, to the fullest extent permitted by law, (i) the other
provisions hereof shall remain in full force and effect in such jurisdiction
and shall be construed in order to carry out the intentions of the parties
hereto as nearly as may be possible; and (ii) the invalidity or
unenforceability of any provision hereof in any jurisdiction shall not affect
the validity or enforceability of such provision in any other jurisdiction.
SECTION 23. WAIVER OF JURY TRIAL.
EACH PLEDGOR HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY.
-13-
<PAGE>
SECTION 24. Counterparts.
This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
UNITED AUTO GROUP, INC.
By
---------------------------------
Title:
UNITED LANDERS, INC.
By
---------------------------------
Title:
DIFEO PARTNERSHIP, INC.
By
---------------------------------
Title:
UAG WEST, INC.
By
---------------------------------
Title:
LANDERS AUTO SALES, INC.
-14-
<PAGE>
By
---------------------------------
Title:
UAG ATLANTA, INC.
By
---------------------------------
Title:
UAG ATLANTA IV, INC.
By
---------------------------------
Title:
UAG NORTHEAST, INC.
By
---------------------------------
Title:
DIFEO PARTNERSHIP HCT, INC.
By
---------------------------------
Title:
HUDSON TOYOTA, INC.
By
---------------------------------
Title:
DIFEO PARTNERSHIP VIII, INC.
By
---------------------------------
Title:
DIFEO PARTNERSHIP IX, INC.
-15-
<PAGE>
By
---------------------------------
Title:
DIFEO PARTNERSHIP SCT, INC.
By
---------------------------------
Title:
SOMERSET MOTORS, INC.
By
---------------------------------
Title:
DIFEO PARTNERSHIP RCT, INC.
By
---------------------------------
Title:
UAG NORTHEAST (NY), INC.
By
---------------------------------
Title:
DIFEO PARTNERSHIP RCM, INC.
By
---------------------------------
Title:
-16-
<PAGE>
SCOTTSDALE AUDI, LTD.
By
---------------------------------
Title:
SK MOTORS, LTD.
By
---------------------------------
Title:
UAG TEXAS, INC.
By
---------------------------------
Title:
UAG TEXAS II, INC.
By
---------------------------------
Title:
THE BANK OF NOVA SCOTIA,
as Administrative Agent
By
---------------------------------
Title:
-17-
<PAGE>
Schedule I
Pledged Stock
Issuers Stock Pledged Hereunder
Pledgor Issuer of Pledged Stock Class No. of Percentage
- ------- ----------------------- ----- Shares of Shares
------ Issued
------
Borrower United Landers, Inc. Common Stock 100 100%
Borrower Atlantic Auto Finance Common Stock 43,500 100%
Corporation
ULI Landers Auto Sales, Inc. Common Stock 10 100%
DPI DiFeo Partnership HCT, Inc. Common Stock 100 100%
DPI DiFeo Partnership RCT, Inc. Common Stock 100 100%
DPI DiFeo Partnership RCM, Inc. Common Stock 100 100%
DPI DiFeo Partnership SCT, Inc. Common Stock 100 100%
DPI DiFeo Partnership VIII, Common Stock 100 100%
Inc.
DPI DiFeo Partnership IX, Common Stock 100 100%
Inc.
Borrower DiFeo Partnership X, Inc. Common Stock 100 100%
Borrower UAG Northeast (NY), Inc. Common Stock 100 100%
DPI Hudson Toyota, Inc. Common Stock 45 100%
DPI Somerset Motors, Inc. Common Stock 100 100%
Borrower UAG West, Inc. Common Stock 100 100%
UAG West SA Automotive, Ltd. Common Stock 1,713,010 100%
-18-
<PAGE>
Pledgor Issuer of Pledged Stock Class No. of Percentage
- ------- ----------------------- ----- Shares of Shares
------ Issued
------
UAG West SL Automotive, Ltd. Common Stock 625,000 100%
UAG West SPA Automotive, Ltd. Common Stock 547,125 100%
UAG West LRP, Ltd. Common Stock 500,000 100%
UAG West Sun BMW, Ltd. Common Stock 900,000 100%
UAG West 6725 Dealership, Ltd. Common Stock 1,250 100%
UAG West Scottsdale Management Common Stock 101,251 100%
Group, Ltd.
UAG West Scottsdale Audi, Ltd. Common Stock 100 100%
LAS Landers United Auto Group, Common Stock 10 100%
Inc.
LAS Landers United Auto Group Common Stock 10 100%
No. 2, Inc.
LAS Landers United Auto Group Common Stock 10 100%
No. 3, Inc.
Borrower UAG Atlanta, Inc. Common Stock 100 100%
UAG Atlanta Toyota, Inc. Common Stock 1,000 100%
Atlanta
Borrower UAG Atlanta IV, Inc. Common Stock 100 100%
UAG UAG Atlanta IV Motors, Common Stock 1,001 100%
Atlanta Inc.
IV
(fka Charles Evans BMW,
Inc.)
Borrower UAG Texas, Inc. Common Stock 100 100%
Borrower UAG Texas II, Inc. Common Stock 100 100%
Borrower United AutoCare, Inc. Common Stock 100 100%
Borrower United AutoCare Products, Common Stock 100 100%
Inc.
Borrower UAG Capital Common Stock 100 100%
-19-
<PAGE>
Pledgor Issuer of Pledged Stock Class No. of Percentage
- ------- ----------------------- ----- Shares of Shares
------ Issued
------
Management, Inc.
-20-
<PAGE>
Pledged Instruments
- -------------------
Pledgor Issuer of Pledged Issue Date Original
------- Instrument ---------- Principal Amount
---------- ----------------
Borrower UAG Atlanta II, Inc. May 1, 1996 $11,450,000
Borrower UAG Atlanta III, Inc. July 12, 1996 $11,000,000
-21-
<PAGE>
Schedule II
Pledged Interests
Partnership
Interest
Pledged
Pledgor Partnership Hereunder
- ------- ----------- ---------
DPI Fair Hyundai Partnership 70%
UAG Northeast Fair Hyundai Partnership 30%
DPI Fair Chevrolet-Geo Partnership 70%
UAG Northeast Fair Chevrolet-Geo Partnership 30%
DPI Danbury Auto Partnership 70%
UAG Northeast Danbury Auto Partnership 30%
DPI Danbury Chrysler Plymouth Partnership 70%
UAG Northeast Danbury Chrysler Plymouth Partnership 30%
DPI HCT Hudson Motors Partnership 70%
Hudson Toyota Hudson Motors Partnership 30%
DPI DiFeo Hyundai Partnership 70%
UAG Northeast DiFeo Hyundai Partnership 30%
DPI J&F Oldsmobile Partnership 70%
UAG Northeast J&F Oldsmobile Partnership 30%
DPI DiFeo Chevrolet-Geo Partnership 70%
UAG Northeast DiFeo Chevrolet-Geo Partnership 30%
DPI DiFeo Chrysler Plymouth Jeep Eagle 70%
Partnership
UAG Northeast DiFeo Chrysler Plymouth Jeep Eagle 30%
Partnership
DPI VIII OCT Partnership 70%
-22-
<PAGE>
Partnership
Interest
Pledged
Pledgor Partnership Hereunder
- ------- ----------- ---------
UAG Northeast OCT Partnership 30%
DPI IX OCM Partnership 70%
UAG Northeast OCM Partnership 30%
DPI SCT Somerset Motors Partnership 70%
Somerset Motors Somerset Motors Partnership 30%
DPI DiFeo BMW Partnership 70%
UAG Northeast DiFeo BMW Partnership 30%
DPI RCT Country Auto Group Partnership 70%
UAG Northeast (NY) Country Auto Group Partnership 30%
DPI RCM Rockland Motors Partnership 70%
UAG Northeast (NY) Rockland Motors Partnership 30%
SA 6725 Agent Partnership 50%
SK Motors 6725 Agent Partnership 50%
UAG Texas Shannon Automotive, Ltd. 99%
UAG Texas II Shannon Automotive, Ltd. 1%
DPI DiFeo Leasing Partnership 70%
UAG Northeast DiFeo Leasing Partnership 30%
-23-
<PAGE>
Schedule III
UCC Filing Locations
- -------------------------------------------------------------------------------
DEBTOR FILING LOCATION(S)
- -------------------------------------------------------------------------------
United Auto Group, Inc. New York Secretary of State
New York City Register
- -------------------------------------------------------------------------------
United Landers, Inc. New York Secretary of State
New York City Register
Arkansas Secretary of State
Saline County Clerk
Pulaski County Clerk
Garland County Clerk
- -------------------------------------------------------------------------------
DiFeo Partnership, Inc. New York Secretary of State
New York City Register
Rockland County Clerk
New Jersey Secretary of State
Hudson County Clerk
Ocean County Clerk
Somerset County Clerk
Bergen County Clerk
Connecticut Secretary of State
Town of Danbury Clerk
- -------------------------------------------------------------------------------
UAG West, Inc. New York Secretary of State
New York City Register
Arizona Secretary of State
Maricopa County Clerk
- -------------------------------------------------------------------------------
-24-
<PAGE>
- -------------------------------------------------------------------------------
DEBTOR FILING LOCATION(S)
- -------------------------------------------------------------------------------
Landers Auto Sales, Inc. New York Secretary of State
New York City Register
Arkansas Secretary of State
Saline County Clerk
Pulaski County Clerk
Garland County Clerk
- -------------------------------------------------------------------------------
UAG Atlanta, Inc. New York Secretary of State
New York City Register
Gwinnett County Clerk
- -------------------------------------------------------------------------------
UAG Atlanta IV, Inc. New York Secretary of State
New York City Register
Gwinnett County Clerk
- -------------------------------------------------------------------------------
UAG Northeast, Inc. New York Secretary of State
New York City Register
Rockland County Clerk
New Jersey Secretary of State
Hudson County Clerk
Ocean County Clerk
Connecticut Secretary of State
Town of Danbury Clerk
- -------------------------------------------------------------------------------
DiFeo Partnership HCT, Inc. New York Secretary of State
New York City Register
New Jersey Secretary of State
Hudson County Clerk
- -------------------------------------------------------------------------------
-25-
<PAGE>
- -------------------------------------------------------------------------------
DEBTOR FILING LOCATION(S)
- -------------------------------------------------------------------------------
Hudson Toyota, Inc. New York Secretary of State
New York City Register
New Jersey Secretary of State
Hudson County Clerk
- -------------------------------------------------------------------------------
DiFeo Partnership VIII, Inc. New York Secretary of State
New York City Register
New Jersey Secretary of State
Hudson County Clerk
Ocean County Clerk
- -------------------------------------------------------------------------------
DiFeo Partnership IX, Inc. New York Secretary of State
New York City Register
New Jersey Secretary of State
Hudson County Clerk
Ocean County Clerk
- -------------------------------------------------------------------------------
DiFeo Partnership SCT, Inc. New York Secretary of State
New York City Register
New Jersey Secretary of State
Hudson County Clerk
Somerset County Clerk
- -------------------------------------------------------------------------------
DiFeo Partnership RCT, Inc. New York Secretary of State
New York City Register
Rockland County Clerk
New Jersey Secretary of State
Hudson County Clerk
- -------------------------------------------------------------------------------
-26-
<PAGE>
- -------------------------------------------------------------------------------
DEBTOR FILING LOCATION(S)
- -------------------------------------------------------------------------------
Somerset Motors, Inc. New York Secretary of State
New York City Register
New Jersey Secretary of State
Hudson County Clerk
Somerset County Clerk
- -------------------------------------------------------------------------------
UAG Northeast (NY), Inc. New York Secretary of State
New York City Register
Rockland County Clerk
- -------------------------------------------------------------------------------
DiFeo Partnership RCM, Inc. New York Secretary of State
New York City Register
Rockland County Clerk
New Jersey Secretary of State
Hudson County Clerk
- -------------------------------------------------------------------------------
Scottsdale Audi, Ltd. Arizona Secretary of State
Maricopa County Clerk
- -------------------------------------------------------------------------------
SK Motors, Ltd. Arizona Secretary of State
Maricopa County Clerk
- -------------------------------------------------------------------------------
UAG Texas, Inc. New York Secretary of State
New York City Register
Texas Secretary of State
Houston County Clerk
- -------------------------------------------------------------------------------
UAG Texas II, Inc. New York Secretary of State
New York City Register
Texas Secretary of State
Houston County Clerk
- -------------------------------------------------------------------------------
-27-
<PAGE>
Schedule IV
Atlantic Auto Financing Agreements
----------------------------------
1. Support Agreement, dated as of June 28, 1995, between the Borrower
and Atlantic Auto Funding Corporation. (This agreement may not be modified
without the consent of Financial Security Assurance Inc.)
2. Support Agreement, dated as of June 14, 1996, between the Borrower
and Atlantic Auto Second Funding Corporation.
-28-
<PAGE>
EXECUTION COPY
PLEDGE AGREEMENT
AGREEMENT dated as of March 20, 1997 among UNITED AUTO GROUP, INC., a
Delaware corporation (together with its successors, the "Borrower"), UNITED
LANDERS, INC., a Delaware corporation ("ULI") and DIFEO PARTNERSHIP, INC., a
Delaware corporation ("DPI"), UAG WEST, INC., a Delaware corporation ("UAG
West"), LANDERS AUTO SALES, INC., an Arkansas corporation ("LAS"), UAG ATLANTA,
INC., a Delaware corporation ("UAG Atlanta"), UAG ATLANTA IV, INC., a Delaware
corporation ("UAG Atlanta IV"), UAG NORTHEAST, INC., a Delaware corporation
("UAG Northeast"), DIFEO PARTNERSHIP HCT, INC., a Delaware corporation ("DPI
HCT"), HUDSON TOYOTA, INC., a New Jersey corporation ("Hudson Toyota"), DIFEO
PARTNERSHIP VIII, INC., a Delaware corporation ("DPI VIII"), DIFEO PARTNERSHIP
IX, INC., a Delaware corporation ("DPI IX"), DIFEO PARTNERSHIP SCT, INC., a
Delaware corporation ("DPI SCT"), SOMERSET MOTORS, INC., a New Jersey
corporation ("Somerset Motors), DIFEO PARTNERSHIP RCT, INC., a Delaware
corporation ("DPI RCT"), UAG NORTHEAST (NY), INC., a New York corporation ("UAG
Northeast (NY)"), DIFEO PARTNERSHIP RCM, INC., a Delaware corporation ("DPI
RCM"), SCOTTSDALE AUDI, LTD., an Arizona corporation ("SA"), SK MOTORS, LTD.,
an Arizona corporation ("SK Motors"), UAG Texas, Inc., a Delaware corporation
("UAG Texas"), UAG Texas II, Inc., a Delaware corporation ("UAG Texas II")
(each together with its successors, a "Pledgor" and collectively the
"Pledgors") and THE BANK OF NOVA SCOTIA, as Administrative Agent.
W I T N E S S E T H :
WHEREAS, the Borrower, the Guarantors party thereto, certain banks,
The Bank of Nova Scotia, as administrative agent for such banks and Morgan
Guaranty Trust Company of New York, as documentation agent for such banks are
parties to a Credit Agreement of even date herewith (as the same may be amended
from time to time, the "Credit Agreement"); and
WHEREAS, in order to induce said banks, The Bank of Nova Scotia, as
administrative agent for such banks and Morgan Guaranty Trust Company of New
York, as documentation agent for such banks, to enter into the Credit
Agreement, the Pledgors have agreed to grant a continuing security interest in
and to the Collateral (as hereafter defined) to secure their obligations under
the Credit Agreement and the Notes issued pursuant thereto;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and
<PAGE>
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. DEFINITIONS
Terms defined in the Credit Agreement and not otherwise defined herein
have, as used herein, the respective meanings provided for therein. The
following additional terms, as used herein, have the following respective
meanings:
"Collateral" has the meaning assigned to such term in Section 3(A).
"Issuer" means any of the companies identified on Schedule I as the
issuers of the Pledged Stock.
"Partnership" means any of the partnerships listed on Schedule II.
"Partnership Interests" means, as to each Pledgor, the reference to
the partnership interest in each Partnership listed opposite such Pledgor's
name on Schedule II attached hereto.
"Pledged Instruments" means, as to each Pledgor, (i) the Subsidiary
Notes of such Pledgor and (ii) any instrument required to be pledged by such
Pledgor to the Administrative Agent pursuant to Section 3(B).
"Pledged Interest" means, as to each Pledgor, the Partnership
Interests of such Pledgor and any other equity interest required to be pledged
by such Pledgor.
"Pledged Securities" means, as to each Pledgor, the Pledged
Instruments, the Pledged Interests and the Pledged Stock of such Pledgor.
"Pledged Stock" means, as to each Pledgor, (i) the Subsidiary Shares
of such Pledgor and (ii) any other capital stock required to be pledged by such
Pledgor to the Administrative Agent pursuant to Section 3(B).
"Secured Obligations" means the obligations secured under this
Agreement which include: (a) with respect to the Borrower, (i) all principal of
and interest (including, without limitation, any interest which accrues after
the commencement of any case, proceeding or other action relating to the
bankruptcy, insolvency or reorganization of the Borrower, whether or not
allowed or allowable as a claim in any such proceeding) on any loan under, or
any note issued pursuant to, the Credit Agreement, (ii) all other amounts
payable by the Borrower hereunder or under the Credit Agreement and (iii) any
renewals, extensions or modifications of any of the foregoing; and (b) with
respect to each other Pledgor, (i) all obligations of such Pledgor under the
Credit Agreement (including without limitation Article 9 thereof)
-2-
<PAGE>
and (ii) any renewals, extensions or modifications of any of the foregoing.
"Security Interests" means, as to each Pledgor, the security interests
in its Collateral granted hereunder securing its Secured Obligations.
"Subsidiary Notes" means, as to each Pledgor, any debt of an Issuer
owing to such Pledgor, whether now existing or hereafter arising, including
without limitation the instruments evidencing obligations owed to such Pledgor
listed on Schedule I hereto.
"Subsidiary Shares" means, as to each Pledgor, the collective
reference to the shares of capital stock of each Issuer listed opposite such
Pledgor's name on Schedule I attached hereto, together with all shares, stocks,
stock certificates, options or rights of any nature whatsoever that currently
exist or which may be issued or granted in respect thereof (or in substitution
for the same) by any Issuer while this Agreement is in effect.
Unless otherwise defined herein, or unless the context otherwise
requires, all terms used herein which are defined in the New York Uniform
Commercial Code as in effect on the date hereof shall have the meanings therein
stated.
SECTION 2. REPRESENTATIONS AND WARRANTIES
Each Pledgor represents and warrants as follows:
(a) Title to Pledged Securities. Such Pledgor owns all of the Pledged
Securities listed on Schedule I and Schedule II across from its name, free and
clear of any Liens other than the Security Interests. Except as set forth on
Schedule I, the Pledged Stock includes all of the issued and outstanding
capital stock of each Issuer. All of the Pledged Stock has been duly authorized
and validly issued, and is fully paid and non-assessable, and is subject to no
options to purchase or similar rights of any Person. Such Pledgor is not and
will not become a party to or otherwise bound by any agreement, other than this
Agreement or various franchise agreements between such Pledgor and automobile
franchisors, which restricts in any manner the rights of any present or future
holder of any of the Pledged Securities with respect thereto.
(b) Validity, Perfection and Priority of Security Interests. Upon the
delivery of its Pledged Instruments and certificates representing its Pledged
Stock to the Administrative Agent in accordance with Section 4 hereof and
assuming that the Administrative Agent will at no time relinquish possession of
such Pledged Instruments and certificates, the Administrative Agent will have
valid and perfected security interests in the Collateral pledged by such
Pledgor hereunder (other than the
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Collateral described in the immediately succeeding sentence) subject to no
prior Lien. When in addition appropriately completed UCC financing statements
shall have been filed as specified in Schedule III hereto, the Security
Interests shall constitute perfected security interests in the Collateral
pledged by such Pledgor hereunder consisting of all right, title and interest
of such Pledgor in Debt of a Subsidiary owing to such Pledgor and not evidenced
by an instrument and the Partnership Interests (and all proceeds thereof).
Except for the filing of such UCC financing statements, no registration,
recordation or filing with any governmental body, agency or official is
required in connection with the execution or delivery of this Agreement or
necessary for the validity or enforceability hereof or for the perfection or
enforcement of the Security Interests. Neither such Pledgor nor any of its
Subsidiaries has performed or will perform any acts which might prevent the
Administrative Agent from enforcing any of the terms and conditions of this
Agreement or which would limit the Administrative Agent in any such
enforcement. On the date hereof, the Pledged Interests pledged by such Pledgor
are not evidenced by any certificates.
(c) UCC Filing Locations. The chief executive office of such Pledgor
is located at its address set forth on the signature pages of the Credit
Agreement.
SECTION 3. THE SECURITY INTERESTS
In order to secure the full and punctual payment of the Secured
Obligations in accordance with the terms thereof, and to secure the performance
of all the obligations of each Pledgor hereunder:
(a) Each Pledgor hereby assigns and pledges to and with the
Administrative Agent for the benefit of the Banks and the Agents and grants to
the Administrative Agent for the benefit of the Banks and the Agents a security
interest in its Pledged Securities, and all of its rights and privileges with
respect to its Pledged Securities, and all income and profits thereon, and all
interest, dividends and other payments and distributions with respect thereto,
all Debt of a Subsidiary owing to such Pledgor from time to time whether or not
evidenced by a Pledged Instrument and all proceeds of the foregoing (the
"Collateral"). Contemporaneously with the execution and delivery hereof, each
Pledgor is delivering its Subsidiary Notes and certificates representing its
Subsidiary Shares in pledge hereunder.
(b) In the event that any Issuer at any time issues to any Pledgor any
additional or substitute shares of capital stock of any class or any substitute
note, or any Partnership issues to any Pledgor any additional or substitute
equity interests of any class or issues certificates representing the Pledged
Interests or any portion thereof, or owes any other Debt to any Pledgor, such
Pledgor will immediately pledge and
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deposit with the Administrative Agent certificates (if any) representing all
such shares and such note or any instrument evidencing such other Debt as
additional security for such Pledgor's Secured Obligations. All such shares,
notes, interests and instruments constitute Pledged Securities and are subject
to all provisions of this Agreement.
(c) The Security Interests granted by each Pledgor are granted as
security only and shall not subject either Agent or any Bank to, or transfer or
in any way affect or modify, any obligation or liability of such Pledgor or any
of its Subsidiaries with respect to any of the Collateral pledged by such
Pledgor hereunder or any transaction in connection therewith.
SECTION 4. DELIVERY OF PLEDGED SECURITIES
All Pledged Instruments delivered to the Administrative Agent by any
Pledgor pursuant hereto shall be endorsed to the order of the Administrative
Agent, and accompanied by any required transfer tax stamps, all in form and
substance satisfactory to the Administrative Agent. All certificates
representing Pledged Stock or Pledged Interests (if any) delivered to the
Administrative Agent by any Pledgor pursuant hereto shall be in suitable form
for transfer by delivery, or shall be accompanied by duly executed instruments
of transfer or assignment in blank, with signatures appropriately guaranteed,
and accompanied by any required transfer tax stamps, all in form and substance
satisfactory to the Administrative Agent.
SECTION 5. FURTHER ASSURANCES
(a) Each Pledgor agrees that it will, at its expense and in such
manner and form as the Administrative Agent may require, execute, deliver, file
and record any financing statement, specific assignment or other paper and take
any other action that may be necessary or desirable, or that the Administrative
Agent may request, in order to create, preserve, perfect or validate any
Security Interest or to enable the Administrative Agent to exercise and enforce
its rights hereunder with respect to any of the Collateral. To the extent
permitted by applicable law, each Pledgor hereby authorizes the Administrative
Agent to execute and file, in the name of such Pledgor or otherwise, Uniform
Commercial Code financing statements (which may be carbon, photographic,
photostatic or other reproductions of this Agreement or of a financing
statement relating to this Agreement) which the Administrative Agent in its
sole discretion may deem necessary or appropriate to further perfect the
Security Interests.
(b) Each Pledgor agrees that it will not change (i) its name, identity
or corporate structure in any manner or (ii) the location of its chief
executive office unless it shall
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have given the Administrative Agent not less than 30 days' prior notice
thereof.
(c) The Borrower agrees that it will cause any Subsidiary which is
owed (i) Debt evidenced by an instrument, (ii) long-term Debt or (iii) Debt
secured by a Lien by the Borrower or another Subsidiary to immediately assign
and pledge to and with the Administrative Agent for the benefit of the Banks
and the Agents and grant to the Administrative Agent for the benefit of the
Banks and the Administrative Agent a security interest in such Debt and
all proceeds of such Debt, in each case as security for such
Subsidiary's obligations under the Credit Agreement.
SECTION 6. RECORD OWNERSHIP OF PLEDGED STOCK AND PLEDGED INTERESTS.
Subject to the provisions of the final paragraph of Section 10, the
Administrative Agent may at any time or from time to time, in its sole
discretion, cause any or all of (i) the Pledged Stock or (ii) the Pledged
Interests to be transferred of record into the name of the Administrative Agent
or its nominee. Each Pledgor will promptly give to the Administrative Agent
copies of any notices or other communications received by it with respect to
Pledged Stock or Pledged Interests registered in the name of such Pledgor and
the Administrative Agent will promptly give to each Pledgor copies of any
notices and communications received by the Administrative Agent with respect to
its Pledged Stock registered in the name of the Administrative Agent or its
nominee.
SECTION 7. RIGHT TO RECEIVE DISTRIBUTIONS ON COLLATERAL.
Unless an Event of Default shall have occurred and be continuing, each
Pledgor shall have the right to receive all dividends, interest and other
payments and distributions made upon or with respect to Collateral pledged by
it hereunder.
If an Event of Default shall have occurred and be continuing, the
Administrative Agent shall have the right receive and to retain as Collateral
hereunder all dividends, interest and other payments and distributions made
upon or with respect to the Collateral and each Pledgor shall take all such
action as the Administrative Agent may deem necessary or appropriate to give
effect to such right. All such dividends, interest and other payments and
distributions which are received by any Pledgor shall be received in trust for
the benefit of the Agents and the Banks and, if the Administrative Agent so
directs shall be segregated from other funds of such Pledgor and shall,
forthwith upon demand by the Administrative Agent, be paid over to the
Administrative Agent as Collateral in the same form as received (with any
necessary endorsement). After all Events of Defaults have been cured, the
Administrative Agent's right to retain
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dividends, interest and other payments and distributions under this Section 7
shall cease and the Administrative Agent shall pay over to each Pledgor any
such Collateral pledged by such Pledgor hereunder retained by the
Administrative Agent during the continuance of an Event of Default.
SECTION 8. RIGHT TO VOTE PLEDGED STOCK AND PLEDGED INTERESTS.
Unless an Event of Default shall have occurred and be continuing, each
Pledgor shall have the right, from time to time, to vote its Pledged Stock and
Pledged Interests and to give consents, ratifications and waivers with respect
to its Pledged Stock and Pledged Interests, and the Administrative Agent shall,
upon receiving a written request from such Pledgor accompanied by a certificate
signed by its principal financial officer stating that no Event of Default has
occurred and is continuing, deliver to such Pledgor or as specified in such
request such proxies, powers of attorney, consents, ratifications and waivers
in respect of any of its Pledged Stock or Pledged Interests which is registered
in the name of the Administrative Agent or its nominee as shall be specified in
such request and be in form and substance satisfactory to the Administrative
Agent.
If an Event of Default shall have occurred and be continuing, the
Administrative Agent shall have the right to the extent permitted by law and
each Pledgor shall take all such action as may be necessary or appropriate to
give effect to such right, to vote and to give consents, ratifications and
waivers, and take any other action with respect to any or all of the Pledged
Stock or Pledged Interests with the same force and effect as if the
Administrative Agent were the absolute and sole owner thereof.
SECTION 9. GENERAL AUTHORITY
Each Pledgor hereby irrevocably appoints the Administrative Agent its
true and lawful attorney, with full power of substitution, in the name of such
Pledgor, the Agents, the Banks or otherwise, for the sole use and benefit of
the Agents and Banks, but at the expense of such Pledgor, to the extent
permitted by law to exercise, at any time and from time to time while an Event
of Default has occurred and is continuing, all or any of the following powers
with respect to all or any of the Collateral:
(a) Each Pledgor agrees that it will not change (i) its name, identity
or corporate structure in any manner or (ii) the location of its chief
executive office unless it shall have given the Administrative Agent not less
than 30 days' prior notice thereof.
(i) to demand, sue for, collect, receive and give acquittance for
any and all monies due or to become due upon or by virtue thereof,
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<PAGE>
(ii) to settle, compromise, compound, prosecute or defend any
action or proceeding with respect thereto,
(iii) to sell, transfer, assign or otherwise deal in or with the
same or the proceeds or avails thereof, as fully and effectually as if
the Administrative Agent were the absolute owner thereof, and
(iv) to extend the time of payment of any or all thereof and to
make any allowance and other adjustments with reference thereto;
provided that the Administrative Agent shall give each Pledgor not
less than ten days' prior notice of the time and place of any sale or other
intended disposition of any of the Collateral pledged by such Pledgor hereunder
except any Collateral which threatens to decline speedily in value or is of a
type customarily sold on a recognized market. The Administrative Agent and each
Pledgor agree that such notice constitutes "reasonable notification" within the
meaning of Section 9-504(3) of the Uniform Commercial Code.
SECTION 10. REMEDIES UPON EVENT OF DEFAULT
If any Event of Default shall have occurred and be continuing, the
Administrative Agent may exercise on behalf of the Banks and the Agents all the
rights of a secured party under the Uniform Commercial Code (whether or not in
effect in the jurisdiction where such rights are exercised) and, in addition,
the Administrative Agent may, without being required to give any notice, except
as herein provided or as may be required by mandatory provisions of law, (i)
apply the cash, if any, then held by it as Collateral as specified in Section
13 and (ii) if there shall be no such cash or if such cash shall be
insufficient to pay all the Secured Obligations in full, sell the Collateral or
any part thereof at public or private sale or at any broker's board or on any
securities exchange, for cash, upon credit or for future delivery, and at such
price or prices as the Administrative Agent may deem satisfactory. Any Bank or
Agent may be the purchaser of any or all of the Collateral so sold at any
public sale (or, if the Collateral is of a type customarily sold in a
recognized market or is of a type which is the subject of widely distributed
standard price quotations, at any private sale). The Administrative Agent is
authorized, in connection with any such sale, if it deems it advisable so to
do, (i) to restrict the prospective bidders on or purchasers of any of the
Pledged Securities to a limited number of sophisticated investors who will
represent and agree that they are purchasing for their own account for
investment and not with a view to the distribution or sale of any of such
Pledged Securities, (ii) to cause to be placed on certificates for any or all
of the Pledged Securities or on any other securities pledged hereunder a legend
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to the effect that such security has not been registered under the Securities
Act of 1933 and may not be disposed of in violation of the provision of said
Act, and (iii) to impose such other limitations or conditions in connection
with any such sale as the Administrative Agent deems necessary or advisable in
order to comply with said Act or any other law. Each Pledgor will execute and
deliver such documents and take such other action as the Administrative Agent
deems necessary or advisable in order that any such sale may be made in
compliance with law. Upon any such sale the Administrative Agent shall have the
right to deliver, assign and transfer to the purchaser thereof the Collateral
so sold. Each purchaser at any such sale shall hold the Collateral so sold
absolutely and free from any claim or right of whatsoever kind, including any
equity or right of redemption of any Pledgor which may be waived, and each
Pledgor, to the extent permitted by law, hereby specifically waives all rights
of redemption, stay or appraisal which it has or may have under any law now
existing or hereafter adopted. The notice (if any) of such sale required by
Section 9 shall (1) in the case of a public sale, state the time and place
fixed for such sale, (2) in the case of a sale at a broker's board or on a
securities exchange, state the board or exchange at which such sale is to be
made and the day on which the Collateral, or the portion thereof so being sold,
will first be offered for sale at such board or exchange, and (3) in the case
of a private sale, state the day after which such sale may be consummated. Any
such public sale shall be held at such time or times within ordinary business
hours and at such place or places as the Administrative Agent may fix in the
notice of such sale. At any such sale the Collateral may be sold in one lot as
an entirety or in separate parcels, as the Administrative Agent may determine.
The Administrative Agent shall not be obligated to make any such sale pursuant
to any such notice. The Administrative Agent may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for the
sale, and such sale may be made at any time or place to which the same may be
so adjourned. In the case of any sale of all or any part of the Collateral on
credit or for future delivery, the Collateral so sold may be retained by the
Administrative Agent until the selling price is paid by the purchaser thereof,
but the Administrative Agent shall not incur any liability in the case of the
failure of such purchaser to take up and pay for the Collateral so sold and, in
the case of any such failure, such Collateral may again be sold upon like
notice. The Administrative Agent, instead of exercising the power of sale
herein conferred upon it, may proceed by a suit or suits at law or in equity to
foreclose the Security Interests and sell the Collateral, or any portion
thereof, under a judgment or decree of a court or courts of competent
jurisdiction.
Notwithstanding any provision of this Agreement to the contrary, (i)
enforcement of the security interest granted hereby in the Pledged Securities
and the exercise of any right or remedy with respect to any of the shares of
Pledged Securities and the
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grant of any pledge pursuant to Section 5(c) shall be subject to prior approval
of the various automobile franchisors with whom the Pledgor or any of its
Affiliates has franchise agreements pursuant to which such enforcement, or
exercise of any remedy or right, or grant, without prior approval from such
automobile franchisors may result in the termination of one or more of such
franchise agreements and (ii) the enforcement of the security interest granted
hereby in the shares of Atlantic Auto Finance Corporation pledged hereunder and
the exercise of any right or remedy with respect thereto shall be subject to
the prior consent of the requisite financing parties with whom Atlantic Auto
Finance Corporation has financing agreements set forth on Schedule IV hereto to
the extent such enforcement or exercise of any remedy or right without prior
approval from such financing parties may result in a default under one or more
of such agreements.
SECTION 11. EXPENSES
Each Pledgor agrees that it will forthwith upon demand pay to the
Administrative Agent:
(i) the amount of any taxes which the Administrative Agent may
have been required to pay by reason of the Security Interests or to
free any of the Collateral of such Pledgor from any Lien thereon,
and
(ii) the amount of any and all out-of-pocket expenses,
including the reasonable fees and disbursements of counsel and of
any other experts, which the Administrative Agent may incur in
connection with (w) the administration or enforcement of this
Agreement, including such expenses as are incurred to preserve the
value of the Collateral and the validity, perfection, rank and value
of any Security Interest, (x) the collection, sale or other
disposition of any of the Collateral, (y) the exercise by the
Administrative Agent of any of the rights conferred upon it
hereunder or (z) any Default or Event of Default.
Any such amount not paid on demand shall bear interest at the rate
applicable to Base Rate Loans plus 2% and shall be an additional Secured
Obligation hereunder.
SECTION 12. LIMITATION ON DUTY OF ADMINISTRATIVE AGENT IN RESPECT OF COLLATERAL.
Beyond the exercise of reasonable care in the custody thereof, the
Administrative Agent shall have no duty as to any Collateral in its possession
or control or in the possession or control of any agent or bailee or any income
thereon or as to the preservation of rights against prior parties or any other
rights
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<PAGE>
pertaining thereto. The Administrative Agent shall be deemed to have exercised
reasonable care in the custody and preservation of the Collateral in its
possession if the Collateral is accorded treatment substantially equal to that
which it accords its own property, and shall not be liable or responsible for
any loss or damage to any of the Collateral, or for any diminution in the value
thereof, by reason of the act or omission of any agent or bailee selected by
the Administrative Agent in good faith and with reasonable care.
SECTION 13. APPLICATION OF PROCEEDS
Upon the occurrence and during the continuance of an Event of Default,
the proceeds of any sale of, or other realization upon, all or any part of the
Collateral pledged by any Pledgor hereunder and any cash held shall be applied
by the Administrative Agent in the following order of priorities:
first, to payment of the expenses of such sale or other realization,
including reasonable compensation to agents and counsel for the
Administrative Agent, and all expenses, liabilities and advances incurred
or made by the Administrative Agent in connection therewith, and any other
unreimbursed expenses for which the Agents or any Bank is to be reimbursed
by such Pledgor pursuant to Section 10.3 and Article 9 of the Credit
Agreement or Section 11 hereof;
second, to the ratable payment of unpaid principal of the Secured
Obligations of such Pledgor;
third, to the ratable payment of accrued but unpaid interest on the
Secured Obligations of such Pledgor in accordance with the provisions of
the Credit Agreement;
fourth, to the ratable payment of all other Secured Obligations of
such Pledgor, until all Secured Obligations of such Pledgor shall have been
paid in full; and
finally, to payment to such Pledgor, or as a court of competent
jurisdiction may direct, of any surplus then remaining from such proceeds.
The Administrative Agent may make distributions hereunder in cash or
in kind or, on a ratable basis, in any combination thereof.
SECTION 14. CONCERNING THE ADMINISTRATIVE AGENT
The provisions of Article VII of the Credit Agreement shall inure to
the benefit of the Administrative Agent in respect of this Agreement and shall
be binding upon the parties to the Credit Agreement in such respect. In
furtherance and not in derogation of the rights, privileges and immunities of
the Administrative Agent therein set forth:
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(a) The Administrative Agent is authorized to take all such action as
is provided to be taken by it as Administrative Agent hereunder and all other
action reasonably incidental thereto. As to any matters not expressly provided
for herein (including, without limitation, the timing and methods of
realization upon the Collateral) the Administrative Agent shall act or refrain
from acting (i) in accordance with the request of the Required Banks or (ii) if
the Loans have been declared due and payable by the Documentation Agent in
accordance with Section 6.1 of the Credit Agreement, in accordance with written
instructions from the Required Banks or, in the absence of such instructions,
in accordance with its discretion.
(b) The Administrative Agent shall not be responsible for the
existence, genuineness or value of any of the Collateral or for the validity,
perfection, priority or enforceability of the Security Interests in any of the
Collateral, whether impaired by operation of law or by reason of any action or
omission to act on its part hereunder. The Administrative Agent shall have no
duty to ascertain or inquire as to the performance or observance of any of the
terms of this Agreement by any Pledgor.
SECTION 15. APPOINTMENT OF CO-ADMINISTRATIVE AGENTS
At any time or times, in order to comply with any legal requirement in
any jurisdiction, the Administrative Agent may appoint another bank or trust
company or one or more other persons, either to act as co-agent or co-agents,
jointly with the Administrative Agent, or to act as separate agent or agents on
behalf of the Agents and the Banks with such power and authority as may be
necessary for the effectual operation of the provisions hereof and may be
specified in the instrument of appointment (which may, in the discretion of the
Administrative Agent, include provisions for the protection of such co-agent or
separate agent similar to the provisions of Section 14).
SECTION 16. TERMINATION OF SECURITY INTERESTS;
Release of Collateral
Upon the repayment in full of all Secured Obligations and the
termination of the Commitments under the Credit Agreement, the Security
Interests shall terminate and all rights to the Collateral pledged by each
Pledgor hereunder shall revert to such Pledgor. At any time and from time to
time prior to such termination of the Security Interests, the Administrative
Agent may release any of the Collateral upon the terms set forth in Section
10.5 of the Credit Agreement. Upon any such termination of the Security
Interests or release of Collateral, the Administrative Agent will, at the
expense of the respective Pledgor, execute and deliver to such Pledgor such
documents as such Pledgor shall reasonably request to evidence the termination
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of the Security Interests or the release of such Collateral, as the case may
be.
SECTION 17. NOTICES
All notices hereunder shall be given in accordance with Section 10.1
of the Credit Agreement.
SECTION 18. WAIVERS, NON-EXCLUSIVE REMEDIES
No failure on the part of the Administrative Agent to exercise, and no
delay in exercising and no course of dealing with respect to, any right under
this Agreement shall operate as a waiver thereof; nor shall any single or
partial exercise by the Administrative Agent of any right under the Credit
Agreement or this Agreement preclude any other or further exercise thereof or
the exercise of any other right. The rights in this Agreement and the Credit
Agreement are cumulative and are not exclusive of any other remedies provided
by law.
SECTION 19. SUCCESSORS AND ASSIGNS
This Agreement is for the benefit of the Agents and the Banks and
their permitted successors and assigns, and in the event of an assignment of
all or any of the Secured Obligations, the rights hereunder, to the extent
applicable to the indebtedness so assigned, shall be transferred with such
indebtedness. This Agreement shall be binding on each Pledgor and its
successors and assigns.
SECTION 20. CHANGES IN WRITING
Neither this Agreement nor any provision hereof may be changed,
waived, discharged or terminated orally, but only in writing signed by each
Pledgor to be bound thereby and the Administrative Agent with the consent of
the Required Banks.
SECTION 21. NEW YORK LAW
This Agreement shall be construed in accordance with and governed by
the laws of the State of New York, except as otherwise required by mandatory
provisions of law and except to the extent that remedies provided by the laws
of any jurisdiction other than New York are governed by the laws of such
jurisdiction.
SECTION 22. SEVERABILITY
If any provision hereof is invalid or unenforceable in any
jurisdiction, then, to the fullest extent permitted by law, (i) the other
provisions hereof shall remain in full force and effect in such jurisdiction
and shall be construed in order to carry out the intentions of the parties
hereto as nearly as may be possible; and (ii) the invalidity or
unenforceability of any
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provision hereof in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction.
SECTION 23. WAIVER OF JURY TRIAL.
EACH PLEDGOR HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 24. COUNTERPARTS.
This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
UNITED AUTO GROUP, INC.
By: /s/ Philip N. Smith, Jr.
-------------------------------
Title: Vice President
UNITED LANDERS, INC.
By: /s/ Philip N. Smith, Jr.
-------------------------------
Title: Vice President
DIFEO PARTNERSHIP, INC.
By: /s/ Philip N. Smith, Jr.
-------------------------------
Title: Vice President
UAG WEST, INC.
By: /s/ Philip N. Smith, Jr.
-------------------------------
Title: Vice President
LANDERS AUTO SALES, INC.
By: /s/ Philip N. Smith, Jr.
-------------------------------
Title: Vice President
UAG ATLANTA, INC.
By: /s/ Philip N. Smith, Jr.
-------------------------------
Title: Vice President
UAG ATLANTA IV, INC.
By: /s/ Philip N. Smith, Jr.
-------------------------------
Title: Vice President
UAG NORTHEAST, INC.
By: /s/ Philip N. Smith, Jr.
-------------------------------
Title: Vice President
DIFEO PARTNERSHIP HCT, INC.
By: /s/ Philip N. Smith, Jr.
-------------------------------
Title: Vice President
HUDSON TOYOTA, INC.
By: /s/ Philip N. Smith, Jr.
-------------------------------
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Title: Vice President
DIFEO PARTNERSHIP VIII, INC.
By: /s/ Philip N. Smith, Jr.
-------------------------------
Title: Vice President
DIFEO PARTNERSHIP IX, INC.
By: /s/ Philip N. Smith, Jr.
-------------------------------
Title: Vice President
DIFEO PARTNERSHIP SCT, INC.
By: /s/ Philip N. Smith, Jr.
-------------------------------
Title: Vice President
SOMERSET MOTORS, INC.
By: /s/ Philip N. Smith, Jr.
-------------------------------
Title: Vice President
DIFEO PARTNERSHIP RCT, INC.
By: /s/ Philip N. Smith, Jr.
-------------------------------
Title: Vice President
UAG NORTHEAST (NY), INC.
By: /s/ Philip N. Smith, Jr.
-------------------------------
Title: Vice President
DIFEO PARTNERSHIP RCM, INC.
By: /s/ Philip N. Smith, Jr.
-------------------------------
Title: Vice President
SCOTTSDALE AUDI, LTD.
By: /s/ Philip N. Smith, Jr.
-------------------------------
Title: Vice President
SK MOTORS, LTD.
By: /s/ Philip N. Smith, Jr.
-------------------------------
Title: Vice President
UAG TEXAS, INC.
By: /s/ Philip N. Smith, Jr.
-------------------------------
Title: Vice President
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UAG TEXAS II, INC.
By: /s/ Philip N. Smith, Jr.
-------------------------------
Title: Vice President
THE BANK OF NOVA SCOTIA,
as Administrative Agent
By: /s/ Brian Allen
-------------------------------
Title: Senior Relationship
Manager
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Schedule I
Pledged Stock
-------------
Issuers Stock Pledged Hereunder
-------------------------------
Percentage
Issuer of Pledged No. of of Shares
Pledgor Stock Class Shares Issued
- ------- ----- ----- ------ ------
Borrower United Landers, Inc. Common Stock 100 100%
Borrower Atlantic Auto Finance Common Stock 43,500 100%
Corporation
ULI Landers Auto Sales, Inc. Common Stock 10 100%
DPI DiFeo Partnership HCT, Common Stock 100 100%
Inc.
DPI DiFeo Partnership RCT, Common Stock 100 100%
Inc.
DPI DiFeo Partnership RCM, Common Stock 100 100%
Inc.
DPI DiFeo Partnership SCT, Common Stock 100 100%
Inc.
DPI DiFeo Partnership VIII, Common Stock 100 100%
Inc.
DPI DiFeo Partnership IX, Common Stock 100 100%
Inc.
Borrower DiFeo Partnership X, Inc. Common Stock 100 100%
Borrower UAG Northeast (NY), Inc. Common Stock 100 100%
DPI Hudson Toyota, Inc. Common Stock 45 100%
DPI Somerset Motors, Inc. Common Stock 100 100%
Borrower UAG West, Inc. Common Stock 100 100%
UAG West SA Automotive, Ltd. Common Stock 1,713,010 100%
UAG West SL Automotive, Ltd. Common Stock 625,000 100%
UAG West SPA Automotive, Common Stock 547,125 100%
<PAGE>
Ltd.
UAG West LRP, Ltd. Common Stock 500,000 100%
UAG West Sun BMW, Ltd. Common Stock 900,000 100%
UAG West 6725 Dealership, Ltd. Common Stock 1,250 100%
UAG West Scottsdale Management Common Stock 101,251 100%
Group, Ltd.
UAG West Scottsdale Audi, Ltd. Common Stock 100 100%
LAS Landers United Auto Common Stock 10 100%
Group, Inc.
LAS Landers United Auto Common Stock 10 100%
Group No. 2, Inc.
LAS Landers United Auto Common Stock 10 100%
Group No. 3, Inc.
Borrower UAG Atlanta, Inc. Common Stock 100 100%
UAG Atlanta Toyota, Inc. Common Stock 1,000 100%
Atlanta
Borrower UAG Atlanta IV, Inc. Common Stock 100 100%
UAG UAG Atlanta IV Motors, Common Stock 1,001 100%
Atlanta Inc.
IV
(fka Charles Evans BMW,
Inc.)
Borrower UAG Texas, Inc. Common Stock 100 100%
Borrower UAG Texas II, Inc. Common Stock 100 100%
Borrower United AutoCare, Inc. Common Stock 100 100%
Borrower United AutoCare Common Stock 100 100%
Products, Inc.
Borrower UAG Capital Common Stock 100 100%
Management, Inc.
<PAGE>
Pledged Instruments
-------------------
Original
Issuer of Pledged Principal
Pledgor Instrument Issue Date Amount
- ------- ---------- ---------- ------
Borrower UAG Atlanta II, Inc. May 1, 1996 $11,450,000
Borrower UAG Atlanta III, Inc. July 12, 1996 $11,000,000
<PAGE>
Schedule II
Pledged Interests
-----------------
Partnership
Interest Pledged
Pledgor Partnership Hereunder
- ------- ----------- ---------
DPI Fair Hyundai Partnership 70%
UAG Northeast Fair Hyundai Partnership 30%
DPI Fair Chevrolet-Geo Partnership 70%
UAG Northeast Fair Chevrolet-Geo Partnership 30%
DPI Danbury Auto Partnership 70%
UAG Northeast Danbury Auto Partnership 30%
DPI Danbury Chrysler Plymouth Partnership 70%
UAG Northeast Danbury Chrysler Plymouth Partnership 30%
DPI HCT Hudson Motors Partnership 70%
Hudson Toyota Hudson Motors Partnership 30%
DPI DiFeo Hyundai Partnership 70%
UAG Northeast DiFeo Hyundai Partnership 30%
DPI J&F Oldsmobile Partnership 70%
UAG Northeast J&F Oldsmobile Partnership 30%
DPI DiFeo Chevrolet-Geo Partnership 70%
UAG Northeast DiFeo Chevrolet-Geo Partnership 30%
DPI DiFeo Chrysler Plymouth Jeep Eagle 70%
Partnership
UAG Northeast DiFeo Chrysler Plymouth Jeep Eagle 30%
Partnership
DPI VIII OCT Partnership 70%
UAG Northeast OCT Partnership 30%
DPI IX OCM Partnership 70%
UAG Northeast OCM Partnership 30%
DPI SCT Somerset Motors Partnership 70%
Somerset Motors Somerset Motors Partnership 30%
DPI DiFeo BMW Partnership 70%
UAG Northeast DiFeo BMW Partnership 30%
DPI RCT Country Auto Group Partnership 70%
UAG Northeast (NY) Country Auto Group Partnership 30%
DPI RCM Rockland Motors Partnership 70%
UAG Northeast (NY) Rockland Motors Partnership 30%
SA 6725 Agent Partnership 50%
SK Motors 6725 Agent Partnership 50%
UAG Texas Shannon Automotive, Ltd. 99%
UAG Texas II Shannon Automotive, Ltd. 1%
DPI DiFeo Leasing Partnership 70%
UAG Northeast DiFeo Leasing Partnership 30%
<PAGE>
Schedule III
UCC Filing Locations
--------------------
- -------------------------------------------------------------------------------
DEBTOR FILING LOCATION(S)
- -------------------------------------------------------------------------------
United Auto Group, Inc. New York Secretary of State
New York City Register
- -------------------------------------------------------------------------------
United Landers, Inc. New York Secretary of State
New York City Register
Arkansas Secretary of State
Saline County Clerk
Pulaski County Clerk
Garland County Clerk
- -------------------------------------------------------------------------------
DiFeo Partnership, Inc. New York Secretary of State
New York City Register
Rockland County Clerk
New Jersey Secretary of State
Hudson County Clerk
Ocean County Clerk
Somerset County Clerk
Bergen County Clerk
Connecticut Secretary of State
Town of Danbury Clerk
- -------------------------------------------------------------------------------
UAG West, Inc. New York Secretary of State
New York City Register
Arizona Secretary of State
Maricopa County Clerk
- -------------------------------------------------------------------------------
Landers Auto Sales, Inc. New York Secretary of State
New York City Register
Arkansas Secretary of State
Saline County Clerk
Pulaski County Clerk
Garland County Clerk
- -------------------------------------------------------------------------------
UAG Atlanta, Inc. New York Secretary of State
New York City Register
Gwinnett County Clerk
- -------------------------------------------------------------------------------
UAG Atlanta IV, Inc. New York Secretary of State
New York City Register
Gwinnett County Clerk
<PAGE>
- -------------------------------------------------------------------------------
UAG Northeast, Inc. New York Secretary of State
New York City Register
Rockland County Clerk
New Jersey Secretary of State
Hudson County Clerk
Ocean County Clerk
Connecticut Secretary of State
Town of Danbury Clerk
- -------------------------------------------------------------------------------
DiFeo Partnership HCT, Inc. New York Secretary of State
New York City Register
New Jersey Secretary of State
Hudson County Clerk
- -------------------------------------------------------------------------------
Hudson Toyota, Inc. New York Secretary of State
New York City Register
New Jersey Secretary of State
Hudson County Clerk
- -------------------------------------------------------------------------------
DiFeo Partnership VIII, Inc. New York Secretary of State
New York City Register
New Jersey Secretary of State
Hudson County Clerk
Ocean County Clerk
- -------------------------------------------------------------------------------
DiFeo Partnership IX, Inc. New York Secretary of State
New York City Register
New Jersey Secretary of State
Hudson County Clerk
Ocean County Clerk
- -------------------------------------------------------------------------------
DiFeo Partnership SCT, Inc. New York Secretary of State
New York City Register
New Jersey Secretary of State
Hudson County Clerk
Somerset County Clerk
- -------------------------------------------------------------------------------
DiFeo Partnership RCT, Inc. New York Secretary of State
New York City Register
Rockland County Clerk
New Jersey Secretary of State
Hudson County Clerk
- -------------------------------------------------------------------------------
Somerset Motors, Inc. New York Secretary of State
New York City Register
New Jersey Secretary of State
Hudson County Clerk
Somerset County Clerk
- -------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
UAG Northeast (NY), Inc. New York Secretary of State
New York City Register
Rockland County Clerk
- -------------------------------------------------------------------------------
DiFeo Partnership RCM, Inc. New York Secretary of State
New York City Register
Rockland County Clerk
New Jersey Secretary of State
Hudson County Clerk
- -------------------------------------------------------------------------------
Scottsdale Audi, Ltd. Arizona Secretary of State
Maricopa County Clerk
- -------------------------------------------------------------------------------
SK Motors, Ltd. Arizona Secretary of State
Maricopa County Clerk
- -------------------------------------------------------------------------------
UAG Texas, Inc. New York Secretary of State
New York City Register
Texas Secretary of State
Houston County Clerk
- -------------------------------------------------------------------------------
UAG Texas II, Inc. New York Secretary of State
New York City Register
Texas Secretary of State
Houston County Clerk
- -------------------------------------------------------------------------------
<PAGE>
Schedule IV
Atlantic Auto Financing Agreements
----------------------------------
1. Support Agreement, dated as of June 28, 1995, between the Borrower
and Atlantic Auto Funding Corporation. (This agreement may not be modified
without the consent of Financial Security Assurance Inc.)
