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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 3, 1999
UNITED AUTO GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1-12297 22-3086739
(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification No.)
incorporation)
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
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ITEM 1. CHANGE IN CONTROL OF REGISTRANT
-------------------------------
On August 3, 1999, United Auto Group, Inc., a Delaware corporation
(the "Company"), International Motor Cars Group I, L.L.C. ("IMCG I") and
International Motor Cars Group II, L.L.C. ("IMCG II"), Delaware limited
liability companies controlled by Penske Capital Partners, L.L.C. ("PCP",
and together with IMCG I and IMCG II, the "Purchaser"), consummated the
second step (the "Second Closing") of the transactions contemplated by the
Securities Purchase Agreement, dated as of April 12, 1999, by and between
the Company and the Purchaser (the "Agreement"). At the Second Closing, the
Purchaser acquired (i) 4,175.25496 shares of the Company's Series A
Convertible Preferred Stock, par value $0.0001 per share (the "Series A
Preferred Stock"), (ii) 396.876 shares of Series B Preferred Stock, par
value $0.0001 per share (the "Series B Preferred Stock"), (iii) Warrants to
purchase 3,898,665 shares of Voting Common Stock, par value $0.0001 per
share (the "Voting Common Stock"), and (iv) 1,101,335 shares of Non-Voting
Common Stock, par value $0.0001 per share (the "Non-Voting Common Stock"),
from the Company for cash in an aggregate amount equal to $49,449,172.67.
In addition, Roger S. Penske, a managing member of PCP, was granted an
option to purchase 400,000 shares of Voting Common Stock in connection with
his service as Chairman and Chief Executive Officer of the Company, which
vest in equal installments over three years and are exercisable at a price
of $10.00 per share. On May 3, 1999, IMCG I and IMCG II had acquired an
aggregate of 3,727.8696 shares of Series A Preferred Stock for
$33,550,827.33 in cash (the "Initial Closing").
The shares of Series A Preferred Stock and Series B Preferred Stock
entitle the Purchaser to dividends at a rate of 6.5% per year, payable in
kind for the first two years following the date of issuance, except that
IMCG II's dividends will be paid in shares of Series B Preferred Stock. The
Series A Preferred Stock is convertible into an aggregate of 7,903,124
shares of Voting Common Stock and the Series B Preferred Stock is
convertible into an aggregate of 396,876 shares of Non-Voting Common Stock.
The Series B Preferred Stock and the Non-Voting Common Stock may be
converted into Series A Preferred Stock and Voting Common Stock,
respectively, upon the occurrence of certain events described in the
Company's Certificate of Designation of the Series B Preferred Stock and
the Third Restated Certificate of Incorporation, which was amended in
connection with the Second Closing. The Series A Preferred Stock and Series
B Preferred Stock may be converted at an average price of $10.00 per share.
Assuming the conversion of all of its Series A Preferred Stock, the exercise
of the Warrants to purchase Voting Common Stock and the exercise of the
options granted to Roger S. Penske, the Purchaser would beneficially own
approximately 36.3% of the outstanding Voting Common Stock as of the date
of the Second Closing.
The Purchaser obtained the funds used to purchase its interest in the
Company from capital contributions by its members.
On the date of the Initial Closing, the Board of Directors of the
Company (the "Board of Directors") appointed three designees of the
Purchaser, Roger S. Penske, James A. Hislop and Richard J. Peters, to the
Board of Directors to fill the vacancies created by the resignations of
Jules B. Kroll, Robert H. Nelson and Richard Sinkfield. On August 3, 1999,
at the Company's 1999 Annual Meeting of Stockholders (the "Stockholders
Meeting"), two additional designees of the Purchaser, Eustace W. Mita and
Donald J. Hoffman, were elected as Class I and Class II directors,
respectively, to fill the vacancies created by the expansion of the number
of Board members, and Roger S. Penske, James A. Hislop and Richard J.
Peters were elected as Class III directors to fill the three vacancies
created by the expiration at the Stockholders Meeting of the term of the
former Class III directors. As a result of the actions taken at the
Stockholders Meeting, designees of the Purchaser currently hold five of the
Company's nine board seats.