2. Support Agreement, dated as of June 14, 1996, between the Borrower
and Atlantic Auto Second Funding Corporation.
<PAGE>
BANK OF AMERICA AUTOMOBILE FLOORING
AND SECURITY AGREEMENT
==============================================================================
This Agreement dated as of March 6, 1997, is between Bank of America National
Trust and Savings Association, successor by merger to Bank of America Arizona
(the "Bank") and Shannon Automotive, Ltd. (the "Borrower").
1. DEFINITIONS In addition to the terms which are defined elsewhere in this
Agreement, the following terms have the meanings indicated for the purposes of
this Agreement:
"ADVANCE" means an advance made to the Borrower or on the Borrower's behalf
under this Agreement.
"BANKING DAY" means a day other than a Saturday or a Sunday on which the Bank
is open for business in Arizona. All payments and disbursements which would be
due on a day which is not a Banking Day will be due on the next Banking Day.
All payments received on a day which is not a Banking Day will be applied to
the credit on the next Banking Day.
"COLLATERAL" means the collateral required by Article 4 of this Agreement.
"COMMERCIAL VEHICLE" means a Vehicle of more than 1-1/2 ton rated capacity.
"DEALER TRADE" means a New Vehicle obtained by the Borrower from another dealer
in trade.
"DEMO" means any New Vehicle which is designated by the Borrower with the
consent of the Bank to be used as a demonstration unit.
"FLEET SALE" means (a) an agreement by the Borrower to sell more than one
Vehicle to the same purchaser, or (b) a series of sales by the Borrower of more
than one Vehicle to the same purchaser, unless the amount due from the
purchaser for each Vehicle is paid in full before the next Vehicle is sold.
"FLEET SALE PURCHASE CONTRACT" means the contract or contracts between the
Borrower and the purchaser under a Fleet Sale, including any delivery
agreement, purchase order, or other document evidencing the Fleet Sale and its
terms.
"NEW VEHICLE" means a Vehicle which has never been owned except by a
manufacturer, distributor or dealer, has never been registered; and has not
been driven more than 400 miles.
<PAGE>
"NON-COMMERCIAL VEHICLE" means a Vehicle which is not a Commercial Vehicle.
"PAYMENT COMMITMENT" means a commitment entered into between the Bank and a
manufacturer or distributor, providing for payment of funds directly by the
Bank to the manufacturer or distributor in payment for the purchase of a New
Vehicle by the Borrower.
"PROGRAM VEHICLE" means a Used Vehicle which is obtained directly from the
manufacturer or distributor, which is from the current or prior model year, and
which has mileage not in excess of 25,000 miles.
"RENTAL VEHICLE" means a Vehicle which is held by the Borrower for short-term
rentals, which short-term rentals shall not exceed two (2) weeks.
"REFERENCE RATE" is the rate of interest publicly announced from time to time
by Bank of America National Trust and Savings Association ("BofA California")
as its "reference rate". The Reference Rate is set by BofA California based on
various factors, including BofA California's costs and desired return, general
economic conditions and other factors, and is used as a reference point for
pricing some loans. The Bank and BofA California may price loans to its
customers at, above, or below the Reference Rate. Any change in the Reference
Rate will take effect at the opening of business on the day specified in the
public announcement of a change in BofA California's Reference Rate.
"RECREATIONAL VEHICLE" ("RV") means a vehicular-type unit primarily designed as
temporary living quarters for recreational, camping, travel, or seasonal use
that either has its own motive power or is mounted on, or towed by, another
vehicle.
"RELATED PRINCIPAL PORTION" means, with respect to each Vehicle, the amount of
principal advanced under this Agreement to finance that Vehicle.
"USED VEHICLE" means a Vehicle other than a New Vehicle.
"VEHICLE" means an automobile or truck which satisfies the following
requirements:
(a) The vehicle is owned by the Borrower free of any title defects or any
liens or interests of others except the security interest in favor of the
Bank and other liens to which the Bank consents in writing.
(b) Unless the vehicle is a Demo or is in transit from the seller, it is
permanently located at locations which the Borrower has disclosed to the
Bank and which are acceptable to the Bank. If the vehicle is in transit
from a seller, then upon receipt by the Borrower it will
-2-
<PAGE>
be permanently located at such locations disclosed to the Bank.
(c) The vehicle is held for sale in the ordinary course of the Borrower's
business and is of good and merchantable quality.
(d) The vehicle is otherwise acceptable to the Bank.
2. LINE OF CREDIT AMOUNT AND TERMS
2.1. COMMITMENT. During the availability period described below, upon the
specific request of the Borrower or pursuant to a Payment Commitment, the Bank
will make Advances to the Borrower to finance Vehicles. Each Advance must be
used for one of the purposes described in this Agreement. The amount of the
line of credit (the "Commitment") is Twenty Million and No/100 Dollars
($20,000,000.00). The Borrower agrees not to permit the outstanding principal
balance of the line of credit to exceed the Commitment.
2.2. AVAILABILITY PERIOD. The line of credit is available between the date of
this Agreement and April 30, 1998 (the "Expiration Date") unless the Borrower
is in default.
2.3. PURPOSE OF ADVANCES. Advances may be made: (a) to finance the acquisition
of New Vehicles and Program Vehicles directly from the manufacturer or
distributor pursuant to a Payment Commitment; (b) to finance the acquisition of
New Vehicles through Dealer Trades; (c) to finance other New Vehicles owned by
the Borrower; or (d) to finance Used Vehicles owned or acquired by the
Borrower.
2.4. ADVANCES FOR NEW NON-COMMERCIAL VEHICLES.
(a) The principal amount of Advances made to finance New Non-Commercial
Vehicles, (including Advances for Demos under Paragraph 2.6 below, and
including Fleet Sales) shall not exceed Seventeen Million and No/100
Dollars ($17,000,000.00) outstanding at any one time.
(b) The principal amount of Advances outstanding at any one time made to
finance New Non-Commercial Vehicles (including Demos and including Fleet
Sales) from the manufacturers or distributors listed below shall not
exceed the dollar limits stated below. (Advances shall not be made with
respect to New Non-Commercial Vehicles from manufacturers or distributors
not listed below without the prior consent of the Bank.)
Manufacturer/Distributor Dollar Amount Within Line Fleet Limit
- ------------------------ ------------- -----------------------
Dodge $9,000,000.00 ($5,000,000.00)
Chrysler/Plymouth/Jeep/Eagle $8,000,000.00 ($3,500,000.00)
-3-
<PAGE>
(c) Each Advance to finance New Non-Commercial Vehicles shall not exceed an
amount equal to one hundred percent (100%) of the amount of the invoice
for the Vehicles. In the case of Dealer Trades, the Advance shall not
exceed an amount equal to one hundred percent (100%) of the acquisition
cost for the Dealer Trade.
2.5. ADVANCES FOR RENTAL VEHICLES.
(a) The principal amount of Advances made to finance Rental Vehicles shall not
exceed Five Hundred Thousand and No/100 Dollars ($500,000.00) outstanding
at any one time.
(b) The principal amount of Advances outstanding at any one time made to
finance Rental Vehicles from the manufacturers or distributors listed
below shall not exceed the following dollar limits (advances shall not be
made with respect to Rental Vehicles from manufacturers or distributors
not listed below without prior written consent of the Bank):
Manufacturer Dollar Amount
- ------------ -------------
Dodge/Chrysler/Plymouth/Jeep/Eagle $500,000.00
(c) Each Advance to finance New Rental Vehicles will be One Hundred percent
(100%) of manufacturers invoice.
(d) Each Advance to finance Used Rental Vehicles shall not exceed the lesser
of One Hundred percent (100%) of acquisition cost or eighty percent (80%)
of wholesale value as determined by the Bank.
2.6. ADVANCES FOR DEMOS.
(a) The principal amount of Advances made to finance Demos shall not exceed
Seven Hundred Thousand and No/100 Dollars ($700,000.00) outstanding at any
one time.
(b) Within the foregoing limit, the principal amount of Advances outstanding
at any one time made to finance Demos from the manufacturers or
distributors listed below shall not exceed the dollar limits stated below,
and the Borrower shall have no more than the number of Demos indicated
from that Manufacturer/Distributor at any one time.
Manufacturer/Distributor Number of Demos Dollar Amount
- ------------------------ --------------- -------------
Dodge 10 $200,000.00
Chrysler/Plymouth/Jeep/Eagle 25 $500,000.00
(c) The Borrower shall have no more than 35 Demos at any one time.
-4-
<PAGE>
(d) Each Advance to finance a Demo shall be subject to the percent limitations
stated in subparagraph 2.4(c) above.
2.7. ADVANCES FOR NEW COMMERCIAL VEHICLES. No New Commercial Vehicles may be
financed under this Agreement.
2.8. ADVANCES FOR USED VEHICLES.
(a) The principal amount of Advances made to finance Used Vehicles shall not
exceed Five Hundred Thousand and No/100 Dollars ($500,000.00) outstanding
at any one time.
(b) Each Advance to finance Used Vehicles shall not exceed the lesser of
eighty percent (80%) of wholesale value as determined by the Bank or 100%
of acquisition cost. As a condition precedent for Used Vehicles to be
eligible for financing by Bank, Used Vehicles must be: (i) listed in a
current used car guide acceptable to the Bank; and (ii) aged less than
five (5) years of current model year.
2.9. ADVANCES FOR PROGRAM VEHICLES.
(a) The principal amount of Advances made to finance Program Vehicles shall
not exceed the amount outstanding at any one time as indicated from that
Manufacturer/Distributor listed below:
Manufacturer/Distributor Amount
- ------------------------ ------
Dodge $1,000,000.00
Chrysler/Plymouth/Jeep/Eagle $1,000,000.00
(b) Each Advance to finance Program Vehicles shall not exceed an amount equal
to one hundred percent (100%) of the amount of invoice for the Program
Vehicles.
Notwithstanding the above paragraphs 2.4, 2.5, 2.6, 2.8 and 2.9, at
the Bank's sole option, Bank may redistribute the above dollar limits
referenced in paragraphs 2.4, 2.5, 2.6, 2.8 and 2.9.
2.10. ADVANCES FOR USED COMMERCIAL VEHICLES. No Used Vehicle which is
Commercial Vehicle may be financed under this Agreement.
2.11. ADVANCES FOR FLEET SALES. In addition to the requirements set forth
above, for Fleet Sales of Non-Commercial Vehicles with a total consideration of
Five Hundred Thousand and No/100 Dollars ($500,000.00) or more, the Borrower
shall provide to the Bank a copy of the Fleet Sale Purchase Contract and an
executed Bank form Assignment of Proceeds covering the Fleet Sale immediately
following consummation of the Fleet Sale Purchase Contract. Such Assignment of
Proceeds may require special language acceptable to the Bank if the Borrower
has executed a power of attorney allowing the fleet purchaser to order Vehicles
directly from the manufacturer.
-5-
<PAGE>
2.12. ADVANCES IN EXCESS OF LIMITATIONS. The Bank shall have no obligation to
make an Advance which would cause the principal amount outstanding under this
Agreement to exceed the Commitment or any of the other limitations stated in
this Agreement; including, without limitation, Advances made pursuant to a
Payment Commitment or in response to a specific request by the Borrower.
Notwithstanding the foregoing, the Borrower shall remain liable for any
Advances in excess of such limitations. Upon demand by the Bank, the Borrower
shall immediately pay to the Bank the amount of any excess over such
limitations.
2.13. PAYMENT COMMITMENT. The Bank is authorized to make Advances on the
Borrower's behalf directly to individual manufacturers or distributors of
Vehicles listed above, in accordance with the terms and conditions of the
Payment Commitment agreed to between the Bank and each manufacturer or
distributor. The Bank may revise, terminate or suspend a Payment Commitment at
any time by giving written notice to the manufacturer or distributor. The
Borrower shall remain liable to the Bank for all payments made to a
manufacturer or distributor pursuant to a Payment Commitment.
2.14. AUTHORIZATION. The Borrower authorizes and requests the Bank to furnish
each manufacturer or distributor listed above information reflecting the
flooring line of credit provided by this Agreement. The Bank is further
instructed and authorized to advise said manufacturer or distributor of any
change or termination which may occur with respect to said flooring line of
credit.
2.15. DEMONSTRATION VEHICLES; USED VEHICLES.
(a) The Borrower may designate certain Vehicles financed under this Agreement
as Demos, in accordance with procedures and criteria established by the
Bank. Unless otherwise stipulated by the Bank in writing, the Bank shall
have the right to inspect each demo at least monthly.
(b) For each Demo with mileage in excess of 6,000 miles, the Borrower shall
repay the Related Principal Portion in monthly installments on the
fifteenth (15th) day of each month following the date that the mileage on
the applicable Demo reaches 6,000. Each installment shall be in an amount
equal to three percent (3%) of the original amount of the Related
Principal Portion of the applicable Demo. Notwithstanding what may
otherwise be provided in this paragraph 2.15, any remaining unpaid
amount(s) of the Related Principal Portion shall be repaid in full in
accordance with the provisions of paragraph 2.16 below.
(c) Demos shall be used only for demonstration purposes and shall at all
times be under the direct control of the Borrower; provided, however,
that the Borrower may allow
-6-
<PAGE>
a prospective purchaser to use a Demo. The Borrower assumes full
responsibility for the use, operation, maintenance and care of Demos,
including all damage thereto, and assumes full responsibility of loss.
(d) Except as modified in this paragraph, all other provisions of this
Agreement shall apply to Demos.
(e) The Borrower agrees that no Used Vehicle financed under this Agreement
other than a Demo shall be driven more than 6,000 additional miles over
the mileage at the time it is acquired by the Borrower.
2.16. PRINCIPAL PAYMENTS. The Borrower will repay in full all principal
outstanding under this Agreement on the earlier of the Expiration Date or the
date(s) determined as follows:
(a) For Advances made to finance New Non-commercial Vehicles (except Fleet
Sales): For each financed Vehicle, the Borrower shall pay the Bank the
Related Principal Portion by the earlier of (i) three (3) Banking Days
following receipt of proceeds from sale of the Vehicle, or (ii) ten (10)
Banking Days following the date of the sale of the Vehicle. If the
Vehicle is not earlier sold, a monthly principal reduction equal to ten
percent (10%) of the Related Principal Portion will be paid by the
Borrower on the fifteenth (15th) day of the next calendar month with
respect to any New Vehicle with an unpaid balance at the end of three
hundred sixty (360) calendar days from the original date of Advance for
such Vehicle and continue for ninety (90) days until a seventy percent
(70%) Loan to Original Value is achieved at which time no curtailments
will be due for ninety (90) days at the end of such period the vehicle(s)
must be paid off in full.
(b) For Advances made to finance Used Non-commercial Vehicles, including
Program Vehicles: For each financed Vehicle, the Borrower shall pay the
Bank the Related Principal Portion by the earlier of (i) three (3)
Banking Days following receipt of proceeds from sale of the Vehicle, or
(ii) ten (10) Banking Days following the date of sale of the Vehicle. If
the Vehicle is not earlier sold, a monthly principal reduction equal to
ten percent (10%) of the Related Principal Portion will be paid by
Borrower on the fifteenth day of the next month with respect to any Used
or Program Vehicle with an unpaid balance at the end of ninety (90)
calendar days from the original date of Advance for such Vehicle. If any
Related Principal Portion remains after one hundred eighty (180) calendar
days from the original date of Advance for any such Vehicle, the Borrower
shall pay the Bank the remaining Related Principal Portion.
-7-
<PAGE>
(c) For Fleet Sales: For each financed Vehicle sold, as part of a Fleet Sale,
the Borrower shall pay the Bank the Related Principal Portion by the
earliest of:
(i) For Harris County, Texas only: (1) the next two (2) Banking Days
following receipt of proceeds from sale of the Vehicle, (2)
forty-five (45) calendar days following the date of sale of the
Vehicle, or (3) the date specified for payment for the Vehicles
by the purchaser in the Fleet Sale Purchase Contract.
(ii) All other Fleet Sales: (1) the next two (2) Banking Days
following receipt of proceeds from sale of the Vehicle, (2)
thirty (30) calendar days following the date of sale of the
Vehicle, or (3) the date specified for payment for the Vehicles
by the purchaser in the Fleet Sale Purchase Contract.
(d) For Advances made to finance Rental Vehicles: For each financed Vehicle
which is a Rental Vehicle, the Borrower shall pay the Bank the Related
Principal Portion as follows:
(1) Three percent (3%) of the original amount of the Related Principal
Portion shall be paid to the Bank on the fifteenth (15th) day of
each calendar month, beginning on the fifteenth (15th) day of the
first (1st) calendar month that the Vehicle became a Rental Vehicle;
(2) The remaining unpaid Related Principal Balance for any Rental
Vehicle shall be due and payable on the fifteenth (15th) day of the
twenty fourth (24th) calendar month following the date that the
Vehicle became a Rental Vehicle.
(3) Upon sale of a Rental Vehicle, the entire unpaid Related Principal
Portion shall be due and payable by the earlier of (i) three (3)
Banking Days following receipt of proceeds from sale of the Vehicle,
or (ii) ten (10) Banking Days following the date of the sale of the
Vehicle.
For the purposes of this paragraph, if the Borrower disposes of a Vehicle by a
dealer trade or otherwise or if the Vehicle ceases to meet the criteria
contained in the definition of Vehicle in this Agreement, such event will be
considered to be a sale of the Vehicle.
(e) Optional Payments: In addition to any payments otherwise required by this
Agreement, the Borrower may reduce the principal balance outstanding
under this Agreement subject to the following:
-8-
<PAGE>
(i) At the Borrower's request, the Bank will establish for the
Borrower a Dealer Cash Management (DCM) Account. The DCM Account
is not a deposit account, and the Borrower shall have no right or
interest in any balance in such account, except as provided by
this sub-paragraph. The DCM Account is intended for the sole
purpose of recording voluntary reductions in principal under this
Agreement. Any voluntary reduction is available for new Advances
under the simplified procedures of this sub-paragraph.
(ii) The Borrower may, at its discretion, make payments to the DCM
Account.
(iii) The balance in the DCM Account will be applied to reduce the
outstanding aggregate Related Principal Portion for New and/or
Used Vehicles including Program Vehicles only for the purpose of
computation of interest and any required net free collected
balances, and shall in no way limit or modify the principal
payment requirements set forth elsewhere in this Agreement.
(iv) Any balance in the DCM Account may be reborrowed as a new Advance
by submitting a written or telephonic request pursuant to
procedures established by the Bank. Such Advance shall be subject
to all the terms and conditions of this Agreement, except for the
provisions in Paragraph 6.7, "Conditions to Each Advance."
(v) Payment into and Advances from the DCM Account must be in amounts
of at least $100,000, except the Borrower may obtain an Advance
in the amount of the remaining balance in the DCM Account if such
amount is less than $100,000.
(vi) The total balance in the DCM Account may not exceed twenty
percent (20%) of the aggregate outstanding Related Principal
Portion for New Vehicles and/or Used Vehicles including Program
Vehicles.
(vii) The DCM Account shall bear interest per annum at 0.00 basis
points less than the lowest effective rate of interest charged on
the Revolving Line. Any change in the interest rate shall take
effect on the same day as the interest rate change on the
Revolving Line. All interest and fees, if any, will be computed
on the basis of a 360-day year and the actual days elapsed. This
will result in more interest or a higher fee than if a 365-day
year were used.
-9-
<PAGE>
(viii) Information regarding the DCM Account will be provided in the
monthly statement described in Paragraph 2.20.
(ix) The Bank may terminate the optional payments provided by this
sub-paragraph at any time at the Bank's sole discretion by
providing at least ten days written notice to the Borrower. In
addition, the Bank may terminate this sub-paragraph without prior
notice if the Borrower is in breach of any term or condition of
this Agreement.
(x) Notwithstanding any other provision in this subparagraph, any
balance in the DCM Account may not be used to reduce any
principal amount outstanding for purposes of determining any
remaining availability under the Commitment or any of the other
limitations stated in this Agreement.
(xi) Subject to the provisions of this Agreement, upon the happening
of an event of default as defined in Article 10 below (subject to
any notice and right to cure periods provided therein), Bank may,
at its option and without further demand or notice to the
Borrower, retain all monies in the DCM Account apply the proceeds
to the Revolving Line debt in such order and amounts as Bank
elects in its sole and absolute discretion.
2.17. INTEREST RATE.
(a) Unless the Borrower elects an optional interest rate as described below,
the entire principal amount outstanding under this Agreement shall bear
interest at the following rates per annum:
(i) The Related Principal Portion of the principal amount outstanding
under this Agreement for all New Vehicles shall bear interest at
the Reference Rate; and
(ii) The Related Principal Portion of the principal amount outstanding
under this Agreement for all Program shall bear interest at the
Reference Rate; and
(iii) The Related Principal Portion of the principal amount outstanding
under this Agreement for all Used Vehicles and Rental Vehicles
shall bear interest at the Reference Rate plus 0.25 percentage
points.
-10-
<PAGE>
(b) The Borrower will pay interest for each month on the fifteenth (15th) day
of the next month, but no later than the Expiration Date.
(c) Except as otherwise stated in this Agreement, all interest and fees, if
any, will be computed on the basis of a 360-day year and actual number of
days elapsed. This results in more interest or a higher fee than if a
365-day year is used.
2.18. OPTIONAL INTEREST RATES. Instead of the interest rate based on the
Reference Rate, the Borrower may elect to have all or portions of the line of
credit for New, Used, Program, and Rental Vehicles (during the availability
period) bear interest at the rate(s) described below during an interest period
agreed to by the Bank and the Borrower. Each interest rate is a rate per year.
Interest will be paid for each month on the fifteenth (15th) day of the next
month. At the end of any interest period, the interest rate will revert to the
rate based on the Reference Rate, unless the Borrower has designated another
optional interest rate for the portion.
2.19. FIXED RATE. The Borrower may elect to have all or portions of the
principal balance of the line of credit bear interest at the Fixed Rate,
subject to the following requirements:
(a) The "Fixed Rate" means the fixed interest rate the Bank and the Borrower
agree will apply to the portion during the applicable interest period.
(b) The interest period during which the Fixed Rate will be in effect will be
one year or less.
(c) Each Fixed Rate portion will be for an amount not less than the
following:
(i) for interest periods of 14 days or longer, Five Hundred Thousand
Dollars ($500,000)
(ii) for interest periods of 1 to 3 days, Five Million Dollars
($5,000,000)
(iii) for interest periods of between 4 days and 13 days, an amount
which, when multiplied by the number of days in the applicable
interest period, is not less than fifteen million (15,000,000)
dollar-days.
(d) The Borrower may not elect a Fixed Rate with respect to any portion of
the principal balance of the line of credit which is scheduled to be
repaid before the last day of the applicable interest period.
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(e) Any portion of the principal balance of the line of credit already
bearing interest at the Fixed Rate will not be converted to a different
rate during its interest period.
(f) The Borrower may prepay the loan in full or in part at any time. The
prepayment will be applied to the most remote installment of principal
due under this Agreement.
(g) Each prepayment of a Fixed Rate portion, whether voluntary, by reason of
acceleration or otherwise, will be accompanied by the amount of accrued
interest on the amount prepaid, and a prepayment fee equal to the amount
(if any) by which:
(i) the additional interest which would have been payable on the
amount prepaid had it not been paid until the last day of the
interest period, exceeds
(ii) the interest which would have been recoverable by the Bank by
placing the amount prepaid on deposit in the certificate of
deposit market for a period starting on the date on which it was
prepaid and ending on the last day of the interest period for
such portion.
2.20. MONTHLY STATEMENTS. The monthly statements provided by the Bank shall be
conclusively presumed to be correct and accurate, unless the Borrower delivers
to the Bank a written objection specifying the errors the Borrower believes
were made, within thirty (30) days after the Bank mails the statement.
2.21. INTEREST ON LATE PAYMENTS. At the Bank's sole option in each instance,
any amount not paid when due under this Agreement (including interest) shall
bear interest from the due date at the Reference Rate plus 0.50 percentage
points. This may result in compounding of interest.
2.22. DEFAULT RATE. Upon the occurrence and during the continuation of any
default under this Agreement, Advances under this Agreement will at the option
of the Bank bear interest at a rate per annum which is 2.00 percentage point(s)
higher than the rate of interest otherwise provided under this Agreement. This
will not constitute a waiver of any default.
3. EXPENSES
3.1. EXPENSES. The Borrower agrees to immediately repay the Bank for expenses
that include, but are not limited to, filing, recording and search fees,
appraisal fees, title report fees, and documentation fees.
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3.2. REIMBURSEMENT COSTS.
(a) The Borrower agrees to reimburse the Bank for any expenses it incurs in
the preparation of this Agreement and any agreement or instrument
required by this Agreement. Expenses include, but are not limited to,
reasonable attorneys' fees, including any allocated costs of the Bank's
in-house counsel.
4. COLLATERAL
4.1. PERSONAL PROPERTY. The Borrower's obligations to the Bank under this
Agreement will be secured by and Bank is hereby granted a security interest in
the following personal property:
(a) all inventory now owned or hereafter acquired by Borrower;
(b) all accounts, contract rights, chattel paper, deposit accounts,
instruments and general intangibles now owned or hereafter acquired by
Borrower;
(c) all negotiable and non-negotiable documents of title now owned or
hereafter acquired by Borrower;
(d) all rights under contract of insurance now owned or hereafter acquired by
Borrower covering any of the above-described properties;
(e) all proceeds now owned or hereafter acquired by Borrower of any of the
above-described properties; and
(f) all books and records now owned or hereafter acquired by Borrower
pertaining to any of the above-described property, including but not
limited to any computer-readable memory and any computer hardware or
software necessary to process such memory.
In addition, all personal property Collateral securing this Agreement shall
also secure all other present and future obligations of the Borrower to the
Bank (excluding any consumer credit covered by the federal Truth in Lending
law, unless the Borrower otherwise agreed in writing). All personal property
collateral securing any other present or future obligations of the Borrower to
the Bank shall also secure this Agreement.
5. DISBURSEMENTS, PAYMENTS AND COSTS
5.1. REQUESTS FOR CREDIT. Each request for an extension of credit will
be made pursuant to a Payment Commitment; in writing in a format acceptable
to the Bank; or by another means acceptable to the Bank.
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5.2. DISBURSEMENTS AND PAYMENTS. Each disbursement by the Bank and each payment
by the Borrower will be:
(a) made at Dealer Corporate Service #55030, 2727 South 48th Street, Tempe,
Arizona 85282, or such other location as selected by the Bank from time
to time;
(b) made in immediately available funds, or such other type of funds as may
be selected by the Bank.
(c) evidenced by records kept by the Bank. In addition, the Bank may, at its
discretion, require the Borrower to sign one or more promissory notes.
5.3. TELEPHONE AND TELEFAX AUTHORIZATION.
(a) The Bank may honor telephone or telefax instructions for advances or
repayments or for the designation of optional interest rates given by any
one of the individual signer(s) of this Agreement or a person or persons
authorized by any one of the signer(s) of this Agreement.
(b) Advances will be deposited in and repayments will be withdrawn from the
Borrower's accounts with the Bank or such other financial institution as
designated in writing by the Borrower.
(c) The Borrower indemnifies and excuses the Bank (including its officers,
employees, and agents) from all liability, loss, and costs in connection
with any act resulting from telephone or telefax instructions it
reasonably believes are made by any individual authorized by the Borrower
to give such instructions. This indemnity and excuse will survive this
Agreement's termination.
5.4. DIRECT DEBIT.
(a) The Borrower agrees that interest will be deducted automatically on the
due date from Borrower's account, at such financial institutions as
designated in writing by the Borrower (the "Designated Account"). In
addition, principal payments may, at the discretion of the Bank, be
deducted automatically on the due date from this checking account.
Nothing in this paragraph shall relieve the Borrower of the obligation to
pay an Advance from the proceeds of the sale of the Related Vehicle
within the time limits specified under the "Principal Payments" section
above.
(b) The Bank will debit the account on the dates the payments become due. If
a due date does not fall on a banking day, the Bank will debit the
account on the first banking day following the due date.
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(c) The Borrower will maintain sufficient funds in the account on the dates
the Bank enters debits authorized by this Agreement. If there are
insufficient funds in the account on the date the Bank enters any debit
authorized by this Agreement, the debit will be reversed.
5.5. TAXES. The Borrower will not deduct any taxes from any payments it makes
to the Bank. If any government authority imposes any taxes on any payments made
by the Borrower, the Borrower will pay the taxes and will also pay to the Bank,
at the time interest is paid, any additional amount which the Bank specifies as
necessary to preserve the after-tax yield the Bank would have received if such
taxes had not been imposed. Upon request by the Bank, the Borrower will confirm
that it has paid the taxes by giving the Bank official tax receipts (or
notarized copies) within 30 days after the due date. However, the Borrower will
not pay the Bank's net income taxes.
5.6. ADDITIONAL COSTS. The Borrower will pay the Bank, on demand, for the
Bank's costs or losses relating to Advances made hereunder, arising from any
statute or regulation or any request or requirement of a regulatory agency. The
costs and losses will be allocated to the Advances in a manner determined by
the Bank, using any reasonable method. The costs include the following:
(a) any reserve or deposit requirements; and
(b) any capital requirements relating to the Bank's assets and commitments
for credit.
6. CONDITIONS The Bank must receive the following items, in form and content
acceptable to the Bank in its sole and absolute discretion, before it is
required to extend any credit to the Borrower under this Agreement:
6.1. AUTHORIZATIONS. Evidence that the execution, delivery and
performance by the Borrower and each guarantor and subordinating creditor of
this Agreement and any instrument or agreement required under this Agreement
have been duly authorized.
6.2. GOVERNING DOCUMENTS. A copy of the Borrower's partnership agreement.
Borrower agrees to provide Bank with any amendments or modifications to
the partnership agreement within 30 days of execution.
6.3. SECURITY AGREEMENTS. Signed original security agreements, assignments,
financing statements and fixture filings (together with Collateral in which
the Bank requires a possessory security interest), which the Bank requires.
6.4. EVIDENCE OF PRIORITY. Evidence that security interests and liens in
favor of the Bank are valid, enforceable, and prior
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to all others' rights and interests, except those the Bank consents to in
writing.
6.5. INSURANCE. Evidence of insurance coverage, as required in the
"Covenants" section of this Agreement.
6.6. ENVIRONMENTAL QUESTIONNAIRE. A completed Bank form Environmental
Questionnaire and Disclosure Statement.
6.7. GUARANTIES. Guaranties signed by United Auto Group, Inc. ("UAG"),
UAG Texas, Inc. ("UAGTX"), and UAG Texas II, Inc. ("UAGTXII") on the Bank's
standard form in an amount as may be acceptable, from time to time, to the
Bank.
6.8. CONDITIONS TO EACH ADVANCE. As a condition precedent to the making
of any Advance hereunder, including the first, the Borrower shall deliver to
the Bank the following:
(a) For Advances made under a Payment Commitment: Manufacturer/Distributor
invoice, cashdraft, electronic record, depository transfer check, sight
draft, or such other documents as specified in the applicable Payment
Commitment, identifying the Related Vehicles delivered or to be delivered
to the Borrower.
(b) For Advances made to finance Used Vehicles: Certificate of Ownership
showing a release by the previous registered and legal owners for the
Related Vehicles and, for Program Vehicles, the Manufacturer/Distributor
invoice.
(c) For Advances made to finance Dealer Trades: Copy of original invoice (or
substitute acceptable to the Bank) and bill of sale duly executed by the
parties to the transaction, evidencing the acquisition cost to the
Borrower of such trades.
(d) For Advances made to finance Fleet Sales: Copy of the Fleet Sale Purchase
Contract(s) and the Assignment of Proceeds, if required under this
Agreement, in form and content acceptable to the Bank.
(e) For Advances made to finance any other New Vehicle (including Program
Vehicles): Manufacturer/Distributor invoice or such other documents
identifying a New Vehicle owned by the Borrower.
(f) For Advances made to finance Rental Vehicles: Certificate of Title
showing Bank as lienholder.
6.9. OTHER ITEMS. Any other items that the Bank reasonably requires.
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7. REPRESENTATIONS AND WARRANTIES When the Borrower signs this Agreement,
and until the Bank is repaid in full, the Borrower makes the following
representations and warranties. Each request for an extension of credit
constitutes a renewed representation:
7.1. ORGANIZATION OF BORROWER. The Borrower is a partnership duly formed
and existing under the laws of the state where organized.
7.2. AUTHORIZATION. This Agreement, and any instrument or agreement
required hereunder, are within the powers of the Borrower and, as the case
may be of each Guarantor or other party thereto, and have been duly
authorized, and do not conflict with any of such party's organizational
papers.
7.3. ENFORCEABLE AGREEMENT. This Agreement, and each other agreement or
document executed by the Borrower, any Guarantor or any other party and
delivered to the Bank in connection with this Agreement, is a legal, valid and
binding agreement of such party enforceable against such party in accordance
with its terms, and any instrument or agreement required hereunder, when
executed and delivered, will be similarly legal, valid, binding and
enforceable.
7.4. GOOD STANDING. In each state in which the Borrower does business,
it is property licensed, in good standing, and, where required, in compliance
with fictitious or assumed name statutes.
7.5. NO CONFLICTS. This Agreement does not conflict with any law, agreement,
or obligation by which the Borrower is bound.
7.6. FINANCIAL INFORMATION. All financial and other information that has been
or will be supplied to the Bank (including, but not limited to, the Borrower's
Proforma Balance Sheet prepared January 21, 1997 showing the Shannon/UAG
Buy-Out adjustments) is:
(a) sufficiently complete to give the Bank accurate knowledge of the
Borrower's and any guarantors historical and proforma financial
condition.
(b) in form and content required by the Bank.
(c) in compliance with all government regulations that apply.
Since the date of the financial statement and proforma specified above, there
has been no material adverse change in the assets or the financial condition of
the Borrower or any guarantor.
7.7. LAWSUITS. There is no lawsuit, tax claim or other dispute pending or
threatened against the Borrower which, if lost, would impair the Borrower's
financial condition or ability
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to repay the loan, except as has been disclosed in writing to the Bank prior to
the date of this Agreement.
7.8. COLLATERAL. All Collateral is owned by the grantor of the security
interest free of any title defects or any liens or interests of others.
7.9. PERMITS, FRANCHISES. The Borrower possesses all permits, memberships,
franchises, contracts and licenses required and all trademark rights, trade
name rights, patent rights and fictitious or assumed name rights necessary to
enable it to conduct the business in which it is now engaged.
7.10. OTHER OBLIGATIONS. The Borrower is not in default on any obligation for
borrowed money, any purchase money obligation or any other material lease,
commitment, contract, instrument or obligation.
7.11. INCOME TAX RETURNS. The Borrower has no knowledge of any pending
assessments or adjustments of its income tax for any year.
7.12. NO EVENT OF DEFAULT. There is no event which is, or with notice or lapse
of time or both would be, a default under this Agreement.
7.13. LOCATION OF BORROWER. The Borrower's place of business (or, if the
Borrower has more than one place of business, its chief executive office) is
located at the address listed under the Borrower's signature on this Agreement.
8. COVENANTS The Borrower agrees, so long as credit is available under this
Agreement and until the Bank is repaid in full:
8.1. USE OF PROCEEDS. To use the proceeds of the credit only for financing
Vehicles as contemplated by this Agreement.
8.2. LOCATION OF VEHICLES. To keep the Vehicles only at the Borrower's regular
dealer locations as approved from time to time by the Bank, except (a) Demos
may be moved to other locations and demonstrated in accordance with the terms
and conditions established by the Bank; and (b) Vehicles subject to a Fleet
Sale Purchase Contract approved by the Bank may be located as provided therein
and (c) Rental Vehicles may be located as provided in the Rental Agreement. For
purpose of this Agreement, "Rental Agreement' means any rental agreement used
by Borrower, the form and substance of which has been approved by Bank in its
sole and absolute discretion.
8.3. MAINTENANCE OF COLLATERAL. To maintain and care for the Collateral and
keep the Collateral free from all liens and encumbrances, of any kind, except
for the Bank's security interests.
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8.4. SALE OF COLLATERAL. Not to sell, contract for sale or otherwise dispose
of any Collateral except in the ordinary course of business.
8.5. NOTICE REGARDING COLLATERAL. To notify Bank in writing of any event which
effects the value of any Collateral, the ability of Borrower or Bank to dispose
of any Collateral, or the rights and remedies of Bank in relation thereto,
including, but not limited to, the levy of any legal process against any
Collateral and the adoption of any marketing order, arrangement or procedure
affecting the Collateral, whether governmental or otherwise.
8.6. DELIVERY OF CERTAIN DOCUMENTS. To immediately deliver to Bank any
negotiable document of title including any warehouse receipt or bill of lading,
if any Collateral is or becomes the subject of such document.
8.7. COLLECTIONS. Unless Bank exercises its rights to make collection, to
diligently collect all Collateral.
8.8. ADDITIONAL REQUIREMENTS REGARDING COLLATERAL. At the option of the Bank,
whether or not the Borrower is in default:
(a) To segregate all collections and proceeds of Collateral so that they are
capable of identification and deliver daily such collections and proceeds
to Bank in kind;
(b) To deliver to Bank (i) copies of or extracts from its books and records,
and (ii) information on any contracts or other matters affecting the
Collateral; and
(c) To permit Bank to examine the Collateral, including the books and
records, and make copies or extracts from the books and records, and for
such purposes enter at any reasonable time upon the property where any
Collateral or any books and records are located.
8.9. TAXES. To pay all federal, state & local taxes or assessments pertaining
to the Borrower's business or the Vehicles.
8.10. FINANCIAL INFORMATION. To provide the following financial information and
statements and such additional information as may be requested by the Bank from
time to time:
(a) Within 120 days of UAG's fiscal year end, UAG's annual financial
statements. These financial statements must be audited by a Certified
Public Accountant ("CPA") acceptable to the Bank. The statements shall be
prepared on a consolidated and consolidating basis showing UAGTXII, UAGTX
and/or Shannon Automotive, Ltd. as separate entities. Such consolidating
statement may be
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in the form of CPA supplementary schedule(s) or work papers.
(b) Copies of each financial statement delivered to a manufacturer or
distributor as required by the dealership franchise agreement with such
manufacturer or distributor, within 30 days of such delivery.
(c) Copies of the Borrower's annual projections by 90 days of each fiscal
year end.
(d) Copies of the Borrower's consolidated Form 10-K, Annual Report and Form
l0-Q Quarterly Report within 30 days after the date of filing with the
Securities and Exchange Commission.
8.11. CURRENT RATIO. To maintain a ratio of current assets to current
liabilities of at least 1.15:1.0, measured quarterly.
For the purposes of this paragraph, inventory asset values shall be based on
actual cost.
8.12. WORKING CAPITAL. To maintain current assets in excess of current
liabilities by at least Three Million Five Hundred Thousand and No/100 Dollars
($3,500,000.00), measured quarterly.
For the purposes of this paragraph, inventory asset values shall be based on
actual cost.
8.13. TANGIBLE NET WORTH. To maintain tangible net worth equal to at least Four
Million Eight Hundred Thousand and No/100 Dollars ($4,800,000.00), measured
quarterly.
"Tangible net worth" means the gross book value of the Borrower's assets
(excluding goodwill, patents, trademarks, trade names, organization expense,
treasury stock, unamortized debt discount and expense, deferred research and
development costs, deferred marketing expenses, other non-franchised assets,
and other like intangibles, and monies due from affiliates, officers, directors
or shareholders of the Borrower) less total liabilities, including but not
limited to accrued and deferred income taxes, and any reserves against assets.
For the purposes of this paragraph, inventory asset values shall be based on
actual cost.
8.14. TOTAL LIABILITIES TO TANGIBLE NET WORTH. To maintain a ratio of Total
Liabilities to Tangible Net Worth not exceeding 4.50:1.0, measured quarterly.
"Total Liabilities" means the sum of current liabilities plus long term
liabilities.
8.15. PROFITABILITY. To maintain a positive net income before taxes for each
year end accounting period, of which 10% must be retained by the Borrower.
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8.16. OTHER DEBTS. Not to have outstanding or incur any direct or contingent
debts or lease obligations (other than those to the Bank), or become liable for
the debts of others without the Bank's written consent. This does not prohibit:
(a) Acquiring goods, supplies, or merchandise on normal trade credit.
(b) Endorsing negotiable instruments received in the usual course of
business.
(c) Obtaining surety bonds in the usual course of business.
(d) Debts and lines of credit and leases in existence on the date of this
Agreement disclosed in writing to the Bank.
(e) Additional debts and lease obligations for the acquisition of fixed or
capital assets and for business purposes which do not exceed a total
principal amount of Two Hundred Thousand and No/100 Dollars ($200,000.00)
outstanding at any one time.
(f) Contingent liabilities ("Contingent Liabilities") of the Borrower shall
be permitted up to a total of Fifty Million and No/100 Dollars
($50,000,000.00) at any one time; provided, however, that such Contingent
Liabilities (1) shall be limited to guarantees of indebtedness of its
parent corporation, UAG; (2) such guaranteed indebtedness also requires
substantially similar guarantees (in form, substance and amount) from all
other UAG operating dealership subsidiaries; and (3) Borrower shall
provide (or cause UAG to provide) a copy of all loan documentation
supporting the guarantee(s) including the Loan Agreement(s) and any
amendment(s) to the Bank within 30 days of execution of such
documentation. While any such Contingent Liabilities exist, UAG shall be
hereinafter referred to as the "Supported Parent".
8.17. OTHER LIENS. Not to create, assume, or allow any security interest or
lien (including judicial liens) on property the Borrower now or later owns,
except:
(a) Deeds of trust and security agreements in favor of the Bank.
(b) Liens for taxes not yet due.
(c) Liens outstanding on the date of this Agreement disclosed in writing to
the Bank.
(d) Additional purchase money security interests in property acquired after
the date of this Agreement, if the total principal amount of debts
secured by such liens does not
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exceed Two Hundred Thousand and No/100 Dollars ($200,000.00) at any one
time.
8.18. CAPITAL EXPENDITURES. Not to spend (including the total amount of any
capital leases) for more than Two Hundred Fifty Thousand and No/100 Dollars
($250,000.00) in any single fiscal year to acquire fixed or capital assets.
8.19. NOTICES TO BANK. To promptly notify the Bank in writing of:
(a) any lawsuit over Two Hundred Fifty Thousand and no/100 Dollars
($250,000.00) against the Borrower or any guarantor.
(b) any substantial dispute between the Borrower or any guarantor and any
government authority.
(c) any failure to comply with this Agreement.
(d) any material adverse change in the Borrower's or any guarantor's
financial condition or operations.
(e) any change in the Borrower's name, legal structure, place of business, or
chief executive office if the Borrower has more than one place of
business.
(f) any material change in the relationship between the Borrower and any
Vehicle manufacturer or distributor including, without limitation, the
loss or cancellation, or threatened loss or cancellation, of a franchise.
(g) any event which affects the value of the Collateral or the ability of the
Bank or the Borrower to dispose of the Collateral.
(h) any default in any Contingent Liabilities.
8.20. BOOKS AND RECORDS. To maintain correct and accurate books and records,
including, but not limited to, an itemization and description of the cost,
price, kind, type, quality and quantity of the Vehicles.
8.21. AUDITS. To allow the Bank and its agents to inspect the Borrower's
properties, including the Vehicles, and to examine, audit and make copies of
books and records at any reasonable time. If any of the Borrower's properties,
Vehicles, books or records are in the possession of a third party, the Borrower
authorizes that third party to permit the Bank or its agents to have access to
perform inspections or audits and to respond to the Bank's requests for
information concerning such properties, Vehicles, books and records.
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8.22. COMPLIANCE WITH LAWS. To comply with the laws (including any fictitious
or assumed name statute), regulations, and orders of any government body with
authority over the Borrower's business.
8.23. PRESERVATION OF RIGHTS. To maintain and preserve all rights, privileges,
and franchises, including dealer franchises, the Borrower now has.
8.24. MAINTENANCE OF PROPERTIES. To make any repairs, renewals, or replacements
to keep the Borrower's properties in good working condition.
8.25. PERFECTION OF LIENS. To help the Bank perfect and protect its security
interests and liens, and reimburse it for related costs it incurs to protect
its security interests and liens.
8.26. COOPERATION. To take any action requested by the Bank to carry out the
intent of this Agreement.
8.27. INSURANCE.
(a) Insurance Covering Collateral. To maintain all risk property damage
insurance policies covering the tangible property comprising the
Collateral. Each insurance policy must be in an amount acceptable to the
Bank. The insurance must be issued by an insurance company acceptable to
the Bank and must include a lender's loss payable endorsement in favor of
the Bank in a form acceptable to the Bank.
(b) General Business Insurance. To maintain insurance satisfactory to the
Bank as to amount, nature and carrier covering property damage (including
loss of use and occupancy) to any of the Borrower's properties, public
liability insurance including coverage for contractual liability, product
liability and workers' compensation, and any other insurance which is
usual for the Borrower's business.
(c) Evidence of Insurance. Upon the request of the Bank, to deliver to the
Bank a copy of each insurance policy or, if permitted by the Bank, a
certificate of insurance listing all insurance in force.
8.28. ADDITIONAL NEGATIVE COVENANTS. Not to, without the Bank's written
consent:
(a) engage in any business activities substantially different from the
Borrower's present business.
(b) liquidate or dissolve the Borrower's business.
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(c) enter into any consolidation, merger, pool, joint venture, syndicate, or
other combination.
(d) lease or dispose of all or a substantial part of the Borrower's business
or the Borrower's assets.
(e) acquire or purchase a business or its assets.
(f) sell or otherwise dispose of any assets for less than fair market value
or enter into any sale and leaseback agreement covering any of its fixed
or capital assets.
(g) voluntarily suspend its business.
9. HAZARDOUS WASTE INDEMNIFICATION The Borrower will indemnify and hold
harmless the Bank from any loss or liability directly or indirectly arising out
of the use, generation, manufacture, production, storage, release, threatened
release, discharge, disposal or presence of a hazardous substance. This
indemnity will apply whether the hazardous substance is on, under or about the
Borrower's property or operations or property leased to the Borrower. The
indemnity includes but is not limited to attorneys' fees (including the
reasonable estimate of the allocated cost of in-house counsel and staff). The
indemnity extends to the Bank, its parent, subsidiaries and all of their
directors, officers, employees, agents, successors, attorneys and assigns. For
these purposes, the term "hazardous substances" means any substance which is or
becomes designated as "hazardous" or "toxic" under any federal, state or local
law. This indemnity will survive repayment of the Borrower's obligations to the
Bank.
10. DEFAULT If any of the following events occur, the Bank may do one or more
of the following: declare the Borrower in default, stop making any additional
credit available to the Borrower, and require the Borrower to repay its entire
debt immediately and without prior notice. If an event of default occurs under
the paragraph entitled "Bankruptcy" below with respect to the Borrower, the
entire debt outstanding under this Agreement will automatically be due
immediately.
10.1. FAILURE TO PAY. The Borrower fails to make a payment under this Agreement
when due.
10.2. LIEN PRIORITY. The Bank fails to have an enforceable first lien
(except for any prior liens to which the Bank has consented in writing) on or
security interest in any property given as security for this loan.
10.3. OTHER LIENS. Any levies of attachment, executions, tax assessments
or similar proceedings shall be brought against the Collateral.
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10.4. FALSE INFORMATION. The Borrower or any guarantor has given the Bank
false or misleading information or representations.
10.5. BANKRUPTCY. The Borrower, any guarantor, any general partner of the
Borrower, or the Supported Parent files a bankruptcy petition, a bankruptcy
petition is filed against the Borrower, any guarantor, any general partner of
the Borrower, or the Supported Parent, or the Borrower, any guarantor, any
general partner of the Borrower, or the Supported Parent makes a general
assignment for the benefit of creditors.
10.6. RECEIVERS. A receiver or similar official is appointed for the
Borrower's or any guarantor's business, or the business is terminated.
10.7. LAWSUITS. Any lawsuit or lawsuits are filed on behalf of one or more
trade creditors against the Borrower in an aggregate amount of Seven Hundred
Fifty Thousand and No/100 Dollars ($750,000.00) or more in excess of any
insurance coverage.
10.8. JUDGMENTS. Any judgments or arbitration awards are entered against the
Borrower or any guarantor, or the Borrower or any guarantor enters into any
settlement agreements with respect to any litigation or arbitration, in an
aggregate amount of One Hundred Thousand and No/100 Dollars ($100,000.00) or
more in excess of any insurance coverage.
10.9. GOVERNMENT ACTION. Any government authority takes action that the Bank
believes materially adversely affects the Borrower's or any guarantors
financial condition or ability to repay.
10.10. MATERIAL ADVERSE CHANGE. A material adverse change occurs in the
Borrower's or any guarantor's financial condition, properties or prospects, or
such parties ability to repay the extensions of credit under this Agreement
and, as applicable, under any guaranty.
10.11. CROSS-DEFAULT. Any default occurs under any agreement in connection with
any credit the Borrower or any guarantor has obtained from anyone else or which
the Borrower or any guarantor has guaranteed.
10.12. DEFAULT UNDER RELATED DOCUMENTS. A breach or default has occurred under
any guaranty, subordination agreement, security agreement, deed of trust, or
other document required by this Agreement or such document (unless any such
termination is consented to in writing by Bank) no longer in effect, or is
revoked in whole or in part.
10.13. OTHER BANK AGREEMENTS. The Borrower or any guarantor fails to meet
the conditions of, or fails to perform any obligation under any
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<PAGE>
other agreement the Borrower or any guarantor has with the Bank or any
affiliate of the Bank.
10.14. OTHER BREACH UNDER AGREEMENT. The Borrower fails to meet the
conditions of, or fails to perform any obligation under, any term of this
Agreement not specifically referred to in this Article.
11. ADDITIONAL REMEDIES AFTER DEFAULT In the event of any default as
described in Article 10 of this Agreement, in addition to the remedies set
forth in such Article, Bank may do any one or more of the following:
(a) Require Borrower to deliver to Bank any instruments or chattel paper.
(b) Require Borrower to obtain Bank's prior written consent to any sale,
lease, agreement to sell or lease, or other disposition of any
inventory.
(c) Notify any account debtors, any buyers of the Collateral, or any other
persons of Bank's interest in the Collateral.
(d) Require Borrower to direct all account debtors to forward all payments
and proceeds of the Collateral to a post office box under Bank's
exclusive control.
(e) Demand and collect any payments and proceeds of the Collateral. In
connection therewith Borrower irrevocably authorizes Bank to endorse or
sign Borrower's name on all checks, drafts, collections, receipts and
other documents, and to take possession of and open the mail addressed
to Borrower and remove therefrom any payments and proceeds of the
Collateral.
(f) Enforce the security interest given hereunder pursuant to the Uniform
Commercial Code and any other applicable law.