Pursuant to the Stockholders Agreement (the "Stockholders Agreement"),
dated as of May 3, 1999, by and among the Company, the Purchaser, Trace
International Holdings, Inc. ("Trace"), AIF II, L.P. and Aeneas Venture
Corporation, the parties agreed, subject to certain exceptions provided
therein, to use their reasonable best efforts to cause the Board of
Directors to consist of nine members for the three year period following
the Second Closing, as follows: (i) Roger S. Penske, (ii) four individuals
designated by the Purchaser, (iii) one individual designated by Trace and
(iv) three independent directors.
The Stockholders Agreement contains certain other rights and
restrictions relating to the acquisition and disposition of equity
securities of the Company and certain other actions by the parties. The
Stockholders Agreement is attached as Exhibit 10.20.6 to the Company's
Current Report on Form 8-K, dated May 10, 1999, file no. 011-12297, and is
incorporated in and made a part of this Form 8-K in its entirety by this
reference.
On the date of the Second Closing, in connection with the
Non-Competition and Standstill Agreement, dated as of April 12, 1999, by
and between Marshall S. Cogan and the Company (the "Non-Competition and
Standstill Agreement"), Marshall S. Cogan was granted a fully vested option
to purchase 400,000 shares of Voting Common Stock at an exercise price of
$10.00 per share, and received a cash payment of $250,000. The
Non-Competition and Standstill Agreement is attached as Exhibit 10.20.5 to
the Company's Current Report on Form 8-K, dated May 10, 1999, file no.
011-12297, and is incorporated in and made a part of this Form 8-K in its
entirety by this reference.
Reference is made to the press release of the Company, dated August 3,
1999, which is attached as Exhibit 99.1 hereto and is incorporated in and
made a part of this Form 8-K in its entirety by this reference.
This Current Report contains "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. All
statements, other than statements of historical facts, included in this
Current Report or incorporated herein by reference regarding the Company's
financial position and business strategy may constitute forward-looking
statements. Although the Company believes that the expectations reflected
in such forward-looking statements are reasonable, it can give no assurance
that such expectations will prove to have been correct. Important factors
that could cause actual results to differ materially from the Company's
expectations, include the following: (i) the Company is subject to the
influence of various manufacturers whose franchises it holds; (ii) the
Company is leveraged and subject to restrictions imposed by the terms of
its indebtedness; (iii) the Company's growth depends in large part on the
Company's ability to manage expansion, control costs in its operations and
consummate and consolidate dealership acquisitions; (iv) many of the
Company's franchise agreements impose restrictions on the transferability
of the Common Stock; (v) the Company will require substantial additional
capital to acquire automobile dealerships and purchase inventory; (vi) unit
sales of motor vehicles historically have been cyclical; (vii) the
automotive retailing industry is highly competitive; (viii) the automotive
retailing industry is a mature industry; (ix) the Company's success depends
to a significant extent on key members of its management; (x) the Company's
business is seasonal; and (xi) the other important risk factors identified
in the Reports and other documents filed by the Company with the Securities
and Exchange Commission. In light of the foregoing, readers of this Current
Report are cautioned not to place undue reliance on the forward-looking
statements contained or incorporated by reference herein.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
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3.1 Certificate of Amendment of Certificate of Incorporation of
United Auto Group, Inc., dated August 3, 1999.
10.1 Stockholders Agreement, dated as of May 3, 1999, by and
among AIF II, L.P., Aeneas Venture Corporation,
International Motor Cars Group I, L.L.C., International
Motor Cars Group II, L.L.C., Trace International Holdings,
Inc., and United Auto Group, Inc., incorporated by reference
to the Company's Current Report on Form 8-K, dated May 10,
1999, file no. 011-12297.
10.2 Non-Competition and Standstill Agreement, dated as of April
12, 1999, by and between Marshall S. Cogan and United Auto
Group, Inc., incorporated by reference to the Company's
Current Report on Form 8-K, dated May 10, 1999, file no.
011-12297.
10.3 Stock Option Agreement, dated as of August 3, 1999, between
United Auto Group, Inc. and Roger S. Penske.
10.4 Stock Option Agreement, dated as of August 3, 1999, between
United Auto Group, Inc. and Marshall S. Cogan.
99.1 Press Release, dated August 3, 1999, issued by United Auto
Group, Inc.
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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 hereunto duly authorized.
Dated: August 13, 1999
UNITED AUTO GROUP, INC.