(g) Enforce the security interest of Bank in any deposit account of Borrower
maintained with Bank by applying such account to the indebtedness.
(h) Require Borrower to assemble the Collateral, including the books and
records, and make them available to Bank at a place designated by Bank.
(i) Enter upon the property where any Collateral, including any books and
records are located and take possession of such Collateral and such
books and records, and use such property (including any buildings and
facilities) and any of Borrower's equipment, if Bank deems such use
necessary or advisable in order to take possession of, hold, preserve,
process, assemble, prepare for sale or lease,
-26-
<PAGE>
market for sale or lease, sell or lease, or otherwise dispose of, any
Collateral.
(j) Grant extensions and compromise or settle claims with respect to the
Collateral for less than face value, all without prior notice to
Borrower.
(k) Use or transfer any of Borrower's rights and interest in any
Intellectual Property now owned or hereafter acquired by Borrower, if
Bank deems such use or transfer necessary or advisable in order to take
possession of, hold, preserve, process, assemble, prepare for sale or
lease, market for sale or lease, sell or lease, or otherwise dispose of,
any Collateral. Borrower agrees that such use or transfer shall be
without any additional consideration to Borrower. As used in this
paragraph, "Intellectual Property" includes, but is not limited to, all
trade secrets, computer software, service marks, trademarks, trade
names, trade styles, copyrights, patents, applications for any of the
foregoing, customer lists, working drawings, instructional manuals, and
rights in processes for technical manufacturing, packaging and labeling
in which Borrower has any right or interest, whether by ownership,
license, contract or otherwise.
(l) Have a receiver appointed by any court of competent jurisdiction to take
possession of the Collateral.
(m) Take such measures as Bank may deem necessary or advisable to take
possession of, hold, preserve, process, assemble, insure, prepare for
sale or lease, market for sale or lease, sell or lease, or otherwise
dispose of, any Collateral, and Borrower hereby irrevocably constitutes
and appoints Bank as Borrower's attorney-in-fact to perform all acts and
execute all documents in connection therewith.
12. ENFORCING THIS AGREEMENT; MISCELLANEOUS
12.1. GAAP. Except as otherwise stated in this Agreement, all financial
information provided to the Bank and all financial covenants will be made
under generally accepted accounting principles, consistently applied.
12.2. ARIZONA LAW. THIS AGREEMENT IS GOVERNED BY ARIZONA LAW.
12.3. SUCCESSORS AND ASSIGNS. This Agreement is binding on the Borrower's and
the Bank's successors and assignees. The Borrower agrees that it may not assign
this Agreement without the Bank's prior consent. The Bank may sell
participations in or assign this loan, and may exchange financial information
about the Borrower with actual or potential participants or assignees. If
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<PAGE>
a participation is sold or the loan is assigned, the purchaser will have the
right of set-off against the Borrower.
12.4. ARBITRATION.
(a) This paragraph concerns the resolution of any controversies or claims
between the Borrower and the Bank, including but not limited to those
that arise from:
(i) This Agreement (including any renewals, extensions or
modifications of this Agreement);
(ii) Any document, agreement or procedure related to or
delivered in connection with this Agreement;
(iii) Any violation of this Agreement; or
(iv) Any claims for damages resulting from any business conducted
between the Borrower and the Bank, including claims for
injury to persons, property or business interests (torts).
(b) At the request of the Borrower or the Bank, any such controversies or
claims will be settled by arbitration in accordance with the United
States Arbitration Act. THE UNITED STATES ARBITRATION ACT WILL APPLY
EVEN THOUGH ITS AGREEMENT PROVIDES THAT IT IS GOVERNED BY ARIZONA LAW.
(c) Arbitration proceedings will be administered by the American Arbitration
Association and will be subject to its commercial rules of arbitration.
(d) For purposes of the application of the statute of limitations, the
filing of an arbitration pursuant to this paragraph is the equivalent of
the filing of a lawsuit, and any claim or controversy which may be
arbitrated under this paragraph is subject to any applicable statute of
limitations. The arbitrators will have the authority to decide whether
any such claim or controversy is barred by the statute of limitations
and, if so, to dismiss the arbitration on that basis.
(e) If there is a dispute as to whether an issue is arbitrable, the
arbitrators will have the authority to resolve any such dispute.
(f) The decision that results from an arbitration proceeding may be
submitted to any authorized court of law to be confirmed and enforced.
(g) This provision does not limit the right of the Borrower or the Bank to:
(i) exercise self-help remedies such as setoff;
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<PAGE>
(ii) foreclose against or sell any real or personal property
collateral; or
(iii) act in a court of law, before, during or after the
arbitration proceeding to obtain:
(A) an interim remedy; and/or
(B) additional or supplementary remedies.
(h) The pursuit of or a successful action for interim, additional or
supplementary remedies, or the filing of a court action, does not
constitute a waiver of the right of the Borrower or the Bank, including
the suing party, to submit the controversy or claim to arbitration if
the other party contests the lawsuit.
(i) If the Bank forecloses against any real property securing this
Agreement, the Bank has the option to exercise the power of sale under
the deed of trust or mortgage, or to proceed by judicial foreclosure.
12.5. SEVERABILITY; WAIVERS. If any part of this Agreement is not enforceable,
the rest of the Agreement may be enforced. The Bank retains all rights, even if
it makes a loan after default. If the Bank waives a default, it may enforce a
later default. Any consent or waiver under this Agreement must be in writing.
12.6. ADMINISTRATION COSTS. The Borrower shall pay the Bank for all reasonable
costs incurred by the Bank in connection with administering this Agreement.
12.7. ATTORNEYS' FEES. The Borrower shall reimburse the Bank for any
reasonable costs and attorneys' fees incurred by the Bank in connection with
the enforcement or preservation of any rights or remedies under this Agreement
and any other documents executed in connection with this Agreement, and
including any amendment, waiver, "workout" or restructuring under this
Agreement. In the event of a lawsuit or arbitration proceeding, the prevailing
party is entitled to recover costs and reasonable attorneys' fees incurred in
connection with the lawsuit or arbitration proceeding, as determined by the
court or arbitrator. As used in this paragraph, "attorneys' fees" includes the
allocated costs of in-house counsel.
12.8. ONE AGREEMENT. This Agreement and any related security or other
agreements required by this Agreement, collectively:
(a) represent the sum of the understandings and agreements between the Bank
and the Borrower concerning this credit; and
(b) replace any prior oral or written agreements between the Bank and the
Borrower concerning this credit; and
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<PAGE>
(c) are intended by the Bank and the Borrower as the final, complete and
exclusive statement of the terms agreed to by them.
In the event of any conflict between this Agreement and any other agreements
required by this Agreement, this Agreement will prevail.
12.9. EXCHANGE OF INFORMATION. The Borrower agrees that the Bank may exchange
financial information about the Borrower with BankAmerica Corporation
affiliates and other related entities.
12.10. USURY LAWS. This paragraph covers the transactions described in this
Agreement and any other agreements with the Bank or its affiliates executed in
connection with this Agreement, to the extent they are subject to the Arizona
usury laws (the "Transactions"). The Borrower understands and believes that the
Transactions comply with the Arizona usury laws. However, if any interest or
other charges paid or payable in connection with the Transactions are ever
determined to exceed the maximum amount permitted by law, the Borrower agrees
that:
(a) the amount of interest or other charges payable by the Borrower pursuant
to the Transactions shall be reduced to the maximum amount permitted by
law; and
(b) any excess amount previously collected from the Borrower in connection
with the Transactions which exceeded the maximum amount permitted by law
will be credited against the then outstanding principal balance. If the
outstanding principal balance has been repaid in full, the excess amount
paid will be refunded to the Borrower.
All fees, charges, goods, things in action or any other sums or things of
value, other than interest at the interest rate described in this Agreement,
paid or payable by the Borrower (collectively the "Additional Sums"), that may
be deemed to be interest with respect to the Transactions, shall, for the
purpose of any laws of the State of Arizona that may limit the maximum amount
of interest to be charged with respect to the Transactions, be payable by
Borrower as, and shall be deemed to be, additional interest. For such purposes
only, the agreed upon and "contracted for rate of interest" of the Transactions
shall be deemed to be increased by the rate of interest resulting from the
Additional Sums.
12.11. NOTICES. All notices required under this Agreement shall be personally
delivered or sent by first class mail, postage prepaid, to the addresses on the
signature page of this Agreement, or to such other addresses as the Bank and
the Borrower may specify from time to time in writing.
12.12. REMEDIES. All rights and remedies herein provided are cumulative
and not exclusive of any rights or remedies otherwise
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<PAGE>
provided by law. Any single or partial exercise of any right or remedy shall
not preclude the further exercise thereof or the exercise of any other right or
remedy.
12.13. OTHER DOCUMENTS. Borrower shall, at the request of Bank, execute such
other agreements, documents, instruments, or financing statements in connection
with this agreement as Bank may reasonably deem necessary.
12.14. HEADINGS. Article and paragraph headings are for reference only and
shall not affect the interpretation or meaning of any provisions of this
Agreement.
12.15. COUNTERPARTS. This Agreement may be executed in as many counterparts as
necessary or convenient, and by the different parties on separate counterparts
each of which, when so executed, shall be deemed an original but all such
counterparts shall constitute but one and the same agreement.
12.16. PRIOR AGREEMENT SUPERSEDED. This Agreement supersedes the Automobile
Flooring and Security Agreement entered into as of June 18, 1996, between the
Bank and the Borrower, as such agreement may have been amended from time to
time prior to the date hereof, and any credit outstanding thereunder shall be
deemed to be outstanding under this Agreement.
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<PAGE>
This Agreement is executed as of the date stated at the top of the first page.
BANK OF AMERICA NATIONAL TRUST SHANNON AUTOMOTIVE, LTD.
AND SAVINGS ASSOCIATION
BY: UAG TEXAS II, INC.
General Partner
By: /s/ M. Patricia Kay
-------------------------------
M. Patricia Kay, Vice President
By: /s/ K.J. Coffey
-------------------------------
Kevin J. Coffey, President
By: /s/ George G. Lowrance
-------------------------------
Address where notices to the Bank George G. Lowrance, Vice
are to be sent: President & Secretary
Dealer Corporate Services #55030 BY: UAG TEXAS, INC.
2727 South 48th Street Limited Partner
Tempe, Arizona 85282
By: /s/ K.J. Coffey
-------------------------------
Kevin J. Coffey, President
By: /s/ George G. Lowrance
-------------------------------
George G. Lowrance, Vice President
& Secretary
Address where notices to the
Borrower are to be sent:
16835 Katy Freeway
Houston, Texas 77094
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<PAGE>
BANK OF AMERICA
AMENDMENT TO DOCUMENTS
==============================================================================
FIRST AMENDMENT TO AUTOMOBILE FLOORING AND SECURITY AGREEMENT
This First Amendment to Automobile Flooring and Security Agreement is entered
into as of March 26, 1997, between Bank of America National Trust and Savings
Association (the "Bank") and Shannon Automotive, Ltd. (the "Borrower").
RECITALS
--------
A. WHEREAS, Bank and Borrower have entered into that certain Automobile
Flooring and Security Agreement dated March 6, 1997, (the "Agreement"); and
B. WHEREAS, Borrower and Bank desire to amend certain terms and
provisions of said Agreement as more specifically hereinafter set forth.
AGREED
------
NOW, THEREFORE, in consideration of the foregoing recitals, Bank and Borrower
mutually agree to amend said Agreement as follows:
1. Paragraph 8.13 (Tangible Net Worth) of the Agreement is amended in its
entirety to read as follows:
8.13 TANGIBLE NET WORTH. To maintain tangible net worth equal to the
amounts indicated for each quarterly period specified below:
Period Amounts
- ------ -------
March 31, 1997 $4,600,000.00
June 30, 1997 and thereafter $4,800,000.00
"Tangible net worth" means the gross book value of the Borrower's assets
(excluding goodwill, patents, trademarks, trade names, organization expense,
treasury stock, unamortized debt discount and expense, deferred research and
development costs, deferred marketing expenses, other non-franchise assets, and
other like intangibles, and monies due from affiliates, officers, directors or
shareholders of the Borrower) less total liabilities, including but not limited
to accrued and deferred income taxes, and any reserves against assets. For the
purposes of this paragraph, inventory asset values shall be based on actual
cost.
This Amendment will become effective as of March 26, 1997 (the "Effective
Date"), provided that each of the following conditions precedent have been
satisfied:
<PAGE>
The Bank has received from the Borrower a duly executed original of this
Amendment, together with a duly executed Guarantor Acknowledgment and
Consent in the form attached hereto (the "Consent").
Except as provided in this Amendment, all of the terms and provisions of the
Agreement shall remain in full force and effect.
This Amendment shall be effective between the parties as of the date hereof.
The Agreement, as amended hereby, shall hereinafter constitute the Agreement
between the parties.
IN WITNESS WHEREOF, this Amendment has been executed by the parties hereto as
of the date first written above.
BANK OF AMERICA NATIONAL TRUST SHANNON AUTOMOTIVE, LTD.
AND SAVINGS ASSOCIATION
By: UAG TEXAS II, INC.
General Partner
/s/ M. Patricia Kay
- -----------------------------
By: M. Patricia Kay,
Vice President
By: /s/ Kevin J. Coffey
----------------------------
Kevin J. Coffey,
President
By:
----------------------------
George G. Lowrance, Vice
President & Secretary
By: UAG TEXAS, INC.,
Limited Partner
By: /s/ Kevin J. Coffey
----------------------------
Kevin J. Coffey,
President
By:
----------------------------
George G. Lowrance, Vice
President & Secretary
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<PAGE>
shall hereinafter constitute the Agreement between the parties.
IN WITNESS WHEREOF, this Amendment has been executed by the parties hereto as
of the date first written above.
BANK OF AMERICA NATIONAL TRUST SHANNON AUTOMOTIVE, LTD.
AND SAVINGS ASSOCIATION
By: UAG TEXAS II, INC.
General Partner
/s/ M. Patricia Kay
- -----------------------------
By: M. Patricia Kay,
Vice President
By:
----------------------------
Kevin J. Coffey,
President
By: /s/ George G. Lowrance
----------------------------
George G. Lowrance, Vice
President & Secretary
By: UAG TEXAS, INC.,
Limited Partner
By:
----------------------------
Kevin J. Coffey,
President
By:
----------------------------
George G. Lowrance, Vice
President & Secretary
-2-
<PAGE>
GUARANTOR ACKNOWLEDGMENT
AND CONSENT
-----------
The undersigned, each a guarantor or third party pledgor with respect to the
Borrower's obligations to the Bank under the Agreement, each hereby (i)
acknowledge and consent to the execution, delivery, and performance by Borrower
of the foregoing First Amendment to Agreement (the "Amendment"), and (ii)
reaffirm and agree that the respective guaranty, third party pledge or security
agreement to which the undersigned is party and all other documents and
agreements executed and delivered by the undersigned to the Bank in connection
with the Agreement are in full force and effect, without defense, offset, or
counterclaim. (Capitalized terms used herein have the meanings specified in the
Amendment.)
UAG TEXAS, INC
Dated: April 9, 1997 X /s/ Kevin J. Coffey
------------- ---------------------
By: Kevin J. Coffey, President
Dated: X
------------- ---------------------
By: George G. Lowrance,
Vice President & Secretary
-3-
<PAGE>
GUARANTOR ACKNOWLEDGMENT
AND CONSENT
-----------
The undersigned, each a guarantor or third party pledgor with respect to the
Borrower's obligations to the Bank under the Agreement, each hereby (i)
acknowledge and consent to the execution, delivery, and performance by Borrower
of the foregoing First Amendment to Agreement (the "Amendment"), and (ii)
reaffirm and agree that the respective guaranty, third party pledge or security
agreement to which the undersigned is party and all other documents and
agreements executed and delivered by the undersigned to the Bank in connection
with the Agreement are in full force and effect, without defense, offset, or
counterclaim. (Capitalized terms used herein have the meanings specified in the
Amendment.)
UAG TEXAS, INC
Dated: X
------------- ------------------------
By: Kevin J. Coffey, President
Dated: April 9, 1997 X /s/ George G. Lowrance
------------- ------------------------
By: George G. Lowrance,
Vice President & Secretary
-3-
<PAGE>
GUARANTOR ACKNOWLEDGMENT
AND CONSENT
-----------
The undersigned, each a guarantor or third party pledgor with respect to the
Borrower's obligations to the Bank under the Agreement, each hereby (i)
acknowledge and consent to the execution, delivery, and performance by Borrower
of the foregoing First Amendment to Agreement (the "Amendment"), and (ii)
reaffirm and agree that the respective guaranty, third party pledge or security
agreement to which the undersigned is party and all other documents and
agreements executed and delivered by the undersigned to the Bank in connection
with the Agreement are in full force and effect, without defense, offset, or
counterclaim. (Capitalized terms used herein have the meanings specified in the
Amendment.)
UAG TEXAS II, INC.
Dated: April 9, 1997 X /s/ Kevin J. Coffey
------------- ---------------------
By: Kevin J. Coffey, President
Dated: X
------------- ---------------------
By: George G. Lowrance,
Vice President & Secretary
-4-
<PAGE>
GUARANTOR ACKNOWLEDGMENT
AND CONSENT
-----------
The undersigned, each a guarantor or third party pledgor with respect to the
Borrower's obligations to the Bank under the Agreement, each hereby (i)
acknowledge and consent to the execution, delivery, and performance by Borrower
of the foregoing First Amendment to Agreement (the "Amendment"), and (ii)
reaffirm and agree that the respective guaranty, third party pledge or security
agreement to which the undersigned is party and all other documents and
agreements executed and delivered by the undersigned to the Bank in connection
with the Agreement are in full force and effect, without defense, offset, or
counterclaim. (Capitalized terms used herein have the meanings specified in the
Amendment.)
UAG TEXAS II, INC.
Dated: X
------------- ------------------------
By: Kevin J. Coffey, President
Dated: April 9, 1997 X /s/ George G. Lowrance
------------- ------------------------
By: George G. Lowrance,
Vice President & Secretary
-4-
<PAGE>
GUARANTOR ACKNOWLEDGMENT
AND CONSENT
-----------
The undersigned, each a guarantor or third party pledgor with respect to the
Borrower's obligations to the Bank under the Agreement, each hereby (i)
acknowledge and consent to the execution, delivery, and performance by Borrower
of the foregoing First Amendment to Agreement (the "Amendment"), and (ii)
reaffirm and agree that the respective guaranty, third party pledge or security
agreement to which the undersigned is party and all other documents and
agreements executed and delivered by the undersigned to the Bank in connection
with the Agreement are in full force and effect, without defense, offset, or
counterclaim. (Capitalized terms used herein have the meanings specified in the
Amendment.)
UNITED AUTO GROUP, INC., a Delaware
corporation
Dated: April 9, 1997 X /s/ George G. Lowrance
------------- ------------------------
By: George G. Lowrance, Executive
Vice President
-5-
<PAGE>
BANK OF AMERICA
Borrowers: Shannon Automotive, Ltd.
Guarantors: United Auto Group, Inc.
==============================================================================
(1) For valuable consideration, the undersigned ("Guarantors") jointly and
severally unconditionally guarantee and promise to pay to Bank of America
National Trust and Savings Association and any other subsidiary or
affiliate of BankAmerica Corporation which has extended or may hereafter
extend credit to Borrowers (each a "Bank"), or order, on demand, in
lawful money of the United States, any and all indebtedness of Shannon
Automotive, Ltd. ("Borrowers") to Bank. The word "indebtedness" is used
herein in its most comprehensive sense and includes any and all advances,
debts, obligations and liabilities of Borrowers or any one or more of
them, heretofore, now, or hereafter made, incurred or created, whether
voluntary or involuntary and however arising, whether direct or acquired
by Bank by assignment or succession, whether due or not due, absolute or
contingent, liquidated or unliquidated, determined or undetermined, and
whether Borrowers may be liable individually or jointly with others, or
whether recovery upon such indebtedness may be or hereafter become barred
by any statute of limitations, or whether such indebtedness may be or
hereafter become otherwise unenforceable.
(2) The liability of Guarantors under this Guaranty (exclusive of liability
under any other guaranties executed by Guarantors) shall not exceed at
any one time the total of (a) Twenty Million and No/100 Dollars
($20,000,000.00), for the principal amount of the indebtedness and (b)
all interest, fees, and other costs and expenses relating to or arising
out of the indebtedness or such part of the indebtedness as shall not
exceed the foregoing limitation. Bank may permit the indebtedness of
Borrowers to exceed Guarantors' liability, and may apply any amounts
received from any source, other than from Guarantors, to the unguaranteed
portion of Borrowers' indebtedness. This is a Continuing Guaranty
relating to any indebtedness, including that arising under successive
transactions which shall either continue the indebtedness or from time to
time renew it after it has been satisfied. Any payment by Guarantors
shall not reduce their maximum obligation hereunder, unless written
notice to that effect be actually received by Bank at or prior to the
time of such payment.
(3) The obligations hereunder are joint and several, and independent of the
obligations of Borrowers, and a separate action or actions may be brought
and prosecuted against
<PAGE>
Guarantors whether action is brought against Borrowers or whether
Borrowers be joined in any such action or actions and regardless of
whether a trustee's sale is held under any deed of trust securing the
indebtedness or regardless of whether a judicial foreclosure sale is held
if any deed of trust securing the indebtedness is judicially foreclosed
as a mortgage. Guarantors waive the benefit of any statute of limitations
affecting their liability hereunder.
(4) Guarantors authorize Bank, without notice or demand and without affecting
their liability hereunder, from time to time, either before or after
revocation hereof, to (a) renew, compromise, extend, accelerate or
otherwise change the time for payment of, or otherwise change the terms
of the indebtedness or any part thereof, including increase or decrease
of the rate of interest thereon; (b) receive and hold security for the
payment of this Guaranty or the indebtedness guaranteed, and exchange,
enforce, waive, release, fail to perfect, sell, or otherwise dispose of
any such security; (c) apply such security and direct the order or manner
of sale thereof as Bank in its discretion may determine, except to the
extent specifically prohibited by law; and (d) release or substitute any
one or more of the endorsers or guarantors.
(5) Guarantors waive any right to require Bank to (a) proceed against
Borrowers; (b) proceed against or exhaust any security held from
Borrowers; or (c) pursue any other remedy in Bank's power whatsoever.
Guarantors waive any defense arising by reason of any disability or other
defense of Borrowers, or the cessation from any cause whatsoever of the
liability of Borrowers, or any claim that Guarantors' obligations exceed
or are more burdensome than those of Borrowers. Guarantors waive any
benefit of the provisions of Arizona Revised Statutes Sections 12-1641
and 12-1642 et seq., and Rule 17(f) of the Arizona Rules of Civil
Procedures, which set forth certain rights and obligations among
guarantors, debtors and creditors, to the extent applicable. Guarantors
waive any right of subrogation, reimbursement, indemnification, and
contribution (contractual, statutory or otherwise), including without
limitation, any claim or right of subrogation under the Bankruptcy Code
(Title 11 of the U.S. Code) or any successor statute, arising from the
existence or performance of this Guaranty and Guarantors waive any right
to enforce any remedy which Bank now has or may hereafter have against
Borrowers, and waive any benefit of, and any right to participate in, any
security now or hereafter held by Bank. Bank may foreclose, either by
judicial foreclosure or by exercise of power of sale, any deed of trust
securing the indebtedness, and, even though the foreclosure may destroy
or diminish Guarantors' rights against Borrowers, Guarantors shall be
liable to Bank for any part of the indebtedness remaining unpaid after
the foreclosure. Guarantors waive
-2-
<PAGE>
any benefit of any statutory provision limiting the right of Bank to
recover a deficiency judgment, or to otherwise proceed, against any
person or entity obligated for payment of the indebtedness, after any
judicial foreclosure sale or trustee's sale of any collateral securing
the indebtedness including, without limitation, the benefits, if any, of
Arizona Revised Statutes Section 33-814, except to the extent otherwise
required by law. Guarantors waive any homestead or exemption rights.
Guarantors waive all presentments, demands for performance, notices of
nonperformance, protests, notices of protest, notices of dishonor, and
notices of acceptance of this Guaranty and of the existence, creation, or
incurring of new or additional indebtedness.
(6) Guarantors acknowledge and agree that they shall have the sole
responsibility for obtaining from Borrowers such information concerning
Borrowers' financial conditions or business operations as Guarantors may
require, and that Bank has no duty at any time to disclose to Guarantors
any information relating to the business operations or financial
conditions of Borrowers.
(7) In addition to Bank's rights of setoff, to secure all of Guarantors'
obligations hereunder, Guarantors assign and grant to Bank a security
interest in all moneys, securities and other property of Guarantors now
or hereafter in the possession of Bank, and all deposit accounts of
Guarantors maintained with Bank, and all proceeds thereof. Upon default
or breach of any of Guarantors' obligations to Bank, Bank may apply any
deposit account to reduce the indebtedness, and may foreclose any
collateral as provided in the Uniform Commercial Code and in any security
agreements between Bank and Guarantors.
(8) Any obligations of Borrowers to Guarantors, now or hereafter existing,
including but not limited to any obligations to Guarantors as subrogees
of Bank or resulting from Guarantors' performance under this Guaranty,
are hereby subordinated to the indebtedness. Such obligations of
Borrowers to Guarantors if Bank so requests shall be enforced and
performance received by Guarantors as trustees for Bank and the proceeds
thereof shall be paid over to Bank on account of the indebtedness of
Borrowers to Bank, but without reducing or affecting in any manner the
liability of Guarantors under the provisions of this Guaranty.
(9) This Guaranty may be revoked at any time by Guarantors in respect to
future transactions, unless there is a continuing consideration as to
such transactions which Guarantors do not renounce. Such revocation shall
be effective upon actual receipt by Bank at the address shown below of
written notice of revocation. Revocation shall not affect any of
Guarantors' obligations or Bank's rights with respect to
-3-
<PAGE>
transactions which precede Bank's receipt of such notice, regardless of
whether or not the indebtedness related to such transactions, before or
after revocation, has been renewed, compromised, extended, accelerated,
or otherwise changed as to any of its terms, including time for payment
or increase or decrease of the rate of interest thereon, and regardless
of any other act or omission of Bank authorized hereunder. Revocation by
any one or more of Guarantors shall not affect any obligations of any
nonrevoking Guarantors. If this Guaranty is revoked, returned, or
canceled, and subsequently any payment or transfer of any interest in
property by Borrowers to Bank is rescinded or must be returned by Bank to
Borrowers, this Guaranty shall be reinstated with respect to any such
payment or transfer, regardless of any such prior revocation, return, or
cancellation.
(10) Where any one or more of Borrowers are corporations or partnerships it is
not necessary for Bank to inquire into the powers of Borrowers or of the
officers, directors, partners or agents acting or purporting to act on
their behalf, and any indebtedness made or created in reliance upon the
professed exercise of such powers shall be guaranteed hereunder.
(11) Bank may, without notice to Guarantors and without affecting Guarantors'
obligations hereunder, assign the indebtedness and this Guaranty, in
whole or in part. Guarantors agree that Bank may disclose to any
prospective purchaser and any purchaser of all or part of the
indebtedness any and all information in Bank's possession concerning
Guarantors, this Guaranty and any security for this Guaranty.
(12) Guarantors agree to pay all attorneys' fees, the allocated costs of
Bank's in-house counsel, and all other costs and expenses which may be
incurred by Bank in the enforcement of this Guaranty, including without
limitation all costs and necessary disbursements in any legal action or
arbitration proceeding.
(13) Any married person who signs this Guaranty hereby expressly agrees that
recourse may be had against such person's separate property and community
property to the extent permitted by law for all obligations under this
Guaranty.
(14) Where there is but a single Borrower, or where a single Guarantor
executes this Guaranty, then all words used herein in the plural shall be
deemed to have been used in the singular where the context and
construction so require; and when there is more than one Borrower named
herein, or when this Guaranty is executed by more than one Guarantor, the
words "Borrowers" and "Guarantors" respectively shall mean all and any
one or more of them.
-4-
<PAGE>
(15) This Guaranty shall be governed by and construed according to the laws of
the State of Arizona, to the jurisdiction of which the parties hereto
submit.
(16) (a) Any controversy or claim between or among the parties, including but
not limited to those arising out of or relating to this Guaranty or any
agreements or instruments relating hereto or delivered in connection
herewith and any claim based on or arising from an alleged tort, shall at
the request of any party be determined by arbitration. The arbitration
shall be conducted in accordance with the United States Arbitration Act
(Title 9, U.S. Code), notwithstanding any choice of law provision in this
Guaranty, and under the Commercial Rules of the American Arbitration
Association ("AAA"). The arbitrator(s) shall give effect to statutes of
limitation in determining any claim. Any controversy concerning whether
an issue is arbitrable shall be determined by the arbitrator(s). Judgment
upon the arbitration award may be entered in any court having
jurisdiction. The institution and maintenance of an action for judicial
relief or pursuit of a provisional or ancillary remedy shall not
constitute a waiver of the right of any party, including the plaintiff,
to submit the controversy or claim to arbitration if any other party
contests such action for judicial relief.
(b) No provision of this paragraph shall limit the right of any party to
this Guaranty to exercise self-help remedies such as setoff, to foreclose
against or sell any real or personal property collateral or security, or
to obtain provisional or ancillary remedies from a court of competent
jurisdiction before, after, or during the pendency of any arbitration or
other proceeding. The exercise of a remedy does not waive the right of
either party to resort to arbitration. At Bank's option, foreclosure
under a deed of trust or mortgage may be accomplished either by exercise
of power of sale under the deed of trust or mortgage or by judicial
foreclosure.
Executed this 6th day of March, 1997.
UNITED AUTO GROUP, INC., a Delaware corporation
By: /s/ George G. Lowrance
-----------------------------------------------
George G. Lowrance, Executive Vice President
325 Park Avenue
New York, NY 10152
Tax I.D. No.: 22-3086739
Address for notices to Bank:
Bank of America National Trust and Savings Association
Dealer Corporate Services #55030
2727 South 48th Street
Tempe, Arizona 85282
<PAGE>
BANK OF AMERICA
Borrowers: Shannon Automotive, Ltd.
Guarantors: UAG Texas, Inc.
==============================================================================
(1) For valuable consideration, the undersigned ("Guarantors") jointly and
severally unconditionally guarantee and promise to pay to Bank of America
National Trust and Savings Association and any other subsidiary or
affiliate of BankAmerica Corporation which has extended or may hereafter
extend credit to Borrowers (each a "Bank"), or order, on demand, in
lawful money of the United States, any and all indebtedness of Shannon
Automotive, Ltd. ("Borrowers") to Bank. The word "indebtedness" is used
herein in its most comprehensive sense and includes any and all advances,
debts, obligations and liabilities of Borrowers or any one or more of
them, heretofore, now, or hereafter made, incurred or created, whether
voluntary or involuntary and however arising, whether direct or acquired
by Bank by assignment or succession, whether due or not due, absolute or
contingent, liquidated or unliquidated, determined or undetermined, and
whether Borrowers may be liable individually or jointly with others, or
whether recovery upon such indebtedness may be or hereafter become barred
by any statute of limitations, or whether such indebtedness may be or
hereafter become otherwise unenforceable.
(2) The liability of Guarantors under this Guaranty (exclusive of liability
under any other guaranties executed by Guarantors) shall not exceed at
any one time the total of (a) Twenty Million and No/100 Dollars
($20,000,000.00), for the principal amount of the indebtedness and (b)
all interest, fees, and other costs and expenses relating to or arising
out of the indebtedness or such part of the indebtedness as shall not
exceed the foregoing limitation. Bank may permit the indebtedness of
Borrowers to exceed Guarantors' liability, and may apply any amounts
received from any source, other than from Guarantors, to the unguaranteed
portion of Borrowers' indebtedness. This is a Continuing Guaranty
relating to any indebtedness, including that arising under successive
transactions which shall either continue the indebtedness or from time to
time renew it after it has been satisfied. Any payment by Guarantors
shall not reduce their maximum obligation hereunder, unless written
notice to that effect be actually received by Bank at or prior to the
time of such payment.
(3) The obligations hereunder are joint and several, and independent of the
obligations of Borrowers, and a separate action or actions may be brought
and prosecuted against Guarantors whether action is brought against
Borrowers or whether Borrowers be joined in any such action or actions
<PAGE>
and regardless of whether a trustee's sale is held under any deed of
trust securing the indebtedness or regardless of whether a judicial
foreclosure sale is held if any deed of trust securing the indebtedness
is judicially foreclosed as a mortgage. Guarantors waive the benefit of
any statute of limitations affecting their liability hereunder.
(4) Guarantors authorize Bank, without notice or demand and without affecting
their liability hereunder, from time to time, either before or after
revocation hereof, to (a) renew, compromise, extend, accelerate or
otherwise change the time for payment of, or otherwise change the terms
of the indebtedness or any part thereof, including increase or decrease
of the rate of interest thereon; (b) receive and hold security for the
payment of this Guaranty or the indebtedness guaranteed, and exchange,
enforce, waive, release, fail to perfect, sell, or otherwise dispose of
any such security; (c) apply such security and direct the order or manner
of sale thereof as Bank in its discretion may determine, except to the
extent specifically prohibited by law; and (d) release or substitute any
one or more of the endorsers or guarantors.
(5) Guarantors waive any right to require Bank to (a) proceed against
Borrowers; (b) proceed against or exhaust any security held from
Borrowers; or (c) pursue any other remedy in Bank's power whatsoever.
Guarantors waive any defense arising by reason of any disability or other
defense of Borrowers, or the cessation from any cause whatsoever of the
liability of Borrowers, or any claim that Guarantors' obligations exceed
or are more burdensome than those of Borrowers. Guarantors waive any
benefit of the provisions of Arizona Revised Statutes Sections 12-1641
and 12-1642 et seq., and Rule 17(f) of the Arizona Rules of Civil
Procedures, which set forth certain rights and obligations among
guarantors, debtors and creditors, to the extent applicable. Guarantors
waive any right of subrogation, reimbursement, indemnification, and
contribution (contractual, statutory or otherwise), including without
limitation, any claim or right of subrogation under the Bankruptcy Code
(Title 11 of the U.S. Code) or any successor statute, arising from the
existence or performance of this Guaranty and Guarantors waive any right
to enforce any remedy which Bank now has or may hereafter have against
Borrowers, and waive any benefit of, and any right to participate in, any
security now or hereafter held by Bank. Bank may foreclose, either by
judicial foreclosure or by exercise of power of sale, any deed of trust
securing the indebtedness, and, even though the foreclosure may destroy
or diminish Guarantors' rights against Borrowers, Guarantors shall be
liable to Bank for any part of the indebtedness remaining unpaid after
the foreclosure. Guarantors waive any benefit of any statutory provision
limiting the right of Bank to recover a deficiency judgment, or to
otherwise proceed, against any person or entity obligated for payment
-2-
<PAGE>
of the indebtedness, after any judicial foreclosure sale or trustee's
sale of any collateral securing the indebtedness including, without
limitation, the benefits, if any, of Arizona Revised Statutes Section
33-814, except to the extent otherwise required by law. Guarantors waive
any homestead or exemption rights. Guarantors waive all presentments,
demands for performance, notices of nonperformance, protests, notices of
protest, notices of dishonor, and notices of acceptance of this Guaranty
and of the existence, creation, or incurring of new or additional
indebtedness.
(6) Guarantors acknowledge and agree that they shall have the sole
responsibility for obtaining from Borrowers such information concerning
Borrowers' financial conditions or business operations as Guarantors may
require, and that Bank has no duty at any time to disclose to Guarantors
any information relating to the business operations or financial
conditions of Borrowers.
(7) In addition to Bank's rights of setoff, to secure all of Guarantors'
obligations hereunder, Guarantors assign and grant to Bank a security
interest in all moneys, securities and other property of Guarantors now
or hereafter in the possession of Bank, and all deposit accounts of
Guarantors maintained with Bank, and all proceeds thereof. Upon default
or breach of any of Guarantors' obligations to Bank, Bank may apply any
deposit account to reduce the indebtedness, and may foreclose any
collateral as provided in the Uniform Commercial Code and in any security
agreements between Bank and Guarantors.
(8) Any obligations of Borrowers to Guarantors, now or hereafter existing,
including but not limited to any obligations to Guarantors as subrogees
of Bank or resulting from Guarantors' performance under this Guaranty,
are hereby subordinated to the indebtedness. Such obligations of
Borrowers to Guarantors if Bank so requests shall be enforced and
performance received by Guarantors as trustees for Bank and the proceeds
thereof shall be paid over to Bank on account of the indebtedness of
Borrowers to Bank, but without reducing or affecting in any manner the
liability of Guarantors under the provisions of this Guaranty.
(9) This Guaranty may be revoked at any time by Guarantors in respect to
future transactions, unless there is a continuing consideration as to
such transactions which Guarantors do not renounce. Such revocation shall
be effective upon actual receipt by Bank at the address shown below of
written notice of revocation. Revocation shall not affect any of
Guarantors' obligations or Bank's rights with respect to transactions
which precede Bank's receipt of such notice, regardless of whether or not
the indebtedness related to such transactions, before or after
revocation, has been renewed, compromised, extended, accelerated, or
otherwise
-3-
<PAGE>
changed as to any of its terms, including time for payment or increase or
decrease of the rate of interest thereon, and regardless of any other act
or omission of Bank authorized hereunder. Revocation by any one or more
of Guarantors shall not affect any obligations of any nonrevoking
Guarantors. If this Guaranty is revoked, returned, or canceled, and
subsequently any payment or transfer of any interest in property by
Borrowers to Bank is rescinded or must be returned by Bank to Borrowers,
this Guaranty shall be reinstated with respect to any such payment or
transfer, regardless of any such prior revocation, return, or
cancellation.
(10) Where any one or more of Borrowers are corporations or partnerships it is
not necessary for Bank to inquire into the powers of Borrowers or of the
officers, directors, partners or agents acting or purporting to act on
their behalf, and any indebtedness made or created in reliance upon the
professed exercise of such powers shall be guaranteed hereunder.
(11) Bank may, without notice to Guarantors and without affecting Guarantors'
obligations hereunder, assign the indebtedness and this Guaranty, in
whole or in part. Guarantors agree that Bank may disclose to any
prospective purchaser and any purchaser of all or part of the
indebtedness any and all information in Bank's possession concerning
Guarantors, this Guaranty and any security for this Guaranty.
(12) Guarantors agree to pay all attorneys' fees, the allocated costs of
Bank's in-house counsel, and all other costs and expenses which may be
incurred by Bank in the enforcement of this Guaranty, including without
limitation all costs and necessary disbursements in any legal action or
arbitration proceeding.
(13) Any married person who signs this Guaranty hereby expressly agrees that
recourse may be had against such person's separate property and community
property to the extent permitted by law for all obligations under this
Guaranty.
(14) Where there is but a single Borrower, or where a single Guarantor
executes this Guaranty, then all words used herein in the plural shall be
deemed to have been used in the singular where the context and
construction so require; and when there is more than one Borrower named
herein, or when this Guaranty is executed by more than one Guarantor, the
words "Borrowers" and "Guarantors" respectively shall mean all and any
one or more of them.
(15) This Guaranty shall be governed by and construed according to the laws of
the State of Arizona, to the jurisdiction of which the parties hereto
submit.
-4-
<PAGE>
(16) (a) Any controversy or claim between or among the parties, including but
not limited to those arising out of or relating to this Guaranty or any
agreements or instruments relating hereto or delivered in connection
herewith and any claim based on or arising from an alleged tort, shall at
the request of any party be determined by arbitration. The arbitration
shall be conducted in accordance with the United States Arbitration Act
(Title 9, U.S. Code), notwithstanding any choice of law provision in this
Guaranty, and under the Commercial Rules of the American Arbitration
Association ("AAA"). The arbitrator(s) shall give effect to statutes of
limitation in determining any claim. Any controversy concerning whether
an issue is arbitrable shall be determined by the arbitrator(s). Judgment
upon the arbitration award may be entered in any court having
jurisdiction. The institution and maintenance of an action for judicial
relief or pursuit of a provisional or ancillary remedy shall not
constitute a waiver of the right of any party, including the plaintiff,
to submit the controversy or claim to arbitration if any other party
contests such action for judicial relief.
(b) No provision of this paragraph shall limit the right of any party to
this Guaranty to exercise self-help remedies such as setoff, to foreclose
against or sell any real or personal property collateral or security, or
to obtain provisional or ancillary remedies from a court of competent
jurisdiction before, after, or during the pendency of any arbitration or
other proceeding. The exercise of a remedy does not waive the right of
either party to resort to arbitration. At Bank's option, foreclosure
under a deed of trust or mortgage may be accomplished either by exercise
of power of sale under the deed of trust or mortgage or by judicial
foreclosure.
Executed this 6th day of March 1997.
----- -------
UAG TEXAS, INC.
By: /s/ Kevin J. Coffey
-----------------------------------
Kevin J. Coffey, President
BY: /s/ George G. Lowrance
-----------------------------------
George G. Lowrance, Vice President & Secretary
325 Park Avenue
New York, NY 10152
Tax I.D. No.:________
President & Secretary
Address for notices to Bank:
Bank of America National Trust and Savings Association
Dealer Corporate Services #55030
2727 South 48th Street
Tempe, Arizona 85282
<PAGE>
BANK OF AMERICA
Borrowers: Shannon Automotive, Ltd.
Guarantors: UAG Texas II, Inc.
==============================================================================
(1) For valuable consideration, the undersigned ("Guarantors") jointly and
severally unconditionally guarantee and promise to pay to Bank of America
National Trust and Savings Association and any other subsidiary or
affiliate of BankAmerica Corporation which has extended or may hereafter
extend credit to Borrowers (each a "Bank"), or order, on demand, in
lawful money of the United States, any and all indebtedness of Shannon
Automotive, Ltd. ("Borrowers") to Bank. The word "indebtedness" is used
herein in its most comprehensive sense and includes any and all advances,
debts, obligations and liabilities of Borrowers or any one or more of
them, heretofore, now, or hereafter made, incurred or created, whether
voluntary or involuntary and however arising, whether direct or acquired
by Bank by assignment or succession, whether due or not due, absolute or
contingent, liquidated or unliquidated, determined or undetermined, and
whether Borrowers may be liable individually or jointly with others, or
whether recovery upon such indebtedness may be or hereafter become barred
by any statute of limitations, or whether such indebtedness may be or
hereafter become otherwise unenforceable.
(2) The liability of Guarantors under this Guaranty (exclusive of liability
under any other guaranties executed by Guarantors) shall not exceed at
any one time the total of (a) Twenty Million and No/100 Dollars
($20,000,000.00), for the principal amount of the indebtedness and (b)
all interest, fees, and other costs and expenses relating to or arising
out of the indebtedness or such part of the indebtedness as shall not
exceed the foregoing limitation. Bank may permit the indebtedness of
Borrowers to exceed Guarantors' liability, and may apply any amounts
received from any source, other than from Guarantors, to the unguaranteed
portion of Borrowers' indebtedness. This is a Continuing Guaranty
relating to any indebtedness, including that arising under successive
transactions which shall either continue the indebtedness or from time to
time renew it after it has been satisfied. Any payment by Guarantors
shall not reduce their maximum obligation hereunder, unless written
notice to that effect be actually received by Bank at or prior to the
time of such payment.
(3) The obligations hereunder are joint and several, and independent of the
obligations of Borrowers, and a separate action or actions may be brought
and prosecuted against Guarantors whether action is brought against
Borrowers or whether Borrowers be joined in any such action or actions
<PAGE>
and regardless of whether a trustee's sale is held under any deed of
trust securing the indebtedness or regardless of whether a judicial
foreclosure sale is held if any deed of trust securing the indebtedness
is judicially foreclosed as a mortgage. Guarantors waive the benefit of
any statute of limitations affecting their liability hereunder.
(4) Guarantors authorize Bank, without notice or demand and without affecting
their liability hereunder, from time to time, either before or after
revocation hereof, to (a) renew, compromise, extend, accelerate or
otherwise change the time for payment of, or otherwise change the terms
of the indebtedness or any part thereof, including increase or decrease
of the rate of interest thereon; (b) receive and hold security for the
payment of this Guaranty or the indebtedness guaranteed, and exchange,
enforce, waive, release, fail to perfect, sell, or otherwise dispose of
any such security; (c) apply such security and direct the order or manner
of sale thereof as Bank in its discretion may determine, except to the
extent specifically prohibited by law; and (d) release or substitute any
one or more of the endorsers or guarantors.
(5) Guarantors waive any right to require Bank to (a) proceed against
Borrowers; (b) proceed against or exhaust any security held from
Borrowers; or (c) pursue any other remedy in Bank's power whatsoever.
Guarantors waive any defense arising by reason of any disability or other
defense of Borrowers, or the cessation from any cause whatsoever of the
liability of Borrowers, or any claim that Guarantors' obligations exceed
or are more burdensome than those of Borrowers. Guarantors waive any
benefit of the provisions of Arizona Revised Statutes Sections 12-1641
and 12-1642 et seq., and Rule 17(f) of the Arizona Rules of Civil
Procedures, which set forth certain rights and obligations among
guarantors, debtors and creditors, to the extent applicable. Guarantors
waive any right of subrogation, reimbursement, indemnification, and
contribution (contractual, statutory or otherwise), including without
limitation, any claim or right of subrogation under the Bankruptcy Code
(Title 11 of the U.S. Code) or any successor statute, arising from the
existence or performance of this Guaranty and Guarantors waive any right
to enforce any remedy which Bank now has or may hereafter have against
Borrowers, and waive any benefit of, and any right to participate in, any
security now or hereafter held by Bank. Bank may foreclose, either by
judicial foreclosure or by exercise of power of sale, any deed of trust
securing the indebtedness, and, even though the foreclosure may destroy
or diminish Guarantors' rights against Borrowers, Guarantors shall be
liable to Bank for any part of the indebtedness remaining unpaid after
the foreclosure. Guarantors waive any benefit of any statutory provision
limiting the right of Bank to recover a deficiency judgment, or to
otherwise
-2-
<PAGE>
proceed, against any person or entity obligated for payment of the
indebtedness, after any judicial foreclosure sale or trustee's sale of
any collateral securing the indebtedness including, without limitation,
the benefits, if any, of Arizona Revised Statutes Section 33-814, except
to the extent otherwise required by law. Guarantors waive any homestead
or exemption rights. Guarantors waive all presentments, demands for
performance, notices of nonperformance, protests, notices of protest,
notices of dishonor, and notices of acceptance of this Guaranty and of
the existence, creation, or incurring of new or additional indebtedness.
(6) Guarantors acknowledge and agree that they shall have the sole
responsibility for obtaining from Borrowers such information concerning
Borrowers' financial conditions or business operations as Guarantors may
require, and that Bank has no duty at any time to disclose to Guarantors
any information relating to the business operations or financial
conditions of Borrowers.
(7) In addition to Bank's rights of setoff, to secure all of Guarantors'
obligations hereunder, Guarantors assign and grant to Bank a security
interest in all moneys, securities and other property of Guarantors now
or hereafter in the possession of Bank, and all deposit accounts of
Guarantors maintained with Bank, and all proceeds thereof. Upon default
or breach of any of Guarantors' obligations to Bank, Bank may apply any
deposit account to reduce the indebtedness, and may foreclose any
collateral as provided in the Uniform Commercial Code and in any security
agreements between Bank and Guarantors.
(8) Any obligations of Borrowers to Guarantors, now or hereafter existing,
including but not limited to any obligations to Guarantors as subrogees
of Bank or resulting from Guarantors' performance under this Guaranty,
are hereby subordinated to the indebtedness. Such obligations of
Borrowers to Guarantors if Bank so requests shall be enforced and
performance received by Guarantors as trustees for Bank and the proceeds
thereof shall be paid over to Bank on account of the indebtedness of
Borrowers to Bank, but without reducing or affecting in any manner the
liability of Guarantors under the provisions of this Guaranty.
(9) This Guaranty may be revoked at any time by Guarantors in respect to
future transactions, unless there is a continuing consideration as to
such transactions which Guarantors do not renounce. Such revocation shall
be effective upon actual receipt by Bank at the address shown below of
written notice of revocation. Revocation shall not affect any of
Guarantors' obligations or Bank's rights with respect to transactions
which precede Bank's receipt of such notice, regardless of whether or not
the indebtedness related to
-3-
<PAGE>
such transactions, before or after revocation, has been renewed,
compromised, extended, accelerated, or otherwise changed as to any of its
terms, including time for payment or increase or decrease of the rate of
interest thereon, and regardless of any other act or omission of Bank
authorized hereunder. Revocation by any one or more of Guarantors shall
not affect any obligations of any nonrevoking Guarantors. If this
Guaranty is revoked, returned, or canceled, and subsequently any payment
or transfer of any interest in property by Borrowers to Bank is rescinded
or must be returned by Bank to Borrowers, this Guaranty shall be
reinstated with respect to any such payment or transfer, regardless of
any such prior revocation, return, or cancellation.
(10) Where any one or more of Borrowers are corporations or partnerships it is
not necessary for Bank to inquire into the powers of Borrowers or of the
officers, directors, partners or agents acting or purporting to act on
their behalf, and any indebtedness made or created in reliance upon the
professed exercise of such powers shall be guaranteed hereunder.
(11) Bank may, without notice to Guarantors and without affecting Guarantors'
obligations hereunder, assign the indebtedness and this Guaranty, in
whole or in part. Guarantors agree that Bank may disclose to any
prospective purchaser and any purchaser of all or part of the
indebtedness any and all information in Bank's possession concerning
Guarantors, this Guaranty and any security for this Guaranty.
(12) Guarantors agree to pay all attorneys' fees, the allocated costs of
Bank's in-house counsel, and all other costs and expenses which may be
incurred by Bank in the enforcement of this Guaranty, including without
limitation all costs and necessary disbursements in any legal action or
arbitration proceeding.
(13) Any married person who signs this Guaranty hereby expressly agrees that
recourse may be had against such person's separate property and community
property to the extent permitted by law for all obligations under this
Guaranty.
(14) Where there is but a single Borrower, or where a single Guarantor
executes this Guaranty, then all words used herein in the plural shall be
deemed to have been used in the singular where the context and
construction so require; and when there is more than one Borrower named
herein, or when this Guaranty is executed by more than one Guarantor, the
words "Borrowers" and "Guarantors" respectively shall mean all and any
one or more of them.
-4-
<PAGE>
(15) This Guaranty shall be governed by and construed according to the laws of
the State of Arizona, to the jurisdiction of which the parties hereto
submit.
(16) (a) Any controversy or claim between or among the parties, including but
not limited to those arising out of or relating to this Guaranty or any
agreements or instruments relating hereto or delivered in connection
herewith and any claim based on or arising from an alleged tort, shall at
the request of any party be determined by arbitration. The arbitration
shall be conducted in accordance with the United States Arbitration Act
(Title 9, U.S. Code), notwithstanding any choice of law provision in this
Guaranty, and under the Commercial Rules of the American Arbitration
Association ("AAA"). The arbitrator(s) shall give effect to statutes of
limitation in determining any claim. Any controversy concerning whether
an issue is arbitrable shall be determined by the arbitrator(s). Judgment
upon the arbitration award may be entered in any court having
jurisdiction. The institution and maintenance of an action for judicial
relief or pursuit of a provisional or ancillary remedy shall not
constitute a waiver of the right of any party, including the plaintiff,
to submit the controversy or claim to arbitration if any other party
contests such action for judicial relief.
-5-
<PAGE>
(b) No provision of this paragraph shall limit the right of any party to
this Guaranty to exercise self-help remedies such as setoff, to foreclose
against or sell any real or personal property collateral or security, or
to obtain provisional or ancillary remedies from a court of competent
jurisdiction before, after, or during the pendency of any arbitration or
other proceeding. The exercise of a remedy does not waive the right of
either party to resort to arbitration. At Bank's option, foreclosure
under a deed of trust or mortgage may be accomplished either by exercise
of power of sale under the deed of trust or mortgage or by judicial
foreclosure.
Executed this 6th day of March , 1997.
------- ---------
UAG TEXAS II, INC.
By: /s/ Kevin J. Coffey
------------------------------
Kevin J. Coffey, President
By: /s/ George G. Lowrance
------------------------------
George G. Lowrance, Vice President & Secretary
325 Park Avenue
New York, NY 10152
Tax I.D. No.:
Address for notices to Bank:
Bank of America National Trust and Savings Association
Dealer Corporate Services #55030
2727 South 48th Street
Tempe, Arizona 85282
-6-
<PAGE>
STOCK PURCHASE AGREEMENT
DATED FEBRUARY 19, 1997
AMONG
UNITED AUTO GROUP, INC.
UAG EAST, INC.
AND
AMITY AUTO PLAZA LTD., D/B/A AMITY TOYOTA SUPERSTORE
MASSAPEQUA IMPORTS LTD., D/B/A LEXUS OF MASSAPEQUA
WESTBURY NISSAN LTD., D/B/A WESTBURY NISSAN SUPERSTORE
WESTBURY SUPERSTORE LTD., D/B/A WESTBURY TOYOTA
J&S AUTO REFINISHING LTD., D/B/A PREMIER AUTO BODY
FLORIDA CHRYSLER PLYMOUTH JEEP EAGLE INC.
PALM AUTO PLAZA INC., D/B/A PALM BEACH TOYOTA
WEST PALM INFINITI INC.
WEST PALM NISSAN INC.
NORTHLAKE AUTO FINISH INC., D/B/A TRAIL AUTO BODY
AND
JOHN A. STALUPPI
JOHN A. STALUPPI, JR.
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1. PURCHASE AND SALE OF SHARES....................................2
1.1 Certain Definitions.......................................2
1.2 Purchase and Sale of the Shares...........................4
1.3 Net Worth Adjustment......................................7
1.4 New Facility..............................................9
1.5 Stock Price Adjustment....................................11
1.6 Escrow Deposit............................................11
1.7 Additional Purchase Price.................................12
1.8 Contingent Payment........................................12
1.9 Effective Date............................................12
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF THE
COMPANIES AND THE STOCKHOLDERS..........................13
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........................16
2.7 Absence of Material Adverse Effect; Conduct of Business...16
2.8 Taxes.....................................................18
2.9 Legal Matters.............................................19
2.10
Property..................................................20
2.11 Environmental Matters.....................................20
2.12
Inventories...............................................23
2.13 Accounts Receivable.......................................23
2.14
Insurance.................................................23
2.15 Contracts; etc............................................23
2.16 Labor Relations...........................................24
2.17 Employee Benefit Plans....................................25
2.18 Other Benefit and Compensation Plans or Arrangements......28
2.19 Transactions with Insiders................................29
2.20 Propriety of Past Payments................................30
2.21 Interest in Competitors...................................30
2.22 Brokers...................................................30
2.23 Accounts..................................................31
2.24 Disclosure................................................31
2.25 Net Worth.................................................31
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS.............31
3.1 Ownership of Shares; Title................................31
3.2 Authority.................................................31
3.3 Real Property and Improvements............................32
3.4 Investment Intent.........................................33
3.5 Qualification of Stockholders.............................33
(i)
<PAGE>
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF UAG..........................33
4.1 Organization and Good Standing............................34
4.2 Subsidiaries..............................................34
4.3 Capitalization............................................34
4.4 SEC Filings...............................................35
4.5 Authority; Approvals and Consents.........................35
4.6 Financial Statements......................................36
4.7 Taxes.....................................................37
4.8 Absence of Undisclosed Liabilities........................37
4.9 Legal Matters.............................................37
4.10 Disclosure................................................38
4.11 Absence of Material Adverse Effect; Conduct of Business...38
4.12
Insurance.................................................39
4.13 Labor Relations...........................................40
4.14 Contracts; Etc............................................41
4.15 Brokers...................................................41
4.16 Propriety of Past Payments................................41
4.17 Environmental Matters.....................................42
4.18 Employee Benefit Plans....................................42
ARTICLE 5. COVENANTS AND ADDITIONAL AGREEMENTS............................42
5.1 Access; Confidentiality...................................42
5.2 Furnishing Information; Announcements.....................43
5.3 Antitrust Improvements Act Compliance.....................43
5.4 Certain Changes and Conduct of Business of the Companies..44
5.5 No Intercompany Payables or Receivables...................48
5.6 Negotiations..............................................48
5.7 Consents; Cooperation.....................................48
5.8 Additional Agreements.....................................49
5.9 Interim Financial Statements..............................49
5.10 Notification of Certain Matters...........................49
5.11 Assurance by the Stockholders.............................50
5.12 Personal Guarantees.......................................50
5.13 Non-Interference..........................................50
5.14 Environmental Audits......................................51
5.15 Access to Records.........................................51
5.16 Nissan, Primus and World Omni Mortgages...................51
5.17 Certain Changes and Conduct of Business of UAG............52
5.18 1996 Financial Statements.................................53
ARTICLE 6. CONDITIONS TO THE OBLIGATIONS OF UAG AND SUB TO EFFECT THE
CLOSING.................................................53
6.1 Representations and Warranties; Agreements; Covenants.....53
6.2 Authorization; Consents...................................54
6.3 Opinions of the Companies' and the Stockholders' Counsel..54
6.4 Absence of Litigation.....................................54
6.5 No Material Adverse Effect................................55
6.6 Net Worth.................................................55
(ii)
<PAGE>
6.7 Completion of Due Diligence...............................55
6.8 Net Income................................................55
6.9 Leases....................................................55
6.10 Board Approval............................................55
6.11 Certificates..............................................55
6.12 Legal Matters.............................................56
6.13 Approval of Manufacturers and Distributors................56
6.14 Nondisturbance Agreements/Estoppel Certificates...........56
6.15 Title Insurance...........................................56
6.16 Schedules.................................................56
6.17 Lease Termination Agreements/Memoranda of Lease...........56
6.18 Resignation of the Companies' Directors...................57
6.19 Employment Agreement......................................57
ARTICLE 7. CONDITIONS TO THE OBLIGATIONS OF THE STOCKHOLDERS TO
EFFECT THE CLOSING......................................57
7.1 Representations and Warranties; Agreements................57
7.2 Authorization of the Agreement, Consents..................57
7.3 Opinions of UAG's and Sub's Counsel.......................58
7.4 Absence of Litigation.....................................58
7.5 Certificates..............................................58
7.6 Legal Matters.............................................58
7.7 Registration Rights Agreement.............................59
7.8 Schedules.................................................59
7.9 Leases....................................................59
7.10 No Material Adverse Effect................................59
7.11 Employment Agreement......................................59
ARTICLE 8. TERMINATION....................................................59
8.1 Termination...............................................59
8.2 Effect of Termination.....................................60
ARTICLE 9. INDEMNIFICATION................................................60
9.1 Indemnification by the Stockholders.......................60
9.2 Indemnification by UAG....................................61
9.3 Procedures................................................62
9.4 Remedies..................................................63
9.5 Definitions...............................................63
9.6 Limitation on Indemnification.............................63
ARTICLE 10. MISCELLANEOUS.................................................65
10.1 Survival of Provisions....................................65
10.2 Fees and Expenses.........................................66
10.3 Headings..................................................66
10.4 Notices...................................................66
10.5 Assignment................................................68
10.6 Entire Agreement..........................................68
10.7 Waiver and Amendments.....................................68
10.8 Counterparts..............................................68
10.9 Accounting Terms..........................................69
10.10 Schedules.................................................69
10.11 Severability..............................................69
(iii)
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10.12 Remedies..................................................69
10.13 Governing Law.............................................69
10.14 Time is of the Essence....................................69
(iv)
<PAGE>
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT, dated February 19, 1997, is by and
among United Auto Group, Inc., a Delaware corporation ("UAG"), UAG East, Inc.,
a Delaware corporation ("UAG East" or "Sub"), Amity Auto Plaza Ltd., d/b/a
Amity Toyota Superstore, a New York corporation ("Amity Toyota"), Massapequa
Imports Ltd., d/b/a Lexus of Massapequa, a New York corporation ("Massapequa
Lexus"), Westbury Nissan Ltd., d/b/a Westbury Nissan Superstore, a New York
corporation ("Westbury Nissan"), Westbury Superstore Ltd., d/b/a Westbury
Toyota, a New York corporation ("Westbury Toyota"), J&S Auto Refinishing Ltd.,
d/b/a Premier Auto Body, a New York corporation ("Premier"), Florida Chrysler
Plymouth Jeep Eagle Inc., a Florida corporation ("Florida CP"), Palm Auto Plaza
Inc., d/b/a Palm Beach Toyota, a Florida corporation ("West Palm Toyota"), West
Palm Infiniti Inc., a Florida corporation ("West Palm Infiniti"), West Palm
Nissan Inc., a Florida corporation ("West Palm Nissan"), Northlake Auto Finish
Inc., d/b/a Trail Auto Body, a Florida corporation ("Trail," and, together with
Amity Toyota, Massapequa Lexus, Westbury Nissan, Westbury Toyota, Premier,
Florida CP, West Palm Toyota, West Palm Infiniti and West Palm Nissan, the
"Companies"), John A. Staluppi ("Mr. Staluppi") and John A. Staluppi, Jr.
(together with Mr. Staluppi, the "Stockholders").
W I T N E S S E T H:
WHEREAS, UAG East is a wholly-owned subsidiary of UAG;
WHEREAS, the Companies operate franchise automobile dealerships and
related businesses in West Palm Beach, Florida and Long Island, New York;
WHEREAS, the Stockholders own all of the issued and outstanding shares
of the capital stock of the Companies (the "Shares");
WHEREAS, UAG East desires to purchase the Shares from the
Stockholders, and the Stockholders desire to sell the Shares to UAG East (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 East will own one hundred percent (100%) of the issued and
outstanding shares of the capital stock of the Companies, on a fully diluted
basis;
NOW, THEREFORE, in consideration of the mutual terms, conditions and
other agreements set forth herein, the parties hereto hereby agree as follows:
<PAGE>
ARTICLE 1.
ARTICLE 2. 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 spouse, his issue,
his parents, his estate and any trust entirely for the benefit of his 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).
(d) "Documents" shall mean the Post-Closing Escrow Agreement, the
Escrow Agreement, the Piggyback Registration Rights Agreement and the Leases.
(e) "Effective Date" shall have the meaning ascribed to it in Section
1.9 hereof.
(f) "Environmental Laws" shall mean all applicable requirements of
environmental, public or employee health and safety, public or community
right-to-know, ecological or natural resource laws or regulations or controls,
including all applicable requirements imposed by any law (including, without
limitation, common law), rule, order, or regulations of any federal, state, or
local executive, legislative, judicial, regulatory, or administrative agency,
board, or authority, or any applicable private agreement (such as covenants,
conditions and restrictions), which relate to, (i) noise, (ii) pollution or
protection of the air, surface water, groundwater, or soil, (iii) solid,
gaseous, or liquid waste generation, treatment, storage, disposal or
transportation, (iv) exposure to Hazardous Materials (as defined below), or (v)
regulation of the manufacture, processing, distribution and commerce, use, or
storage of Hazardous Materials.
(g) "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.
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(h) "Escrow Agent" shall mean Newman Tannenbaum Helpern Syracuse &
Hirschtritt LLP.
(i) "Escrow Deposit" shall have the meaning ascribed to it in Section
1.6.
(j) "GAAP" shall mean generally accepted accounting principles which
are in effect in the United States on the Closing Date.
(k) "Hazardous Materials" shall mean, collectively, (i) those
substances included within the definitions of or identified as "hazardous
chemicals," "hazardous waste," "hazardous substances," "hazardous materials,"
"toxic substances" or similar terms in or pursuant to, without limitation, the
Comprehensive Environmental Response Compensation and Liability Act of 1980 (42
U.S.C. 9601 et seq.) ("CERCLA"), as amended by Superfund Amendments and
Reauthorization Act of 1986 (Pub. L. 99-499, 100 State, 1613), the Resource
Conservation and Recovery Act of 1976 (42 U.S.C. 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) 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.
(l) "Knowledge" shall mean, with respect to the Stockholders, that
either of the Stockholders knows 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, service manager, office manager (or any person with similar such
responsibilities regardless of title) knows of the particular matter referred
to; and, with respect to UAG, that the President or any Vice-President of UAG
knows of the particular matter referred to.
(m) "Leases" shall have the meaning ascribed to it in Section
1.2(c)(v).
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(n) "Liens" shall mean any mortgages, pledges, title defects or
objections, liens, claims, security interests, conditional and installment sale
agreements, encumbrances or similar charges.
(o) "Material Adverse Effect" shall mean any change in, or effect on,
any of the Companies (including the 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.
(p) "November 30 Balance Sheets" shall have the meaning ascribed to it
in Section 2.5.
(q) "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.
(r) "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.
(s) "Piggyback Registration Rights Agreement" shall have the meaning
ascribed to it in Section 1.2(c)(vi).
(t) "Pre-Tax Earnings" shall mean net earnings (or losses), before
taxes, computed in accordance with GAAP.
(u) "UAG Common Stock" shall mean the shares of common stock, par
value $.0001 per share of UAG.
(v) "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 twenty
(20) 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. PURCHASE AND SALE OF THE SHARES.
(a) Purchase and Sale. Upon the terms and subject to the conditions
set forth in this Agreement, the Stockholders shall sell to UAG East, and UAG
East shall purchase from the Stockholders, the Shares for an aggregate purchase
price (the "Purchase Price") equal to (i) Twenty-Five Million Dollars
($25,000,000) in cash less the amount of any distributions (the
"Distributions") made by the Companies to the Stockholders from
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<PAGE>
November 30, 1996 until the Closing Date (other than distributions of net
income attributable to periods after November 30, 1996 or distributions
attributable to periods prior to November 30, 1996 which are reflected on the
November 30 Balance Sheets) (the "Base Price"), which Base Price is subject to
adjustment after Closing as provided in Sections 1.3, 1.7 and 1.8 below; (ii)
promissory notes in substantially the form attached hereto as Exhibit A (the
"Three Year Notes") issued by UAG in the aggregate principal amount of Twelve
Million Five Hundred Thousand Dollars ($12,500,000) with interest only payable
quarterly at the rate of six and one-half percent (6.5%) per annum, maturing on
the third anniversary of the Closing Date; (iii) promissory notes in
substantially the form attached hereto as Exhibit B (together with the Three
Year Notes, the "Notes") issued by UAG in the aggregate principal amount of
Twelve Million Five Hundred Thousand Dollars ($12,500,000) with interest only
payable quarterly at the rate of six and one-half percent (6.5%) per annum,
maturing on the sixth anniversary of the Closing Date; and (iv) One Hundred
Twenty-Seven Thousand Six Hundred Sixty (127,660) shares of UAG Common Stock
(the "UAG Shares") bearing the restrictive legend customarily placed on
securities that have not been registered under applicable federal and state
securities laws, which shares shall be deposited in escrow pursuant to Section
1.2(c) below. At the Closing referred to in Section 1.2(b) hereof:
(i) the Stockholders shall sell, assign, transfer and deliver to
Sub 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
Stockholders and in payment therefor shall (A) 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; (B) deliver to the Stockholders the Notes; and (C) deliver to
the Escrow Agent certificates representing the UAG Shares bearing the
restrictive legend customarily placed on securities that have not been
registered under applicable federal or state securities laws.
(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
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<PAGE>
waived but no later than April 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 certificates
representing the Shares 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 Stockholders or the Companies at or prior to the
Closing or otherwise required in connection herewith;
(ii) the Sub shall (A) pay to the Stockholders funds as required
by Section 1.2(a)(ii) hereof; (B) deliver to the Stockholders the
Notes; and (C) 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;
(iii) UAG and Mr. Staluppi shall enter into the Post-Closing
Escrow Agreement substantially in the form attached hereto as Exhibit
C (the "Post Closing Escrow Agreement"), and UAG shall deliver to the
Escrow Agent certificates representing the UAG Shares issued in the
name of Mr. Staluppi which shares shall be held and distributed
pursuant to the terms of the Post-Closing Escrow Agreement;
(iv) The Companies (other than Westbury Toyota) and the owner of
the property on which each such Company conducts its business (each a
"Landlord" and collectively the "Landlords") 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"), such form to be agreed to by the parties within twenty
(20) days of the date of this Agreement. Each Lease shall be for a
twenty (20) year term and the lessee shall have the option to renew
the lease for two additional five year terms. Each Lease shall be a
triple net lease and the initial base monthly rent for each Lease
shall be as set forth on Schedule 1.2. Each lease with Mr. Staluppi or
any entity in which he has an ownership or control position shall
contain a provision whereby at the applicable Company's option,
exercisable within six (6) months after the Closing Date, the Company
may have an appraisal of the real property conducted and if the
appraisal reflects that the initial base monthly rent is greater than
one-twelfth (1/12) of the
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appraised fair market value of the property multiplied by a 10.75%
capitalization rate ("Cap Rate") then no adjustments shall be made to
the lease rate for the CPI Increase (as hereinafter defined) until
from and after the initial lease rate is equal to or exceeds the fair
market value lease rate (but in no event until three (3) years after
the Closing Date); provided, however, the Landlord under the affected
lease shall have the right to then obtain its own appraisal within two
(2) months thereafter and if the parties cannot agree on the fair
market value lease rate, the two appraisers shall select a third
appraiser to determine the fair market lease rate within two (2)
months after Landlord's appraisal. All appraisers must be independent
and MAI certified with a minimum of ten (10) years' experience. Mr.
Staluppi represents and warrants that the initial lease rates do not
exceed the fair market lease rate for such property as determined by
taking into account the property's fair market value and a lease rate
of return not to exceed the Cap Rate. Subject to the foregoing, on the
third anniversary of the Closing Date and every three years
thereafter, the lease rate for each Lease shall increase to an amount
equal to the rate then in effect plus an amount equal to a percentage
of the rate then in effect, which percentage shall be equal to two
hundred percent (200%) of 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 such increase shall not exceed eight and one-half
percent (8.5%) for each three (3) year period ("CPI Increase"). UAG
shall guarantee the payment under and performance of the lessees under
the Leases; and
(v) UAG and Mr. Staluppi shall enter into a registration rights
agreement in the form attached hereto as Exhibit D (the "Piggyback
Registration Rights Agreement").
1.3. NET WORTH ADJUSTMENT.
(a) On the Closing Date, or as soon as practicable after the Closing
Date, the Stockholders shall deliver to UAG balance sheets of the Companies
dated as of the Closing Date (such balance sheets so delivered are referred to
herein as the "Closing Date Balance Sheets"). The Closing Date Balance Sheets
shall be prepared in good faith on the same basis and in accordance with the
accounting principles, methods and practices used in preparing the November 30
Balance Sheets (as defined in Section 2.5 hereof) (such accounting principles,
methods and practices and such procedures, are referred to herein as the
"Accounting Principles"). In connection with the preparation of
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the Closing Date Balance Sheets, 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.
(b) Within sixty (60) days after delivery of the Closing Date Balance
Sheets, (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
Sheets in such manner as UAG and the Reviewer deem appropriate, and (ii) UAG
shall deliver such reviewed balance sheet (the "Reviewed Balance Sheets"),
together with the Reviewer's report thereon, to the Stockholders. The Reviewed
Balance Sheets (i) shall be prepared on the same basis and in accordance with
the Accounting Principles and (ii) shall include a schedule showing the
computation of 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 Stockholders, the Companies and each of the accountants and other
representatives of the Stockholders and the Companies and to examine the work
papers, schedules and other documents prepared by the Stockholders, the
Companies and each of such accountants and other representatives during the
preparation of the Closing Date Balance Sheets. The Stockholders and the
Stockholders' independent public accountants shall have the opportunity to
consult with the Reviewer and to examine the work papers, schedules and other
documents prepared by the Reviewer during the preparation of the Reviewed
Balance Sheets.
(c) The Stockholders shall have a period of forty-five (45) days after
delivery of the Reviewed Balance Sheets to present in writing to UAG all
objections the Stockholders may have to any of the matters set forth or
reflected therein, which objections shall be set forth in reasonable detail. If
no objections are raised within such 45-day period, the Reviewed Balance Sheets
shall be deemed accepted and approved by the Stockholders and a supplemental
closing (the "Supplemental Closing") shall take place within five (5) Business
Days following the expiration of such 45-day period, or on such other date as
may be mutually agreed upon in writing by UAG and the Stockholders.
(d) If the Stockholders shall raise any objection within such 45-day
period, UAG and the Stockholders shall attempt to resolve the matter or matters
in dispute and, if resolved, the Supplemental Closing shall take place within
five (5) Business Days following such resolution.
(e) If such dispute cannot be resolved by UAG and the Stockholders
within sixty (60) days after the delivery of the Reviewed Balance Sheets, then
the specific matters in dispute shall be submitted to a firm of independent
public accountants mutually acceptable to UAG and the Stockholders, which firm
shall
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<PAGE>
make a final and binding determination as to such matter or matters. Such
accounting firm shall send its written determination to UAG and the
Stockholders and the Supplemental Closing, if any, shall take place five (5)
Business Days following the receipt of such determination by UAG and the
Stockholders. The fees and expenses of the accounting firm referred to in this
Section 1.3(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 1.3(e) hereof in order that any
and all matters in dispute shall be resolved as soon as practicable.
(g) (i) If the aggregate Net Worth as shown on the Reviewed Balance
Sheets as finally determined through the operation of Sections 1.3 (a) through
(e) hereof plus the amount of the Distributions (such amount being referred to
herein as the "Final Net Worth") shall be less than the Net Worth of the
Companies as set forth on the November 30 Balance Sheets (which balance sheets
are attached hereto as Schedule 2.5) (the amount of any such deficiency being
referred to herein as the "Net Worth Deficiency"), the Stockholders shall pay
to UAG at the Supplemental Closing, by wire transfer of immediately available
funds to an account designated in writing by UAG at least two (2) Business Days
prior to the date of the Supplemental Closing, an amount equal to the Net Worth
Deficiency.
(ii) "Net Worth", computed in connection with the Closing Date
Balance Sheets, the Company Balance Sheets and the Reviewed Balance
Sheets, 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 Companies comprising the Closing Date
Balance Sheets, the Company Balance Sheets or the Reviewed Balance
Sheets, as the case may be.
1.4. NEW FACILITY.
(a) Mr. Staluppi or an Affiliate is the owner of a parcel of land
located on Military Trail, West Palm Beach (the "West Palm Parcel") and is in
the process of developing a new facility on such land for use by West Palm
Toyota (the "New Facility"). The New Facility is to be developed pursuant to
plans and specifications to be agreed upon by the parties, which plans and
specifications shall include a breakdown of all hard and soft costs together
with the maximum total cost (the "Plans"). The construction contractor shall be
chosen from among no less than three (3) bidders (one of whom UAG may
designate) and the lowest bidder that is qualified to Toyota standards
(including an ability to post a performance bond) shall be selected. The
parties acknowledge that the New Facility will not
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be completed on the Closing Date. Within nine (9) months after the Closing
Date, Mr. Staluppi shall, at his sole cost and expense, complete the New
Facility as set forth in the Plans. No change shall be made to the Plans
without the prior written consent of UAG which shall not be unreasonably
withheld. Upon completion of the New Facility and satisfaction of the New
Facility Closing Conditions (as hereinafter defined) West Palm Toyota and Mr.
Staluppi shall enter into a lease for the New Facility in a form mutually
acceptable to the parties (the "New Facility Lease") (the date on which the New
Facility Lease becomes effective is referred to herein as the "New Facility
Lease Date"), such form to be agreed to by the parties within twenty (20) days
after the date of this Agreement. The New Facility Lease shall be for a twenty
(20) year term and the lessee shall have the option to renew the lease for two
additional five year terms. The initial lease rate under the New Facility Lease
shall be fixed at a dollar amount equal to 100% of all hard and soft costs
provided for in the Plans and actually incurred by Mr. Staluppi for acquisition
and construction of the facility multiplied by the Cap Rate. Mr. Staluppi
represents and warrants that the acquisition cost of the property is no greater
than fair market value. The initial lease rate shall be increased every third
anniversary after the commencement of the lease as set forth in Section
1.2(c)(iv).
For purposes of this Agreement, "New Facility Closing Conditions" shall mean
(i) the completion of the New Facility substantially in accordance with the
Plans including but not limited to substantially all material punch list items
as certified by the architect for such New Facility; provided, however, that if
UAG disputes such certificate it may retain its own architect to determine if
such New Facility has been completed substantially in accordance with such
Plans; (ii) the issuance of a permanent Certificate of Occupancy by the local
governmental authorities with respect to such New Facility without condition;
(iii) West Palm Toyota having received any necessary consents or approvals from
Toyota to relocate its operations to the New Facility; (iv) delivery of an ALTA
"as-built" survey of the New Facility and the property upon which it is located
reflecting no encroachments on adjoining land or into set-back areas and that
all utilities serve the New Facility through publicly dedicated rights-of-way
and tie into public utilities, such survey to be certified to UAG, UAG East,
West Palm Toyota and a title insurance company chosen by UAG; (v) UAG's
obtaining a leasehold title insurance policy, without standard exceptions
insuring West Palm Toyota's leasehold estate in the New Facility subject to no
prior ground lease, mortgage, deed of trust or other security instrument or if
so encumbered, Mr. Staluppi's obtaining a non-disturbance agreement from the
holder thereof in favor of West Palm Toyota in form and substance reasonably
satisfactory to UAG in recordable form and insured by such title company and
otherwise subject to only those exceptions to title as are reasonably
acceptable to UAG and providing such endorsements as UAG shall require
including, but not limited to, coverage over mechanics and materialman's liens;
(vi) UAG
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confirming that the New Facility complies with all zoning requirements and the
title company is prepared to issue a zoning endorsement; and (vii) UAG
obtaining an updated Phase I environmental report reflecting that (x) there are
no Hazardous Materials on or in the New Facility or the land upon which it is
located other than any that may be disclosed in the initial Phase I conducted
by UAG, (y) there are no violations of Environmental Laws at the New Facility
or the land upon which it is located; and (z) there is no recommendation for
further investigation or action with respect to the New Facility or such land,
which report shall be for the benefit of UAG, UAG East and West Palm Toyota. In
addition, Mr. Staluppi shall complete all remaining punch list items within
sixty (60) days after the New Facility Lease Date and shall use his best
efforts to obtain standard warranties for construction and equipment (including
roofs) and to assign such warranties to UAG or West Palm Toyota. Mr. Staluppi
also agrees that all equipment and fixtures necessary for a "turn-key" car
dealership similar to the existing West Palm Toyota dealership shall be
relocated from the existing West Palm Toyota Facility to the New Facility. In
addition, from and after the Closing Date until the earlier of (i) the New
Facility Lease Date, and (ii) nine (9) months after the Closing Date, West Palm
Toyota shall pay to Mr. Staluppi his out of pocket costs attributable to (x)
real property taxes, (y) ground lease payments and (z) interest on borrowed
funds utilized to acquire and construct the New Facility land and improvements.
1.5. STOCK PRICE ADJUSTMENT.
If the UAG Market Value on the Adjustment Date (as defined below) is
less than Twenty-three and 50/100 Dollars ($23.50) (the amount of any such
deficiency being referred to herein as the ("Stock Price Deficiency") then, no
later than ten (10) Business Days after the Adjustment Date, UAG shall pay to
Mr. Staluppi cash in an amount (the "Adjustment Amount") equal to the Stock
Price Deficiency multiplied by the number of UAG Shares Mr. Staluppi received
at the Closing.
For purposes of this Agreement, the Adjustment Date shall mean the earlier of
(i) the date on which the UAG Shares are registered pursuant to the Piggyback
Registration Rights Agreement or (ii) the date on which Mr. Staluppi may sell
the UAG Shares in reliance on Rule 144 promulgated by the Securities and
Exchange Commission ("SEC") pursuant to the Securities Act of 1933, as amended
("Rule 144").
1.6. ESCROW DEPOSIT.
Within three (3) business days of the Effective Date of this
Agreement, UAG will deposit into escrow funds in the amount of Two Hundred
Fifty Thousand Dollars ($250,000) (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 the terms of an escrow agreement in substantially
the form attached hereto as Exhibit E.
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1.7. ADDITIONAL PURCHASE PRICE.
If the Companies, on a combined basis, achieve annual Pre-Tax Earnings
of at least Eleven Million Five Hundred Thousand Dollars ($11,500,000) in any
of the three (3) successive twelve (12) month periods beginning on the first
day of the calendar month immediately following the New Facility Lease Date
(such twelve (12) month periods being referred to herein as "Year One," "Year
Two," and "Year Three," respectively), then, in consideration for the sale of
the Shares by the Stockholders to Sub, Sub will make an additional payment to
the Stockholders with respect to each such year that such Pre-Tax Earnings
shall be achieved in the aggregate amount of One Million Dollars ($1,000,000)
(each such payment being referred to herein as an "Additional Payment"), which
Additional Payments, if any, shall be allocated among the Stockholders as they
so determine in their sole discretion. In the event that Sub is required to
make an Additional Payment in either Year One, Year Two or Year Three, then Sub
shall make the Additional Payment within sixty (60) days after the completion
of the review by the Companies' certified public accountant of the Companies'
financial statements covering the entire Year for which such Additional Payment
is to be paid. For purposes of this Agreement, Pre-Tax Earnings shall not
include any general overhead charges, management fees or other similar payments
to UAG or its Affiliates. During Years One, Two and Three each Company shall
deliver to Mr. Staluppi a copy of its monthly factory statement within five (5)
days of its delivery to the factory which statement shall be treated as
confidential by Mr. Staluppi.
1.8. CONTINGENT PAYMENT.
If the total of the annual Pre-Tax Earnings for Year One, Year Two and
Year Three (the "Total Pre-Tax Earnings") exceeds Thirty Four Million Five
Hundred Thousand Dollars ($34,500,000), then, in consideration for the sale of
the Shares by the Stockholders to Sub, Sub will make an additional payment to
the Stockholders in the aggregate amount of One Million Dollars ($1,000,000)
(such payment being referred to herein as the "Contingent Payment"), which
Contingent Payment shall be allocated among the Stockholders as they so
determine in their sole discretion. In the event that Sub is required to make a
Contingent Payment, then Sub shall make the Contingent Payment within sixty
(60) days after completion of the review by the Companies' certified public
accounts of the Companies' financial statements covering Year Three.
1.9. EFFECTIVE DATE.
The obligations of the parties hereunder shall not take effect until
the parties have notified all of the manufacturer's whose consent is required
(the "Effective Date").
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ARTICLE 2. REPRESENTATIONS AND WARRANTIES
OF THE COMPANIES AND THE STOCKHOLDERS
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 Stockholders no later than ten (10) Business Days after the Effective
Date hereof, the Companies and the Stockholders hereby jointly and severally
represent and warrant to UAG and Sub 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 their businesses
as now being conducted. The Companies are duly qualified to do business and are
in good standing as a foreign corporation in each state and jurisdiction where
qualification as a foreign corporation is required, except for such failures to
be qualified and in good standing, if any, which when taken together with all
other such failures of the Companies would not, or could not reasonably be
expected to, in the aggregate have a Material Adverse Effect. Schedule 2.1
hereto lists (i) the states and other jurisdictions where the Companies are so
qualified and (ii) the assumed names under which the Companies conduct
business. Attached to Schedule 2.1(b) hereto are complete and correct copies of
the Companies' Articles of Incorporation and Bylaws (including comparable
governing instruments with different names), as amended and presently in
effect.
2.2. SUBSIDIARIES.
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 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,
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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 Stockholders of this Agreement and the Documents to which it
or 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 Articles of Incorporation or
By-Laws (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 hereof) or, except as set forth
on Schedule 2.4 hereto, require any consent or waiver of any party to
any Company Agreement;
(iii) result in the creation of any security interest upon, or
any person obtaining any right to acquire, any properties, assets or
rights of the Companies (other than the rights of Sub to acquire the
Shares pursuant to this Agreement);
(iv) violate or conflict with any Legal Requirements (as defined
in Section 2.9 hereof) applicable to the Companies or any of their
respective businesses or properties; or
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(v) require any authorization, consent, order, permit or approval
of, or notice to, or filing, registration or qualification with, any
governmental, administrative or judicial authority, 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.
Except as otherwise indicated below, attached as Schedule 2.5 are true
and complete copies of:
(i) (A) the balance sheets of the Companies as of December 31,
1995, and the related consolidated statements of income, stockholders'
equity and cash flow for the fiscal year ended December 31, 1995,
together with the notes thereto and (B) the balance sheets of the
Companies as of December 31, 1994, and the related consolidated
statements of income, stockholders' equity and cash flow for the
fiscal year ended December 31, 1994, together with the notes thereto,
in each case examined by and accompanied by the report of independent
certified public accountants (except where such examination and report
are not available);
(ii) the balance sheets of the Companies as of November 30, 1996
(the "November 30 Balance Sheets"); and
(iii) the most recent monthly and year-to-date financial
statements provided to each franchisor of the Companies (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 the case of
the financial statements referred to in clause (i) above in conformity with
GAAP consistently applied (except as
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otherwise indicated in such statements) during such periods, and the unaudited
financial statements included in the Company Financial Statements indicate all
adjustments, which consist of only normal recurring accruals, necessary for
such fair presentations. The Company Financial Statements are consistent with
the financial records maintained and the accounting methods applied by the
Companies for tax purposes. 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 material liability of any nature
whatsoever (whether known or unknown, due or to become due, accrued, absolute,
contingent or otherwise), including, without limitation, any unfunded
obligation under employee benefit plans or arrangements as described in Section
2.18 and 2.19 hereof or liabilities for Taxes (as defined in Section 2.8
hereof), except for (i) liabilities reflected or reserved against on the most
recent Company Financial Statements, (ii) current liabilities incurred in the
ordinary course of business and consistent with past practice after the date of
the Company Balance Sheets which, individually and in the aggregate, do not
have, and cannot reasonably be expected to have, a Material Adverse Effect, and
(iii) liabilities disclosed on Schedule 2.6 hereto. The Companies are not
parties to any Company Agreement, or subject to any charter or by-law
provision, any other corporate limitation or any Legal Requirement, which has,
or can reasonably be expected to have, a Material Adverse Effect.
2.7. ABSENCE OF MATERIAL ADVERSE EFFECT; CONDUCT OF BUSINESS.
(a) Since November 30, 1996, the Companies have operated in the
ordinary course of business consistent with past practice, except as set forth
on Schedule 2.7(a) hereto, and there has not been:
(i) any material adverse change in the assets, properties,
business, operations, prospects, net income or financial condition of
the 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 the Companies, whether or not covered
by insurance;
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(iii) any change in any method of accounting or accounting
practice 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, or any
equivalent employee of any of the Companies.
(b) Since November 30, 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 canceled 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 except in the ordinary
course of business consistent with past practices;
(viii) granted any increase in the compensation or benefits of
employees other than increases in accordance with past practice not
exceeding 10% or entered into any employment or severance agreement or
arrangement with any of them except in the ordinary course of business
consistent with past practices;
(ix) made any individual capital expenditure in excess of
$100,000, or aggregate capital expenditures in excess of $300,000, or
additions to
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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, as amended (the "Code"), to be an "S
Corporation" within the meaning of Section 1361(a)(1) of the Code and (with the
exception of West Palm Nissan) have continued to qualify as such for all
taxable years since their 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 to the extent available and in the
possession of the Companies 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, the Companies are not
liable, or will not become liable, for any Taxes for any period ending on or
prior to the Closing
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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 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 $50,000. Neither the Companies
nor any Stockholder knows of any basis for an assertion of a deficiency for
Taxes against the Companies. The Stockholders will cooperate, and will cause
their Affiliates to cooperate, with the Companies in the filing of any returns
and in any audit or refund claim proceedings involving Taxes for which the
Companies may be liable or with respect to which the Companies may be entitled
to a refund.
2.9. LEGAL MATTERS.
(a) Except as set forth on Schedule 2.9(a) hereto, (i) there is no
claim, action, suit, litigation, investigation, inquiry, review or proceeding
(collectively, "Claims") pending against, and, to the knowledge of the
Companies or the Stockholders, there is no material claim threatened against or
affecting, the Companies, any ERISA Plan (as defined in Section 2.18(a) hereof)
or any of their respective properties or rights before or by any court,
arbitrator, panel, agency or other governmental, administrative or judicial
entity, domestic or foreign, nor is any basis known to the Stockholders 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 businesses of the Companies are being conducted in compliance
with all laws, ordinances, codes, rules, regulations, standards, judgments and
other requirements of all governmental, administrative or judicial entities
(collectively, "Legal Requirements") applicable to the Companies or any of
their respective businesses or properties except where the failure to be in
such compliance could not reasonably be expected to have a Material Adverse
Effect. The Companies hold, and are in compliance with, all 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 businesses. 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.
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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 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, and together with the New Facility, the "Real
Property"). With respect to any leased Real Property owned by Mr. Staluppi or
any of his 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. With respect to any leased Real
Property not owned by Mr. Staluppi or any of his Affiliates, neither the
Companies nor the Stockholders have (i) received notice of any defaults by any
parties under such leases (the "Third Party Leases") or (ii) 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 leased 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 Stockholders and the
Companies, such Improvements do not encroach in any respect on property of
others. To the knowledge of the Stockholders and the Companies, 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 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.
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 is limited to the knowledge of the Stockholders and the
Companies as it may relate to compliance for any period prior to the
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Initial Date), (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 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 Stockholders 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 Stockholders have not violated, done or
suffered any act which could give rise to liability under, and, to the
knowledge of the Stockholders and the Companies, are not otherwise exposed to
liability under, any Environmental Law. After the Initial Date (and, to the
knowledge of the Stockholders 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 Stockholders 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.
(c) Except as set forth on Schedule 2.11(c) hereto, (i) after the
Initial Date (and, to the knowledge of the Stockholders 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 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 or release of
any Hazardous Materials (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 Stockholders 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
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 Stockholders,
none of the Real
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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 Stockholders 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
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 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,
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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 or Sub have arising out of the representations and warranties
contained herein.
2.12. INVENTORIES.
The values at which inventories are carried on the Company Balance
Sheets and Company Factory Statements reflect the normal inventory valuation
policies of the Companies, and, in the case of the Company Balance Sheets, such
values are in conformity with GAAP consistently applied. All inventories
reflected on the Company Balance Sheets and Company Factory Statements or
arising since the date thereof are currently marketable and can reasonably be
anticipated to be sold at normal mark-ups within 120 days after the date hereof
in the ordinary course of business, except for spare parts inventory which
inventory is good and usable.
2.13. ACCOUNTS RECEIVABLE.
All accounts receivable reflected on the Company Balance Sheets are,
and all accounts receivable that will be or will have been reflected on the
Closing Date Balance Sheets will be, good, and have been or will have been
collected or are collectible, without resort to litigation, within 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 customary for companies engaged in similar
businesses or owning similar assets. Set forth on Schedule 2.14 hereto is a
list and brief description (including the name of the insurer, the type of
coverage provided, the amount of the annual premium for the current policy
period, the amount of remaining coverage and deductibles and the coverage
period) of all policies for such insurance and the Companies have made or will
make available to UAG true and complete copies of all such policies. All such
policies are in full force and effect, are sufficient for all applicable
requirements of law and will not in any way be affected by or terminated or
lapsed by reason of the consummation of the transactions contemplated by this
Agreement. 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,
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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 respective 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 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
Stockholders is, any other party thereto, in material 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 material breach or default under, or
would permit modification, cancellation, acceleration or termination of, any
Company Agreement or result in the creation of any material Lien upon, or any
Person obtaining any right to acquire, any properties, assets or rights of the
Companies in any such case where such breach, default or other event would
have, or could reasonably be expected to have, a Material Adverse Effect. There
are no material unresolved disputes involving any of the Companies under any
Company Agreement.
2.16. LABOR RELATIONS.
(a) The Companies have paid or made provision for the payment of all
salaries and accrued wages and have complied in all material respects with all
applicable laws, rules and regulations relating to the employment of labor,
including those relating to wages, hours, collective bargaining and the payment
and withholding of taxes, and have withheld and paid to the appropriate
governmental authority, or are holding for payment not yet due to such
authority, all amounts required by law or agreement to be withheld from the
wages or salaries of their employees.
(b) Except as described in Section 6.13 and 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
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employed by the Companies, nor do the Stockholders 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 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, (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:
(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(i) of ERISA, maintained by the Companies or to which the Companies
are required to make contributions ("Welfare Benefit Plan").
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True and complete copies of all Pension Benefit Plans and Welfare Benefit Plans
(collectively, "ERISA Plans") have been delivered to or made available to UAG
together with, as applicable with respect to each such ERISA Plan, trust
agreements, summary plan descriptions, all IRS determination letters or
applications therefor with respect to any Pension Benefit Plan intended to be
qualified pursuant to Section 401(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), and valuation or actuarial reports, accountant's
opinions, financial statements, IRS Form 5500s (or 5500-C or 5500-R) and
summary annual reports for the last three years.
(b) With respect to the ERISA Plans, except as set forth on Schedule
2.17(b):
(i) there is no ERISA Plan which is a " multiemployer" plan as
that term is defined in Section 3(37) of ERISA ("Multiemployer Plan");
(ii) no event has occurred or (to the knowledge of the 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 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 Stockholders) no
such action is contemplated or under consideration and the IRS has not
asserted that any Pension Benefit Plan is not qualified under Section
401(a) of the Code or that any trust
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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
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 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.
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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, 1995; 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 provided to UAG together with, where prepared
by or for the Companies, any valuation, actuarial or accountant's
opinion or
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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 Stockholders) no such action is contemplated or under
consideration;
(iii) has no liability for any federal, state, local or foreign
Taxes;
(iv) has no claims subject to dispute or litigation;
(v) has met all applicable requirements, if any, of the Code; and
(vi) has operated since its inception in material compliance with
the reporting and disclosure requirements imposed under ERISA and the
Code.
2.19. TRANSACTIONS WITH INSIDERS.
Set forth on Schedule 2.19 hereto is a complete and accurate
description of all material transactions between the Companies or any ERISA
Plan, on the one hand, and any Insider, on the other hand, that have occurred
since December 31, 1995. For purposes of this Agreement:
(i) the term "Insider" shall mean the Stockholders, any director
or officer 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
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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
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 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.
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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 Stockholders have made any material
misrepresentation to UAG or the Sub relating to the Companies or the Shares or
the Real Property or Improvements and neither the Companies nor the
Stockholders to their knowledge 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.
2.25. NET WORTH.
On the Closing Date, the Net Worth of the Companies will be equal to
or greater than the November 30, 1996 Net Worth less the amount of any
Distributions.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
Subject to the parties' agreement and acknowledgement that the
Schedules referred to in this Article 3 are to be delivered by the Stockholders
no later than ten (10) Business Days after the Effective Date hereof, the
Stockholders hereby represent and warrant to UAG as follows:
3.1. OWNERSHIP OF SHARES; TITLE.
Each 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, encumbrances,
proxies and voting or other agreements except restrictions on transfer imposed
by applicable federal and state securities laws.
3.2. AUTHORITY.
The Stockholders have all requisite power and authority and have full
legal capacity and are competent to execute, deliver and perform this Agreement
and the Documents to which they are a
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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
Stockholders and constitutes, and the 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 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
Stockholders and the consummation of the transactions contemplated hereby and
thereby do not and will not:
(i) (after notice or lapse of time or both) conflict with, result
in a breach of any provision of, constitute a default under, result in
the modification or cancellation of, or give rise to any right of
termination or acceleration in respect of, any material contract,
agreement, commitment, understanding, arrangement or restriction to
which any of the Stockholders is a party or to which any of the
Stockholders or any of their property is subject;
(ii) violate or conflict with any Legal Requirements applicable
to the Stockholders or any of Stockholders' 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 Mr. Staluppi 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 Mr. Staluppi 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 or, as to the New Facility, as proposed to be 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
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Schedule 3.3 are all surveys, title binders, title policies and copies of any
exceptions to title relating to such Real Property or Improvements.
3.4. INVESTMENT INTENT.
Mr. Staluppi has no present plan, intention or arrangement to dispose
of any of the UAG Common Stock received by him pursuant to the terms of this
Agreement.
3.5. QUALIFICATION OF STOCKHOLDERS.
Mr. Staluppi (i) is an "accredited investor" within the meaning of
Regulation D of the Securities Act of 1933, as amended (the "Securities Act"),
and is acquiring the UAG Common Stock 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) understands and acknowledges
that such UAG Common Stock 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 Mr. Staluppi's investment intent as expressed herein; (iii) is able to bear
the economic risk of investment in such UAG Common Stock and has such knowledge
and experience in financial and business matters that he is capable of
evaluating the risks and merits of such UAG Common Stock; (iv) acknowledges
that the UAG shares were not offered to him by means of publicly disseminated
advertisements or sales literature, or as part of a general solicitation; (v)
acknowledges that in deciding to proceed with the transaction set forth herein
he has relied solely on his own independent investigation of UAG and upon the
representations of UAG set forth herein; and (vi) understands and acknowledges
that such UAG Common Stock will be "restricted securities" as that term is
defined in Rule 144 under the Securities Act and that the certificates
representing such UAG Common Stock will bear a legend restricting transfer
unless (A) the transfer is exempt from the registration requirements under the
Securities Act and any applicable state securities law and an opinion of
counsel reasonably satisfactory to UAG that such transfer is exempt therefrom
is delivered to UAG or (B) the transfer is made pursuant to an effective
registration statement under the Securities Act and any applicable state
securities law.
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 the Stockholders
no later than ten (10) Business Days after the Effective Date hereof, UAG and
UAG East hereby represent and warrant to the Companies and the Stockholders as
follows:
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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 UAG Subsidiaries (as
defined below) would not, or could not reasonably be expected to, in the
aggregate have a Material Adverse Effect on UAG and the UAG Subsidiaries, taken
as a whole. UAG has made available to the Stockholders complete and correct
copies of its charter and by-laws, as amended and presently in effect.
4.2. SUBSIDIARIES.
Each of the UAG Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own, lease and operate
the properties and assets used in its business and to carry on its business as
now being conducted, and is duly qualified to do business and in good standing
as a foreign corporation in each jurisdiction where qualification as a foreign
corporation is required, except for such failures to be qualified and in good
standing, if any, which when taken together with all other such failures of UAG
and the UAG Subsidiaries would not, or could not reasonably be expected to, in
the aggregate have a Material Adverse Effect on UAG and the UAG Subsidiaries,
taken as a whole. All of the outstanding shares of capital stock of the UAG
Subsidiaries have been validly authorized and issued, are fully paid and
non-assessable, have not been issued in violation of any preemptive rights or
of any federal or state securities law. "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.
4.3. 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.
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4.4. SEC FILINGS.
UAG has heretofore made available to Mr. Staluppi UAG's Registration
Statement on Form S-1 as declared effective by the SEC on October 23, 1996 and
UAG's Quarterly Report on Form 10-Q for the period ending September 30, 1996
(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.
4.5. AUTHORITY; APPROVALS AND CONSENTS.
UAG has the corporate power and authority to enter into this Agreement
and the Documents to which it is a party and to perform its obligations
hereunder and thereunder. At the time of the Closing, the execution, delivery
and performance of this Agreement and the Documents to which it is a party and
the consummation of the transactions contemplated hereby and thereby will have
been duly authorized and approved by the Board of Directors of UAG and no other
corporate proceedings on the part of UAG 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, enforceable against UAG in accordance with their
respective terms. Except as set forth on Schedule 4.5 hereto, the execution,
delivery and performance by UAG of this Agreement and the Documents to which it
is a party and the consummation of the transactions contemplated hereby and
thereby do not and will not:
(i) contravene any provisions of the Certificate of Incorporation
or By-Laws of UAG;
(ii) (after notice or lapse of time or both) conflict with,
result in a breach of any provision of, constitute a default under,
result in the modification or cancellation of, or give rise to any
right of termination or acceleration in respect of, any UAG Agreement
(as defined below) or require any consent or waiver of any party to
any UAG Agreement;
(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.
Except as set forth or referred to above, no authorization, consent, order,
permit or approval of, or notice to, or filing, registration or qualification
with, any governmental administrative or judicial authority is necessary to be
obtained or made by UAG to enable UAG to continue to conduct its business and
operations and use its properties after the Closing in a manner which is in all
material respects consistent with that in which they are presently conducted.
4.6. FINANCIAL STATEMENTS.
Attached as Schedule 4.6 are true and complete copies of:
(a) the consolidated balance sheet of UAG and its consolidated UAG
Subsidiaries as of December 31 in each of the years 1994 and 1995, and the
related consolidated statements of income, stockholders' equity and cash flows
for the fiscal years ended on such dates, together with the notes thereto, in
each case examined by and accompanied by the report of Coopers & Lybrand,
independent certified public accountants; and
(b) the unaudited consolidated balance sheet of UAG and its
consolidated UAG Subsidiaries as of September 30, 1996 (the "UAG Balance
Sheet"), and the unaudited consolidated statements of income, stockholders'
equity and cash flows for the month periods ended on such dates, together with
the notes thereto;
(all the foregoing financial statements, including the notes thereto, being
referred to herein collectively as the "UAG Financial Statements"). The UAG
Financial Statements are in accordance with the books and records of UAG and
the UAG Subsidiaries, fairly present the consolidated financial position,
results of operations, stockholders' equity and changes in financial position
of UAG and the UAG Subsidiaries as of the dates and for the periods indicated,
in each case in conformity with GAAP consistently applied (except as otherwise
indicated in such statements) during such periods, and can be legitimately
reconciled with the financial statements and the financial records maintained
and the accounting methods applied by UAG and the UAG Subsidiaries for federal
income tax purposes, and the unaudited financial statements included in the UAG
Financial Statements indicate all adjustments, which consist of only normal
recurring accruals, necessary for such fair presentations. The statements of
income included in the UAG Financial Statements do not contain any items of
special or nonrecurring income except as expressly specified
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therein, and the balance sheets included in the UAG Financial Statements do not
reflect any write-up or revaluation increasing the book value of any assets.
The books and accounts of UAG and the UAG Subsidiaries are complete and correct
in all material respects and fairly reflect all of the transactions, items of
income and expense and all assets and liabilities of the businesses of UAG and
the UAG Subsidiaries consistent with prior practices of UAG and the UAG
Subsidiaries.
4.7. TAXES.
UAG, each UAG Subsidiary and, for any period during all or part of
which the tax liability of any other corporation was determined on a combined
or consolidated basis with UAG or any UAG Subsidiary, any such other
corporation, have filed timely all federal, state, local and foreign tax
returns, reports and declarations required to be filed (or have obtained or
timely applied for an extension with respect to such filing) correctly
reflecting the Taxes and all other information required to be reported thereon
and have paid, or made adequate provision for the payment of, all Taxes which
are due pursuant to such returns or pursuant to any assessment received by UAG
or any UAG Subsidiary or any such other corporation. In the ordinary course,
UAG makes adequate provision on its books for the payment of all Taxes
(including for the current fiscal period) owed by UAG and the UAG Subsidiaries.
Neither UAG nor any UAG Subsidiary has been subject to a federal or state tax
audit of any kind, and no adjustment has been proposed by the IRS with respect
to any return for any subsequent year. UAG knows of no basis for an assertion
of a deficiency for Taxes against UAG or any UAG Subsidiary.
4.8. ABSENCE OF UNDISCLOSED LIABILITIES.
Neither UAG nor any UAG Subsidiary has any material liability of any
nature whatsoever (whether known or unknown, due or to become due, accrued,
absolute, contingent or otherwise), including, without limitation, liabilities
for Taxes (as defined in Section 4.8), except for (i) liabilities reflected or
reserved against the most recent UAG Financial Statement, (ii) liabilities
disclosed in the SEC filings, (iii) current liabilities incurred in the
ordinary course of business and consistent with past practice after the date of
the UAG Balance Sheet which, individually and in the aggregate, do not have,
and cannot reasonably be expected to have, a material adverse effect on UAG and
the UAG Subsidiaries, taken as a whole, and (iv) liabilities disclosed on
Schedule 4.8 hereto.