By: /s/ Michael A. Duff
------------------------------------
Name: Michael A. Duff
Title: Executive Vice President
and General Counsel
Exhibit 3.1
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
United Auto Group, Inc., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation, adopted a
resolution proposing and declaring advisable the following amendment to the
Certificate of Incorporation of said corporation:
RESOLVED, that the Certificate of Incorporation of United Auto
Group, Inc. be amended so that:
1. The first paragraph of Section 1 of ARTICLE IV CAPITAL shall
be amended to read as follows:
The total number of shares of capital stock which the
Corporation shall have the authority to issue is 67,225,000,
consisting of: (i) 40,000,000 shares of Voting Common Stock, par value
$0.0001 per share (the "VOTING COMMON STOCK"); (ii) 7,125,000 shares
of Non-voting Common Stock, par value $0.0001 per share (the
"NON-VOTING COMMON STOCK"); (iii) 20,000,000 shares of Class C Common
Stock, par value $0.0001 per share (the "CLASS C COMMON STOCK" and,
collectively with the Voting Common Stock, and the Non-voting Common
Stock, the "COMMON STOCK"); and (iv) 100,000 shares of Preferred
Stock, par value $0.0001 per share.
2. The following shall be added to the end of Sub-Section (b) of
Section 2 of ARTICLE IV CAPITAL:
; provided that the holders of Non-voting Common Stock shall
have the right to vote as a separate class on any merger or
consolidation of the Corporation with or into another entity or
entities, or any recapitalization or reorganization, in which shares
of Non-voting Common Stock would receive or be exchanged for
consideration different on a per share basis from consideration
received with respect to or in exchange for the shares of Voting
Common Stock or would otherwise be treated differently from shares of
Voting Common Stock in connection with such transaction, except that
shares of Non-voting Common Stock may, without such a separate class
vote, receive or be exchanged for non-voting securities which are
otherwise identical on a per share basis in amount and form to the
voting securities received with respect to or exchanged for the Voting
Common Stock so long as (i) such non-voting securities are convertible
into such voting securities on the same terms as the Non-voting Common
Stock is convertible into Voting Common Stock and (ii) all other
consideration is equal on a per share basis. Notwithstanding the
foregoing, holders of shares of the Non-voting Common Stock shall be
entitled to vote as a separate class on any amendment to this
paragraph (b) of this Section 2.
3. The following shall be added the end of Sub-Section (b) of
Section 3 of ARTICLE IV CAPITAL:
and, provided, further, that each holder of Non-voting
Common Stock may convert such shares into Voting Common Stock if such
holder reasonably believes that such converted shares will be
transferred within fifteen (15) days pursuant to a Conversion Event
(as hereinafter defined) and such holder agrees not to vote any such
shares of Voting Common Stock prior to such Conversion Event and
undertakes to promptly convert such shares back into Non-voting Common
Stock if such shares are not transferred pursuant to a Conversion
Event. Each Regulated Stockholder may provide for further restrictions
upon the conversion of any shares of Non-voting Common Stock by
providing the Corporation with signed, written instructions specifying
such additional restrictions and legending such shares as to the
existence of such restrictions.
4. The following shall be added to the end of Sub-Section (c) of
Section 3 of ARTICLE IV CAPITAL:
Notwithstanding any provision of this Section 3 to the
contrary, each holder of Non-voting Common Stock shall be entitled to
convert shares of Non-voting Common Stock in connection with any
Conversion Event if such holder reasonably believes that such
Conversion Event will be consummated, and a written request for
conversion from any holder of Non-voting Common Stock to the
Corporation stating such holder's reasonable belief that a Conversion
Event shall occur shall be conclusive and shall obligate the
Corporation to effect such conversion in a timely manner so as to
enable each such holder to participate in such Conversion Event. The
Corporation will not cancel the shares of Non-voting Common Stock so
converted before the 15th day following such Conversion Event and will
reserve such shares until such 15th day for reissuance in compliance
with the next sentence. If any shares of Non-voting Common Stock are
converted into shares of Voting Common Stock in connection with a
Conversion Event and such shares of Voting Common Stock are not
actually distributed, disposed of or sold pursuant to such Conversion
Event, such shares of Voting Common Stock shall be promptly converted
back into the same number of shares of Non-voting Common Stock.