4.9. LEGAL MATTERS.
(a) Except as set forth on Schedule 4.9(a) hereto, (i) there are no
material Claims pending against, or, to the knowledge of UAG or any UAG
Subsidiary, threatened against or affecting, UAG, any UAG Subsidiary, any of
their respective officers, directors, employees, agents or Affiliates
involving,
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affecting or relating to any assets, properties or operations of UAG or any UAG
Subsidiary, or any of their respective properties or rights before or by any
court, arbitrator, panel, agency or other governmental, administrative or
judicial entity, domestic or foreign, nor is any basis known to UAG, any UAG
Subsidiary or any of their directors, officers, employees or agents for any
such Claims, and (ii) neither UAG nor any UAG Subsidiary is subject to any
material Judgments of any governmental, administrative or judicial authority,
domestic or foreign.
(b) The businesses of UAG and the UAG Subsidiaries are being conducted
in compliance with all Legal Requirements applicable to UAG or any UAG
Subsidiary or any of their respective businesses or properties, except where
the failure to be in such compliance could not reasonably be expected to have a
material adverse effect on UAG and the UAG Subsidiaries, taken as a whole.
Except as set forth on Schedule 4.9(b) hereto, UAG and the UAG Subsidiaries
hold, and are in compliance with, all Permits required by all applicable Legal
Requirements except where the failure to hold or be in compliance with such
Permits could not reasonably be expected to have a material adverse effect on
UAG and the UAG Subsidiaries, taken as a whole.
(c) UAG and each UAG Subsidiary owns or holds all Permits material to
the conduct of its business. No event has occurred and is continuing which
permits, or after notice or lapse of time or both would permit, any
modification or termination of any Permit.
4.10. DISCLOSURE.
Neither UAG nor any UAG Subsidiary has made any material
misrepresentation to the Companies or the Stockholders relating to this
Agreement and neither UAG nor any UAG Subsidiary has omitted to state to the
Companies or the Stockholders any material fact relating to this Agreement
which is necessary in order to make the information given by or on behalf of
UAG or any UAG Subsidiary to the Companies or the Stockholders or their
representatives at or prior to Closing not misleading. No fact, event,
condition or contingency exists or has occurred which has, or in the future can
reasonably be expected to have, a material adverse effect on UAG and the UAG
Subsidiaries, taken as a whole, which has not been disclosed in the SEC Filings
or the Schedules to this Agreement.
4.11. ABSENCE OF MATERIAL ADVERSE EFFECT;
CONDUCT OF BUSINESS.
(a) Since October 28, 1996, UAG and the UAG Subsidiaries have operated
in the ordinary course of business consistent with past practice, except as set
forth on Schedule 4.11(a) hereto, and there has not been:
(i) any material adverse change in the assets, properties,
business, operations, prospects,
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net income or financial condition of UAG and the UAG Subsidiaries,
taken as a whole, and no factor, event, condition, circumstance or
prospective development exists which threatens or may threaten to have
a material adverse effect on UAG and the UAG Subsidiaries, taken as a
whole.
(ii) any material loss, damage, destruction or other casualty to
the property or other assets of UAG or any UAG Subsidiary, whether or
not covered by insurance;
(iii) any change in any method of accounting or accounting
practice of UAG or any UAG Subsidiary; or
(b) Since October 28, 1996, except as set forth in Schedule 4.11(b)
hereto, neither UAG nor the UAG Subsidiaries have:
(i) incurred any material obligation or liability (whether
absolute, accrued, contingent or otherwise), except in the ordinary
course of business consistent with past practice and except in
connection with the acquisition of additional dealerships;
(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) 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;
(iv) defaulted on any material obligation;
(v) written down the value of any inventory or written off as
uncollectible any accounts receivable or any portion thereof not
reflected in the UAG Financial Statements; or
(vi) entered into any agreement or made any commitment to do any
of the foregoing that has not been terminated.
4.12. INSURANCE.
All properties and assets of UAG and the UAG Subsidiaries which are of
an insurable character are insured against loss or damage by fire and other
risks to the extent and in the manner reasonable in light of the risks
attendant to the businesses and activities in which UAG and the UAG
Subsidiaries are
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or have been engaged and customary for companies engaged in similar businesses
or owning similar assets.
4.13. LABOR RELATIONS.
(a) UAG and each of the UAG Subsidiaries has paid or made provision
for the payment of all salaries and accrued wages and has complied in all
material respects with all applicable laws, rules and regulations relating to
the employment of labor, including those relating to wages, hours, collective
bargaining and the payment and withholding of taxes, and has withheld and paid
to the appropriate governmental authority, or is holding for payment not yet
due to such authority, all amounts required by law or agreement to be withheld
from the wages or salaries of its employees.
(b) Except as set forth in Schedule 4.13(b) hereto, (i) there is no
unfair labor practice charge or complaint pending before the NLRB, (ii) there
is no labor strike, material slowdown or material work stoppage or lockout
actually pending or, to UAG's or any of the UAG Subsidiaries' knowledge,
threatened, against or affecting UAG or any UAG Subsidiary, and neither UAG nor
any UAG Subsidiary has experienced any strike, material slow down or material
work stoppage, lockout or other collective labor action by or with respect to
employees of UAG or any UAG Subsidiary, (iii) there is no representation claim
or petition pending before the NLRB or any similar foreign agency and no
question concerning representation exists relating to the employees of UAG or
any UAG Subsidiary, (iv) there are no charges with respect to or relating to
UAG or any UAG Subsidiary pending before the Equal Employment Opportunity
Commission or any state, local or foreign agency responsible for the prevention
of unlawful employment practices, (v) neither UAG nor any UAG Subsidiary has
received formal notice from any federal, state, local or foreign agency
responsible for the enforcement of labor or employment laws of an intention to
conduct an investigation of UAG or any UAG Subsidiary and no such investigation
is in progress and (vi) the consents of the unions that are parties to any UAG
Employment and Labor Agreements (as defined below) are not required to complete
the transactions contemplated by this Agreement and the Documents. As used in
this agreement, the term "UAG Employment and Labor Agreements" shall mean all
(i) outstanding employment agreements or contracts with officers or employees
that are not terminable at will, or that provide for the payment of any bonus
or commission, (ii) agreements, policies or practices that require UAG or any
UAG Subsidiary to pay termination or severance pay to salaried, non-exempt or
hourly employees (other than as required by law), (iii) collective bargaining
agreements or other labor union contracts applicable to persons employed by UAG
or any UAG Subsidiary.
(c) Neither UAG nor any UAG Subsidiary has ever caused any "plant
closing" or "mass layoff" as such actions are defined in the Worker Adjustment
and Retraining Notification Act,
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as codified at 29 U.S.C. ss.ss. 2101-2109, and the regulations promulgated
therein.
4.14. CONTRACTS; ETC.
As used in this Agreement, the term "UAG Agreements" shall mean all
mortgages, indenture notes, agreements, contracts, leases, licenses,
franchises, obligations, instruments or other commitments, arrangements or
understandings of any kind, whether written or oral, binding or non-binding, to
which UAG or any UAG Subsidiary is a party or by which UAG or any UAG
Subsidiary or any of their respective properties may be bound or affected,
including all amendments, modifications, extensions or renewals of any of the
foregoing which are material to the businesses, operations, assets, condition
(financial or otherwise) or prospects of UAG and the UAG Subsidiaries. Neither
UAG nor any UAG Subsidiary nor, to the knowledge of UAG and each UAG
Subsidiary, any other party thereto, is in breach of or default under any UAG
Agreement, and no event has occurred which (after notice or lapse of time or
both) would become a breach or default under, or would permit modification,
cancellation, acceleration or termination of, any UAG Agreement or result in
the creation of any security interest upon, or any person obtaining any right
to acquire, any properties, assets or rights of UAG or any UAG Subsidiary in
any such case where such breach, default or other event would have, or could
reasonably be expected to have, a material adverse effect on UAG and the UAG
Subsidiaries, taken as a whole.
4.15. 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.
4.16. PROPRIETY OF PAST PAYMENTS.
No funds or assets of UAG or any UAG Subsidiary have been used for
illegal purposes; no unrecorded funds or assets of UAG or any UAG Subsidiary
have been established for any purpose; no accumulation or use of UAG's or any
UAG Subsidiary's corporate funds or assets has been made without being properly
accounted for in the respective books and records of UAG or any UAG Subsidiary;
all payments by or on behalf of UAG and the UAG Subsidiaries have been duly and
properly recorded and accounted for in their respective books and records; no
false or artificial entry has been made in the books and records of UAG or any
UAG Subsidiary for any reason; no payment has been made by or on behalf of UAG
or any UAG Subsidiary with the understanding that any part of such payment is
to be used for any purpose other than that described in the documents
supporting such payment; and neither UAG nor any UAG Subsidiary has made,
directly or indirectly, any illegal contributions to any political party or
candidate, either domestic
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or foreign. Neither the IRS nor any other federal, state, local or foreign
government agency or entity has initiated or threatened any investigation of
any payment made by UAG or any UAG Subsidiary of, or alleged to be of, the type
described in this Section 4.16.
4.17. ENVIRONMENTAL MATTERS.
UAG and the UAG Subsidiaries have not violated, done or suffered any
act which could give rise to liability under and, to the knowledge of UAG, are
not otherwise exposed to liability under, any Environmental Law which could
reasonably be expected to have a material adverse effect on the financing
condition of UAG and the UAG Subsidiaries taken as a whole.
4.18. EMPLOYEE BENEFIT PLANS.
UAG and the UAG Subsidiaries are not subject to any liability under
any employee pension benefit plans or employee welfare benefit plans (as
defined in ERISA) maintained by UAG or any UAG Subsidiary which could
reasonably be expected to have a material adverse effect on the financial
condition of UAG and the UAG Subsidiaries, taken as a whole.
ARTICLE 5.
COVENANTS AND ADDITIONAL AGREEMENTS
5.1. ACCESS; CONFIDENTIALITY.
Between the date hereof and the Closing Date, the Stockholders and the
Companies will (i) provide to the officers and other authorized representatives
of UAG and 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 held by
UAG and Sub, including all copies and summaries 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,
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except information (x) ascertainable or obtained from public information, (y)
received from a third party not employed by or otherwise affiliated with the
Companies unless such information is received from a third party in violation
of a duty such third party owes to the Companies not to disclose such
information, or (z) which is or becomes known to the public, other than through
a breach by UAG of this Agreement. The Stockholders will hold in confidence
(unless and to the extent compelled to disclose by judicial or administrative
process, or, in the opinion of 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, including any due diligence
review by or on behalf of the Stockholders. If this Agreement is terminated,
the Stockholders will promptly return to UAG, upon the reasonable request of
UAG, all UAG Confidential Information furnished by UAG and held by the
Stockholders, including all copies and summaries thereof. As used herein, "UAG
Confidential Information" shall mean all information concerning UAG obtained by
the Stockholders 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 unless such information is received from a third party in
violation of a duty such third party owes to UAG not to disclose such
information, or (z) which is or becomes known to the public, other than a
breach by the Stockholders 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 parties' counsel.
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 Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "H-S-R Act"), and the rules and
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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 OF THE COMPANIES.
(a) From and after the date of this Agreement and until the Closing
Date, the Companies shall, and the Stockholders shall cause the Companies to,
conduct their respective businesses solely in the ordinary course consistent
with past practices and, without the prior written consent of UAG, neither the
Stockholders nor the Companies will, except as required or permitted pursuant
to the terms hereof, permit the Companies to:
(i) make any material change in the conduct of their respective
businesses and operations or enter into any transaction other than in
the ordinary course of business consistent with past practices;
(ii) make any change in their Articles of Incorporation or
By-laws, issue any additional shares of capital stock or equity
securities or grant any option, warrant or right to acquire any
capital stock or equity securities or issue any security convertible
into or exchangeable for their capital stock or alter any term of any
of their outstanding securities or make any change in their
outstanding shares of capital stock or other ownership interests or
its capitalization, whether by reason of a reclassification,
recapitalization, stock split or combination, exchange or readjustment
of shares, stock dividend or otherwise;
(iii) (A) incur, assume or guarantee any indebtedness for
borrowed money, issue any notes, bonds, debentures or other corporate
securities or grant any option, warrant or right to purchase any
thereof, except pursuant to transactions in the ordinary course of
business consistent with past practices, (B) issue any securities
convertible or exchangeable for debt securities of the Companies, or
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(C) issue any options or other rights to acquire from the Companies,
directly or indirectly, debt securities of the Companies or any
security convertible into or exchangeable for such debt securities;
(iv) make any sale, assignment, transfer, abandonment or other
conveyance of any of their assets or any part thereof, except
transactions pursuant to existing contracts set forth in Schedule 2.15
hereto and dispositions of inventory or of worn-out or obsolete
equipment for fair or reasonable value in the ordinary course of
business consistent with past practices;
(v) subject any of their assets, or any part thereof, to any Lien
or suffer such to be imposed other than such Liens as may arise in the
ordinary course of business consistent with past practices by
operation of law which will not have, or cannot reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect;
(vi) declare, set aside or pay any dividends or other
distributions (whether in cash, stock, property or any combination
thereof) in respect of any shares of their capital stock (other than
distributions of net income attributable to periods after November 30,
1996 or distributions of existing cash as of November 30, 1996 as long
as such distributions could not reasonably be expected to adversely
effect the business or operation of the Companies) or redeem, retire,
purchase or otherwise acquire, directly or indirectly, any shares of
its capital stock;
(vii) acquire any assets, raw materials or properties, or enter
into any other transaction, other than in the ordinary course of
business consistent with past practices;
(viii) enter into any new (or amend any existing) employee
benefit plan, program or arrangement or any new (or amend any
existing) employment, severance or consulting agreement, grant any
general increase in the compensation of officers or employees
(including any such increase pursuant to any bonus, pension,
profit-sharing or other plan or commitment) or grant any increase in
the compensation payable or to become payable to any employee, except
in accordance with pre-existing contractual provisions or consistent
with past practices;
(ix) make or commit to make any individual material capital
expenditure in excess of $100,000, or aggregate capital expenditures
in excess of $300,000;
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(x) pay, loan or advance any amount to, or sell, transfer or
lease any properties or assets to, or enter into any agreement or
arrangement with, any of 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, amend in any material respect or
terminate any material commitment, bid or expenditure, other than in
the ordinary course of business consistent with past practice;
(xvii) take any other action that would cause any of the
representations and warranties made by the Companies in this Agreement
not to remain true and correct; or
(xviii) commit itself to do any of the foregoing.
(b) From and after the date hereof and until the Closing Date, the
Stockholders and the Companies will cause the Companies to use their reasonable
best efforts to:
(i) continue to maintain, in all material respects, their
properties in accordance with present practices in a condition
suitable for their current use;
(ii) comply with all applicable Environmental Laws, and, in the
event the Companies shall receive notice that there exists a violation
of any
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Environmental Law with respect to their operations or any Real
Property, promptly (and in any event within the time period permitted
by the applicable governmental authority) remove or remedy such
violation in accordance with all applicable Environmental Laws except
where the noticed violation is contested in good faith and by
appropriate proceedings diligently conducted; 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 Companies unless the validity thereof is
contested in good faith and by appropriate proceedings diligently
conducted;
(iv) keep its books of account, records and files in the ordinary
course and in accordance with existing practices;
(v) preserve its business organization intact and continue to
maintain existing business relationships with suppliers, customers and
others with whom business relationships exist other than relationships
that are, at the same time, not economically beneficial to it; and
(vi) continue to conduct their business in the ordinary course
consistent with past practices.
(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 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
non-material Liens in the ordinary course of business consistent with
past practice;
(iii) take any other action that would cause any of the
representations or warranties made by the Stockholders in this
Agreement not to remain true and correct in all material respects; or
(iv) commit themselves to do any of the foregoing.
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5.5. NO INTERCOMPANY PAYABLES OR RECEIVABLES.
Except as disclosed on Schedule 5.5 hereto, at the Closing there will
be no intercompany payables or intercompany receivables due and/or owing
between the Stockholders and their Affiliates (other than the Companies) on the
one hand, and the Companies, on the other hand, other than those incurred in
the ordinary course of business and disclosed in the Notes to the Company
Financial Statements.
5.6. NEGOTIATIONS.
Until the earlier of 180 days from the date hereof and the termination
of this Agreement pursuant to clause (ii) of Section 8.1 hereof, no
Stockholder, nor the Companies, nor their officers, directors, employees,
advisors, agents, representatives, Affiliates or anyone acting on behalf of the
Stockholders, the Companies or such persons, shall, directly or indirectly,
encourage, solicit, initiate or engage in discussions or negotiations with, or
provide any information to, any person (other than UAG or its representatives)
concerning any merger, sale of assets (other than in the ordinary course of
business), purchase or sale of shares of capital stock or similar transaction
involving the Companies or purchase or sale of any of the Real Property or
Improvements. The Stockholders shall promptly communicate to UAG any inquiries
or communications concerning any such transaction (including the identity of
any person making such inquiry or communication) which any Stockholder may
receive or of which any of the Stockholders may become aware.
5.7. CONSENTS; COOPERATION.
Subject to the terms and conditions hereof, the Stockholders and the
Companies and UAG will use their respective best efforts at their own expense:
(i) to obtain prior to the earlier of the date required (if so
required) or the Closing Date, all waivers, permits, licenses,
approvals, authorizations, qualifications, orders and consents of all
third parties and governmental authorities, and make all filings and
registrations with governmental authorities which are required on
their respective parts for (A) the consummation of the transactions
contemplated by this Agreement, (B) the ownership or leasing and
operating after the Closing by the Companies of all their material
properties and (C) the conduct after the Closing by the Companies of
their respective businesses as conducted by them on the date hereof;
(ii) to defend, consistent with applicable principles and
requirements of law, any lawsuit or other legal proceedings, whether
judicial or administrative, whether brought derivatively or on
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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.
Each of the parties agrees to execute and deliver any and all documents that
the respective manufacturers typically require a selling dealer or an acquiring
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, each of the parties and the proper
officers of the Companies shall take all such necessary action.
5.9. INTERIM FINANCIAL STATEMENTS.
Within thirty (30) days after the end of each calendar month after the
date of this Agreement, the Companies will deliver to UAG the most recent
monthly and year-to-date financial statements provided to each franchisor of
the Companies. All such statements shall fairly present the financial position,
results of operations and cash flow of the Companies and UAG, as applicable, as
at the date or for the periods indicated and shall be prepared on a basis
consistent with the Company Factory Statements attached hereto as Schedule 2.5.
5.10. NOTIFICATION OF CERTAIN MATTERS.
Between the date hereof and the Closing, each party to this Agreement
will give prompt notice in writing to the other party hereto of: (i) any
information that indicates that any representation and warranty of such party
contained herein was not true and correct as of the date hereof or will not be
true and correct as of the Closing, (ii) the occurrence of any event which
could result in the failure to satisfy a condition specified in Article 6 or
Article 7 hereof, as applicable, (iii) any notice or other communication from
any third person alleging that the consent of such third person is or may be
required in connection with the transactions contemplated by this Agreement,
and (iv) in the case of the Stockholders and the 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
Stockholders shall (x) promptly advise UAG of any event that has, or could in
the future have, a Material Adverse
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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
Stockholders 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 Stockholders (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 any Stockholder has knowledge which could result in any failure
to consummate the sale of the Shares as contemplated hereby.
5.11. ASSURANCE BY THE STOCKHOLDERS.
The Stockholders shall cause each of the Companies to comply with
their respective covenants set forth in this Agreement.
5.12. PERSONAL GUARANTEES.
UAG will use reasonable efforts to cause the Stockholders to be
released from any and all personal guarantees of any loans, leases or other
indebtedness of the Companies set forth on the Company Financial Statements
(the "Personal Guarantees"). In the event that any of the Personal Guarantees
are not released by the Closing, UAG will indemnify and hold the Stockholders
harmless from any loss with respect to the Personal Guarantees which arises
after the Closing. Notwithstanding anything in this Section 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.
5.13. NON-INTERFERENCE.
After the Closing Date and for a period of five (5) years thereafter,
the Stockholders and their 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 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 employment with the Companies.
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5.14. ENVIRONMENTAL AUDITS.
Prior to the Closing, 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
is required, the Stockholders shall pay the entire costs of the Phase II audit.
If the Phase II audit indicates that any remedial action is required under any
Environmental Laws and UAG reasonably determines that such remedial action is
required in order for (i) the applicable company to continue to operate its
business as conducted at the time of discovery of the need for remedial action;
or (ii) the applicable company not to incur any liability to any Person as a
result of the presence of the material which prompts the recommendation for
such remedial action, then the Stockholders shall pay the costs of such
remedial action; provided, however, that the Stockholders shall only be
required to pay the costs of the minimum remedial action required to comply
with applicable Environmental Laws to the extent provided above and provided,
further, that the Stockholder shall not be required to pay any remedial costs
that exceed $500,000 in the aggregate. If the Phase II report concludes that
remedial action is required in an amount that exceeds $500,000 in the aggregate
and the Stockholders decide not to pay the costs of such remediation then UAG
may, at its option, terminate this Agreement pursuant to Section 8.1 (iv). The
Stockholders shall have the right to obtain a second opinion with respect to
the necessity of such remedial action within thirty (30) days after the Phase
II audit and if the two (2) environmental firms cannot agree, they shall chose
a third environmental company to make such determination within sixty (60) days
after the first Phase II audit. Such third environmental company shall be
independent of the parties and generally accepted by major institutional
lenders.
5.15. ACCESS TO RECORDS.
After Closing, UAG shall provide the Stockholders with reasonable
access to the books and records of the Companies to the extent necessary for
the Stockholders to comply with applicable tax laws. UAG will cooperate, and
will cause its Affiliates to cooperate, with the Stockholders in the filing of
any returns and in any audit or refund claims proceeding involving Taxes for
which the Stockholders may be liable or with respect to which the Stockholders
may be entitled to a refund.
5.16. NISSAN, PRIMUS AND WORLD OMNI MORTGAGES.
(a) If UAG does not accept floor plan financing from Nissan, Primus or
World Omni for each of the Companies that
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currently have floor plan financing through Nissan, Primus and World Omni (on
terms comparable to such existing terms) and the failure to accept such
financing causes an event of default under the Stockholders' existing mortgages
with Nissan, Primus and World Omni which default Nissan, Primus or World Omni
(as the case may be) refuses to waive, then UAG shall secure alternative
financing for the amount of such mortgages on commercially reasonable terms.
(b) If Primus, Nissan or World Omni do not offer floor plan financing
to UAG for each of the Companies that currently have floor plan financing
through Nissan, Primus and World Omni (on terms comparable to such existing
terms) and, as a result, there is an event of default under the Stockholders'
existing mortgages with Nissan, Primus or World Omni (as the case may be) which
default is not waived, then UAG and the Stockholders will cooperate to secure
alternative financing for the amount of such mortgages on commercially
reasonable terms. If alternative financing is not available, either party may
terminate this Agreement pursuant to Section 8.1 hereof.
5.17. CERTAIN CHANGES AND CONDUCT OF BUSINESS OF UAG.
From and after the date hereof and until the Closing Date, UAG and the
UAG Subsidiaries will use their reasonable best efforts to:
(i) continue to maintain, in all material respects, their
properties in accordance with present practices in a condition
suitable for their current use except where to do so would not be
economically beneficial to UAG or the UAG Subsidiaries;
(ii) comply with all applicable Environmental Laws, and, in the
event UAG or the UAG Subsidiaries receive notice that there exists a
violation of any Environmental Law with respect to their operations or
any Real Property, promptly (and in any event within the time period
permitted by the applicable governmental authority) remove or remedy
such violation in accordance with all applicable Environmental Laws,
except where the notice of violation is contested in good faith and by
appropriate proceedings diligently conducted;
(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 UAG or any UAG Subsidiaries unless the validity
thereof is contested in good faith and by appropriate proceedings
diligently conducted;
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(iv) keep their books of account, records and files in the
ordinary course and in accordance with existing practices;
(v) preserve their business organization intact and continue to
maintain existing business relationships with suppliers, customers and
others with whom business relationships exist other than relationships
that are, at the same time, not economically beneficial to it; and
(vi) not take any other action that would cause any of the
representations or warranties made by UAG in this Agreement not to
remain true and correct in all material respects.
5.18. 1996 FINANCIAL STATEMENTS.
Prior to the Closing, the Stockholders shall deliver to UAG audited
balance sheets of the Companies as of December 31, 1996 (the "Company Balance
Sheets") 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 which statements shall be examined and accompanied by
the report of the Companies' independent certified public accountants and, upon
delivery, such statements shall be included within the definition of Company
Financial Statements. Notwithstanding the preceding sentence, the income
statement and cash flow statement for Westbury Nissan will not be audited
statements. UAG and the Stockholders shall each pay one-half of the cost of
such audit.
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 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
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Stockholders, to the effect that the conditions set forth in the two preceding
sentences have been satisfied.
6.2. AUTHORIZATION; CONSENTS.
(a) All corporate action necessary to authorize the execution,
delivery and performance of this Agreement and the Documents, and the
consummation of the transactions contemplated hereby and thereby shall have
been duly and validly taken by the Companies. All filings required to be made
under the H-S-R Act in connection with the transactions contemplated hereby
shall have been made and all applicable waiting periods with respect to each
such filing, including any extensions thereof, shall have expired or been
terminated.
(b) All notices to, and declarations, filings and registrations with,
and consents, authorizations, approvals and waivers from, governmental and
regulatory bodies and third persons (including, but not limited to, all
automobile manufacturers with whom the Companies have entered into a franchise
agreement (or comparable instrument, mortgages, floor plan lenders and other
lenders)) 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, which opinion shall
have been rendered with respect to those matters contained in Sections 2.1,
2.3, 2.4, 2.9, 3.1 and 3.2 hereof. In rendering the foregoing opinion, such
counsel may rely as to factual matters upon certificates or other documents
furnished by officers and directors of the 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 New York, Florida and federal laws.
6.4. ABSENCE OF LITIGATION.
No order, stay, injunction or decree of any court of competent
jurisdiction in the Untied States shall be in effect (i) that prevents or
delays the consummation of any of the transactions contemplated hereby or (ii)
would impose any limitation on the ability of UAG or Sub effectively to
exercise full rights of ownership of the Shares. No action, suit or proceeding
before any court or any governmental or regulatory entity shall be pending (or
threatened by any governmental or regulatory entity), and no investigation by
any governmental or regulatory entity shall have
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been commenced (and be pending), seeking to restrain or prohibit (or
questioning the validity or legality of) the consummation of the transactions
contemplated by this Agreement or seeking damages in connection therewith which
UAG or Sub, in good faith and with the advice of counsel, believes makes it
undesirable to proceed with the consummation of the transactions contemplated
hereby.
6.5. NO MATERIAL ADVERSE EFFECT.
During the period from December 31, 1995 to the Closing Date, there
shall not have been any material adverse change in the assets, properties,
business, operations, prospects, net income or financial condition of the
Companies.
6.6. NET WORTH.
On the Closing Date, the Stockholder shall deliver to UAG a balance
sheet of the Companies in accordance with Section 1.3.
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.
6.8. NET INCOME.
Coopers & Lybrand or such other accounting firm as UAG may select
shall have confirmed to UAG that the 1996 Earnings of the Companies for the
year ending December 31, 1996 are no less than Eleven Million Dollars
($11,000,000). For purposes of this Section 6.8, 1996 Earnings shall be
determined using the same methodology as the earnings set forth on Schedule 6.8
hereto.
6.9. LEASES.
The Companies and the Landlords shall have entered into the Leases and
shall have agreed to the form of the New Facility Lease.
6.10. BOARD APPROVAL.
The Board of Directors of UAG and Sub shall have approved the
consummation of all of the transactions contemplated by this Agreement.
6.11. CERTIFICATES.
The Stockholders and the Companies shall have furnished UAG and Sub
with a certificate, dated as of the Closing Date, executed by the Stockholders
certifying to the fulfillment of the
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conditions set forth in Sections 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.
6.12. 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.
6.13. APPROVAL OF MANUFACTURERS AND DISTRIBUTORS.
The Stockholders and the Companies shall have obtained the consent,
authorization and approval of each of the Companies' respective manufacturers
for the transfer of the Companies to UAG or UAG East on terms no less favorable
to those granted to the Stockholders and the Companies immediately prior to the
execution of this Agreement.
6.14. 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.
6.15. TITLE INSURANCE.
UAG 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.
6.16. SCHEDULES.
The Companies and the Stockholders shall have delivered to UAG and Sub
all Schedules referred to herein and such Schedules shall be acceptable in form
and substance to UAG and Sub.
6.17. 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.
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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.
6.19. EMPLOYMENT AGREEMENT.
UAG and John A. Staluppi, Jr. shall have entered into an employment
agreement on terms mutually agreeable to such parties.
ARTICLE 7.
CONDITIONS TO THE OBLIGATIONS OF
THE STOCKHOLDERS TO EFFECT THE CLOSING
The obligations of the Stockholders and the Companies required to be
performed by them at the Closing shall be subject to the satisfaction, at or
prior to the Closing, of each of the following conditions, each of which may be
waived by the Companies and the Stockholders as provided herein except as
otherwise required by applicable law:
7.1. REPRESENTATIONS AND WARRANTIES; AGREEMENTS.
Each of the representations and warranties of UAG and Sub contained in
this Agreement shall be true and correct on the date made and shall be true and
correct in all material respects as of the Closing. Each of the obligations of
UAG and Sub required by this Agreement to be performed by them at or prior to
the Closing shall have been duly performed and complied with in all material
respects as of the Closing. At the Closing, the Stockholders shall have
received a certificate, dated the Closing Date and duly executed by 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
automobile manufacturers with whom the Companies have entered into a franchise
agreement (or comparable instrument, mortgages, floor plan lenders and other
lenders)) required to consummate the
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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 counsel, which opinions,
when taken together, shall have been rendered with respect to those matters
contained in Sections 4.1 and 4.2 hereof. In rendering the foregoing opinions,
such counsel may rely as to factual matters upon certificates or other
documents furnished by officers and directors of UAG and the Subs 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 Untied States shall be in effect (i) that prevents or
delays the consummation of any of the transactions contemplated hereby or (ii)
would impose any limitation on the ability of the Stockholders to transfer the
Shares. No action, suit or proceeding before any court or any governmental or
regulatory entity shall be pending (or threatened by any governmental or
regulatory entity), and no investigation by any governmental or regulatory
entity shall have been commenced (and be pending), seeking to restrain or
prohibit (or questioning the validity or legality of) the consummation of the
transactions contemplated by this Agreement or seeking damages in connection
therewith which the Stockholders, in good faith and with the advice of counsel,
believes makes it undesirable to proceed with the consummation of the
transactions contemplated hereby.
7.5. CERTIFICATES.
UAG and Sub shall have furnished the Stockholders with such
certificates of its officers and others to evidence compliance with the
conditions set forth in this Article 7 as may be reasonably requested by the
Stockholders.
7.6. 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. REGISTRATION RIGHTS AGREEMENT.
UAG shall have entered into the Piggyback Registration Rights
Agreement.
7.8. SCHEDULES.
UAG shall have delivered to the Stockholders all Schedules referred to
in Article 4 and such Schedules shall be acceptable in form and substance to
the Stockholders.
7.9. LEASES.
The Companies and the Landlords shall have entered into the Leases and
shall have agreed to the form of the New Facility Lease.
7.10. NO MATERIAL ADVERSE EFFECT.
During the period from October 28, 1996 to the Closing Date, there
shall not have been any material adverse change in the assets, properties,
business, prospects, net income or financial condition of UAG.
7.11. EMPLOYMENT AGREEMENT.
UAG and John A. Staluppi, Jr. shall have entered into an employment
agreement on terms mutually agreeable to such parties.
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 April 30, 1997, or such later date as
shall have been approved by UAG and the Stockholders (provided that
the terminating party is not otherwise in material breach of its
representations, warranties, covenants or agreements under this
Agreement);
(iii) by UAG or the Stockholders if any court of competent
jurisdiction in the United States or other United States governmental
body shall have issued an order, decree or ruling or taken any other
action restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement, and such
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order, decree, ruling or other action shall have become final and
non-appealable;
(iv) by UAG or Sub if any of the conditions specified in Article
6 hereof have not been met or waived by UAG and Sub at such time as
such condition is no longer capable of satisfaction (provided UAG and
Sub are not otherwise in material breach of its representations,
warranties, covenants or agreements under this Agreement);
(v) by the Stockholders if any of the conditions specified in
Article 7 hereof have not been met or waived by the Stockholders at
such time as such condition is no longer capable of satisfaction
(provided that neither the Stockholders nor the Companies is otherwise
in material breach of their or its representations, warranties
covenants or agreements under this Agreement); or
(vi) by either UAG or the Stockholders if there has been a
material breach on the part of the other of any representation,
warranty, covenant or agreement set forth in this Agreement, which
breach (if capable of being cured) has not been cured within ten (10)
Business Days following receipt by the breaching party of written
notice of such breach.
If UAG or the Stockholders shall terminate this Agreement pursuant to the
provisions hereof, such termination shall be effected by notice to the other
party specifying the provision hereof pursuant to which such termination is
made.
8.2. EFFECT OF TERMINATION.
Except (i) for any willful 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 STOCKHOLDERS.
Notwithstanding the Closing or the delivery of the Shares, the
Stockholders, jointly and severally, 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
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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 Stockholders or the Companies or the
breach of any warranty of the Stockholders 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 Stockholders or the Companies (or
any representative of the Stockholders or the Companies) to UAG (or any
representative of UAG) and any misrepresentation in or omission from any
document furnished to UAG in connection with the Closing, and (ii) any failure
of the Stockholders 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.
9.2. INDEMNIFICATION BY UAG.
Notwithstanding the Closing, UAG indemnifies and agrees to fully
defend, save and hold harmless on an after-tax basis the Stockholders, the
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
any assets, properties or operations of UAG or the conduct of the business of
UAG prior to the Closing Date (a "UAG Third Party Claim"). As used herein, "UAG
Event of Breach" shall be and mean any one or more of the following: (i) any
untruth or inaccuracy in any representation of UAG or 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 Stockholders (or
any representative of the Stockholder) and any misrepresentation in or omission
from any document furnished to the Stockholders in connection with the
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Closing, and (ii) any failure of UAG duly to perform or observe any term,
provision, covenant, agreement or condition on the part of UAG to be performed
or observed.
9.3. PROCEDURES.
If (i) any Event of Breach occurs or is alleged and a UAG Indemnified
Party asserts that the Stockholders 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 Stockholders may become
obligated to a UAG Indemnified Party hereunder, or (ii) a UAG Event of Breach
occurs or is alleged and a Stockholder Indemnified Party asserts that UAG has
become obligated to a Stockholder Indemnified Party pursuant to Section 9.2, or
if any UAG Third Party Claim is begun, made or instituted as a result of which
UAG may become obligated to a Stockholder Indemnified Party hereunder (for
purposes of this Article 2, any UAG Indemnified Party and any Stockholder
Indemnified Party is sometimes referred to as an "Indemnified Party" and UAG
and the Stockholders are sometimes referred to as an "Indemnifying Party," and
any UAG Third Party Claim and any Stockholder Third Party Claim is sometimes
referred to as a "Third Party Claim," in each case as the context so requires),
such Indemnified Party shall give written notice to the Indemnifying Party of
its or his obligation to provide indemnification hereunder, provided that any
failure to so notify the Indemnifying Party shall not relieve them from any
liability that it or he may have to the Indemnified Party under this Article 9.
If such notice relates to a Third Party Claim, each Indemnifying Party, jointly
and severally, agrees to defend, contest or otherwise protect such Indemnified
Party against any such Third Party Claim at his or its sole cost and expense.
Such Indemnified Party shall have the right, but not the obligation, to
participate at its own expense in the defense thereof by counsel of such
Indemnified Party's choice and shall in any event cooperate with and assist the
Indemnifying Party to the extent reasonably possible. If the Indemnifying Party
fails timely to defend, contest or otherwise protect against such Third Party
Claim, such Indemnified Party shall have the right to do so, including, without
limitation, the right to make any compromise or settlement thereof, and such
Indemnified Party shall be entitled to recover the entire Cost thereof from the
Indemnifying Party, including, without limitation, attorneys' fees,
disbursements and amounts paid (or of which such Indemnified Party has become
obligated to pay) as the result of such Third Party Claim. Failure by the
Indemnifying Party to notify such Indemnified Party of its or their election to
defend any such Third Party Claim within fifteen (15) days after notice thereof
shall have been given to the Indemnifying Party shall be deemed a waiver by the
Indemnifying Party of its or their right to defend such Third Party Claim. If
the Indemnifying Party assumes the defense of the particular Third Party Claim,
the Indemnifying Party shall not, in the defense of such Third Party Claim,
consent to entry of any judgment or enter into any settlement, except with the
written consent of such Indemnified Party. In addition, the Indemnifying
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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. 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.
9.5. DEFINITIONS.
For purposes of this Article 9 "Costs" shall mean all liabilities,
losses, reasonable costs, damages (not including consequential damages),
expenses, claims, reasonable attorneys' fees, experts' fees, consultants' fees,
and disbursements of any kind or of any nature whatsoever. For purposes of
application of the indemnity provisions of this Article 9, the amount of any
Cost arising from the breach of any representation, warranty, covenant or
agreement shall be the entire amount of any Cost suffered, paid or required to
be paid by the respective Indemnified Party as a result of such breach.
9.6. 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 Two Hundred Fifty Thousand Dollars
($250,000) with respect to a breach of any provision herein other than
Section 2.11 or exceed a separate $250,000 amount with respect to a
breach under Section 2.11; provided, however, that notwithstanding the
preceding limitation, a UAG Indemnified Party shall be entitled to
indemnification for all Costs incurred or sustained by such UAG
Indemnified Party as a result of any untruth or inaccuracy in, or
breach of, a representation, warranty or covenant (or failure to
perform or observe any term,
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agreement or condition) contained in Article 1 or Sections 2.3, 2.8,
3.1, 5.6 and 5.14 (to the extent specified therein) hereof.
(ii) A UAG Indemnified Party shall be entitled to indemnification
in connection with an Event of Breach arising out of a breach of any
of the representations or warranties set forth in Articles 2 or 3
hereof or in connection with a Stockholder Third Party Claim for a
period terminating on the later of (i) the date two years after the
Closing Date, or (ii) with respect to any claim asserted with respect
to any breach of such representation or warranty pursuant to Section
9.3 hereof before the expiration of such two year period, on the date
such claim is finally liquidated or otherwise resolved; provided,
however, that a UAG Indemnified Party shall be entitled to
indemnification in connection with an Event of Breach arising out of
the representations and warranties in Sections 2.3, 2.8, 2.11, 2.20,
and 3.1 hereof until such claim is otherwise barred by the applicable
statute of limitations.
(iii) The aggregate Costs for which the Stockholders shall be
obligated to indemnify the UAG Indemnified Parties shall not exceed
Twenty-Five Million Dollars ($25,000,000) 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 Stockholder Indemnified Parties exceed Two Hundred
Fifty Thousand Dollars ($250,000); provided, however, that,
notwithstanding the preceding limitation, a Stockholder Indemnified
Party shall be entitled to indemnification for all Costs incurred or
sustained by such Stockholder Indemnified Party as a result of 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) A Stockholder Indemnified Party shall be entitled to
indemnification in connection with an UAG Event of Breach arising out
of a breach of any of the representations or warranties set forth in
Article 4 hereof or in connection with a UAG Third Party Claim for a
period terminating on the later of (i) the date two years after the
Closing Date, and (ii) with respect to any claim asserted with respect
to any breach of such representation or warranty pursuant to Section
9.3 hereof before the expiration of such representation or warranty,
on the date such claim is finally liquidated or otherwise resolved;
provided, however, that a Stockholder Indemnified Party shall be
entitled to indemnification in connection with an UAG Event of Breach
arising out of the representations and warranties in Sections 4.7,
4.9(b) and 4.16 hereof until such claim is otherwise barred by the
applicable statute of limitations.
(iii) The aggregate Costs for which UAG shall be obligated to
indemnify the Stockholder Indemnified Parties shall not exceed
Twenty-Five Million Dollars ($25,000,000) in the case of Costs
incurred or sustained by all Stockholder Indemnified Parties in
connection with a UAG Event of Breach; provided, however, that a
Stockholder Indemnified Party shall be entitled to indemnification for
all Costs incurred or sustained by such Stockholder Indemnified Party
as a result of untruth or inaccuracy in, or breach of, a
representation, warranty or covenant (or failure to perform or observe
any term, agreement or condition) contained in Article 1 or Sections
4.7, 4.9(b) and 4.16 hereof.
ARTICLE 10.
MISCELLANEOUS
10.1. SURVIVAL OF PROVISIONS.
(a) The respective representations, warranties, covenants and
agreements of each of the parties to this Agreement (except covenants and
agreements which are expressly required to be performed and are performed in
full on or before the Closing Date) shall survive the Closing Date and the
consummation of the transactions contemplated by this Agreement, subject to
Section 10.1(b) below. In the event of a breach of any such representations,
warranties or covenants, the party to whom such representations, warranties or
covenants have been made shall have all rights and remedies for such breach
available to it under the provisions of this Agreement or otherwise, whether at
law or in equity, regardless of any disclosure to, or investigation made by or
on behalf of, such party on or before the Closing Date.
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(b) Each of the representations and warranties set forth in Article 2,
Article 3 and Article 4 hereof and in any certificate delivered pursuant to
Article 6 or Article 7 hereof shall survive, and not be affected in any respect
by, the Closing for a period terminating on the later of (i) the date two years
after the Closing Date, and (ii) with respect to any claim asserted with
respect to any breach of such representation or warranty pursuant to Section
9.3 hereof before the expiration of such representation or warranty, on the
date such claim is finally liquidated or otherwise resolved, except with
respect to the representations and warranties in Sections 2.3, 2.8, 2.11, 2.20,
3.1, 4.7, 4.9(b) and 4.16 hereof.
10.2. FEES AND EXPENSES.
If the Closing does not occur and Section 5.6 hereof is materially
breached, then the Stockholders or the Companies shall pay to UAG, within five
(5) Business Days after receipt of a request therefor, an amount equal to all
of the reasonable 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:
c/o Mr. John A. Staluppi
474 South Beach Road
Hobe Sound, Florida 33455
with a copy to:
Newman Tannenbaum Helpern
Syracuse & Hirschtritt, LLP
900 Third Avenue
New York, New York 10022
Attn: Stuart B. Newman, Esq.
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If to the Companies after the Closing Date (in addition to the
foregoing addresses):
United Auto Group, Inc.
375 Park Avenue
New York, New York 10022
Attn: George G. Lowrance
Executive Vice President
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:
c/o Mr. John A. Staluppi
474 South Beach Road
Hobe Sound, Florida 33455
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 10022
Attn: George G. Lowrance
Executive Vice President
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 with respect to the
Stockholders, the personal representatives and heirs of the Stockholders) and
their respective successors and permitted assigns, and the provisions of
Article 9 hereof shall inure to the benefit of the Indemnified Parties referred
to therein; provided, however, that neither this Agreement nor any of the
rights, interests, or obligations hereunder may be assigned by any of the
parties hereto without the prior written consent of the other parties.
Notwithstanding the foregoing, UAG shall have the unrestricted right to assign
this Agreement and to delegate all or any part of its obligations hereunder to
any Affiliate of UAG, but in such event UAG shall remain fully liable for the
performance of all of such obligations in the manner prescribed in this
Agreement.
10.6. ENTIRE AGREEMENT.
This Agreement (including the Schedules hereto) and the Documents
embody the entire agreement and understanding of the parties with respect to
the transactions contemplated hereby and supersede all prior written or oral
commitments, arrangements or understandings between the parties with respect
thereto and all prior drafts of this Agreement. There are no restrictions,
agreements, promises, warranties, covenants or undertakings with respect to the
transactions contemplated hereby other than those expressly set forth herein or
in the Documents. Prior drafts of this Agreement shall not be used as a basis
for interpreting this Agreement.
10.7. WAIVER AND AMENDMENTS.
Each of the Stockholders 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
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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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
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UNITED AUTO GROUP, INC.
By: /s/ George Lowrance
--------------------------------------
Its: Executive Vice President
[Signatures continued on following pages]
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UAG EAST, INC.
By: /s/ George Lowrance
--------------------------------------
Its:
AMITY AUTO PLAZA LTD., D/B/A AMITY TOYOTA
SUPERSTORE
By: /s/ John A. Staluppi
--------------------------------------
Its: President
MASSAPEQUA IMPORTS LTD., D/B/A LEXUS OF
MASSAPEQUA
By: /s/ John A. Staluppi
--------------------------------------
Its: President
WESTBURY NISSAN LTD., D/B/A WESTBURY
NISSAN SUPERSTORE
By: /s/ John A. Staluppi
--------------------------------------
Its: President
WESTBURY SUPERSTORE LTD., D/B/A WESTBURY
TOYOTA
By: /s/ John A. Staluppi
--------------------------------------
Its: President
J&S AUTO REFINISHING LTD., D/B/A PREMIER
AUTO BODY
By: /s/ John A. Staluppi
--------------------------------------
Its: President
[Signatures continued on following page]
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FLORIDA CHRYSLER PLYMOUTH JEEP EAGLE INC.
By: /s/ John A. Staluppi
--------------------------------------
Its: President
PALM AUTO PLAZA INC., D/B/A PALM BEACH
TOYOTA
By: /s/ John A. Staluppi
--------------------------------------
Its: President
WEST PALM INFINITI INC.
By: /s/ John A. Staluppi
--------------------------------------
Its: President
WEST PALM NISSAN INC.
By: /s/ John A. Staluppi
--------------------------------------
Its: President
NORTHLAKE AUTO FINISH INC., D/B/A TRAIL
AUTO BODY
By: /s/ John A. Staluppi
--------------------------------------
Its: President
/s/ John A. Staluppi
-----------------------------------------
JOHN A. STALUPPI
/s/ John A. Staluppi, Jr.
-----------------------------------------
JOHN A. STALUPPI, JR.
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STOCK PURCHASE AGREEMENT
DATED AS OF MARCH 5, 1997
AMONG
UNITED AUTO GROUP, INC.
MARSHAL MIZE FORD, INC.,
WADE FORD, INC.,
WADE FORD BUFORD, INC.
D/B/A WADE FORD MERCURY,
MARSHAL D. MIZE,
ALAN K. ARNOLD,
LEWIS J. DYER AND
GARY R. BILLINGS
<PAGE>
TABLE OF CONTENTS
-----------------
Page
<PAGE>
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT, dated March 5, 1997, is by and among
United Auto Group, Inc., a Delaware corporation ("UAG"), Marshal Mize Ford,
Inc., a Delaware corporation ("Mize Ford"), Wade Ford Buford, Inc. d/b/a Wade
Ford Mercury, a Georgia Corporation ("Buford Ford"), Wade Ford, Inc., a Georgia
corporation ("Wade Ford" and, together with Mize Ford and Buford Ford, the
"Companies"), Alan K. Arnold, an individual resident of the State of Georgia
("Arnold"), Marshal D. Mize, an individual resident of the State of Tennessee
("Mize"), Lewis J. Dyer, an individual resident of the State of Tennessee
("Dyer"), and Gary R. Billings, an individual resident of the State of Georgia
("Billings" and, together with Arnold, Mize and Dyer, the "Stockholders").
W I T N E S S E T H:
WHEREAS, Mize Ford operates a franchise automobile dealership and
related businesses in Chattanooga, Tennessee;
WHEREAS, Wade Ford operates a franchise automobile dealership and
related businesses in the metropolitan Atlanta, Georgia area;
WHEREAS, Buford Ford operates a franchise automobile dealership and
related businesses in the metropolitan Atlanta, Georgia area;
WHEREAS, Arnold owns eighty percent (80%) and Billings owns twenty
percent (20%) of all of the issued and outstanding shares of the capital stock
of Buford Ford (the "Buford Ford Shares");
WHEREAS, Mize owns eighty percent (80%) and Dyer owns twenty percent
(20%) of all of the issued and outstanding shares of the capital stock of Mize
Ford (the "Mize Ford Shares");
WHEREAS, Arnold and his Affiliates own all of the issued and
outstanding shares of the capital stock of Wade Ford (the "Wade Ford Shares"
and, together with the Mize Ford Shares and the Buford Ford Shares, the
"Shares");
WHEREAS, UAG desires to purchase all of the Shares from the
Stockholders, and the Stockholders desire to sell the Shares to UAG (in each
case upon the terms and subject to the conditions set forth in this Agreement),
such that immediately after giving effect to such purchase and sale, UAG will
own one hundred percent (100%) of the issued and outstanding shares of the
capital stock of the Companies, on a fully diluted basis;
<PAGE>
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, estate 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).
(d) "Company Accounting Principles" shall mean (i) with respect to
Mize Ford, income tax basis of accounting principles and (ii) with respect to
Wade Ford and Buford Ford, GAAP (except with respect to depreciation which is
computed on the income tax basis of accounting), and, in each case, shall
include such significant accounting principles as are set forth on Schedule 1.1
hereof.
(e) "GAAP" shall mean generally accepted accounting principles which
are in effect in the United States on the Closing Date.
(f) "Knowledge" means, with respect to the Stockholders, that the
Stockholders knew, or in the exercise of reasonable diligence, would or should
have known of the particular matter referred to; with respect to the Companies,
that the general manager knew, or in the exercise of reasonable diligence,
would or should have known, of the particular matter referred to; and, with
respect to UAG, that the President of UAG knew or, in the exercise of
reasonable diligence, would or should have known, of the particular matter
referred to.
(g) "Leases" shall have the meaning ascribed to it in Section
1.2(c)(iii).
(h) "Liens" shall mean any mortgages, pledges, title defects or
objections, liens, claims, security interests, prior
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assignments, conditional and installment sale agreements, encumbrances or
charges of any kind.
(i) "Material Adverse Effect" shall mean any change in, or effect on,
either of the Companies (including the business thereof) which is, or might be,
materially adverse to the business, operations, assets or condition (financial
or otherwise) of such Company.
(j) "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.
(k) "Pre-Tax Earnings" shall mean net earnings (or losses), before
taxes, computed in accordance with the Company Accounting Principles together
with such adjustments as have been agreed upon by the parties.
(l) "UAG Common Stock" shall mean the shares of common stock, par
value $.0001 per share of UAG.
(m) "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 thirty
(30) 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. PURCHASE AND SALE OF THE SHARES
(a) Purchase and Sale. Upon the terms and subject to the conditions
set forth in this Agreement, the Stockholders shall sell to UAG, and UAG shall
purchase from the Stockholders, the Shares for an aggregate purchase price (the
"Purchase Price") equal to (i) Eighteen Million Seven Hundred Fifty Thousand
Dollars ($18,750,000) in cash (the "Base Price"), which Base Price is subject
to adjustment at the Closing as provided in Section 1.3 below and after Closing
as provided in Section 1.4 below; (ii) shares of UAG Common Stock (the "UAG
Shares") having an aggregate UAG Market Value on the Closing Date equal to Four
Million Dollars ($4,000,000); and (iii) the Additional Payments (if any) made
pursuant to Section 1.6 below. The aggregate consideration shall be allocated
among the Stockholders as set forth on Schedule 1.2(a) hereof. 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; and
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(ii) UAG shall accept and purchase the Shares from the Stockholders
and in payment therefor shall (A) deliver to the Stockholders immediately
available funds in an aggregate amount equal to the Base Price by wire
transfer to an account designated in writing by the Stockholders or by
certified funds; and (B) deliver to the Stockholders the certificates
representing the UAG Shares.
(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 May 15, 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 UAG 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 UAG good
title to all the Shares, and (B) all opinions, certificates and other
instruments and documents required to be delivered by the Companies or the
Stockholders at or prior to the Closing or otherwise required in connection
herewith;
(ii) UAG shall (A) pay to the Stockholders funds and deliver the
certificates representing the UAG Shares as required by Section 1.2(a)(ii)
hereof; and (B) deliver to the Stockholders all opinions, certificates and
other instruments and documents required to be delivered by UAG at or prior
to the Closing or otherwise required in connection herewith; and
(iii) (a) Buford Ford and Arnold shall enter into a lease for the real
property on which Buford Ford operates in a form mutually acceptable to the
parties (the "Buford Lease"). The Buford Lease shall be for a twenty (20)
year term and the lessee shall have the option to renew the lease for two
additional five year terms. The initial monthly lease rate shall be an
amount agreed to by the parties not to exceed the fair market lease rate
and shall be subject to periodic adjustments to be agreed to by the
parties.
(b) Wade Ford and Arnold shall enter into a lease for the parcel of
land owned by Arnold on which Wade Ford operates a portion of its business in a
form to be mutually
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acceptable to the parties (the "Wade/Arnold Lease"). The initial lease rate
shall be $10,000 per month and shall be subject to periodic adjustments to be
agreed to by the parties. The terms of the Wade/Arnold Lease and the Buford
Lease shall be agreed to within twenty (20) Business Days.
(c) Except as set forth in Sections 1.2(c)(iii)(a) and 1.2(c)(iii)(b),
the Companies' leases on Real Property shall continue in full force and effect
after the Closing Date.
1.3. EARNINGS ADJUSTMENT.TMENT
If the Companies, on a combined basis, have Pre-Tax Earnings of more
or less than $4,450,000 for the year ending December 31, 1996 ("1996
Earnings"), then the Purchase Price shall be increased or decreased (as
appropriate) by an amount equal to $[(4,450,000 - 1996 Earnings) x 5].
1.4. NET WORTH ADJUSTMENT.TMENT
(a) On the Closing Date, or as soon as practicable (but no later than
thirty (30) days) after the Closing Date, the Stockholders shall deliver to UAG
balance sheets of the Companies dated as of the Closing Date (such balance
sheets so delivered are referred to herein as the "Closing Date Balance
Sheets"). The Closing Date Balance Sheets shall be prepared in good faith on
the same basis and in accordance with the Company Accounting Principles, as
applicable (such accounting principles, methods and practices and such
procedures, are referred to herein as the "Accounting Principles"). In
connection with the preparation of the Closing Date Balance Sheets, the
Stockholders and the Companies shall permit the Reviewer (as defined below) and
other representatives of UAG to conduct a physical inventory at each location
where inventory is held by the Companies.
(b) Within sixty (60) days after delivery of the Closing Date Balance
Sheets, (i) Coopers & Lybrand or such other accounting firm (the "Reviewer")
selected by UAG shall audit or otherwise review the Closing Date Balance Sheets
in such manner as UAG and the Reviewer deem appropriate, and (ii) UAG shall
deliver such reviewed balance sheet (the "Reviewed Balance Sheets"), together
with the Reviewer's report thereon, to the Stockholders. The Reviewed Balance
Sheets (i) shall be prepared on the same basis and in accordance with the
Accounting Principles and (ii) shall include a schedule showing the computation
of the Final Net Worth (as defined in Section 1.4(g)(i) hereof), computed in
accordance with the definition of Net Worth set forth in Section 1.4(g)(iii)
hereof. UAG and the Reviewer shall have the opportunity to consult with the
Stockholders, the Companies and each of the accountants and other
representatives of the Stockholders and the Companies and examine the work
papers, schedules and other documents prepared by the Stockholders, the
Companies and each of such accountants and
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other representatives during the preparation of the Closing Date Balance
Sheets. The Stockholders and the Stockholders' independent public accountants
shall have the opportunity to consult with the Reviewer and examine the work
papers and schedules prepared by the Reviewer during the preparation of the
Reviewed Balance Sheets.
(c) The Stockholders shall have a period of forty-five (45) days after
delivery of the Reviewed Balance Sheets to present in writing to UAG all
objections the Stockholders may have to any of the matters set forth or
reflected therein, which objections shall be set forth in reasonable detail. If
no objections are raised within such 45-day period, the Reviewed Balance Sheets
shall be deemed accepted and approved by the Stockholders and a supplemental
closing (the "Supplemental Closing") shall take place within five (5) Business
Days following the expiration of such 45-day period, or on such other date as
may be mutually agreed upon in writing by UAG and the Stockholders.
(d) If the Stockholders shall raise any objection within the 45-day
period, UAG and the Stockholders shall attempt to resolve the matter or matters
in dispute and, if resolved, the Supplemental Closing shall take place within
five (5) Business Days following such resolution.
(e) If such dispute cannot be resolved by UAG and the Stockholders
within ninety (90) days after the delivery of the Reviewed Balance Sheets, then
the specific matters in dispute shall be submitted to a firm of independent
public accountants mutually acceptable to UAG and the Stockholders, which firm
shall make a final and binding determination as to such matter or matters. Such
accounting firm shall send its written determination to UAG and the
Stockholders and the Supplemental Closing, if any, shall take place five (5)
Business Days following the receipt of such determination by UAG and the
Stockholders. The fees and expenses of the accounting firm referred to in this
Section 1.4(e) shall be paid one half by UAG and one-half by the Stockholders.
(f) UAG and the Stockholders agree to cooperate with each other and
each other's authorized representatives and with any accounting firm selected
by UAG and the Stockholders pursuant to Section 1.4(e) hereof in order that any
and all matters in dispute shall be resolved as soon as practicable.
(g)(i) If the aggregate Net Worth as shown on the Reviewed Balance
Sheets as finally determined through the operation of Sections 1.4 (a) through
(e) hereof (such amount being referred to herein as the "Final Net Worth")
shall be less than Five Million Dollars ($5,000,000) (the amount of any such
deficiency being referred to herein as the "Net Worth Deficiency"), the
Stockholders shall pay to UAG at the Supplemental Closing, by wire transfer of
immediately available
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funds to an account designated in writing by UAG within two (2) Business Days
of the date of the Supplemental Closing, an amount equal to the Net Worth
Deficiency, together with interest on such amount from the Closing Date to the
date of the Supplemental Closing at the prime rate or its equivalent (as
announced from time to time by Citibank, N.A.).
(ii) If the Net Worth as shown on the Closing Date Balance Sheets is
equal to or greater than Five Million Dollars ($5,000,000) and the Net
Worth as shown on the Reviewed Balance Sheets as finally determined through
the operation of Sections 1.4(a) through (e) hereof shall be greater than
the Net Worth as shown on the Closing Date Balance Sheets (the amount of
any such excess being referred to as the "Net Worth Excess"), UAG shall pay
to the Stockholders, by wire transfer of immediately available funds to an
account designated in writing within two (2) Business Days of the
Supplemental Closing, an amount equal to the Net Worth Excess, together
with interest on such amount from the Closing Date to the date of the
Supplemental Closing at the prime rate or its equivalent (as announced from
time to time by Citibank, N.A.).
(iii) "Net Worth" shall mean the amount by which the total assets plus
LIFO reserves (in each case using the Company Accounting Principles)
(excluding good will) exceed the total liabilities reflected, in each case,
on the balance sheets of Companies comprising the Closing Date Balance
Sheets or the Reviewed Balance Sheets, as the case may be.
1.5. STOCK PRICE ADJUSTMENT
If the UAG Market Value on the Adjustment Date (as defined below), is
less than the UAG Market Value on the Closing Date (the amount of any such
deficiency being referred to herein as the "Stock Price Deficiency") then, no
later than thirty (30) days after the Adjustment Date, UAG shall pay to each
Stockholder cash in an amount (the "Adjustment Amount") equal to the Stock
Price Deficiency multiplied by the number of UAG Shares that such Stockholder
is permitted to sell on the Adjustment Date.
For purposes of this Agreement, the Adjustment Date shall mean the
earlier of (i) the date on which the Stockholders may sell the UAG Shares in
reliance on Rule 144 promulgated by the Securities and Exchange Commission
("SEC") pursuant to the Securities Act of 1933, as amended ("Rule 144") and
(ii) the date on which the UAG Shares are registered pursuant to the provisions
of a piggyback registration rights agreement or otherwise. If any Stockholder
is not permitted to sell all of his UAG Shares on the Adjustment Date as a
result of any volume restrictions set forth in Rule 144 or market cutbacks in
connection with a piggyback registration and the UAG Market Value ninety days
after the Adjustment Date is less than the UAG Market Value on the
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Closing Date (the amount of any such deficiency being referred to herein as the
("Remaining Stock Price Deficiency") then, no later than one hundred and fifty
(150) days after the Adjustment Date, UAG shall pay to such Stockholder cash in
an amount equal to the Remaining Stock Price Deficiency multiplied by the
number of UAG Shares that such Stockholder was not permitted to sell on the
Adjustment Date.
1.6. ADDITIONAL PURCHASE PRICE.PRICE
If the Companies (except for Buford Ford), on a combined basis,
achieve annual Pre-Tax Earnings of at least Three Million Eight Hundred
Thousand Dollars ($3,800,000) in either of the two (2) successive twelve (12)
month periods beginning on the first day of the calendar month immediately
following the Closing then, in consideration for the sale of the Shares by the
Stockholders to UAG, UAG will make an additional one-time cash payment to the
Stockholders (or their designees) in the aggregate amount of Eight Hundred
Fifty Thousand Dollars ($850,000) (the "Additional Payment"). In the event that
UAG is required to make the Additional Payment, then UAG shall make the
Additional Payment within sixty (60) days after the completion of the review by
the Companies' certified public accountant of the Companies' financial
statements covering the entire 12-month period for which such Additional
Payment is to be paid (but in no event shall such Additional Payment be paid
later than 120 days after the end of such 12-month period).
1.7. EFFECTIVE DATE
The obligations of the parties hereunder shall not take effect until
the date on which any of the parties notify Ford Motor Company of the execution
of the Agreement (the "Effective Date").
1.8. SCHEDULES
The parties acknowledge and agree that the Schedules referred to in
this Article 1 shall be delivered no later than twenty (20) Business Days after
the Effective Date.
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES
OF THE COMPANIES AND THE STOCKHOLDERS
Subject to the parties acknowledgement and agreement that the
Schedules referred to in this Article 2 are to be delivered by the Companies
and the Stockholders no later than twenty (20) Business Days after the
Effective Date hereof, the Companies and the Stockholders hereby represent and
warrant to UAG as follows, each such representation and warranty referring (a)
in the case of Mize and Mize Ford only to Mize and Mize Ford; (b) in the case
of Dyer, only to Dyer and Mize Ford; (c) in the case of Arnold, Wade Ford and
Buford Ford only to Arnold, Wade
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Ford and Buford Ford; (d) in the case of Buford Ford to Buford Ford; and (e) in
the case of Billings only to Billings and Buford Ford.
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 businesses as
now being conducted. The Companies are duly qualified to do business and are in
good standing as a foreign corporation in each state and jurisdiction where
qualification as a foreign corporation is required. Schedule 2.1 hereto lists
(i) the states and other jurisdictions where the Companies are so qualified and
(ii) the assumed names under which the Companies conduct business. Attached to
Schedule 2.1(b) hereto are complete and correct copies of the Companies'
Articles of Incorporation and Bylaws (including comparable governing
instruments with different names), as amended and presently in effect.
2.2. SUBSIDIARIES
Except as set forth on Schedule 2.2 hereof, 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 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").
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2.4. AUTHORITY; APPROVALS AND CONSENTS
(a) The Companies have the corporate power and authority to enter into
this Agreement and the documents referred to herein (the "Documents") to which
they are a party and to perform their obligations hereunder and thereunder. The
execution, delivery and performance of this Agreement and the Documents to
which they are a party and the consummation of the transactions contemplated
hereby and thereby have been duly authorized and approved by the Board of
Directors of each of the Companies and no other corporate proceedings on the
part of the Companies are necessary to authorize and approve this Agreement and
the Documents and the transactions contemplated hereby and thereby. This
Agreement has been, and on the Closing Date the Documents will be, duly
executed and delivered by, and constitute valid and binding obligations of,
each of the Companies, enforceable against the Companies in accordance with
their respective terms.
(b) The execution, delivery and performance by each of the Companies
and the Stockholders of this Agreement and the Documents to which it or 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 Articles of Incorporation or
By-Laws (including any comparable governing instrument with a different
name) of either 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 hereof) or, except as set forth on Schedule 2.4 hereto, require any
consent or waiver of any party to any Company Agreement;
(iii) result in the creation of any security interest upon, or any
person obtaining any right to acquire, any properties, assets or rights of
the 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 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 comp-
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liance 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
Except as otherwise indicated below, attached as Schedule 2.5 are true
and complete copies of:
(i) (A) the audited balance sheets of Wade Ford and Buford Ford as of
December 31, 1996 (the "Wade Ford and Buford Ford Company Balance Sheets"),
and the related consolidated statements of income, stockholders' equity and
cash flow for the fiscal year ended December 31, 1996, together with the
notes thereto and (B) the reviewed balance sheets of Wade Ford and Buford
Ford as of December 31, 1995, and the related consolidated statements of
income, stockholders' equity and cash flow for the fiscal year ended
December 31, 1995, together with the notes thereto, in each case examined
or reviewed by (as the case may be) and accompanied by the report of
independent certified public accountants; and
(ii) (A) the reviewed balance sheets of Mize Ford as of December 31,
1996 (the "Mize Ford Company Balance Sheet" and, together with the Wade
Ford and Buford Ford Company Balance Sheets, the "Company Balance Sheets"),
and the related consolidated statements of income and stockholders' equity
for the fiscal year ended December 31, 1995, together with the notes
thereto, in each case reviewed by and accompanied by the report of
independent certified public accountants; and
(iii) the most recent monthly and year-to-date financial statements
provided to Ford Motor Company by each of the Companies (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 in accordance with the books and records of
the Companies, fairly present the financial position, results of operations,
stockholders' equity as of the dates and for the periods indicated, in the case
of the financial statements referred to in
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clause (i) and (ii) above in conformity with the Company Accounting Principles
consistently applied during such periods (except as expressly stated otherwise
therein), and can be legitimately reconciled with the financial statements and
the financial records maintained and the accounting methods applied by the
Companies for federal income tax purposes, and the unaudited financial
statements included in the Company Financial Statements indicate all
adjustments, which consist of only normal recurring accruals, necessary for
such fair presentations. The statements of income included in the Company
Financial Statements do not contain any items of special or nonrecurring income
except as expressly specified therein, 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 liability of any nature whatsoever
(whether known or unknown, due or to become due, accrued, absolute, contingent
or otherwise), including, without limitation, any unfunded obligation under
employee benefit plans or arrangements as described in Section 2.17 and 2.18
hereof or liabilities for Taxes (as defined in Section 2.8 hereof), except for
(i) liabilities reflected or reserved against on the most recent Company
Financial Statements, (ii) current liabilities incurred in the ordinary course
of business and consistent with past practice after the date of the Company
Balance Sheets which, individually and in the aggregate, do not have, and
cannot reasonably be expected to have, a Material Adverse Effect, (iii)
liabilities disclosed on Schedule 2.6 hereto, and (iv) liabilities that do not,
in the aggregate, exceed $10,000. The Companies are not parties to any Company
Agreement, or subject to any charter or by-law provision, any other corporate
limitation or any Legal Requirement, which has, or can reasonably be expected
to have, a Material Adverse Effect.
2.7. ABSENCE OF MATERIAL ADVERSE EFFECT; CONDUCT OF BUSINESS
(a) Since December 31, 1996, the Companies have 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, net income or financial condition of the Companies, and no
factor, event, condition or circumstance exists which threatens or may
threaten to have a Material Adverse Effect;
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(ii) any material loss, damage, destruction or other casualty to the
property or other assets of the Companies, whether or not covered by
insurance;
(iii) any change in any method of accounting or accounting practice of
the Companies; or
(iv) any loss of the employment, services or benefits of any manager
of either 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;
(vi) entered into any material transaction, except in the ordinary
course of business consistent with past practice;
(vii) written down the value of any inventory or written off as
uncollectible any accounts receivable or any portion thereof not reflected in
the Company Financial Statements;
(viii) granted any increase in the compensation or benefits of
employees other than increases in accordance with past practice not exceeding
10% or entered into any employment or severance agreement or arrangement with
any of them;
(ix) made any individual capital expenditure in excess of $75,000, or
aggregate capital expenditures in excess of $200,000, or additions to property,
plant and equipment other than ordinary repairs and maintenance;
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(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, 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 at least 1986 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 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, prior to or
through the Closing Date for which tax returns have not yet been filed. In the
ordinary course, the Companies make adequate provision on their books for the
payment of all Taxes (including for the current fiscal period) owed by the
Companies on an annual basis. Except to the extent reserves therefor are
reflected on the Company Balance Sheets, the Companies are not liable, or will
not become liable, for any Taxes for any period ending on, prior to or through
the Closing Date. Except as set forth on Schedule 2.8 hereto, since January 1,
1990 the Companies have not been subject to a federal or state tax audit of any
kind, and no adjustment has been
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proposed by the Internal Revenue Service ("IRS") with respect to any return for
any subsequent year. With respect to the audits referred to on Schedule 2.8
hereto, no such audit has resulted in an adjustment in excess of $50,000.
Neither the Companies nor any Stockholder knows of any basis for an assertion
of a deficiency for Taxes against the Companies. The Stockholders will
cooperate, and will cause their Affiliates to cooperate, with the Companies in
the filing of any returns and in any audit or refund claim proceedings
involving Taxes for which the Companies may be liable or with respect to which
the Companies may be entitled to a refund.
2.9. LEGAL MATTERS
(a) Except as set forth on Schedule 2.9(a) hereto, (i) there is no
claim, action, suit, litigation, investigation, inquiry, review or proceeding
(collectively, "Claims") pending against, or, to the knowledge of the Companies
or the Stockholders, threatened against or affecting, the Companies, any ERISA
Plan (as defined in Section 2.18(a) hereof) or any of their respective
properties or rights before or by any court, arbitrator, panel, agency or other
governmental, administrative or judicial entity, domestic or foreign, nor is
any basis known to the Stockholders 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 businesses of the Companies are being conducted in compliance
with all laws, ordinances, codes, rules, regulations, standards, judgments and
other requirements of all governmental, administrative or judicial entities
(collectively, "Legal Requirements") applicable to the Companies or any of
their respective businesses or properties. 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 businesses. No event has occurred and is continuing which permits, or
after notice or lapse of time or both would permit, any modification or
termination of any Permit.
2.10. PROPERTY
The properties and assets, real and personal, owned by or leased to
the Companies are adequate for the conduct of the respective businesses of the
Companies as presently conducted. Set forth on Schedule 2.10(a) hereto is a
list of all interests
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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 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 and true and correct copies
of such leases are attached as Schedule 2.10(b). All properties leased by the
Companies are leased at rates which do not exceed the fair market lease rate
for such property. 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 in good operating condition and in good repair, subject
only to ordinary wear and tear. 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 such Improvements do not encroach in any respect on property of others. To
the knowledge of the Stockholders, 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. To the
extent required by law, Certificates of Occupancy have been issued with respect
to the Improvements without special conditions or restrictions. No notice of
any pending, threatened or contemplated action by any governmental authority or
agency having the power of eminent domain has been given to the Companies or
the Stockholders with respect to the Real Property.
2.11. ENVIRONMENTAL MATTERS
(a) Except as set forth on Schedule 2.11(a) hereto, (i) the Companies,
the Real Property, the Improvements and any property formerly owned, occupied
or leased by the Companies are in full 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 full compliance with all terms and
conditions of such Environmental Permits. As used herein, "Environmental Laws"
shall mean all applicable requirements of environmental, public or employee
health and safety, public or community right-to-know, ecological or natural
resource laws or regulations or controls, including all applicable requirements
imposed by any law (including without limitation common law), rule, order, or
regulations of any federal, state, or local executive, legislative, judicial,
regulatory, or administrative agency, board, or authority, or any applicable
private agreement (such as covenants, conditions and restrictions), which
relate to, (i) noise, (ii) pollution or protection of the air, surface water,
groundwater, or soil, (iii) solid, gaseous, or liquid waste generation,
treatment, storage, disposal or transportation, (iv) exposure to Hazardous
Materials
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(as defined below), or (v) regulation of the manufacture, processing,
distribution and commerce, use, or storage of Hazardous Materials. As used
herein, "Environmental Permits" shall mean all permits, licenses, approvals,
authorizations, consents or registrations required under applicable
Environmental Law in connection with the ownership, use and/or operation of the
Companies' businesses or the Real Property or Improvements.
As used in this Section 2.11, "Hazardous Materials" shall mean, collectively,
(i) those substances included within the definitions of or identified as
"hazardous chemicals," "hazardous waste," "hazardous substances," "hazardous
materials," "toxic substances" or similar terms in or pursuant to, without
limitation, the Comprehensive Environmental Response Compensation and
Liability Act of 1980 (42 U.S.C. 9601 et seq.) ("CERCLA"), as amended by
Superfund Amendments and Reauthorization Act of 1986 (Pub. L. 99-499, 100
State, 1613), the Resource Conservation and Recovery Act of 1976 (42 U.S.C. 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) 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.
(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
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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 or release of
any Hazardous Materials (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) none of the Real Property or 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 Stockholders, any site or location where the
Companies sent waste of any kind, is identified on the current or proposed (A)
National Priorities List under 40 C.F.R. 300 Appendix B, (B) Comprehensive
Environmental Response Compensation and Liability Inventory System list, or (C)
any list arising from any statute analogous to CERCLA. As used herein,
"Remedial Action" shall mean any action required to (i) clean up, remove or
treat Hazardous Materials, (ii) prevent a release or threat of release of any
Hazardous Material, (iii) perform pre-remedial studies, investigations or
post-remedial monitoring and care, (iv) cure a violation of Environmental Law
or (v) take corrective action under sections 3004(u), 3004(v) or 3008(h) of
RCRA or analogous state law.
(d) Except as set forth on Schedule 2.11(d) hereto, there have been
and are no (i) aboveground or underground storage tanks, subsurface disposal
systems, or wastes, drums or 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 either of the Companies, the Real Property, the
Improvements, any property formerly owned, leased or occupied by
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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 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 or Sub have
arising out of the representations and warranties contained herein.
2.12. INVENTORIES
The values at which inventories are carried on the Company Balance
Sheets and Company Factory Statements reflect the normal inventory valuation
policies of the Companies, and such values are in conformity with the Company
Accounting Principles. All inventories (other than new car inventories)
reflected on the Company Balance Sheets and Company Factory Statements or
arising since the date thereof are currently marketable and can reasonably be
anticipated to be sold at normal mark-ups within 90 days after the date hereof
in the ordinary course of business, except for spare parts inventory which
inventory is good and usable. All new car inventories reflected on the Company
Balance Sheets and Company Factory Statements or arising since the date thereof
and prior to Closing are currently marketable and can reasonably be anticipated
to be sold in the ordinary course of business within 90 days.
2.13. ACCOUNTS RECEIVABLE
All accounts receivable reflected on the Company Balance Sheets are,
and all accounts receivable that will be or
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will have been reflected on the Closing Date Balance Sheets will have arisen
from bona fide transactions in the ordinary course of business 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 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 either of the Companies is a party or by which either of the Companies
or any of their respective assets or properties (including the Real Property
and the Improvements) may be bound or affected, including all amendments,
modifications, extensions 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 either of the Companies. True and complete copies of
all written Company Agreements referred to on Schedule 2.15 and Schedule 2.10
hereto, exclusive of individual vehicle titles and/or manufacturer's
certificates of origin and floor plan liens applicable to individual vehicles,
have been delivered 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 Stockholders is, any other party
thereto, in breach of or default under any Company Agreement, and no event
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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 either of the Companies under any Company Agreement. For purposes of
this Section 2.15, material shall mean any Company Agreement that requires
payments or expenditures in excess of $100,000 in any 12-month period.
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 Stockholders 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 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, (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
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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:
(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(i) 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 Internal Revenue Code of 1986, as
amended (the "Code"), and valuation or actuarial reports, accountant's
opinions, financial statements, IRS Form 5500s (or 5500-C or 5500-R) and
summary annual reports for the last three years.
(b) With respect to the ERISA Plans, except as set forth on
Schedule 2.17(b):
(i) there is no ERISA Plan which is a " multiemployer" plan as that
term is defined in Section 3(37) of ERISA ("Multiemployer Plan");
(ii) no event has occurred or (to the knowledge of the Companies or
the Stockholders) is threatened or about to
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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 Stockholders) no such action
is contemplated or under consideration and the IRS has not asserted that
any Pension Benefit Plan is not qualified under Section 401(a) of the Code
or that any trust established under a Pension Benefit Plan is not exempt
under Section 501(a) of the Code.
(d) With respect to each Pension Benefit Plan which is a defined
benefit plan under Section 414(j) and, for the purpose solely of Section
2.17(d)(iv) hereof, each defined contribution plan under Section 414(i) of the
Code:
(i) no liability to the Pension Benefit Guaranty Corporation ("PBGC")
under Sections 4062-4064 of ERISA has been incurred by the 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;
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(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 Company
Accounting Principles, 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, 1995; 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.
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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 which require payments that exceed $50,000 in any 12-month
period, 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 $50,000. True and complete
copies of all of the written plans, arrangements and agreements referred to
on Schedule 2.18(a) ("Compensation Commitments") have been provided to UAG
together with, where prepared by or for the 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 Stockholders) no such action is contemplated or under consideration;
(iii) has no liability for any federal, state, local or foreign Taxes;
(iv) has no claims subject to dispute or litigation;
(v) has met all applicable requirements, if any, of the Code; and
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(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:
the term "Insider" shall mean the Stockholders, any director or
officer of the Companies, and any Affiliate, Associate or Relative of any of
the foregoing persons;
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
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.
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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 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
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 or which if disclosed would reasonably affect the decision
of a person considering an acquisition of the Shares. To the knowledge of 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.
2.25. WORKING CAPITAL
On the Closing Date, the Net Worth of the Companies shall include
adequate working capital for each of the Companies sufficient to continue
operating in the normal course of business.
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ARTICLE 3.
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
Subject to the parties' agreement and acknowledgement that the
Schedules referred to in this Article 3 are to be delivered by the Stockholders
no later than twenty (20) Business Days after the Effective Date hereof, each
Stockholder (with respect only to himself) hereby represents and warrants to
UAG as follows:
3.1. OWNERSHIP OF SHARES; TITLE
Each Stockholder is the owner of record and beneficially of the Shares
as set forth on Schedule 3.1 hereof and has, and shall transfer to UAG at the
Closing, good and marketable title to the Shares owned by him, free and clear
of any and all security interests, pledge agreements, Liens, encumbrances,
proxies and voting or other agreements except restrictions on transfer imposed
by applicable federal and state securities laws.
3.2. AUTHORITY
The Stockholders have all requisite power and authority and have 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 UAG
as contemplated by this Agreement). This Agreement has been duly executed and
delivered by the Stockholders and constitutes, and the 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 in accordance with its terms. The execution, delivery and
performance of this Agreement and the Documents by the Stockholders and the
consummation of the transactions contemplated hereby and thereby do not and
will not:
(i) (after notice or lapse of time or both) conflict with, result in a
breach of any provision of, constitute a default under, result in the
modification or cancellation of, or give rise to any right of termination
or acceleration in respect of, any material contract, agreement,
commitment, understanding, arrangement or restriction to which any of the
Stockholders is a party or to which any of the Stockholders or any of their
property is subject;
(ii) violate or conflict with any Legal Requirements applicable to the
Stockholders or any of Stockholders' 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.
3.3. REAL PROPERTY AND IMPROVEMENTS
The Real Property and Improvements owned by the Stockholders are owned
in fee simple, free and clear of all Liens, claims and encumbrances, except
those disclosed in Schedule 3.3, none of which currently or, to their
knowledge, in the future will affect the use of the Real Property or the
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 the Real
Property or Improvements other than the existing leases in favor of the
Companies, and pursuant to which the Stockholders shall acknowledge there are
no defaults under any such leases and no liability of either of the Companies
results from such leases. The Stockholders shall make available to UAG all
surveys, title binders, title policies and copies of any exceptions to title in
their possession or control.
3.4. INVESTMENT INTENT
No Stockholder has a present plan, intention or arrangement to dispose
of any of the UAG Common Stock received by him pursuant to the terms of this
Agreement.
3.5. QUALIFICATION OF STOCKHOLDERS
Each Stockholder (i) is an "accredited investor" within the meaning of
Regulation D of the Securities Act, and is acquiring the UAG Common Stock 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)
understands and acknowledges that such UAG Common Stock 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 his investment intent as expressed
herein; (iii) is able to bear the economic risk of investment in such UAG
Common Stock and has such knowledge and experience in financial and business
matters that he is capable of evaluating the risks and merits of such UAG
Common Stock; and (iv) understands and acknowledges that such UAG Common Stock
will be "restricted securities" as that term is defined in Rule 144 under the
Securities Act and that the certificates representing such UAG Common Stock
will bear a legend restricting transfer unless (A)
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the transfer is exempt from the registration requirements under the Securities
Act and any applicable state securities law and an opinion of counsel
reasonably satisfactory to UAG that such transfer is exempt therefrom is
delivered to UAG or (B) the transfer is made pursuant to an effective
registration statement under the Securities Act and any applicable state
securities law.
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 no later
than twenty (20) Business Days after the Effective Date hereof, UAG hereby
represents and warrants to the Companies and the Stockholders as follows:
4.1. ORGANIZATION AND GOOD STANDING
UAG is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has the corporate power
and authority to own, lease and operate the properties used in its business and
to carry on its business as now being conducted. UAG is duly qualified to do
business and is in good standing as a foreign corporation in each state and
jurisdiction where qualification as a foreign corporation is required, except
for such failures to be qualified and in good standing, if any, which when
taken together with all other such failures of UAG and the UAG Subsidiaries (as
defined below) would not, or could not reasonably be expected to, in the
aggregate have a material adverse effect on UAG and the UAG Subsidiaries, taken
as a whole. UAG has made available to the Stockholders complete and correct
copies of its charter and bylaws, as amended and presently in effect.
4.2. SUBSIDIARIES
Each of the UAG Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own, lease and operate
the properties and assets used in its business and to carry on its business as
now being conducted, and is duly qualified to do business and in good standing
as a foreign corporation in each jurisdiction where qualification as a foreign
corporation is required, except for such failures to be qualified and in good
standing, if any, which when taken together with all other such failures of UAG
and the UAG Subsidiaries would not, or could not reasonably be expected to, in
the aggregate have a Material Adverse Effect on UAG and the UAG Subsidiaries,
taken as a whole. All of the outstanding shares of capital stock of the UAG
Subsidiaries have been validly authorized and issued, are fully paid and
non-assessable, have not been issued in violation of any preemptive rights or
of any federal or state securities law. "UAG Subsidiary" shall mean any
corporation or other entity in which UAG, directly or indirectly,
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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.
4.3. 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
Registration Statement on Form S-1 as declared effective by the SEC on October
23, 1996 and UAG's Quarterly Report on Form 10-Q for the period ending
September 30, 1996 (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. UAG shall provide to Mize and Arnold any Quarterly Reports or
Annual Reports filed with the SEC between the date hereof and Closing, promptly
after such reports are filed.
4.5. AUTHORITY; APPROVALS AND CONSENTS
UAG has the corporate power and authority to enter into this Agreement
and the Documents to which it is a party and to perform its obligations
hereunder and thereunder. At the time of the Closing, the execution, delivery
and performance of this Agreement and the Documents to which it is a party and
the consummation of the transactions contemplated hereby and thereby will have
been duly authorized and approved by the Board of Directors of UAG and no other
corporate proceedings on the part of UAG 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, enforceable against UAG in accordance with their
respective terms. Except as set forth on Schedule 4.5 hereto, the execution,
delivery and performance by UAG of this Agreement and the Documents to which it
is a party and the consummation of the transactions contemplated hereby and
thereby do not and will not:
(i) contravene any provisions of the Certificate of Incorporation or
ByLaws of UAG;
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(ii) (after notice or lapse of time or both) conflict with, result in
a breach of any provision of, constitute a default under, result in the
modification or cancellation of, or give rise to any right of termination
or acceleration in respect of, any UAG Agreement (as defined 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.
4.6. FINANCIAL STATEMENTS
Attached as Schedule 4.6 are true and complete copies of:
(a) the consolidated balance sheet of UAG and its consolidated UAG
Subsidiaries as of December 31 in each of the years 1994 and 1995, and the
related consolidated statements of income, stockholders' equity and cash flows
for the fiscal years ended on such dates, together with the notes thereto, in
each case examined by and accompanied by the report of Coopers & Lybrand,
independent certified public accountants; and
(b) the unaudited consolidated balance sheet of UAG and its
consolidated UAG Subsidiaries as of September 30, 1996 (the "UAG Balance
Sheet"), and the unaudited consolidated statements of income, stockholders'
equity and cash flows for the month periods ended on such dates, together with
the notes thereto;
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(all the foregoing financial statements, including the notes thereto, being
referred to herein collectively as the "UAG Financial Statements"). The UAG
Financial Statements are in accordance with the books and records of UAG and
the UAG Subsidiaries, fairly present the consolidated financial position,
results of operations, stockholders' equity and changes in financial position
of UAG and the UAG Subsidiaries as of the dates and for the periods indicated,
in each case in conformity with GAAP consistently applied (except as otherwise
indicated in such statements) during such periods, and can be legitimately
reconciled with the financial statements and the financial records maintained
and the accounting methods applied by UAG and the UAG Subsidiaries for federal
income tax purposes, and the unaudited financial statements included in the UAG
Financial Statements indicate all adjustments, which consist of only normal
recurring accruals, necessary for such fair presentations. The statements of
income included in the UAG Financial Statements do not contain any items of
special or nonrecurring income except as expressly specified therein, and the
balance sheets included in the UAG Financial Statements do not reflect any
write-up or revaluation increasing the book value of any assets. The books and
accounts of UAG and the UAG Subsidiaries are complete and correct in all
material respects and fairly reflect all of the transactions, items of income
and expense and all assets and liabilities of the businesses of UAG and the UAG
Subsidiaries consistent with prior practices of UAG and the UAG Subsidiaries.
4.7. TAXES
UAG, each UAG Subsidiary and, for any period during all or part of
which the tax liability of any other corporation was determined on a combined
or consolidated basis with UAG or any UAG Subsidiary, any such other
corporation, have filed timely all federal, state, local and foreign tax
returns, reports and declarations required to be filed (or have obtained or
timely applied for an extension with respect to such filing) correctly
reflecting the Taxes and all other information required to be reported thereon
and have paid, or made adequate provision for the payment of, all Taxes which
are due pursuant to such returns or pursuant to any assessment received by UAG
or any UAG Subsidiary or any such other corporation. In the ordinary course,
UAG makes adequate provision on its books for the payment of all Taxes
(including for the current fiscal period) owed by UAG and the UAG Subsidiaries.
Neither UAG nor any UAG Subsidiary has been subject to a federal or state tax
audit of any kind, and no adjustment has been proposed by the IRS with respect
to any return for any subsequent year. UAG knows of no basis for an assertion
of a deficiency for Taxes against UAG or any UAG Subsidiary.
4.8. DISCLOSURE
Neither UAG nor any UAG Subsidiary has made any material
misrepresentation to the Companies or the Stockholders
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relating to this Agreement and neither UAG nor any UAG Subsidiary has omitted
to state to the Companies or the Stockholders any material fact relating to
this Agreement which is necessary in order to make the information given by or
on behalf of UAG or any UAG Subsidiary to the Companies or the Stockholders or
their representatives at or prior to Closing not misleading. 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 and the UAG Subsidiaries, taken as a whole, which has not been
disclosed in the SEC Filings or the Schedules to this Agreement.
4.9. BROKERS
Neither UAG nor any of their directors, officers or employees has
employed any broker or finder or has incurred or will incur any broker's,
finder's or similar fees, commissions or expenses, in each case in connection
with the transactions contemplated by this Agreement.
ARTICLE 5.
COVENANTS AND ADDITIONAL AGREEMENTS
5.1. ACCESS; CONFIDENTIALITY
Between the date that is two (2) Business Days after the Effective
Date and the Closing Date, the Stockholders and the Companies will (i) provide
to the officers and other authorized representatives of UAG full access, during
normal business hours, to any and all premises, properties, files, books,
records, documents, and other information of the Companies and will cause their
officers to furnish to UAG 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 true and complete copies of any documents
relating to the foregoing. UAG will hold in confidence (unless and to the
extent compelled to disclose by judicial or administrative process or, in the
opinion of its counsel, by other requirements of law) all Confidential
Information (as defined below) and will not use the same to the detriment of
the Companies or the Stockholders 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. If this Agreement is terminated, UAG will promptly return
to the Companies, all information furnished by the Companies and held by UAG,
including all copies and summaries thereof. In connection with the foregoing,
UAG shall coordinate with the Stockholders or their designees and, without the
consent of the Stockholders, shall not have more than three (3) representatives
at any of the Companies at any one time. As used herein, "Confidential
Information" shall mean all information concerning the Companies obtained by
UAG from the Companies in connection with the transactions
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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 of this Agreement. The
Stockholders will hold in confidence (unless and to the extent compelled to
disclose by judicial or administrative process, or, in the opinion of 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, including any due diligence review by or on behalf of the
Stockholders. If this Agreement is terminated, the Stockholders will promptly
return to UAG, upon the reasonable request of UAG, all UAG Confidential
Information furnished by UAG and held by the Stockholders, including all copies
and summaries thereof. As used herein, "UAG Confidential Information" shall
mean all information concerning UAG obtained by the Stockholders 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 Stockholders of this Agreement.
5.2. FURNISHING INFORMATION; ANNOUNCEMENTS
The Stockholders and the Companies, on the one hand, and UAG, on the
other hand, will, as soon as practicable after reasonable request therefor,
furnish to the other all the information concerning the Stockholders and the
Companies or UAG, 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, 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. UAG shall not file
this agreement as an Exhibit to any SEC filing unless such filing is required
to be filed by applicable law, as determined by UAG's counsel in its sole
discretion.
5.3. ANTITRUST IMPROVEMENTS ACT COMPLIANCE
UAG and the Stockholders and the Companies, as applicable, shall each
file or cause to be filed with the Federal Trade Commission and the United
States Department of Justice any notifications required to be filed by the
respective "ultimate parent" entities under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "H-S-R Act"), and the rules
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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 respective businesses solely in the ordinary course consistent
with past practices and, without the prior written consent of UAG, neither the
Stockholders nor the Companies will, except as required or permitted pursuant
to the terms hereof, permit the Companies to:
(i) make any material change in the conduct of their respective
businesses and operations or enter into any transaction other than in the
ordinary course of business consistent with past practices;
(ii) make any change in their Articles of Incorporation or 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 their
capital stock or alter any term of any of their outstanding securities or
make any change in their outstanding shares of capital stock or other
ownership interests or its capitalization, whether by reason of a
reclassification, recapitalization, stock split or combination, exchange or
readjustment of shares, stock dividend or otherwise;
(iii) (A) incur, assume or guarantee any indebtedness for borrowed
money, issue any notes, bonds, debentures or other corporate securities or
grant any option, warrant or right to purchase any thereof, except pursuant
to transactions in the ordinary course of business consistent with past
practices, (B) issue any securities convertible or exchangeable for debt
securities of the Companies, or (C) issue any options or other rights to
acquire from the
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Companies, directly or indirectly, debt securities of the Companies or any
security convertible into or exchangeable for such debt securities;
(iv) make any sale, assignment, transfer, abandonment or other
conveyance of any of their assets or any part thereof, except transactions
pursuant to contracts set forth in Schedule 2.15 hereto and dispositions of
inventory or of worn-out or obsolete equipment for fair or reasonable value
in the ordinary course of business consistent with past practices;
(v) subject any of their assets, or any part thereof, to any Lien or
suffer such to be imposed other than such Liens as may arise in the
ordinary course of business consistent with past practices by operation of
law which will not have, or cannot reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect;
(vi) declare, set aside or pay any dividends or other distributions
(whether in cash, stock, property or any combination thereof) in respect of
any shares of their capital stock (other than distributions or other
payments that do not reduce the Net Worth of the Companies below
$5,000,000) or redeem, retire, purchase or otherwise acquire, directly or
indirectly, any shares of its capital stock;
(vii) acquire any assets, raw materials or properties, or enter into
any other transaction, other than in the ordinary course of business
consistent with past practices;
(viii) enter into any new (or amend any existing) employee benefit
plan, program or arrangement or any new (or amend any existing) employment,
severance or consulting agreement, grant any general increase in the
compensation of officers or employees (including any such increase pursuant
to any bonus, pension, profit-sharing or other plan or commitment) or grant
any increase in the compensation payable or to become payable to any
employee, except in accordance with pre-existing contractual provisions or
consistent with past practices;
(ix) make or commit to make any individual material capital
expenditure in excess of $60,000, or aggregate capital expenditures in
excess of $150,000 (excepting rental vehicles);
(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 except for transactions pursuant to contracts set
forth on Schedule 2.15;
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(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 claim or litigation or waive any
material right above $25,000;
(xvi) make, enter into, modify, amend in any material respect or
terminate any material commitment, bid or expenditure, other than in the
ordinary course of business consistent with past practice;
(xvii) take any other action that would cause any of the
representations and warranties made by the Companies in this Agreement not
to remain true and correct; or
(xviii) commit itself to do any of the foregoing.
(b) From and after the date hereof and until the Closing Date, the
Stockholders and the Companies will cause the Companies to use their reasonable
best efforts to:
(i) continue to maintain, in all material respects, their properties
in accordance with present practices in a condition suitable for their
current use;
(ii) comply with all applicable Environmental Laws, and, in the event
the Companies shall receive notice that there exists a violation of any
Environmental Law with respect to their operations or any Real Property,
promptly (and in any event within the time period permitted by the
applicable governmental authority) 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
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be filed and pay when due all taxes, assessments, fees and other charges
lawfully levied or assessed against the Companies unless the validity
thereof is contested in good faith and by appropriate proceedings
diligently conducted;
(iv) keep its books of account, records and files in the ordinary
course and in accordance with existing practices;
(v) preserve its business organization intact and continue to maintain
existing business relationships with suppliers, customers and others with
whom business relationships exist other than relationships that are, at the
same time, not economically beneficial to it; and
(vi) continue to conduct their business in the ordinary course
consistent with past practices.
5.5. NO INTERCOMPANY PAYABLES OR RECEIVABLES
Except as disclosed on Schedule 5.5 hereto, at the Closing there will
be no intercompany payables or intercompany receivables due and/or owing
between the Stockholders and their Affiliates (other than the Companies) on the
one hand, and the Companies, on the other hand, other than those incurred in
the ordinary course of business and disclosed in the Notes to the Company
Financial Statements.
5.6. NEGOTIATIONS
From the date hereof and until the termination of this Agreement
pursuant to the provisions hereof, no Stockholder, nor the Companies, nor their
officers, directors, employees, advisors, agents, representatives, Affiliates
or anyone acting on behalf of the Stockholders, the Companies or such persons,
shall, directly or indirectly, encourage, solicit, initiate or engage in
discussions or negotiations with, or provide any information to, any person
(other than UAG or its representatives) concerning any merger, sale of assets
(other than in the ordinary course of business), purchase or sale of shares of
capital stock or similar transaction involving the Companies or purchase or
sale of any of the Real Property.
5.7. CONSENTS; COOPERATION
Subject to the terms and conditions hereof, the Stockholders and the
Companies and UAG will use their respective best efforts at their own expense:
(i) to obtain prior to the earlier of the date required (if so
required) or the Closing Date, all waivers, permits, licenses, approvals,
authorizations, qualifications, orders and consents of all third parties
and governmental authorities, and make all filings and registrations
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with governmental authorities which are required on their respective parts
for (A) the consummation of the transactions contemplated by this
Agreement, (B) the ownership or leasing and operating after the Closing by
the Companies of all their material properties and (C) the conduct after
the Closing by the Companies of their respective businesses as conducted by
them on the date hereof;
(ii) to defend, consistent with applicable principles and requirements
of law, any lawsuit or other legal proceedings, whether judicial or
administrative, whether brought derivatively or on behalf of third persons
(including governmental authorities) challenging this Agreement or the
transactions contemplated hereby and thereby; and
(iii) to furnish each other such information and assistance as may
reasonably be requested in connection with the foregoing.
5.8. ADDITIONAL AGREEMENTS
Subject to the terms and conditions of this Agreement, each of the
parties hereto agrees to use its 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 Stockholders agree to execute and deliver any and all documents that Ford
Motor Company typically requires 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 Stockholders and the proper officers of the Companies and UAG and its
proper officers, as the case may be, shall take all such necessary action.
5.9. INTERIM FINANCIAL STATEMENTS
Within thirty (30) days after the end of each calendar month after the
date of this Agreement, the Companies will deliver to UAG the most recent
monthly and year-to-date financial statements delivered to Ford Motor Company.
All such financial statements shall fairly present the financial position,
results of operations of the Companies as of the date or for the periods
indicated. All financial statements delivered pursuant to this Section 5.9
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 party hereto of: (i) any
information that indicates that any
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representation and warranty of such party contained herein was not true and
correct as of the date hereof or will not be true and correct as of the
Closing, (ii) the occurrence of any event which could result in the failure to
satisfy a condition specified in Article 6 or Article 7 hereof, as applicable,
(iii) any notice or other communication from any third person alleging that the
consent of such third person is or may be required in connection with the
transactions contemplated by this Agreement, and (iv) in the case of the
Stockholders and the 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 Stockholders 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
Stockholders 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 Stockholders (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 any Stockholder has knowledge which could result in any failure
to consummate the sale of the Shares as contemplated hereby.
5.11. ASSURANCE BY THE STOCKHOLDERS
The Stockholders shall cause each of the Companies to comply with
their respective covenants set forth in this Agreement.
5.12. SECTION 338(H)(10) ELECTION
The Stockholders agree to join with UAG, if UAG so requests, in making
a timely election to treat the purchase and sale of the Shares pursuant to this
Agreement as a sale of all of the Companies' 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, UAG agrees to promptly pay to the
Stockholders the amount of any additional federal or state income tax
(including any penalties and interest thereon) that is imposed on the
Stockholders solely by reason of the making of such election. Thus, in the
event that the federal and/or state income tax imposed on the
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Stockholders by reason of the stock sale exceeds the income tax that would have
been imposed if no such election had been made, UAG will be responsible for
such excess, along with any penalties and interest thereon. The parties agree
that, to the extent the payment required pursuant to this Section 5.12 relates
to LIFO reserves, the amount of any payment to the Stockholders pursuant to
this Section 5.12 shall be computed based on the LIFO reserve amounts as
currently reflected in the Companies' tax returns and records without taking
into account any adjustment to such LIFO reserve amounts upon audit of any
taxable year up through the date of the Closing. UAG further agrees to "gross
up" any payment to the Stockholder pursuant to this Section 5.12 to take into
account that any such payment would itself be subject to income tax.
5.13. NON-INTERFERENCE
After the Closing Date, the Stockholders and their Affiliates shall
not interfere with or disrupt, or attempt to interfere with or disrupt, the
relationship, contractual or otherwise, between the Company and any customer,
client, supplier, manufacturer, distributor, consultant, independent contractor
or employee of the Companies and agree not to solicit or hire any employee of
the Companies unless such employee has already terminated his employment with
the Companies.
5.14. INSURANCE
UAG shall either keep in place existing insurance policies relating to
workers' compensation, property damage and personal injury or, if UAG chooses
to replace such policies, UAG shall indemnify the Stockholders for any Costs
suffered by the Stockholders in connection with any workers' compensation,
property damage or personal injury claims made after the Closing; provided,
however, that such indemnification shall be limited to Costs, if any, that
would have been covered by the Companies' insurance policies in effect (as of
the Closing Date) had such policies remained in full force and effect.
5.15. PIGGYBACK REGISTRATION RIGHTS AGREEMENT
UAG and the Stockholders shall enter into a piggyback registration
rights agreement on terms mutually agreeable to the parties, which agreement
shall include customary terms and which agreement shall be subject to any
existing contractual rights of UAG.
5.16. REIMBURSEMENT BY UAG FOR TAX BENEFITS
In the event that the parties do not make an election pursuant to
Section 338(h)(10) of the Code pursuant to Section 5.12 hereof and any taxing
authority (including, without limitation, the Internal Revenue Service or
similar state revenue department) shall increase the taxable income of any of
the
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Companies in any taxable year up to the date of Closing, UAG shall pay to the
Stockholder or Stockholders (including any prior stockholders of the Company)
who pay the tax relating to such increase the lesser of (i) the Net Tax Benefit
(as defined in the following sentence) and (ii) the additional tax (excluding
any interest of penalties) paid by such Stockholder or Stockholders with
respect to such additional taxable income as reduced (on a gross and not a
present value basis) by any subsequent tax savings to such Stockholder or
Stockholders caused by the recognition of such additional taxable income,
including (without limitation) any amount of tax saved upon the sale of the
Shares pursuant to this Agreement. For this purpose, "Net Tax Benefit" is
defined as the present value (using a discount rate equal to UAG's average cost
of capital at the time of calculation) of the tax savings to be realized, or
which reasonably can be expected to be realized by UAG, as a result of the
recognition by such Stockholder (determined on an individual
Stockholder-by-Stockholder basis) of such additional taxable income. By way of
example and not by way of limitation, if the 1992 taxable income of Wade Ford,
Inc. were to be increased by $1,000,000 due to a change in its LIFO reserve
amount, the Net Tax Benefit, assuming UAG's average cost of capital is 7% and
the future tax benefit of the elimination of the LIFO reserve will be realized,
or reasonably can be expected to be realized, ratably (on an annual basis) over
approximately 7 years and assuming that UAG's combined federal and state income
tax rate is 40% during the 7-year period that the tax benefit is to be
realized, the Net Tax Benefit would be approximately $307,000. Any payment
pursuant to this Section 5.16 shall be made to the Stockholder or Stockholders
within sixty (60) days after written notice from such Stockholder certifying to
UAG that the Stockholder has paid the taxes relating to the increased taxable
income. The parties agree to cooperate in good faith to agree upon the
assumptions, if any, required in order to calculate the amount of any payment
to be made pursuant to this Section 5.16.
ARTICLE 6.
CONDITIONS TO THE OBLIGATIONS
OF UAG TO EFFECT THE CLOSING
The obligations of UAG 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 as provided herein
except as otherwise required by applicable law:
6.1. REPRESENTATIONS AND WARRANTIES; AGREEMENTS; COVENANTS
Each of the representations and warranties of the Companies and the
Stockholders contained in this Agreement shall be true and correct in all
material respects as of the date hereof and (having been deemed to have been
made again at and as of the Closing) shall be true and correct in all material
respects as of the Closings. Each of the obligations of the
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Companies and the Stockholders required by this Agreement to be performed by
them at or prior to the Closing shall have been duly performed and complied
with in all material respects as of the Closing. At the Closing, UAG shall have
received a certificate, dated the Closing Date and duly executed by the
Stockholders, 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, Ford Motor
Company 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 shall have been furnished with the opinion of counsel for the
Companies and the Stockholders, dated the Closing Date, in form and substance
satisfactory to UAG and its counsel, which opinions shall have been rendered
with respect to those matters generally contained in Sections 2.1, 2.2, 2.3,
2.4, 2.9, 3.1 and 3.2 hereof and which opinions shall be appropriately
qualified. 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
Georgia, Tennessee and Federal laws, as the case may be.
6.4. ABSENCE OF LITIGATION
No order, stay, injunction or decree of any court of competent
jurisdiction in the Untied States shall be in effect (i) that prevents or
delays the consummation of any of the transactions contemplated hereby or (ii)
would impose any limitation on the ability of UAG effectively to exercise full
rights of ownership of the Shares. No action, suit or proceeding
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before any court or any governmental or regulatory entity shall be pending (or
threatened by any governmental or regulatory entity), and no investigation by
any governmental or regulatory entity shall have been commenced (and be
pending), seeking to restrain or prohibit (or questioning the validity or
legality of) the consummation of the transactions contemplated by this
Agreement or seeking damages in connection therewith which UAG, in good faith
and with the advice of counsel, believes makes it undesirable to proceed with
the consummation of the transactions contemplated hereby.
6.5. NO MATERIAL ADVERSE EFFECT
During the period from December 31, 1996 to the Closing Date, there
shall not have been any Material Adverse Effect.
6.6. NET WORTH
On the Closing Date, the Stockholders (at UAG's expense) 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 the Accounting
Principles (the "Estimated Closing Date Balance Sheets"). The Estimated Closing
Date Balance Sheet shall show as of the date thereof, after taking into account
the payment of any of the fees, costs and expenses by the Companies incurred in
connection with this Agreement, a Net Worth not less than Five Million Dollars
($5,000,000).
6.7. COMPLETION OF DUE DILIGENCE
UAG 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. 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
is recommended, the Stockholders shall pay the entire costs of the Phase II
audit.
6.8. NET INCOME
Coopers & Lybrand shall have confirmed to UAG that the Pre-Tax
Earnings of the Companies for the year ending December 31, 1996 is no less than
Four Million Five Hundred Fifty Thousand Dollars ($4,550,000).
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6.9. LEASES
The Companies and the Stockholders shall have entered into the Leases.
6.10. BOARD APPROVAL
The Board of Directors of UAG shall have approved the consummation of
all of the transactions contemplated by this Agreement provided, however, that
this condition shall be deemed waived after April 30, 1997.
6.11. CERTIFICATES
The Stockholders and the Companies shall have furnished UAG with a
certificate, dated as of the Closing Date, executed by the Stockholders
certifying to the fulfillment of the conditions set forth in Sections 6.5 and
6.6 hereof and shall have furnished UAG with such other certificates of its
officers and others as UAG may reasonably request to evidence compliance with
the conditions set forth in this Article 6.
6.12. 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.
6.13. APPROVAL OF MANUFACTURERS AND DISTRIBUTORS
The Stockholders and the Companies shall have obtained the consent,
authorization and approval of Ford Motor Company for the transfer of the
Companies to UAG on customary terms no less favorable than those currently
granted by Ford Motor Company to other dealers.
6.14. 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.
6.15. TITLE INSURANCE
UAG shall have obtained title insurance (at its sole expense) 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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6.16. SCHEDULES
The Companies and the Stockholders shall have delivered to UAG all
Schedules referred to herein and such Schedules shall be acceptable in form and
substance to UAG. UAG shall have fifteen (15) Business Days from receipt of the
complete set of Schedules to reject the Schedules, or this condition shall be
deemed satisfied; provided, however, that nothing in this Section shall be
construed as limiting UAG's right to conduct due diligence pursuant to Section
6.7 hereof with respect to any and all matters disclosed on such Schedules.
6.17. 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.
6.18. RESIGNATION OF THE COMPANIES DIRECTORS.
Each of the persons who is a director of the Companies on the Closing
Date shall have tendered to UAG in writing his or her resignation as such in
form and substance satisfactory to UAG.
6.19. EMPLOYMENT OR CONSULTING AGREEMENTS.
UAG and Mize shall have entered into an employment or consulting
agreement on terms mutually agreeable to UAG and Mize. UAG and Arnold shall
have entered into an employment or consulting agreement on terms mutually
agreeable to UAG and Arnold.
ARTICLE 7.
CONDITIONS TO THE OBLIGATIONS OF
THE STOCKHOLDERS TO EFFECT THE CLOSING
The obligations of the Stockholders and the Companies required to be
performed by them at the Closing shall be subject to the satisfaction, at or
prior to the Closing, of each of the following conditions, each of which may be
waived by the Companies and the Stockholders as provided herein except as
otherwise required by applicable law:
7.1. REPRESENTATIONS AND WARRANTIES; AGREEMENTS
Each of the representations and warranties of UAG contained in this
Agreement shall be true and correct on the date made and shall be true and
correct in all material respects as of the Closing. Each of the obligations of
UAG required by this Agreement to be performed by them at or prior to the
Closing shall have been duly performed and complied with in all material
respects as of the Closing. At the Closing, the Stockholders shall have
received a certificate, dated the Closing Date and
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duly executed by UAG to the effect that the conditions set forth in the
preceding two sentences have been satisfied.
7.2. AUTHORIZATION OF THE AGREEMENT, CONSENTS
(a) All corporate action necessary to authorize the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby shall have been duly and validly taken by UAG.
All filings required to be made under the H-S-R Act in connection with the
transactions contemplated hereby shall have been made and all applicable
waiting periods with respect to each such filing, including 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, Ford Motor
Company) required to consummate the transactions contemplated hereby and all
consents or waivers shall have been made or obtained.
7.3. OPINIONS OF UAG'S COUNSEL
The Stockholders shall have been furnished with the opinion of Rogers
& Hardin, counsel to UAG, dated the Closing Date, in form and substance
reasonably satisfactory to the Stockholders and their counsel, which opinions,
when taken together, shall have been rendered with respect to those matters
generally contained in Sections 4.1, 4.2 and 4.3 hereof and which opinions
shall be appropriately qualified. In rendering the foregoing opinions, such
counsel may rely as to factual matters upon certificates or other documents
furnished by officers and directors of UAG and by government officials, and
upon such other documents and data as such counsel deems appropriate as a basis
for its opinion. Such opinions may be limited to federal laws and the General
Corporation Law of the State of Delaware.
7.4. ABSENCE OF LITIGATION
No order, stay, judgment or decree shall have been issued by any court
and be in effect restraining or prohibiting the consummation of the
transactions contemplated hereby.
7.5. CERTIFICATES
UAG shall have furnished the Stockholders with such certificates of
its officers and others to evidence compliance with the conditions set forth in
this Article 7 as may be reasonably requested by the Stockholders.
7.6. LEGAL MATTERS
All certificates, instruments, opinions and other documents required
to be executed or delivered by or on behalf of UAG
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under the provisions of this Agreement, and all other actions and proceedings
required to be taken by or on behalf of UAG in furtherance of the transactions
contemplated hereby, shall be reasonably satisfactory in form and substance to
counsel for the Stockholders.
7.7. EMPLOYMENT OR CONSULTING AGREEMENT.
UAG and Mize shall have entered into an employment or consulting
agreement on terms mutually agreeable to UAG and Mize. UAG and Arnold shall
have entered into an employment or consulting agreement on terms mutually
agreeable to UAG and Arnold.
7.8. SCHEDULES.
The Stockholders shall have ten (10) Business Days from receipt of the
complete set of Schedules to reject the Schedules, or this condition shall be
deemed satisfied; provided, however, that nothing in this Section shall be
construed as limiting the Stockholders' right to conduct due diligence pursuant
to Section 7.9 hereof.
7.9. DUE DILIGENCE.
The Stockholders shall have completed their financial due diligence of
UAG and the results of such examination shall be satisfactory to the
Stockholders.
7.10. APPROVAL OF MANUFACTURERS AND DISTRIBUTORS
The Stockholders and the Companies shall have obtained the consent,
authorization and approval of Ford Motor Company for the transfer of the
Companies to UAG on customary terms no less favorable than those currently
granted by Ford Motor Company to other dealers.
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 May 15, 1997, or such later date as shall have
been approved by UAG and the Stockholders (provided that the terminating
party is not otherwise in material breach of its representations,
warranties, covenants or agreements under this Agreement);
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(iii) by UAG or the Stockholders if any court of competent
jurisdiction in the United States or other United States governmental body
shall have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement, and such order, decree, ruling or other
action shall have become final and non-appealable;
(iv) by UAG if any of the conditions specified in Article 6 hereof
have not been met or waived by UAG at such time as such condition is no
longer capable of satisfaction (provided UAG is not otherwise in material
breach of its representations, warranties, covenants or agreements under
this Agreement);
(v) by the Stockholders if any of the conditions specified in Article
7 hereof have not been met or waived by the Stockholders at such time as
such condition is no longer capable of satisfaction (provided that neither
the Stockholders nor the Companies is otherwise in material breach of their
or its representations, warranties covenants or agreements under this
Agreement); or
(vi) by either UAG or the Stockholders if there has been a material
breach on the part of the other of any representation, warranty, covenant
or agreement set forth in this Agreement, which breach has not been cured
(if curable) within ten (10) Business Days following receipt by the
breaching party of written notice of such breach.
If UAG or the Stockholders shall terminate this Agreement pursuant to
the provisions hereof, such termination shall be effected by notice to the
other party specifying the provision hereof pursuant to which such termination
is made.
8.2. EFFECT OF TERMINATION
Except (i) for any breach of this Agreement prior to its termination,
(ii) for the obligations contained in Sections 5.1 and 10.2 hereof and (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. In the event that this Agreement is terminated prior to Closing, no
party shall be liable to any other party for any amount in excess of Fifty
Thousand Dollars ($50,000).
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ARTICLE 9.
INDEMNIFICATION
9.1. INDEMNIFICATION BY THE STOCKHOLDERS
(a) Notwithstanding the Closing or the delivery of the Shares, Mize
and Dyer, jointly and severally, indemnify and agree to fully defend, save and
hold harmless on an after-tax basis UAG, 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 Mize 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 Mize Ford or the conduct of the business of Mize Ford prior to
the Closing Date (a "Stockholder Third Party Claim"). As used herein, "Mize
Event of Breach" shall be and mean any one or more of the following: (i) any
untruth or inaccuracy in any representation of Mize, Dyer or Mize Ford or the
breach of any warranty of Mize, Dyer or Mize Ford 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 Mize, Dyer or Mize Ford (or any of their
representatives) 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 Mize, Dyer or Mize Ford
duly to perform or observe any term, provision, covenant, agreement or
condition on the part of Mize, Dyer or Mize Ford to be performed or observed.
(b) Notwithstanding the Closing or the delivery of the Shares, Arnold
and Billings, jointly and severally, indemnify and agree to fully defend, save
and hold harmless on an after-tax basis, the UAG Indemnified Parties, if a UAG
Indemnified Party (including the Companies after the Closing) shall at any time
or from time to time suffer any Costs arising, directly or indirectly, out of
or resulting from, or shall pay or become obligated to pay any sum on account
of, (i) any and all Wade 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 Wade Ford or Buford Ford or the conduct
of the business of Wade Ford or Buford Ford prior to the Closing Date (a "Wade
Stockholder Third Party Claim"). As used herein, "Wade Event of Breach" shall
be and mean any one or more of the following: (i) any untruth or inaccuracy in
any representation of Arnold, Billings, Wade Ford
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or Buford Ford or the breach of any warranty of Arnold, Billings, Wade Ford or
Buford Ford 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
Arnold, Billings, Wade Ford or Buford Ford (or any of their representatives) 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 Arnold, Billings, Wade Ford or Buford Ford duly to perform or
observe any term, provision, covenant, agreement or condition on the part of
Arnold, Billings, Wade Ford and Buford Ford to be performed or observed.
9.2. INDEMNIFICATION BY UAG
Notwithstanding the Closing, UAG indemnifies and agrees to fully
defend, save and hold harmless on an after-tax basis the Stockholders, the
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
any assets, properties or operations of UAG or the conduct of the business of
UAG prior to the Closing Date (a "UAG Third Party Claim"). As used herein, "UAG
Event of Breach" shall be and mean any one or more of the following: (i) any
untruth or inaccuracy in any representation of UAG or the breach of any
warranty of UAG contained in this Agreement, including, without limitation, any
misrepresentation in, or omission from, any statement, certificate, schedule,
exhibit, annex or other document furnished pursuant to this Agreement by UAG
(or any representative of UAG) to the Stockholders (or any representative of
the Stockholder) and any misrepresentation in or omission from any document
furnished to the Stockholders in connection with the Closing, and (ii) any
failure of UAG duly to perform or observe any term, provision, covenant,
agreement or condition on the part of UAG to be performed or observed.
9.3. PROCEDURES
If (i) any Mize Event of Breach or Wade Event of Breach occurs or is
alleged and a UAG Indemnified Party asserts that any of the Stockholders have
become obligated to a UAG Indemnified Party pursuant to Section 9.1, or if any
Mize Third Party Claim or Wade Third Party Claim is begun, made or instituted
as a result of which the Stockholders may become obligated to a UAG Indemnified
Party hereunder, or (ii) a UAG Event of Breach occurs or is alleged and a
Stockholder Indemnified Party asserts that
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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 2, any UAG Indemnified Party and any Stockholder
Indemnified Party is sometimes referred to as an "Indemnified Party" and UAG
and the Stockholders are sometimes referred to as an "Indemnifying Party," and
any UAG Third Party Claim and any Mize Third Party Claim and any Wade Third
Party Claim is sometimes referred to as a "Third Party Claim," in each case as
the context so requires), such Indemnified Party shall give written notice to
the Indemnifying Party of its or his obligation to provide indemnification
hereunder, provided that any failure to so notify the Indemnifying Party shall
not relieve them from any liability that it or he may have to the Indemnified
Party under this Article 9. If such notice relates to a Third Party Claim, each
Indemnifying Party, jointly and severally, agrees to defend, contest or
otherwise protect such Indemnified Party against any such Third Party Claim at
his or its sole cost and expense. Such Indemnified Party shall have the right,
but not the obligation, to participate at its own expense in the defense
thereof by counsel of such Indemnified Party's choice and shall in any event
cooperate with and assist the Indemnifying Party to the extent reasonably
possible. If the Indemnifying Party fails timely to defend, contest or
otherwise protect against such Third Party Claim, such Indemnified Party shall
have the right to do so, including, without limitation, the right to make any
compromise or settlement thereof, and such Indemnified Party shall be entitled
to recover the entire Cost thereof from the Indemnifying Party, including,
without limitation, attorneys' fees, disbursements and amounts paid (or of
which such Indemnified Party has become obligated to pay) as the result of such
Third Party Claim. Failure by the Indemnifying Party to notify such Indemnified
Party of its or their election to defend any such Third Party Claim within
fifteen (15) days after notice thereof shall have been given to the
Indemnifying Party shall be deemed a waiver by the Indemnifying Party of its or
their right to defend such Third Party Claim. If the Indemnifying Party assumes
the defense of the particular Third Party Claim, the Indemnifying Party shall
not, in the defense of such Third Party Claim, consent to entry of any judgment
or enter into any settlement, except with the written consent of such
Indemnified Party. In addition, the Indemnifying Party shall not enter into any
settlement of any Third Party Claim except with the written consent of such
Indemnified Party) which does not include as an unconditional term thereof the
giving by the claimant or the plaintiff to such Indemnified Party a full
release from all liability in respect of such Third Party Claim.
Notwithstanding the foregoing, the Indemnifying Party shall not be entitled to
control (but shall be entitled to participate at their own expense in the
defense of), and the 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
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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 (excluding any
employment or consulting agreements and 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.
9.5. REMEDIES
The rights of an Indemnified Party under this Article 9 are in
addition to such other equitable 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) UAG Indemnified Party shall be entitled to indemnification in
connection with a Mize Event of Breach only if the aggregate Costs incurred
or sustained by all UAG Indemnified Parties in connection with all Mize
Events of Breach exceed the applicable Basket; provided, however, that
notwithstanding the preceding limitation, a UAG Indemnified Party shall be
entitled to indemnification for all Costs incurred or sustained by such UAG
Indemnified Party as a result of any untruth or inaccuracy in, or breach
of, a representation, warranty or covenant (or failure to perform or
observe any term, agreement or condition) contained in Article 1 or
Sections 2.3, 2.4(a), 2.4(b)(i), 3.1 and 10.2 hereof or arising out of an
act of fraud by Mize, Dyer, or Mize Ford.
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(ii) A UAG Indemnified Party shall be entitled to indemnification in
connection with a Wade Event of Breach only if the aggregate Costs incurred
or sustained by all UAG Indemnified Parties in connection with all Wade
Events of Breach exceed the applicable Basket; provided, however, that
notwithstanding the preceding limitation, a UAG Indemnified Party shall be
entitled to indemnification for all Costs incurred or sustained by such UAG
Indemnified Party as a result of any untruth or inaccuracy in, or breach
of, a representation, warranty or covenant (or failure to perform or
observe any term, agreement or condition) contained in Article 1 or
Sections 2.3, 2.4(a), 2.4(b)(i), 3.1 and 10.2 hereof or arising out of an
act of fraud by Arnold, Billings, Wade Ford or Buford Ford.
(iii) The aggregate Costs for which the Stockholders shall be
obligated to indemnify the UAG Indemnified Parties shall not exceed the
applicable Cap in the case of Costs incurred or sustained by all UAG
Indemnified Parties in connection with a Mize Event of Breach or a Wade
Event of Breach; provided, however, that a UAG Indemnified Party shall be
entitled to indemnification for all Costs incurred or sustained by such UAG
Indemnified Party as a result of any untruth or inaccuracy in, or breach
of, a representation, warranty or covenant (or failure to perform or
observe any term, agreement or condition) contained in Article 1 or
Sections 2.3, 2.4(a), 2.4(b)(i), 2.8, 2.11, and 3.1 hereof or arising out
of an act of fraud by the Stockholders.
(iv) The "Basket" shall mean in the aggregate Two Hundred Fifty
Thousand Dollars ($250,000) and the "Cap" shall mean in the aggregate Seven
Million Five Hundred Thousand Dollars ($7,500,000). In each instance where
either the Basket or the Cap is applied, the Basket or the Cap, as the case
may be, shall be allocated to each Stockholder in accordance with the
percentage interests set forth on Schedule 1.2(a).
(b) Indemnification by UAG.
(i) A Stockholder Indemnified Party shall be entitled to
indemnification in connection with a UAG Event of Breach only if the
aggregate Costs incurred or sustained by all Stockholder Indemnified
Parties exceed Two Hundred Fifty Thousand Dollars ($250,000); provided,
however, that, notwithstanding the preceding limitation, a Stockholder
Indemnified Party shall be entitled to indemnification for all Costs
incurred or sustained by such Stockholder Indemnified Party as a result of
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 Section 4.3 or arising out of any act
of fraud by UAG.
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<PAGE>
(ii) The aggregate Costs for which UAG shall be obligated to indemnify
the Stockholder Indemnified Parties shall not exceed Seven Million Five
Hundred Thousand Dollars ($7,500,000) in the case of Costs incurred or
sustained by all Stockholder Indemnified Parties in connection with a UAG
Event of Breach; provided, however, that a Stockholder Indemnified Party
shall be entitled to indemnification for all Costs incurred or sustained by
such Stockholder Indemnified Party as a result of any untruth or inaccuracy
in, or breach of, a representation, warranty or covenant (or failure to
perform or observe any term, agreement or condition) contained in Article 1
or Sections 4.3 hereof or arising out of an act of fraud by UAG.
ARTICLE 10.
MISCELLANEOUS
10.1. SURVIVAL OF PROVISIONS.
(a) The respective representations, warranties, covenants and
agreements of each of the parties to this Agreement (except covenants and
agreements which are expressly required to be performed and are performed in
full on or before the Closing Date) shall survive the Closing Date and the
consummation of the transactions contemplated by this Agreement, subject to
Section 10.1(b) below.
(b) Each of the representations and warranties set forth in Article 2,
Article 3 and Article 4 hereof and in any certificate delivered pursuant to
Article 6 or Article 7 hereof shall survive, and not be affected in any respect
by, the Closing for a period terminating on the later of (i) the date two years
after the Closing Date, and (ii) with respect to any claim asserted with
respect to any breach of such representation or warranty pursuant to Section
9.3 hereof before the expiration of such representation or warranty, on the
date such claim is finally liquidated or otherwise resolved, except with
respect to the representations and warranties in Sections 2.8 and 2.11 hereof,
which shall survive the Closing Date for a period terminating on the later of
(y) the date five years after the Closing Date and (z) with respect to any
claim asserted with respect to any breach of such representations or warranties
pursuant to Section 9.3 hereof before the expiration of such representations or
warranties, on the date such claim is finally liquidated or otherwise resolved.
Notwithstanding the above, the representations and warranties in Section 2.3
and 3.1 hereof and any breach of a representation or warranty arising out of an
act of fraud shall not be limited by the provisions hereof.
10.2. FEES AND EXPENSES
Except as otherwise expressly provided in this Agreement, all legal
and other fees, costs and expenses incurred in connection with this Agreement
and the transactions contemplated
-56-
<PAGE>
hereby through the Closing Date shall be paid by the party incurring such fees,
costs or expenses; provided, however, that if the Closing does not occur and
Section 5.6 hereof is breached, then the Stockholders or the 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. Notwithstanding the above, UAG agrees to pay $30,000 of the fees, costs
and expenses incurred by the Stockholders in connection with the transaction
contemplated herein.
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:
Marshal Mize Ford, Inc.
5348 Highway 153
Chattanooga, Tennessee 37421
Attn: Marshal D. Mize
with a copy to:
Wade Ford, Inc.
3860 South Cobb Drive
Smyrna, Georgia 30080
Attn: Alan K. Arnold
If to the Companies after the Closing Date (in addition to the
foregoing addresses):
United Auto Group, Inc.
375 Park Avenue
New York, New York 10022
Attn: George G. Lowrance
Executive Vice President
-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:
Marshal D. Mize
8 Brooks Edge Lane
Signal Mountain, Tennessee 37377
Lewis J. Dyer
501 Shady Cove
Chattanooga, Tennessee 37421
Alan K. Arnold
4415 Pemberton Cove
Alpharetta, Georgia 30202
Gary Billings
c/o Wade Ford Buford
4525 Nelson Brogden Blvd.
Buford, Georgia 30518
with a copy to:
Michael V. Elsberry
Lowndes, Drosdick, Doster
Kantor & Reed, P.A.
215 North Eola Drive
Orlando, Florida 32802
and a copy to:
Fred H. Moore
Spears, Moore, Rebman, & Williams
Eighth Floor Blue Cross Building
P.O. Box 1749
Chattanooga, Tennessee 37401-1749
If to UAG:
United Auto Group, Inc.
375 Park Avenue
New York, New York 10022
Attn: George G. Lowrance
Executive Vice President
-58-
<PAGE>
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 with respect to the
Stockholders, the personal representatives and heirs of the Stockholders) and
their respective successors and permitted assigns, and the provisions of
Article 9 hereof shall inure to the benefit of the Indemnified Parties referred
to therein; provided, however, that neither this Agreement nor any of the
rights, interests, or obligations hereunder may be assigned by any of the
parties hereto without the prior written consent of the other parties.
Notwithstanding the foregoing, UAG shall have the unrestricted right to assign
this Agreement and to delegate all or any part of its obligations hereunder to
any Affiliate of UAG, but in such event UAG shall remain fully liable for the
performance of all of such obligations in the manner prescribed in this
Agreement.
10.6. ENTIRE AGREEMENT
This Agreement (including the Schedules hereto) and the Documents
embody the entire agreement and understanding of the parties with respect to
the transactions contemplated hereby and supersede all prior written or oral
commitments, arrangements or understandings between the parties with respect
thereto and all prior drafts of this Agreement. There are no restrictions,
agreements, promises, warranties, covenants or undertakings with respect to the
transactions contemplated hereby other than those expressly set forth herein or
in the Documents.
10.7. WAIVER AND AMENDMENTS
Each of the Stockholders and the Companies as one party, and UAG 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
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<PAGE>
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 Company Accounting Principles.
10.10. 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.
10.11. 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.
10.12. TIME IS OF THE ESSENCE
Time is of the essence for purposes of this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
UNITED AUTO GROUP, INC.
By: /s/ George G. Lowrance
-------------------------------
George G. Lowrance
Executive Vice President
[Remainder of page left intentionally blank]
[Signatures continued on following]
<PAGE>
MARSHAL MIZE FORD, INC.
By: /s/ Marshal D. Mize
-------------------------------
Its: President
WADE FORD, INC.
By: /s/ Alan K. Arnold
-------------------------------
Its: President
WADE FORD BUFORD, INC. D/B/A
WADE FORD MERCURY
By: /s/ Alan K. Arnold
-------------------------------
Its: President
/s/ Marshal D. Mize
----------------------------------
MARSHAL D. MIZE
/s/ Alan K. Arnold
----------------------------------
ALAN K. ARNOLD
/s/ Lewis J. Dyer
----------------------------------
LEWIS J. DYER
/s/ Gary R. Billings
----------------------------------
GARY R. BILLINGS
<PAGE>
MARSHAL MIZE FORD, INC.
By:
----------------------------------
Its:
WADE FORD, INC.
By:
----------------------------------
Its:
WADE FORD BUFORD, INC. D/B/A
WADE FORD MERCURY
By:
----------------------------------
Its:
----------------------------------
MARSHAL D. MIZE
----------------------------------
ALAN K. ARNOLD
----------------------------------
LEWIS J. DYER
----------------------------------
GARY R. BILLINGS
<PAGE>
STOCK PURCHASE AGREEMENT
DATED: FEBRUARY 7, 1997
AMONG
UNITED AUTO GROUP, INC.
UAG NEVADA, INC.,
GARY HANNA NISSAN, INC.,
THE GARY W. HANNA FAMILY TRUST
RESTATED DECEMBER 18, 1990
AND
GARY W. HANNA
<PAGE>
TABLE OF CONTENTS
Page
----
PURCHASE AND SALE OF SHARES................................................. 2
CERTAIN DEFINITIONS......................................................... 2
PURCHASE AND SALE OF THE SHARES............................................. 3
NET WORTH ADJUSTMENT........................................................ 5
STOCK PRICE ADJUSTMENT...................................................... 7
REPRESENTATIONS AND WARRANTIES.............................................. 8
ORGANIZATION AND GOOD STANDING.............................................. 8
SUBSIDIARIES................................................................ 8
CAPITALIZATION.............................................................. 8
AUTHORITY; APPROVALS AND CONSENTS........................................... 9
FINANCIAL STATEMENTS........................................................10
ABSENCE OF UNDISCLOSED LIABILITIES..........................................11
<PAGE>
ABSENCE OF MATERIAL ADVERSE EFFECT; CONDUCT OF BUSINESS.....................11
TAXES.......................................................................13
LEGAL MATTERS...............................................................14
PROPERTY....................................................................14
ENVIRONMENTAL MATTERS.......................................................15
INVENTORIES.................................................................18
ACCOUNTS RECEIVABLE.........................................................18
INSURANCE...................................................................19
CONTRACTS; ETC..............................................................19
LABOR RELATIONS.............................................................20
EMPLOYEE BENEFIT PLANS......................................................21
OTHER BENEFIT AND COMPENSATION PLANS OR ARRANGEMENTS........................23
TRANSACTIONS WITH INSIDERS..................................................24
PROPRIETY OF PAST PAYMENTS..................................................25
<PAGE>
INTEREST IN COMPETITORS.....................................................25
BROKERS.....................................................................26
ACCOUNTS....................................................................26
DISCLOSURE..................................................................26
NET WORTH...................................................................26
REPRESENTATIONS AND WARRANTIES..............................................26
OWNERSHIP OF SHARES; TITLE..................................................26
AUTHORITY...................................................................27
REAL PROPERTY AND IMPROVEMENTS..............................................27
INVESTMENT INTENT...........................................................28
QUALIFICATION OF STOCKHOLDER................................................28
REPRESENTATIONS AND WARRANTIES OF UAG.......................................29
ORGANIZATION AND GOOD STANDING..............................................29
SUBSIDIARIES................................................................29
<PAGE>
CAPITALIZATION..............................................................29
SEC Filings.................................................................30
AUTHORITY; APPROVALS AND CONSENTS...........................................30
FINANCIAL STATEMENTS........................................................31
TAXES.......................................................................32
DISCLOSURE..................................................................32
COVENANTS AND ADDITIONAL AGREEMENTS.........................................33
ACCESS; CONFIDENTIALITY.....................................................33
FURNISHING INFORMATION; ANNOUNCEMENTS.......................................34
ANTITRUST IMPROVEMENTS ACT COMPLIANCE.......................................34
CERTAIN CHANGES AND CONDUCT OF BUSINESS.....................................35
NO INTERCOMPANY PAYABLES OR RECEIVABLES.....................................38
NEGOTIATIONS................................................................38
CONSENTS; COOPERATION.......................................................38
<PAGE>
ADDITIONAL AGREEMENTS.......................................................39
INTERIM FINANCIAL STATEMENTS................................................39
NOTIFICATION OF CERTAIN MATTERS.............................................39
ASSURANCE BY THE STOCKHOLDER AND MR. HANNA..................................40
SECTION 338(H)(10) ELECTION.................................................40
CONDITIONS TO THE OBLIGATIONS...............................................42
REPRESENTATIONS AND WARRANTIES; AGREEMENTS; COVENANTS.......................42
AUTHORIZATION; CONSENTS.....................................................43
OPINIONS OF THE COMPANY'S AND THE STOCKHOLDER'S COUNSEL.....................43
ABSENCE OF LITIGATION.......................................................43
NO MATERIAL ADVERSE EFFECT..................................................44
NET WORTH...................................................................44
COMPLETION OF DUE DILIGENCE.................................................44
NET INCOME..................................................................45
<PAGE>
LEASE.......................................................................45
BOARD APPROVAL..............................................................45
CERTIFICATES................................................................45
LEGAL MATTERS...............................................................45
APPROVAL OF MANUFACTURERS AND DISTRIBUTORS..................................45
ENVIRONMENTAL LAWS..........................................................45
NONDISTURBANCE AGREEMENT....................................................45
TITLE INSURANCE.............................................................46
SCHEDULES...................................................................46
LEASE TERMINATION AGREEMENT/MEMORANDUM OF LEASE.............................46
CONDITIONS TO THE OBLIGATIONS OF............................................46
REPRESENTATIONS AND WARRANTIES; AGREEMENTS..................................46
AUTHORIZATION OF THE AGREEMENT, CONSENTS....................................47
OPINIONS OF UAG'S AND SUB'S COUNSEL.........................................48
<PAGE>
ABSENCE OF LITIGATION.......................................................48
CERTIFICATES................................................................48
LEGAL MATTERS...............................................................48
SCHEDULES...................................................................49
TERMINATION.................................................................49
TERMINATION.................................................................49
EFFECT OF TERMINATION.......................................................50
INDEMNIFICATION.............................................................50
INDEMNIFICATION BY THE STOCKHOLDER..........................................50
INDEMNIFICATION BY UAG AND SUB..............................................51
PROCEDURES..................................................................51
OFFSET......................................................................52
REMEDIES....................................................................53
DEFINITIONS.................................................................53
<PAGE>
MISCELLANEOUS...............................................................53
SURVIVAL OF PROVISIONS......................................................53
FEES AND EXPENSES...........................................................53
HEADINGS....................................................................54
NOTICES.....................................................................54
ASSIGNMENT..................................................................55
ENTIRE AGREEMENT............................................................55
WAIVER AND AMENDMENTS.......................................................56
COUNTERPARTS................................................................56
ACCOUNTING TERMS............................................................56
SCHEDULES...................................................................56
SEVERABILITY................................................................56
REMEDIES....................................................................57
GOVERNING LAW...............................................................57
<PAGE>
TIME IS OF THE ESSENCE......................................................57
<PAGE>
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT, dated February __, 1997, is by and
among United Auto Group, Inc., a Delaware corporation ("UAG"), UAG Nevada,
Inc., a Delaware corporation ("UAG Nevada" or "Sub"), Gary Hanna Nissan, Inc.,
a Nevada corporation (the "Company"), The Gary W. Hanna Family Trust Restated
December 18, 1990 (the "Stockholder") and Gary W. Hanna, an individual resident
of the state of Nevada ("Mr. Hanna").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, UAG Nevada is a wholly-owned subsidiary of UAG;
WHEREAS, the Company operates a franchise automobile dealership and
related businesses in Las Vegas, Nevada;
WHEREAS, the Stockholder owns all of the issued and outstanding shares
of the capital stock of the Company (the "Shares");
WHEREAS, UAG Nevada desires to purchase all of the Shares from the
Stockholder, and the Stockholder desires to sell the Shares to UAG Nevada (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 Nevada will own one hundred percent (100%) of the issued and
outstanding shares of the capital stock of the Company, on a fully diluted
basis;
NOW, THEREFORE, in consideration of the mutual terms, conditions and
other agreements set forth herein, the parties hereto hereby agree as follows:
<PAGE>
1
PURCHASE AND SALE OF SHARES
.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, estate and any trust entirely 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).
(d) "GAAP" shall mean generally accepted accounting principles which
are in effect in the United States on the Closing Date.
(e) "Knowledge" shall mean, with respect to the Stockholders, that the
Stockholder knows, or in the exercise of reasonable diligence, would or should
have known of the particular matter referred to and, with respect to UAG, that
the President of UAG knows or, in the exercise of reasonable diligence, would
or should have known of the particular matter referred to.
(f) "Lease" shall have the meaning ascribed to it in Section
1.2(c)(iii).
(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 any change in, or effect on,
the Company (including the business thereof) which is, or might be, materially
adverse to the business, operations, assets, condition (financial or otherwise)
or prospects of the Company.
(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.
2
<PAGE>
(j) "Pre-Tax Earnings" shall mean net earnings (or losses), before
taxes, computed in accordance with GAAP.
(k) "UAG Common Stock" shall mean the shares of common stock, par
value $.0001 per share of UAG.
(l) "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 twenty
(20) 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.
.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) Seven Million Dollars ($7,000,000) (the "Base
Price"), which Base Price is subject to adjustment after Closing as provided in
Sections 1.3 below; and (ii) shares of UAG Common Stock (the "UAG Shares")
having an aggregate UAG Market Value on the Closing Date equal to Five Million
Five Hundred Thousand Dollars ($5,500,000). At the Closing referred to in
Section 1.2(b) hereof:
(i) the Stockholder shall sell, assign, transfer and deliver to Sub
the Shares representing 100% of the issued and outstanding capital stock of
the Company 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 or by
certified funds; and (B) deliver to the Stockholder the certificates
representing the UAG Shares.
(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 April 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:
3
<PAGE>
(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 Company, the Stockholder or
Mr. Hanna at or prior to the Closing or otherwise required in connection
herewith;
(ii) the Sub shall (A) pay to the Stockholder funds and deliver the
certificates representing the UAG Shares as required by Section 1.2(a)(ii)
hereof; and (B) 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; and
(iii) the Company and the Stockholder shall enter into a lease for the
real property used in the business of the Company in a form mutually
acceptable to the parties (the "Lease"). The Lease shall be for a twenty
(20) year term commencing on the Closing Date. The initial annual lease
rate shall be the lease rate paid by the Company for the year ending
December 31, 1996 (unless such lease rate exceeds the fair market rate in
which case the initial lease rate shall be the fair market rate for the
year ending December 31, 1996)("Base Rate"), payable monthly, and (x) on
the fifth anniversary of the Closing Date (the "Fifth Anniversary") shall
increase to an amount equal to the Base Rate plus an amount equal to a
percentage of the Base Rate, which percentage shall be the percentage
increase in the Consumer Price Index published from time to time by the
United States Department of Labor ("CPI") between the Closing Date and the
Fifth Anniversary (such increased lease rate hereinafter the "Increased
Rate"), and (y) on the tenth anniversary of the Closing Date (the "Tenth
Anniversary") shall increase to an amount equal to the Increased Rate plus
an amount equal to a percentage of the Increased Rate, which percentage
shall be the percentage increase in the CPI between the Fifth Anniversary
and the Tenth Anniversary (such increased lease rate being referred to as
the "Second Increased Rate"), and (z) on the fifteenth anniversary of the
Closing Date (the "Fifteenth Anniversary") shall increase to an amount
equal to the Second Increased Rate plus an amount equal to a percentage of
the Second Increased Rate, which percentage shall be the percentage
increase in the CPI between the Tenth Anniversary and the Fifteenth
Anniversary (such increased lease rate being referred to as the "Third
Increased Rate"). The lease shall provide the Company with the option to
extend the lease term for an additional five-year period (the "First
Option") commencing on the twentieth
4
<PAGE>
anniversary of the Closing Date ("Twentieth Anniversary") at a rate equal
to the Third Increased Rate plus a percentage of the Third Increased Rate,
which percentage shall be the percentage increase in the CPI between the
Fifteenth Anniversary and the Twentieth Anniversary (such increased lease
rate being referred to as the "Fourth Increased Rate"). The lease shall
further provide that, in the event the Company exercises the First Option,
the Company shall have the option to extend the lease term for an
additional five-year period commencing with the twenty-fifth anniversary of
the Closing Date ("Twenty-Fifth Anniversary") at a rate equal to the Fourth
Increased Rate plus a percentage of the Fourth Increased Rate, which
percentage shall be the percentage increase in the CPI between the
Twentieth Anniversary and the Twenty-Fifth Anniversary.
3. NET WORTH ADJUSTMENT.
(a) On the Closing Date, or as soon as practicable after the Closing
Date, the Stockholder shall deliver to UAG a balance sheet of the Company dated
as of the Closing Date (such balance sheet so delivered is referred to herein
as the "Closing Date Balance Sheet"). The Closing Date Balance Sheet shall be
prepared in good faith on the same basis and in accordance with the accounting
principles, methods and practices used in preparing the Company Financial
Statements (as defined in Section 2.5 hereof) (such accounting principles,
methods and practices and such procedures, are referred to herein as the
"Accounting Principles"). In connection with the preparation of the Closing
Date Balance Sheet, the Stockholder and the Company shall permit the Reviewer
(as defined below) and other representatives of UAG to conduct a physical
inventory at each location where inventory is held by the Company.
(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"),
together with the Reviewer's report thereon, to the Stockholder. The Reviewed
Balance Sheet (i) shall be prepared on the same basis and in accordance with
the Accounting Principles and (ii) shall include a schedule showing the
computation of the Final Net Worth (as defined in Section 1.3(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 Company and each of the accountants and other
representatives of the Stockholder and the Company and to examine the work
papers, schedules and other documents prepared by the Stockholder, the Company
and each of such accountants and other representatives during the preparation
of the Closing Date Balance Sheet. The Stockholder and the Stockholder's
independent public accountants
5
<PAGE>
shall have the opportunity to consult with the Reviewer and to examine the work
papers, schedules and other documents prepared by the Reviewer during the
preparation of the Reviewed 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 aggregate 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 of the Company as set forth on the November 30
Balance Sheet (as defined in Section 2.5) (the "November 30 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
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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.).
(i) "Net Worth" computed in connection with the Closing Date Balance
Sheet, the November 30 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 Company
comprising the Closing Date Balance Sheet, the November 30 Balance Sheet or the
Reviewed Balance Sheet, as the case may be.
.4 STOCK PRICE ADJUSTMENT.
If, on the Adjustment Date (as defined below), the UAG Shares have an
aggregate UAG Market Value of less than Six Million Dollars ($6,000,000) (the
amount of any such deficiency being referred to herein as the "Stock Price
Deficiency") then, no later than thirty (30) days after the Adjustment Date,
UAG shall pay the Stockholder cash in an amount (the "Adjustment Amount") equal
to the Stock Price Deficiency. For purposes of this Agreement, the Adjustment
Date shall mean the date on which the Stockholder may sell the UAG Shares in
reliance on Rule 144 promulgated by the Securities and Exchange Commission
("SEC") pursuant to the Securities Act of 1933, as amended ("Rule 144").
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2
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY, THE STOCKHOLDER AND MR. HANNA
Subject to the parties' agreement and acknowledgement that certain of
the Schedules referred to in this Article 2 are to be delivered by the Company
and the Stockholder no later than thirty (30) days from the date hereof, the
Company, the Stockholder and Mr. Hanna hereby jointly and severally represent
and warrant to UAG and Sub as follows:
.1 ORGANIZATION AND GOOD STANDING.
The Company 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 business and to carry on its business as now being conducted. The
Company is duly qualified to do business and is in good standing as a foreign
corporation in each state and jurisdiction where qualification as a foreign
corporation is required, except for such failures to be qualified and in good
standing, if any, which when taken together with all other such failures of the
Company would not, or could not reasonably be expected to, in the aggregate
have a Material Adverse Effect. Schedule 2.1(a) hereto lists (i) the states and
other jurisdictions where the Company is so qualified and (ii) the assumed
names under which the Company conducts business. Attached to Schedule 2.1(b)
hereto are complete and correct copies of the Company's Articles of
Incorporation and Bylaws (including comparable governing instruments with
different names), as amended and presently in effect.
.2 SUBSIDIARIES.
The Company does not have any interest or investment in any Person.
.3 CAPITALIZATION.
The authorized stock of the Company and the number of shares of
capital stock which are issued and outstanding are set forth on Schedule 2.3
hereto. The shares listed on Schedule 2.3 hereto constitute all the issued and
outstanding shares of capital stock of the Company and have been validly
authorized and issued, are fully paid and nonassessable, have not been issued
in violation of any preemptive rights or of any federal or state securities law
and no personal liability attaches to the ownership thereof. There is no
security, option, warrant, right, call, subscription, agreement, commitment or
understanding of any nature whatsoever, fixed or contingent, that directly or
indirectly (i) calls for the issuance, sale, pledge or other disposition of any
shares of capital stock of the Company or any securities convertible into, or
other rights to acquire, any shares of capital stock of the Company, or (ii)
obligates the
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Company to grant, offer or enter into any of the foregoing, or (iii) relates to
the voting or control of such capital stock, securities or rights, except as
set forth on Schedule 2.3 hereto. The Company has not agreed to register any
securities under the Securities Act of 1933, as amended (the "Securities Act").
.4 AUTHORITY; APPROVALS AND CONSENTS. D CONSENTS
The Company has the corporate power and authority to enter into this
Agreement and the documents referred to herein (the "Documents") to which it is
a party and to perform its obligations hereunder and thereunder. The execution,
delivery and performance of this Agreement and the Documents to which it is a
party and the consummation of the transactions contemplated hereby and thereby
have been duly authorized and approved by the Board of Directors of the Company
and no other corporate proceedings on the part of the Company is 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, the Company, enforceable against the Company
in accordance with its terms. The execution, delivery and performance by the
Company, the Stockholder and Mr. Hanna of this Agreement and the Documents to
which it or 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 Articles of Incorporation or
Bylaws (including any comparable governing instrument with a different
name) of the Company;
(ii) (after notice or lapse of time or both) conflict with, result in
a breach of any provision of, constitute a default under, result in the
modification or cancellation of, or give rise to any right of termination
or acceleration in respect of, any Company Agreement (as defined in Section
2.15 hereof) or, except as set forth on Schedule 2.4 hereto, require any
consent or waiver of any party to any Company Agreement;
(iii) result in the creation of any security interest upon, or any
Person obtaining any right to acquire, any properties, assets or rights of
the Company (other than the rights of Sub to acquire the Shares pursuant to
this Agreement);
(iv) violate or conflict with any Legal Requirements (as defined in
Section 2.9 hereof) applicable to the Company or its business 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 Company to enable the Company to
continue to conduct its business and operations and use its properties after
the Closing in a manner which is in all material respects consistent with that
in which it is presently conducted.
.5 FINANCIAL STATEMENTS.
Except as otherwise indicated below, attached as Schedule 2.5 are true
and complete copies of:
(i) (A) the balance sheet of the Company 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 and (B) the balance sheet of the Company as of December 31, 1994,
and the related consolidated statement of income, stockholders' equity and
cash flow for the fiscal year ended December 31, 1994, together with the
notes thereto;
(ii) the balance sheet of the Company as of December 31, 1996 (the
"December 31 Balance Sheet") and the statement of income, stockholders'
equity and cash flow for the month periods ended on such date, together
with the notes thereto;
(iii) the balance sheet of the Company as of November 30, 1996 (the
"November 30 Balance Sheet"); and
(iv) the most recent monthly and year-to-date financial statements
provided to Nissan (the "Company Factory Statement");
(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 Company, fairly present the financial position,
results of operations, stockholders' equity and changes in financial position
of the Company as of the dates and for the periods indicated, in the case of
the financial statements referred to in clauses (i), (ii) and (iii) above in
conformity with GAAP consistently applied (except as set forth on Schedule
2.5(b) hereto) during such periods, and can be legitimately reconciled with the
financial statements and the financial records maintained and the accounting
methods applied by the Company for
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federal income tax purposes, and the unaudited financial statements included in
the Company Financial Statements indicate all adjustments, which consist of
only normal recurring accruals, necessary for such fair presentations. The
statements of income included in the Company Financial Statements do not
contain any items of special or nonrecurring income except as expressly
specified therein, and the balance sheets included in the Company Financial
Statements do not reflect any write-up or revaluation increasing the book value
of any assets. The books and accounts of the Company are complete and correct
in all material respects and fairly reflect all of the transactions, items of
income and expense and all assets and liabilities of the businesses of the
Company.
.6 ABSENCE OF UNDISCLOSED LIABILITIES.
The Company does not have any liability of any nature whatsoever
(whether known or unknown, due or to become due, accrued, absolute, contingent
or otherwise), including, without limitation, any unfunded obligation under
employee benefit plans or arrangements as described in Section 2.17 and 2.18
hereof or liabilities for Taxes (as defined in Section 2.8 hereof), except for
(i) liabilities reflected or reserved against on the most recent Company
Financial Statements, (ii) current liabilities incurred in the ordinary course
of business and consistent with past practice after the date of the November 30
Balance Sheet which, individually and in the aggregate, do not have, and cannot
reasonably be expected to have, a Material Adverse Effect, and (iii)
liabilities disclosed on Schedule 2.6 hereto. The Company is not a party to any
Company Agreement, or subject to any charter or bylaw provision, any other
corporate limitation or any Legal Requirement, which has, or can reasonably be
expected to have, a Material Adverse Effect.
.7 ABSENCE OF MATERIAL ADVERSE EFFECT; CONDUCT OF BUSINESS.
(a) Since December 31, 1995, the Company has operated in the ordinary
course of business consistent with past practice, except as set forth on
Schedule 2.7(a) hereto, and there has not been:
(i) any material adverse change in the assets, properties, business,
operations, prospects, net income or financial condition of the Company,
and no factor, event, condition, circumstance or prospective development
exists which threatens or may threaten to have a Material Adverse Effect;
(ii) any material loss, damage, destruction or other casualty to the
property or other assets of the Company, whether or not covered by
insurance;
(iii) any change in any method of accounting or accounting practice of
the Company; or
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(iv) any loss of the employment, services or benefits of any key
employee of the Company.
(b) Since December 31, 1995, except as set forth in Schedule 2.7(b)
hereto, the Company has not:
(i) incurred any material obligation or liability (whether absolute,
accrued, contingent or otherwise), except in the ordinary course of
business consistent with past practice;
(ii) failed to discharge or satisfy any lien or pay or satisfy any
obligation or liability (whether absolute, accrued, contingent or
otherwise), other than liabilities being contested in good faith and for
which adequate reserves have been provided;
(iii) mortgaged, pledged or subjected to any lien any of its property
or other assets, except for mechanics liens and liens for taxes not yet due
and payable;
(iv) sold or transferred any assets or cancelled any debts or claims
or waived any rights, except in the ordinary course of business consistent
with past practice;
(v) defaulted on any material obligation;
(vi) entered into any material transaction, except in the ordinary
course of business consistent with past practice;
(vii) written down the value of any inventory or written off as
uncollectible any accounts receivable or any portion thereof not reflected
in the Company Financial Statements;
(viii) granted any increase in the compensation or benefits of
employees other than increases in accordance with past practice not
exceeding 10% or entered into any employment or severance agreement or
arrangement with any of them;
(ix) made any individual capital expenditure in excess of $75,000, or
aggregate capital expenditures in excess of $200,000, or additions to
property, plant and equipment other than ordinary repairs and maintenance;
(x) discontinued any franchise or the sale of any products or product
line or program;
(xi) incurred any obligation or liability for the payment of severance
benefits; or
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(xii) entered into any agreement or made any commitment to do any of
the foregoing.
.8 TAXES.
The Company has 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 has
continued to qualify as such for all taxable years since December 31, 1986 and
will continue to so qualify through the Closing Date.
The Company and, for any period during all or part of which the tax
liability of any other corporation was determined on a combined or consolidated
basis with the Company any such other corporation, has filed timely all
federal, state, local and foreign tax returns, reports and declarations
required to be filed (or have obtained or timely applied for an extension with
respect to such filing) correctly reflecting the Taxes (as defined below) and
all other information required to be reported thereon and have paid, or made
adequate provision for the payment of, all Taxes which are due pursuant to such
returns or pursuant to any assessment received by the Company or any such other
corporation. As used herein, "Taxes" shall mean all taxes, fees, levies or
other assessments, including but not limited to income, excise, property,
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, 1991 have been furnished or made available to UAG or its
representatives and such copies are accurate and complete as of the date
hereof. The Company has also furnished to UAG correct and complete copies of
all notices and correspondence sent or received since December 31, 1991 by the
Company to or from any federal, state or local tax authorities. The Company has
adequately reserved for the payment of all Taxes with respect to periods ended
on, prior to or through the Closing Date for which tax returns have not yet
been filed. In the ordinary course, the Company makes adequate provision on its
books for the payment of all Taxes (including for the current fiscal period)
owed by the Company. Except to the extent reserves therefor are reflected on
the Closing Date Balance Sheet, the Company is not liable, or will not become
liable, for any Taxes for any period ending on, prior to or through the Closing
Date. Except as set forth on Schedule 2.8 hereto, the Company has not been
subject to a federal or state tax audit of any kind, and no adjustment has been
proposed by the Internal Revenue Service ("IRS") with respect to any return for
any subsequent year. With respect to the audits referred to on Schedule 2.8
hereto, no such audit has resulted in an adjustment in excess of $50,000.
Neither the Company nor the Stockholder knows of any basis for an assertion of
a deficiency for Taxes
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against the Company. The Stockholder will cooperate, and will cause its
Affiliates to cooperate, with the Company in the filing of any returns and in
any audit or refund claim proceedings involving Taxes for which the Company may
be liable or with respect to which the Company may be entitled to a refund.
.9 LEGAL MATTERS.
(a) Except as set forth on Schedule 2.9(a) hereto, (i) there is no
claim, action, suit, litigation, investigation, inquiry, review or proceeding
(collectively, "Claims") pending against, or, to the knowledge of the Company
or the Stockholder, threatened against or affecting, the Company, any ERISA
Plan (as defined in Section 2.17(a) hereof) or any of its properties or rights
before or by any court, arbitrator, panel, agency or other governmental,
administrative or judicial entity, domestic or foreign, nor is any basis known
to the Stockholder or the Company for any such Claims, and (ii) the Company is
not subject to any judgment, decree, writ, injunction, ruling or order
(collectively, "Judgments") of any governmental, administrative or judicial
authority, domestic or foreign. Schedule 2.9(a) hereto identifies each Claim
and Judgment disclosed thereon which is fully covered by an insurance policy.
(b) The business of the Company 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 Company or its business
or properties. The Company holds, and is in compliance with, all franchises,
licenses, permits, registrations, certificates, consents, approvals or
authorizations (collectively, "Permits") required by all applicable Legal
Requirements. A list of all such permits is set forth on Schedule 2.9(b)
hereof.
(c) The Company owns or holds all Permits material to the conduct of
its business. No event has occurred and is continuing which permits, or after
notice or lapse of time or both would permit, any modification or termination
of any Permit.
.10 PROPERTY.
The properties and assets, real and personal, owned by or leased to
the Company are adequate for the conduct of the business of the Company as
presently conducted. Set forth on Schedule 2.10(a) hereto is a list of all
interests in real property owned by or leased to the Company (including all
real property owned or leased by the Stockholder, directly or indirectly) and
used in the business of the Company 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 parties 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
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leases and true and correct copies of such leases 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 Company are in good operating condition and in good repair and are fit for
the particular purposes for which they are used by the Company, subject only to
ordinary wear and tear. Such tangible properties and all Improvements owned or
leased by the Company conform in all material respects with all applicable
laws, ordinances, rules and regulations and other Legal Requirements and such
Improvements do not encroach in any respect on property of others. There are no
latent defects with respect to the Improvements. The Real Property is currently
zoned to permit the conduct of the business of the Company 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 notice of any pending,
threatened or contemplated action by any governmental authority or agency
having the power of eminent domain has been given to the Company or the
Stockholder with respect to the Real Property.
.11 ENVIRONMENTAL MATTERS.
(a) Except as set forth on Schedule 2.11(a) hereto, (i) to the
knowledge of the Stockholder and the Company, the Company, the Real Property,
the Improvements and any property formerly owned, occupied or leased by the
Company are in full compliance with all Environmental Laws (as defined below),
(ii) the Company has obtained all Environmental Permits (as defined below),
(iii) such Environmental Permits are in full force and effect, and (iv) the
Company is in compliance with all terms and conditions of such Environmental
Permits. The Stockholder and the Company did not engage in any activity or
conduct, or cause or permit any condition, that would not be in compliance with
the Environmental Laws or Environmental Permits. As used herein, "Environmental
Laws" shall mean all applicable requirements of environmental, public or
employee health and safety, public or community right-to-know, ecological or
natural resource laws or regulations or controls, including all applicable
requirements imposed by any law (including without limitation common law),
rule, order, or regulations of any federal, state, or local executive,
legislative, judicial, regulatory, or administrative agency, board, or
authority, or any applicable private agreement (such as covenants, conditions
and restrictions), which relate to, (i) noise, (ii) pollution or protection of
the air, surface water, groundwater, or soil, (iii) solid, gaseous, or liquid
waste generation, treatment, storage, disposal or transportation, (iv) exposure
to Hazardous Materials (as defined below), or (v) regulation of the
manufacture, processing, distribution and commerce, use, or storage of
Hazardous Materials. As used herein, "Environmental Permits" shall mean all
permits, licenses, appro-
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vals, authorizations, consents or registrations required under applicable
Environmental Laws in connection with the ownership, use and/or operation of
the Company's business or the Real Property or Improvements.
As used in this Section 2.11, "Hazardous Materials" shall mean,
collectively, (i) those substances included within the definitions of or
identified as "hazardous chemicals," "hazardous waste," "hazardous substances,"
"hazardous materials," "toxic substances" or similar terms in or pursuant to,
without limitation, the Comprehensive Environmental Response Compensation and
Liability Act of 1980 (42 U.S.C. 9601 et seq.) ("CERCLA"), as amended by
Superfund Amendments and Reauthorization Act of 1986 (Pub. L. 99-499, 100
State, 1613), the Resource Conservation and Recovery Act of 1976 (42 U.S.C. 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)
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.
(b) The Company 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 Company, are not otherwise exposed to
liability under, any Environmental Law. To the knowledge of the Stockholder and
the Company, no event has occurred with respect to the Real Property, the
Improvements or any property formerly owned, occupied or leased by the Company,
which, with the passage of time or the giving of notice, or both, would
constitute a violation of or non-compliance with any applicable Environmental
Law. The Company has no contingent liability under any Environmental Law. There
are no liens under any Environmental Law on the Real Property.
(c) Except as set forth on Schedule 2.11(c) hereto, (i) neither the
Company, the Real Property or any portion thereof, the Improvements or any
property formerly owned, occupied or leased by the Company, nor, to the
knowledge of the Company or the Stockholder, any property adjacent to the Real
Property is being used or has been used (at such time as the
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Stockholder owned or leased such property) 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 or release of any Hazardous Materials (provided, however, that certain
petroleum products are stored and handled on the Real Property in the ordinary
course of the Company's business in full compliance with all Environmental Laws
including the existing regulations of the United States Environmental
Protection Agency 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) to the knowledge of the
Stockholder and the Company none of the Real Property or portion thereof, the
Improvements or any property formerly owned, occupied or leased by the Company
has been subject to investigation by any governmental authority evaluating the
need to investigate or undertake Remedial Action (as defined below) at such
property, and (iii) to the knowledge of the Company and the Stockholder, none
of the Real Property, the Improvements or any property formerly owned, occupied
or leased by the Company or any site or location where the Company sent waste
of any kind, is identified on the current or proposed (A) National Priorities
List under 40 C.F.R. 300 Appendix B, (B) Comprehensive Environmental Response
Compensation and Liability Inventory System list, or (C) any list arising from
any statute analogous to CERCLA. As used herein, "Remedial Action" shall mean
any action required to (i) clean up, remove or treat Hazardous Materials, (ii)
prevent a release or threat of release of any Hazardous Material, (iii) perform
pre-remedial studies, investigations or post-remedial monitoring and care, (iv)
cure a violation of Environmental Law or (v) take corrective action under
sections 3004(u), 3004(v) or 3008(h) of RCRA or analogous state law.
(d) Except as set forth on Schedule 2.11(d) hereto, there have been
and are no (i) aboveground or underground storage tanks, subsurface disposal
systems, or wastes, drums or containers disposed of or buried on, in or under
the ground or any surface waters, (ii) asbestos or asbestos containing
materials or radon gas, (iii) polychlorinated biphenyls ("PCB") or
PCB-containing equipment, including transformers, or (iv) wetlands (as defined
under any Environmental Law) located within any portion of the Real Property,
nor have any liens been placed upon any portion of the Real Property, the
Improvements or any property formerly owned, occupied or leased by the Company
in connection with any actual or alleged liability under any Environmental Law.
(e) Except as set forth on Schedule 2.11(e) hereto, (i) there is no
pending or threatened claim, litigation, or administrative proceeding, or known
prior claim, litigation or administrative proceeding, arising under any
Environmental Law involving the Company, the Real Property, the Improvements,
any property formerly owned, leased or occupied by the Company, any offsite
contamination affecting the business of the Company or
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any operations conducted at the Real Property, (ii) there are no ongoing
negotiations with or agreements with any governmental authority relating to any
Remedial Action or other environmentally related claim, (iii) the Company has
not submitted notice pursuant to Section 103 of CERCLA or analogous statute or
notice under any other applicable Environmental Law reporting a release of a
Hazardous Material into the environment, and (iv) the Company has not received
any notice, claim, demand, suit or request for information from any
governmental or private entity with respect to any liability or alleged
liability under any Environmental Law, nor to the knowledge of the Stockholder
and the Company, has any other entity whose liability therefor, in whole or in
part, may be attributed to the Company, received such notice, claim, demand,
suit or request for information.
(f) The Stockholder and the Company have provided to UAG all
environmental studies and reports obtained by them or known to them pertaining
to the Real Property, the Improvements, the Company and any property formerly
owned, occupied or leased by the Company, and have permitted (or will have
permitted as of the Closing Date), the testing of the soil, groundwater,
building components, tanks, containers and equipment on the Real Property, the
Improvements, and any property formerly owned, occupied or leased by the
Company, by UAG or UAG's agents or experts as they have or shall have deemed
necessary or appropriate to confirm the condition of such properties.
.12 INVENTORIES.
The values at which inventories are carried on the Company Financial
Statements reflect the normal inventory valuation policies of the Company, and,
in the case of the December 31 Balance Sheet, such values are 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 be anticipated to be sold at normal mark-ups within ninety
(90) days after the date hereof in the ordinary course of business, except for
spare parts inventory which inventory is good and usable.
.13 ACCOUNTS RECEIVABLE.
All accounts receivable reflected on the December 31 Balance Sheet
are, and all accounts receivable that will be or will have been reflected on
the Closing Date Balance Sheet will be, good, and have been or will have been
collected or are collectible, without resort to litigation, within 90 days of
the Closing Date, and are subject to no defenses, setoffs or counterclaims
other than normal cash discounts accrued in the ordinary course of business.
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.14 INSURANCE.
All material properties and assets of the Company which are of an
insurable character are insured against loss or damage by fire and other risks
to the extent and in the manner reasonable in light of the risks attendant to
the businesses and activities in which the Company is engaged and customary for
companies engaged in similar businesses or owning similar assets. Set forth on
Schedule 2.14 hereto is a list and brief description (including the name of the
insurer, the type of coverage provided, the amount of the annual premium for
the current policy period, the amount of remaining coverage and deductibles and
the coverage period) of all policies for such insurance and the Company 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 Company.
.15 CONTRACTS; ETC.
As used in this Agreement, the term "Company Agreements" shall mean
all mortgages, indenture notes, agreements, contracts, leases, licenses,
franchises, obligations, instruments or other commitments, arrangements or
understandings of any kind, whether written or oral, binding or non-binding,
(including all leases and other agreements referred to on Schedule 2.10 hereto)
to which the Company is a party or by which the Company or any of its assets or
properties (including the Real Property and the Improvements) may be bound or
affected, including all amendments, modifications, extensions or renewals of
any of the foregoing. Set forth on Schedule 2.15 hereto is a complete and
accurate list of each Company Agreement which is material to the business,
operations, assets, condition (financial or otherwise) or prospects of the
Company. True and complete copies of all written Company Agreements referred to
on Schedule 2.15 and Schedule 2.10 hereto, exclusive of individual vehicle
titles and/or manufacturer's certificates of origin and floor plan liens
applicable to individual vehicles, have been delivered or made available to
UAG, and the Company has provided UAG with accurate and complete written
summaries of all such Company Agreements which are unwritten. Except as set
forth on Schedule 2.15, the Company is not, nor, to the knowledge of the
Company and the Stockholder is, any other party thereto, in breach of or
default under any Company Agreement, and no event has occurred which (after
notice or lapse of time or both) would become a breach or default under, or
would permit modification, cancellation, acceleration or termination of, any
Company Agreement or result in the creation of any Lien upon, or any Person
obtaining any right to acquire, any properties, assets or rights of the Company
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in any such case where such breach, default or other event would have, or could
reasonably be expected to have, a Material Adverse Effect. There are no
material unresolved disputes involving the Company under any Company Agreement.
.16 LABOR RELATIONS.
(a) The Company has paid or made provision for the payment of all
salaries and accrued wages and has complied in all material respects with all
applicable laws, rules and regulations relating to the employment of labor,
including those relating to wages, hours, collective bargaining and the payment
and withholding of taxes, and 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, the Company is not
a party to any (i) outstanding employment agreements or contracts with officers
or employees that are not terminable at will, or that provide for payment of
any bonus or commission, (ii) agreement, policy or practice that requires it to
pay termination or severance pay to salaried, non-exempt or hourly employees
(other than as required by law), (iii) collective bargaining agreement or other
labor union contract applicable to persons employed by the Company, nor do the
Stockholder or the Company know of any activities or proceedings of any labor
union to organize any such employees. The Company has furnished to UAG complete
and correct copies of all such agreements ("Employment and Labor Agreements").
The Company has not breached or otherwise failed to comply with any provisions
of any Employment or Labor Agreement.
(c) Except as set forth in Schedule 2.16(c) hereto, (i) there is no
unfair labor practice charge or complaint pending before the National Labor
Relations Board ("NLRB"), (ii) there is no labor strike, material slowdown or
material work stoppage or lockout actually pending or, to the Stockholder's or
the Company's knowledge, threatened, against or affecting the Company, and the
Company has not experienced any strike, material slow down or material work
stoppage, lockout or other collective labor action by or with respect to
employees of the Company, (iii) there is no representation claim or petition
pending before the NLRB or any similar foreign agency and no question
concerning representation exists relating to the employees of the Company, (iv)
there are no charges with respect to or relating to the Company pending before
the Equal Employment Opportunity Commission or any state, local or foreign
agency responsible for the prevention of unlawful employment practices, (v) the
Company has not received formal notice from any federal, state, local or
foreign agency responsible for the enforcement of labor or employment laws of
an intention to conduct an investigation of the Company and, to the knowledge
of the Company, no such investigation is in progress and (vi) the consents of
the unions that are
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parties to any Employment and Labor Agreements are not required to complete the
transactions contemplated by this Agreement and the Documents.
(d) The Company has never caused any "plant closing" or "mass layoff"
as such actions are defined in the Worker Adjustment and Retraining
Notification Act, as codified at 29 U.S.C. ss.ss. 2101-2109, and the
regulations promulgated therein.
.17 EMPLOYEE BENEFIT PLANS.
(a) Set forth on Schedule 2.17(a) hereto is a true and complete list
of:
(i) each employee pension benefit plan, as defined in Section 3(2) of
the Employee Retirement Income Security Act of 1974 ("ERISA"), maintained
by the Company or to which the Company is required to make contributions
("Pension Benefit Plan"); and
(ii) each employee welfare benefit plan, as defined in Section 3(i) of
ERISA, maintained by the Company or to which the Company is required to
make contributions ("Welfare Benefit Plan").
True and complete copies of all Pension Benefit Plans and Welfare
Benefit Plans (collectively, "ERISA Plans") have been delivered to or made
available to UAG together with, as applicable with respect to each such ERISA
Plan, trust agreements, summary plan descriptions, all IRS determination
letters or applications therefor with respect to any Pension Benefit Plan
intended to be qualified pursuant to Section 401(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), and valuation or actuarial reports,
accountant's opinions, financial statements, IRS Form 5500s (or 5500-C or
5500-R) and summary annual reports for the last three years.
(b) With respect to the ERISA Plans, except as set forth on Schedule
2.17(b):
(i) there is no ERISA Plan which is a " multiemployer" plan as that
term is defined in Section 3(37) of ERISA ("Multiemployer Plan");
(ii) no event has occurred or (to the knowledge of the Company or the
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
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(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 Company 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 Company since
the effective date of ERISA and all premiums due and owing to the PBGC have
been timely paid;
(ii) the PBGC has not notified the Company or any Pension Benefit Plan
of the commencement of proceedings under Section 4042 of ERISA to terminate
any such plan;
(iii) no event has occurred since the inception of any Pension Benefit
Plan or (to the knowledge of the Company or the Stockholder) is threatened
or about to occur which would constitute a reportable event within the
meaning of Section 4043(b) of ERISA;
(iv) no Pension Benefit Plan ever has incurred any "accumulated
funding deficiency" (as defined in Section 302 of ERISA and Section 412 of
the Code); and
(v) if any of such Pension Benefit Plans were to be terminated on the
Closing Date (A) no liability under Title IV of ERISA would be incurred by
the Company and (B) all benefits accrued to the day prior to the Closing
Date (whether or not vested) would be fully funded in accordance
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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
Company to be paid or accrued under ERISA Plans for the current fiscal year is
set forth on Schedule 2.17(f) (the "Aggregate ERISA Contributions"), and the
Aggregate ERISA Contributions are not expected to exceed the total amount set
forth on Schedule 2.17(f). To the extent required in accordance with GAAP, the
December 31 Balance Sheet reflects in the aggregate an accrual of all amounts
of employer contributions accrued but unpaid by the Company under the ERISA
Plans as of the date of the December 31 Balance Sheet.
(g) With respect to any Multiemployer Plan (1) the Company has not,
since its formation, made or suffered a "complete withdrawal" or "partial
withdrawal" as such terms are respectively defined in Sections 4203 and 4205 of
ERISA; (2) there is no withdrawal liability of the Company under any
Multiemployer Plan, computed as if a "complete withdrawal" by the Company had
occurred under each such Plan as of December 31, 1995; and (3) the Company has
not received notice to the effect that any Multiemployer Plan is either in
reorganization (as defined in Section 4241 of ERISA) or insolvent (as defined
in Section 4245 of ERISA).
(h) With respect to the Welfare Benefit Plans:
(i) There are no liabilities of the Company under Welfare Benefit
Plans with respect to any condition which relates to a claim filed on or
before the Closing Date.
(ii) No claims for benefits are in dispute or litigation.
.18 OTHER BENEFIT AND COMPENSATION PLANS OR ARRANGEMENTS.
(a) Set forth on Schedule 2.18(a) hereto is a true and complete list
of:
(i) each employee stock purchase, employee stock option, employee
stock ownership, deferred compensation, performance, bonus, incentive,
vacation pay, holiday pay, insurance, severance, retirement, excess benefit
or other plan, trust or arrangement which is not an ERISA Plan whether
written or oral, which the Company maintains or is required to make
contributions to;
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(ii) each other agreement, arrangement, commitment and understanding
of any kind, whether written or oral, with any current or former officer,
director or consultant of the Company pursuant to which payments may be
required to be made at any time following the date hereof (including,
without limitation, any employment, deferred compensation, severance,
supplemental pension, termination or consulting agreement or arrangement);
and
(iii) each employee of the Company whose aggregate compensation for
the fiscal year ended December 31, 1996 exceeded $50,000. True and complete
copies of all of the written plans, arrangements and agreements referred to
on Schedule 2.18(a) ("Compensation Commitments") have been provided to UAG
together with, where prepared by or for the Company, any valuation,
actuarial or accountant's opinion or other financial reports with respect
to each Compensation Commitment for the last three years. An accurate and
complete written summary has been provided to UAG with respect to any
Compensation Commitment which is unwritten.
(b) Each Compensation Commitment:
(i) since its inception, has been operated in all material respects in
accordance with its terms;
(ii) is not currently under investigation, audit or review by the IRS
or any other federal or state agency and (to the knowledge of the Company
or the Stockholder) no such action is contemplated or under consideration;
(iii) has no liability for any federal, state, local or foreign Taxes;
(iv) has no claims subject to dispute or litigation;
(v) has met all applicable requirements, if any, of the Code; and
(vi) has operated since its inception in material compliance with the
reporting and disclosure requirements imposed under ERISA and the Code.
.19 TRANSACTIONS WITH INSIDERS.
Set forth on Schedule 2.19 hereto is a complete and accurate
description of all material transactions between the Company or any ERISA Plan,
on the one hand, and any Insider, on the other hand, that have occurred since
January 1, 1995. For purposes of this Agreement:
(i) the term "Insider" shall mean the Stockholder, any director or
officer of the Company, and any
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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.
.20 PROPRIETY OF PAST PAYMENTS.
No funds or assets of the Company have been used for illegal purposes;
no unrecorded funds or assets of the Company have been established for any
purpose; no accumulation or use of the Company's corporate funds or assets have
been made without being properly accounted for in the respective books and
records of the Company; all payments by or on behalf of the Company have been
duly and properly recorded and accounted for in their respective books and
records; no false or artificial entry has been made in the books and records of
the Company for any reason; no payment has been made by or on behalf of the
Company with the understanding that any part of such payment is to be used for
any purpose other than that described in the documents supporting such payment;
and the Company has not made, directly or indirectly, any illegal contributions
to any political party or candidate, either domestic or foreign. Neither the
IRS nor any other federal, state, local or foreign government agency or entity
has initiated or threatened any investigation of any payment made by the
Company of, or alleged to be of, the type described in this Section 2.20.
.21 INTEREST IN COMPETITORS.
Except as set forth on Schedule 2.21, neither the Company nor the
Stockholder, nor any of their Affiliates, have any interest, either by way of
contract or by way of investment (other than as holder of not more than 2% of
the outstanding capital stock of a publicly traded Person, so long as such
holder has no other connection or relationship with such Person) or otherwise,
directly or indirectly, in any Person other than the Company that is engaged in
the retail sale of automobiles or light duty trucks.
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.22 BROKERS.
Neither the Company, nor any director, officer or employee thereof,
nor the Stockholder or any representative of the Stockholder, has employed any
broker or finder or has incurred or will incur any broker's, finder's or
similar fees, commissions or expenses, in each case in connection with the
transactions contemplated by this Agreement or the Documents except that the
Stockholder has employed Ben Hicks (the "Broker") in connection with this
transaction. The Stockholder will satisfy any obligations of UAG, Sub, the
Stockholder, Mr. Hanna and the Company relating to the employment of Broker,
and will hold UAG, Sub and the Company harmless therefrom.
.23 ACCOUNTS.
Schedule 2.23 hereof correctly identifies each bank account maintained
by or on behalf or for the benefit of the Company and the name of each Person
with any power or authority to act with respect thereto.
.24 DISCLOSURE.
Neither the Company nor the Stockholder have made any material
misrepresentation to UAG or the Sub relating to the Company or the Shares or
the Real Property or Improvements and neither the Company nor the Stockholder
have omitted to state to UAG any material fact relating to the Company 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 Company or the Stockholder to UAG
not misleading or which if disclosed would reasonably affect the decision of a
person considering an acquisition of the Shares. No fact, event, condition or
contingency exists or has occurred which has, or in the future can reasonably
be expected to have, a Material Adverse Effect, which has not been disclosed in
the Company Financial Statements or the Schedules to this Agreement.
.25 NET WORTH.
On the Closing Date, the Net Worth of the Company will be equal to or
greater than the November 30 Net Worth.
3
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDER
Subject to the parties' agreement and acknowledgement that certain of
the Schedules referred to in this Article 3 are to be delivered by the Company
and the Stockholder no later than thirty (30) days after the date hereof, the
Stockholder hereby represents and warrants to UAG as follows:
.1 OWNERSHIP OF SHARES; TITLE.
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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 it, 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.
.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 it 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 the Documents to which the
Stockholder is a party when executed and delivered by the Stockholder will
constitute, a valid and binding obligation of the Stockholder, enforceable
against 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 its property
is subject;
(ii) violate or conflict with any Legal Requirements applicable to the
Stockholder or any of 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).
.3 REAL PROPERTY AND IMPROVEMENTS.
The Stockholder owns the Real Property and Improvements in fee simple,
free and clear of all Liens, except those disclosed in Schedule 3.3(a), none of
which currently or, to its knowledge, in the future will affect the use of the
Real Property or the Improvements for the conduct of the business of the
Company as presently conducted. No assessments have been made against any
portion of the Real Property which are unpaid (except
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ad valorem taxes for the current year that are not yet due and payable),
whether or not they have become Liens. There are no disputes concerning the
location of the lines and corners of the Real Property. No one has been granted
any right to purchase or lease the Real Property or Improvements other than the
existing leases in favor of the Company, which are to be terminated at the
Closing by agreement between the parties and pursuant to which the Stockholder
shall acknowledge that there are no defaults under any such leases and that the
Company has no liability arising out of or relating to such leases.
.4 INVESTMENT INTENT.
The Stockholder has no present plan, intention or arrangement to
dispose of any of the UAG Common Stock received by it pursuant to the terms of
this Agreement.
.5 QUALIFICATION OF STOCKHOLDER.
The Stockholder and Mr. Hanna (i) are "accredited investors" within
the meaning of Regulation D of the Securities Act, and the Stockholder is
acquiring the UAG Common Stock to be issued pursuant to the terms of this
Agreement for its own account and not with a view to, or for resale in
connection with, any distribution thereof; (ii) the Stockholder was not formed
for the purpose of acquiring UAG Common Stock; (iii) the Stockholder and Mr.
Hanna understand and acknowledge that such UAG Common Stock 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 and Mr. Hanna are able to bear the
economic risk of investment in such UAG Common Stock and have such knowledge
and experience in financial and business matters that they are capable of
evaluating the risks and merits of such UAG Common Stock; (v) the Stockholder
and Mr. Hanna acknowledge that the UAG Shares were not offered to them by means
of publicly disseminated advertisements or sales literature, or as part of a
general solicitation; (vi) the Stockholder and Mr. Hanna acknowledge that in
deciding to proceed with the transaction set forth herein they have relied
solely on their own independent investigation of UAG; and (vii) the Stockholder
and Mr. Hanna understand and acknowledge that such UAG Common Stock will be
"restricted securities" as that term is defined in Rule 144 under the
Securities Act and that the certificates representing such UAG Common Stock
will bear a legend restricting transfer unless (A) the transfer is exempt from
the registration requirements under the Securities Act and any applicable state
securities law and an opinion of counsel reasonably satisfactory to UAG that
such transfer is exempt therefrom is delivered to UAG or (B) the transfer is
made pursuant to an effective registration statement under the Securities Act
and any applicable state securities law.
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4
REPRESENTATIONS AND WARRANTIES OF UAG
Subject to the parties' agreement and acknowledgment that certain of
the Schedules referred to in this Article 4 are to be delivered by the UAG no
later than thirty (30) days after the date hereof, UAG and Sub hereby represent
and warrant to the Company and the Stockholder as follows:
.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 and the Sub, taken as a whole. UAG has made available to the
Stockholder complete and correct copies of its charter and bylaws, as amended
and presently in effect.
.2 SUBSIDIARIES.
The Sub is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, has the
corporate power and authority to own, lease and operate the properties and
assets used in its business and to carry on its business as now being
conducted, and is duly qualified to do business and in good standing as a
foreign corporation in each jurisdiction where qualification as a foreign
corporation is required, except for such failures to be qualified and in good
standing, if any, which when taken together with all other such failures of UAG
and the Sub would not, or could not reasonably be expected to, in the aggregate
have a material adverse effect on UAG and the Sub, taken as a whole. 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.
.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
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preemptive rights or of any federal or state securities law and no personal
liability attaches to the ownership thereof.
.4 SEC FILINGS.
UAG has heretofore made available to the Company, the Stockholder and
Mr. Hanna UAG's Registration Statement on Form S-1 as declared effective by the
SEC on October 23, 1996 and UAG's Quarterly Report on Form 10-Q for the period
ending September 30, 1996 (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.
.5 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 its
obligations hereunder and thereunder. At the time of the Closing, the
execution, delivery and performance of this Agreement and the Documents to
which it is a party and the consummation of the transactions contemplated
hereby and thereby 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
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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 (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 its assets or properties may be bound or affected,
including all amendments, modifications, extensions or renewals of any of the
foregoing, and which involve receipts or payments by UAG or UAG Subsidiaries
which exceed $100,000 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.
.6 FINANCIAL STATEMENTS.
Attached as Schedule 4.6 are true and complete copies of:
(a) the consolidated balance sheet of UAG and its consolidated UAG
Subsidiaries as of December 31 in each of the years 1994 and 1995, and the
related consolidated statements of income, stockholders' equity and cash flows
for the fiscal years ended on such dates, together with the notes thereto, in
each case examined by and accompanied by the report of Coopers & Lybrand,
independent certified public accountants; and
(b) the unaudited consolidated balance sheet of UAG and its
consolidated UAG Subsidiaries as of September 30, 1996 (the "UAG Balance
Sheet"), and the unaudited consolidated statements of income, stockholders'
equity and cash flows for the month periods ended on such dates, together with
the notes thereto;
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(all the foregoing financial statements, including the notes thereto, being
referred to herein collectively as the "UAG Financial Statements"). The UAG
Financial Statements are in accordance with the books and records of UAG and
the UAG Subsidiaries, fairly present the consolidated financial position,
results of operations, stockholders' equity and changes in financial position
of UAG and the UAG Subsidiaries as of the dates and for the periods indicated,
in each case in conformity with GAAP consistently applied (except as otherwise
indicated in such statements) during such periods, and can be legitimately
reconciled with the financial statements and the financial records maintained
and the accounting methods applied by UAG and the UAG Subsidiaries for federal
income tax purposes, and the unaudited financial statements included in the UAG
Financial Statements indicate all adjustments, which consist of only normal
recurring accruals, necessary for such fair presentations. The statements of
income included in the UAG Financial Statements do not contain any items of
special or nonrecurring income except as expressly specified therein, and the
balance sheets included in the UAG Financial Statements do not reflect any
write-up or revaluation increasing the book value of any assets. The books and
accounts of UAG and the UAG Subsidiaries are complete and correct in all
material respects and fairly reflect all of the transactions, items of income
and expense and all assets and liabilities of the businesses of UAG and the UAG
Subsidiaries consistent with prior practices of UAG and the UAG Subsidiaries.
.7 TAXES.
UAG, each UAG Subsidiary and, for any period during all or part of
which the tax liability of any other corporation was determined on a combined
or consolidated basis with UAG or any UAG Subsidiary, any such other
corporation, have filed timely all federal, state, local and foreign tax
returns, reports and declarations required to be filed (or have obtained or
timely applied for an extension with respect to such filing) correctly
reflecting the Taxes and all other information required to be reported thereon
and have paid, or made adequate provision for the payment of, all Taxes which
are due pursuant to such returns or pursuant to any assessment received by UAG
or any UAG Subsidiary or any such other corporation. In the ordinary course,
UAG makes adequate provision on its books for the payment of all Taxes
(including for the current fiscal period) owed by UAG and the UAG Subsidiaries.
Neither UAG nor any UAG Subsidiary has been subject to a federal or state tax
audit of any kind, and no adjustment has been proposed by the IRS with respect
to any return for any subsequent year. UAG knows of no basis for an assertion
of a deficiency for Taxes against UAG or any UAG Subsidiary.
.8 DISCLOSURE.
Neither UAG nor any UAG Subsidiary has made any material
misrepresentation to the Company or the Stockholder
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relating to this Agreement and neither UAG nor any UAG Subsidiary has omitted
to state to the Company 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 any UAG Subsidiary to the Company 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 and the UAG
Subsidiaries, taken as a whole, which has not been disclosed in the SEC Filings
or the Schedules to this Agreement.
5
COVENANTS AND ADDITIONAL AGREEMENTS
.1 ACCESS; CONFIDENTIALITY.
Between the date hereof and the Closing Date, the Stockholder, the
Company and Mr. Hanna will (i) provide to the officers and other authorized
representatives of UAG and Sub full access, during normal business hours, to
any and all premises, properties, files, books, records, documents, and other
information of the Company and will cause their officers to furnish to UAG and
Sub and their authorized representatives any and all financial, technical and
operating data and other information pertaining to the businesses and
properties of the Company, and (ii) make available for inspection and copying
by UAG and Sub true and complete copies of any documents relating to the
foregoing. UAG and Sub will hold in confidence (unless and to the extent
compelled to disclose by judicial or administrative process or, in the opinion
of its counsel, by other requirements of law) all Confidential Information (as
defined below) and will not disclose the same to any third party except in
connection with obtaining financing and otherwise as may reasonably be
necessary to carry out this Agreement and the transactions contemplated hereby,
including any due diligence review by or on behalf of UAG and Sub. If this
Agreement is terminated, UAG and Sub will promptly return to the Company, upon
the reasonable request of the Company, all Confidential Information furnished
by the Company and held by UAG and Sub, including all copies and summaries
thereof. As used herein, "Confidential Information" shall mean all information
concerning the Company obtained by UAG or Sub from the Company in connection
with the transactions contemplated by this Agreement, except information (x)
ascertainable or obtained from public information, (y) received from a third
party not employed by or otherwise affiliated with the Company or (z) which is
or becomes known to the public, other than through a breach by UAG of this
Agreement. The Stockholder 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
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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 and
summaries thereof. As used herein, "UAG Confidential Information" shall mean
all information concerning UAG obtained by the Stockholder, the Company and Mr.
Hanna 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, the Company and Mr. Hanna of this Agreement.
.2 FURNISHING INFORMATION; ANNOUNCEMENTS.
The Stockholder and the Company, on the one hand, and UAG and Sub, on
the other hand, will, as soon as practicable after reasonable request therefor,
furnish to the other all the information concerning the Stockholder and the
Company or UAG and Sub, respectively, required for inclusion in any statement
or application made by UAG or the Company to any governmental or regulatory
body or in connection with obtaining any third party consent in connection with
the transactions contemplated by this Agreement. Neither the Stockholder nor
the Company, 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.
.3 ANTITRUST IMPROVEMENTS ACT COMPLIANCE.
UAG and Sub and the Stockholder, Mr. Hanna and the Company, as
applicable, shall each file or cause to be filed with the Federal Trade
Commission and the United States Department of Justice any notifications
required to be filed by the respective "ultimate parent" entities under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "H-S-R
Act"), and the rules and regulations promulgated thereunder, with respect to
the transactions contemplated herein. The parties shall use their best efforts
to make such filings promptly, to respond to any requests for additional
information made by either of such agencies, to cause the waiting periods under
the H-S-R Act to terminate or expire at the earliest possible date and to
resist vigorously, at their respective cost and expense (including, without
limitation, the institution or defense of legal proceedings), any assertion
that the transactions contemplated herein constitute a violation of the
antitrust laws, all to the end of expediting consummation of the transactions
contemplated herein; provided, however, that if UAG or the 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
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notice to the other party, terminate this Agreement with the effect set forth
in Section 8.2 hereof.
.4 CERTAIN CHANGES AND CONDUCT OF BUSINESS.
(a) From and after the date of this Agreement and until the Closing
Date, the Company shall, and the Stockholder and Mr. Hanna shall cause the
Company to, conduct its business solely in the ordinary course consistent with
past practices and, without the prior written consent of UAG, neither the
Stockholder, Mr. Hanna, nor the Company will, except as required or permitted
pursuant to the terms hereof, permit the Company to:
(i) make any material change in the conduct of its 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;
(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
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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 periods after November 30, 1996) or redeem, retire,
purchase or otherwise acquire, directly or indirectly, any shares of its
capital stock;
(vii) acquire any assets, raw materials or properties, or enter into
any other transaction, other than in the ordinary course of business
consistent with past practices;
(viii) enter into any new (or amend any existing) employee benefit
plan, program or arrangement or any new (or amend any existing) employment,
severance or consulting agreement, grant any general increase in the
compensation of officers or employees (including any such increase pursuant
to any bonus, pension, profit-sharing or other plan or commitment) or grant
any increase in the compensation payable or to become payable to any
employee, except in accordance with pre-existing contractual provisions or
consistent with past practices;
(ix) make or commit to make any individual material capital
expenditure in excess of $50,000, or aggregate capital expenditures in
excess of $150,000;
(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
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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, Mr. Hanna and the Company will cause the Company 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.
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(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 themselves to do any of the foregoing.
.5 NO INTERCOMPANY PAYABLES OR RECEIVABLES.
Except as disclosed on Schedule 5.5 hereto, at the Closing there will
be no intercompany payables or intercompany receivables due and/or owing
between the Stockholder, Mr. Hanna and their Affiliates (other than the
Company) on the one hand, and the Company, on the other hand.
.6 NEGOTIATIONS.
Until the earlier of 180 days from the date hereof, the Closing and
the termination of this Agreement pursuant to clause (ii) of Section 8.1
hereof, neither the Stockholder, nor the Company, nor Mr. Hanna nor their
officers, directors, employees, advisors, agents, representatives, Affiliates
or anyone acting on behalf of the Stockholder, the Company, Mr. Hanna or such
Persons, shall, directly or indirectly, encourage, solicit, initiate or engage
in discussions or negotiations with, or provide any information to, any person
(other than UAG or its representatives) concerning any merger, sale of assets
(other than in the ordinary course of business), purchase or sale of shares of
capital stock or similar transaction involving the Company or purchase or sale
of any of the Real Property or Improvements. The Stockholder and Mr. Hanna
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 Company, the Stockholder or Mr. Hanna may receive
or of which any of such parties may become aware.
.7 CONSENTS; COOPERATION.
Subject to the terms and conditions hereof, the Stockholder, Mr. Hanna
and the Company and UAG will use their respective best efforts at their own
expense:
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(i) to obtain prior to the earlier of the date required (if so
required) or the Closing Date, all waivers, permits, licenses, approvals,
authorizations, qualifications, orders and consents of all third parties
and governmental authorities, and make all filings and registrations with
governmental authorities which are required on their respective parts for
(A) the consummation of the transactions contemplated by this Agreement,
(B) the ownership or leasing and operating after the Closing by the Company
of all of its material properties and (C) the conduct after the Closing by
the Company of its business as conducted by it on the date hereof;
(ii) to defend, consistent with applicable principles and requirements
of law, any lawsuit or other legal proceedings, whether judicial or
administrative, whether brought derivatively or on behalf of third persons
(including governmental authorities) challenging this Agreement or the
transactions contemplated hereby and thereby; and
(iii) to furnish each other such information and assistance as may
reasonably be requested in connection with the foregoing.
.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 agrees to execute and deliver any and all documents that the
manufacturer typically requires 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 Company shall take all such
necessary action.
.9 INTERIM FINANCIAL STATEMENTS.
Within thirty (30) days after the end of each calendar month after the
date of this Agreement and continuing until the Closing Date, the Company will
deliver to UAG the most recent monthly and year-to-date financial statements
provided to Nissan. All such statements shall fairly present the financial
position, results of operations and cash flow of the Company as of the date or
for the periods indicated and shall be prepared on a basis consistent with the
Company Factory Statement attached hereto as part of Schedule 2.5.
.10 NOTIFICATION OF CERTAIN MATTERS.
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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, Mr. Hanna and the Company, any notice
of, or other communication relating to, any default or event which, with notice
or lapse of time or both, would become a default under any Company Agreement.
Mr. Hanna 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 Company 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 and Mr. Hanna 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 or Mr. Hanna has knowledge which could
result in any failure to consummate the sale of the Shares as contemplated
hereby.
.11 ASSURANCE BY THE STOCKHOLDER AND MR. HANNA.
The Stockholder and Mr. Hanna shall cause the Company to comply with
its covenants set forth in this Agreement and Mr. Hanna shall cause the
Stockholder to comply with its covenants set forth in this Agreement.
.12 SECTION 338(H)(10) ELECTION.
The Stockholder agrees to join with UAG or Sub, if UAG or Sub so
requests, in making a timely election to treat the purchase and sale of the
Shares pursuant to this Agreement as a sale of all of the Company's assets
under Section 338(h)(10) of the Internal Revenue Code of 1986, as amended, as
permitted pursuant to Section 1.338(h)(10)-1(a) of the Treasury Regulations
promulgated thereunder.
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.13 NON-INTERFERENCE.
From the Closing Date until the later of (i) five years or (ii) such
other period of time as may be the maximum permissible period of enforceability
of this covenant, the Stockholder, Mr. Hanna and their Affiliates shall not
interfere with or disrupt, or attempt to interfere with or disrupt, the
relationship, contractual or otherwise, between the Company and any customer,
client, supplier, manufacturer, distributor, consultant, independent contractor
or employee of the Company and agree not to solicit or hire any employee of the
Company unless such employee has already terminated his employment with the
Company.
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.14 DISTRIBUTION OF EARNINGS TO STOCKHOLDER.
At the Supplemental Closing, the Company shall make a final
distribution to the Stockholder of any earnings attributable to the period from
December 1, 1996 to the Closing Date (to the extent such earnings have not
previously been distributed); provided, however, that such distribution shall
only be made to the extent that the Final Net Worth as determined in accordance
with Section 1.3 hereof exceeds the November 30 Net Worth.
.15 ACCOUNTANT'S FEES.
To the extent that Coopers & Lybrand determines that it is necessary
to have the Company's accountant certify or audit any of the Company Financial
Statements, then the Stockholder and UAG shall each pay one-half (1/2) of the
Company's accountant's fees relating hereto.
.16 S SHORT YEAR.
The parties hereto acknowledge that upon the closing of the
transactions contemplated by this Agreement, the Company's status as an
S-corporation for federal income tax purposes shall cease, that the taxable
year of the Company in which such closing occur shall be divided into two (2)
short taxable years (an S Short Year and C Short Year). Each of the parties
hereto covenants and agrees to make all elections, consents, statements, and
filings that may be required by the Internal Revenue Code of 1986 to close the
Company's books on the last applicable day of the S Short Year.
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:
.1 REPRESENTATIONS AND WARRANTIES; AGREEMENTS; COVENANTS.
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Each of the representations and warranties of the Company, the
Stockholder and Mr. Hanna 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 Company, the Stockholder and Mr. Hanna
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 and Mr. Hanna, to the effect
that the conditions set forth in the two preceding sentences have been
satisfied.
.2 AUTHORIZATION; CONSENTS.
(a) All corporate action necessary to authorize the execution,
delivery and performance of this Agreement and the Documents, and the
consummation of the transactions contemplated hereby and thereby shall have
been duly and validly taken by the Company. All filings required to be made
under the H-S-R Act in connection with the transactions contemplated hereby
shall have been made and all applicable waiting periods with respect to each
such filing, including any extensions thereof, shall have expired or been
terminated.
(b) All notices to, and declarations, filings and registrations with,
and consents, authorizations, approvals and waivers from, governmental and
regulatory bodies and third persons (including, but not limited to, Nissan
required to consummate the transactions contemplated hereby and all consents or
waivers shall have been made or obtained.
.3 OPINIONS OF THE COMPANY'S AND THE STOCKHOLDER'S COUNSEL.
UAG and Sub shall have been furnished with the opinion of counsel for
the Company 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 Company and by government officials and upon such
other documents and data as such counsel deem appropriate as a basis for their
opinions. Such counsel may specify the state or states in which they are
admitted to practice, that they are not admitted to the Bar in any other state
or experts in the law of any other state and that such opinions are limited to
the State of Nevada and federal laws.
.4 ABSENCE OF LITIGATION.
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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.
.5 NO MATERIAL ADVERSE EFFECT.
During the period from December 31, 1995 to the Closing Date, there
shall not have been any material adverse change in the assets, properties,
business, operations, prospects, net income or financial condition of the
Company.
.6 NET WORTH.
On the Closing Date, the Stockholder shall deliver to UAG a balance
sheet of the Company dated as of the most recent practicable date preceding the
Closing Date, prepared in accordance with the Accounting Principles (the
"Estimated Closing Date Balance Sheet"). The Estimated Closing Date Balance
Sheet shall show as of the date thereof, after taking into account the payment
of any of the fees, costs and expenses by the Company incurred in connection
with this Agreement, a Net Worth not more than $250,000 less than the November
30, 1996 Net Worth.
.7 COMPLETION OF DUE DILIGENCE.
UAG and Sub shall have completed their due diligence examination of
the Company, the Real Property and the Improvements and the results of such
examination, including any Phase I or Phase II environmental audits of the
Company, shall be satisfactory to UAG and Sub. UAG will pay the costs for a
Phase I environmental audit. If, after obtaining the results of the Phase I
environmental audit, UAG determines that a Phase II environmental audit is
required, 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.
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.8 NET INCOME.
Coopers & Lybrand shall have confirmed to UAG that the Pre-Tax
Earnings of the Company for the year ending December 31, 1996 are no less than
the pre-tax earnings set forth on the Company's December 31, 1996 income
statement.
.9 LEASE.
The Company and the Stockholder shall have entered into the Lease.
.10 BOARD APPROVAL.
The Board of Directors of UAG and Sub shall have approved the
consummation of all of the transactions contemplated by this Agreement.
.11 CERTIFICATES.
The Stockholder, the Company and Mr. Hanna shall have furnished UAG
and Sub with a certificate, dated as of the Closing Date, executed by the
Stockholder and Mr. Hanna certifying to the fulfillment of the conditions set
forth in Sections 6.4, 6.5, 6.6 and 6.14 hereof and shall have furnished UAG
and Sub with such any other certificates of its officers and others as UAG and
Sub may reasonably request to evidence compliance with the conditions set forth
in this Article 6.
.12 LEGAL MATTERS.
All certificates, instruments, opinions and other documents required
to be executed or delivered by or on behalf of the Stockholder and the Company
under the provisions of this Agreement, and all other actions and proceedings
required to be taken by or on behalf of the Stockholder and the Company in
furtherance of the transactions contemplated hereby, shall be reasonably
satisfactory in form and substance to counsel for UAG and Sub.
.13 APPROVAL OF MANUFACTURERS AND DISTRIBUTORS.
The Stockholder and the Company shall have obtained the consent,
authorization and approval of Nissan for the transfer of the Company to Sub on
terms no less favorable to those granted to the Stockholder and the Company
immediately prior to the execution of this Agreement.
.14 ENVIRONMENTAL LAWS.
The Company shall be in compliance with all applicable Environmental
Laws.
.15 NONDISTURBANCE AGREEMENT.
45
<PAGE>
UAG shall have been provided with a nondisturbance agreement in form
and substance satisfactory to UAG with respect to the properties that are the
subject of the Lease.
.16 TITLE INSURANCE.
UAG shall have obtained title insurance on behalf of the Company with
respect to the leasehold estates arising out of the Lease in form and substance
satisfactory to UAG.
.17 SCHEDULES.
The Company and the Stockholder shall have delivered to UAG and Sub
all Schedules referred to in Articles 2 and 3 and such Schedules shall be
acceptable in form and substance to UAG and Sub.
.18 LEASE TERMINATION AGREEMENT/MEMORANDUM OF LEASE.
The appropriate parties shall have executed a lease termination
agreement and memorandum of lease in form and substance satisfactory to UAG.
7
CONDITIONS TO THE OBLIGATIONS OF
THE COMPANY, THE STOCKHOLDER AND MR. HANNA
TO EFFECT THE CLOSING
The obligations of the Company, the Stockholder and Mr. Hanna required
to be performed by them at the Closing shall be subject to the satisfaction, at
or prior to the Closing, of each of the following conditions, each of which may
be waived by the Company, the Stockholder and Mr. Hanna as provided herein
except as otherwise required by applicable law:
.1 REPRESENTATIONS AND WARRANTIES; AGREEMENTS.
Each of the representations and warranties of UAG and Sub contained in
this Agreement shall be true and correct on the date made and shall be true and
correct in all material respects as of the Closing. Each of the obligations of
UAG and Sub required by this Agreement to be performed by them at or prior to
the Closing shall have been duly performed and complied with in all material
respects as of the Closing. At the Closing, the Stockholder shall have received
a certificate, dated the Closing Date and duly executed by UAG and Sub to the
effect that the conditions set forth in the preceding two sentences have been
satisfied.
46
<PAGE>
.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, [Nissan]
required to consummate the transactions contemplated hereby and all consents or
waivers shall have been made or obtained.
<PAGE>
.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 4.5 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.
.4 ABSENCE OF LITIGATION.
No order, stay, injunction or decree of any court of competent
jurisdiction in the United States shall be in effect (i) that prevents or
delays the consummation of any of the transactions contemplated hereby or (ii)
would impose any limitation on the ability of the Stockholder effectively to
exercise full 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 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.
.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.
.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.
<PAGE>
.7 SCHEDULES.
UAG shall have delivered to the Stockholder all Schedules referred to
in Article 4 and such Schedules shall be acceptable in form and substance to
the Stockholder.
8
TERMINATION
.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 April 30, 1997, or such later date as shall have
been approved by UAG and the Stockholder (provided that the terminating
party is not otherwise in material breach of its representations,
warranties, covenants or agreements under this Agreement);
(iii) by UAG or the Stockholder if any court of competent jurisdiction
in the United States or other United States governmental body shall have
issued an order, decree or ruling or taken any other action restraining,
enjoining or otherwise prohibiting the transactions contemplated by this
Agreement, and such order, decree, ruling or other action shall have become
final and non-appealable;
(iv) by UAG or Sub if any of the conditions specified in Article 6
hereof have not been met or waived by UAG and Sub at such time as such
condition is no longer capable of satisfaction (provided UAG and Sub are
not otherwise in material breach of their or its representations,
warranties, covenants or agreements under this Agreement);
(v) by the Stockholder if any of the conditions specified in Article 7
hereof have not been met or waived by the Stockholder at such time as such
condition is no longer capable of satisfaction (provided that neither the
Stockholder nor the Company is otherwise in material breach of their or its
representations, warranties covenants or agreements under this Agreement);
or
(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
within ten (10) Business Days following receipt by the breaching party of
written notice of such breach.
<PAGE>
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.
.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.
9
INDEMNIFICATION
.1 INDEMNIFICATION BY THE STOCKHOLDER.
Notwithstanding the Closing or the delivery of the Shares, the
Stockholder and Mr. Hanna indemnify and agree to fully defend, save and hold
harmless on an after-tax basis UAG, Sub, the Company (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 Company after the Closing Date) shall at
any time or from time to time suffer any Costs (as defined in Section 9.6
below) arising, directly or indirectly, out of or resulting from, or shall pay
or become obligated to pay any sum on account of, (i) any and all Events of
Breach (as defined below) or (ii) any Claim before or by any court, arbitrator,
panel, agency or other governmental, administrative or judicial entity, which
Claim involves, affects or relates to any assets, properties or operations of
the Company or the conduct of the business of the Company prior to the Closing
Date (a "Stockholder Third Party Claim"). As used herein, "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, the Company or Mr. Hanna
or the breach of any warranty of the Stockholder, the Company or Mr. Hanna
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, the Company or Mr. Hanna (or any representative of the
Stockholder, the Company or Mr. Hanna) 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, the
Company or Mr. Hanna duly to perform or observe any term, provision, covenant,
agreement or condition on the part
<PAGE>
of the Stockholder, the Company or Mr. Hanna to be performed or observed.
.2 INDEMNIFICATION BY UAG AND SUB.
Notwithstanding the Closing, UAG and Sub indemnifies and agrees to
fully defend, save and hold harmless on an after-tax basis the Stockholder, the
Company (prior to Closing) and Mr. Hanna 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 any assets, properties or operations of
UAG or the conduct of the business of UAG and Sub 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, the Company or Mr. Hanna (or
any representative of the Stockholder, the Company or Mr. Hanna) and any
misrepresentation in or omission from any document furnished to the
Stockholder, the Company or Mr. Hanna 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.
.3 PROCEDURES.
If (i) any Event of Breach occurs or is alleged and a UAG Indemnified
Party asserts that the Stockholder, the Company or Mr. Hanna 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, the Company or Mr. Hanna 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, the Stockholder
and Mr. Hanna are sometimes referred to as an "Indemnifying Party," and any UAG
<PAGE>
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.
.4 OFFSET.
In addition to and not in limitation of all rights of offset that an
Indemnified Party may have under applicable law,
<PAGE>
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.
.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.
.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.
10
MISCELLANEOUS
.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.
.2 FEES AND EXPENSES.
If the Closing does not occur and Section 5.6 hereof is breached, then
the Stockholder or the Company shall pay to UAG, within five (5) Business Days
after receipt of a request therefor, an amount equal to all of the legal and
other fees,
<PAGE>
costs and expenses incurred by UAG in connection with this Agreement and the
transactions contemplated hereby.
.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.
.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 Company before the Closing Date:
Gary Hanna Nissan
2850 Augusta Drive
Las Vegas, Nevada 89109
with a copy to:
Clark Greene & Associates, Ltd.
3770 Howard Hughes Parkway, Suite 195
Las Vegas, Nevada 89109-0940
Attn: A. Kent Greene, Esq.
If to the Company after the Closing Date (in addition to the
foregoing addresses):
United Auto Group, Inc.
375 Park Avenue
New York, New York 10022
Attn: George G. Lowrance
Executive Vice President
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 or Mr. Hanna:
2850 Augusta Drive
Las Vegas, Nevada 89109
<PAGE>
with a copy to:
Clark Greene & Associates, Ltd.
3770 Howard Hughes Parkway, Suite 195
Las Vegas, Nevada 89109-0940
Attn: A. Kent Greene, Esq.
If to UAG or Sub:
United Auto Group, Inc.
375 Park Avenue
New York, New York 10022
Attn: George G. Lowrance
Executive Vice President
with a copy to:
Rogers & Hardin
2700 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.
.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.
.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
<PAGE>
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.
.7 WAIVER AND AMENDMENTS.
Each of the Stockholder, Mr. Hanna and the Company as one party, and
UAG and Sub as the other party may by written notice to the other parties (i)
extend the time for the performance of any of the obligations or other actions
of the other parties, (ii) waive any inaccuracies in the representations or
warranties of the other parties contained in this Agreement, (iii) waive
compliance with any of the covenants of the other parties contained in this
Agreement, (iv) waive performance of any of the obligations of the other
parties created under this Agreement, or (v) waive fulfillment of any of the
conditions to its own obligations under this Agreement. The waiver by any party
hereto of a breach of any provision of this Agreement shall not operate or be
construed as a waiver of any subsequent breach, whether or not similar. This
Agreement may be amended, modified or supplemented only by a written instrument
executed by the parties hereto.
.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.
.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 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.
.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
<PAGE>
of this Agreement shall not be affected thereby. To the extent permitted by
applicable law, each party waives any provision of law which renders any
provision of this Agreement invalid, illegal or unenforceable in any respect.
.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.
.13 GOVERNING LAW.
This Agreement shall be governed by and construed in accordance the
laws of the State of Nevada without giving effect to any choice or conflict of
law provision or rule that would cause the laws of any other jurisdiction to
apply.
.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: /s/ George G. Lowrance
--------------------------------
George G. Lowrance
Executive Vice President
UAG NEVADA, INC.
By: /s/ George G. Lowrance
--------------------------------
Its: Vice President
GARY HANNA NISSAN, INC.
By: /s/ Gary W. Hanna
--------------------------------
Gary W. Hanna
President
THE GARY W. HANNA FAMILY TRUST
By: /s/ Gary W. Hanna
--------------------------------
Trustee
<PAGE>
/s/ Gary W. Hanna
-----------------------------------
GARY W. HANNA, INDIVIDUALLY
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-01-1996
<PERIOD-START> JAN-01-1997 JAN-01-1996
<PERIOD-END> MAR-31-1997 DEC-31-1996
<CASH> 36,083 66,875
<SECURITIES> 0 0
<RECEIVABLES> 62,461 53,241
<ALLOWANCES> 1,147 1,223
<INVENTORY> 213,629 168,855
<CURRENT-ASSETS> 324,699 299,571
<PP&E> 28,879 25,967
<DEPRECIATION> 4,020 3,626
<TOTAL-ASSETS> 571,664 522,950
<CURRENT-LIABILITIES> 266,344 221,455
<BONDS> 11,777 11,121
0 0
0 0
<COMMON> 2 2
<OTHER-SE> 283,461 281,466
<TOTAL-LIABILITY-AND-EQUITY> 571,664 522,950
<SALES> 388,200 1,302,031
<TOTAL-REVENUES> 389,185 1,303,829
<CGS> 340,588 1,157,368
<TOTAL-COSTS> 383,281 1,284,479
<OTHER-EXPENSES> 172 103
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 144 4,716
<INCOME-PRETAX> 5,552 13,731
<INCOME-TAX> 2,235 6,270
<INCOME-CONTINUING> 3,317 7,461
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 4,987
<CHANGES> 0 0
<NET-INCOME> 3,317 2,474
<EPS-PRIMARY> 0.19 0.23
<EPS-DILUTED> 0.19 0.23
</TABLE>