5. The following shall be added before the first paragraph of
Sub-Section (h) of Section 3 of ARTICLE IV CAPITAL:
"Conversion Event" shall mean (a) any public offering or
public sale of securities of the Corporation (including a public
offering registered under the Securities Act of 1933 and a public sale
pursuant to Rule 144 of the Securities and Exchange Commission or any
similar rule then in force), (b) any sale of securities of the
Corporation to a person or group of persons (within the meaning of the
Securities Exchange Act of 1934, as amended (the "1934 Act")) if,
after such sale, such person or group of persons in the aggregate
would own or control securities which possess in the aggregate the
ordinary voting power to elect a majority of the Corporation's
directors (provided that such sale has been approved by the
Corporation's Board of Directors or a committee thereof), (c) any sale
of securities of the Corporation to a person or group of persons
(within the meaning of the 1934 Act) if, after such sale, such person
or group of persons in the aggregate would own or control securities
of the Corporation (excluding any Non-voting Common Stock being
converted and disposed of in connection with such Conversion Event)
which possess in the aggregate the ordinary voting power to elect a
majority of the Corporation's directors, (d) any sale of securities of
the Corporation to a person or group of persons (within the meaning of
the 1934 Act) if, after such sale, such person or group of persons
would not, in the aggregate, own, control or have the right to acquire
more than two percent (2%) of the outstanding securities of any class
of voting securities of the Corporation, and (e) a merger,
consolidation or similar transaction involving the Corporation if,
after such transaction, a person or group of persons (within the
meaning of the 1934 Act) in the aggregate would own or control
securities which possess in the aggregate the ordinary voting power to
elect a majority of the surviving corporation's directors (provided
that the transaction has been approved by the Corporation's Board of
Directors or committee thereof).
6. The following shall be added to the end of the last paragraph
of Sub-Section (h) of Section 3 of ARTICLE IV CAPITAL:
and (v) International Motor Cars Group II, LLC, Chase Equity
Associates, L.P. or any other stockholder (x) that is subject to the
provisions of Regulation Y and (y) that holds shares of Common Stock
or Preferred Stock of the Corporation.
SECOND: That the aforesaid amendment was duly adopted in
accordance with the applicable provisions of Sections 242 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said United Auto Group, Inc. has caused this
certificate to be signed by a duly authorized officer this August 3, 1999.
United Auto Group, Inc.
By:/s/ Philip N. Smith, Jr.
--------------------------
Name: Philip N. Smith, Jr.
Title: Senior Vice President
Exhibit 10.3
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement") is dated as of August
3, 1999, and is entered into between United Auto Group, Inc., a Delaware
corporation (the "Company"), and Roger S. Penske ("Optionee").
W I T N E S S E T H:
WHEREAS, the Company is a party to a Stockholders Agreement by
and among AIF II, L.P., a Delaware limited partnership, Aeneas Venture
Corporation, a Delaware corporation, International Motor Cars Group I,
L.L.C. ("IMCG I"), International Motor Cars Group II, L.L.C. ("IMCG II"),
Trace International Holdings, Inc. and the Company (as amended,
supplemented or otherwise modified from time to time, the "Stockholders
Agreement"); and
WHEREAS, in consideration of the Optionee's agreement to serve as
the Chairman of the Company until the third anniversary of the Second
Closing Date (as defined in the Stockholders Agreement) and as Chief
Executive Officer of the Company until the second anniversary of the Second
Closing Date, the Company is, among other things, granting the Optionee an
option to purchase shares of voting Common Stock, par value $.0001 per
share (the "Common Stock"), of the Company, on the terms and conditions set
forth herein and in the Stockholders Agreement.
NOW, THEREFORE, the parties hereby agree:
1. GRANT OF OPTIONS. The Company hereby grants to the Optionee an
option (the "Option") to purchase, at the purchase price of $10.00 per
share, up to 400,000 shares of Common Stock, such number to be adjusted as
provided in Section 7(b) hereof.
2. EXERCISABILITY OF OPTIONS. (a) Unless otherwise provided in
this Agreement, the Option will vest and become exercisable ratably in
three installments as follows: the Option shall be vested and exercisable
with respect to one-third of the aggregate number of shares covered thereby
from and after May 3, 2000; the Option shall be vested and exercisable with
respect to two-thirds of the aggregate number of shares covered thereby
from and after May 3, 2001; and the Option shall be fully (100%) vested and
exercisable from and after May 3, 2002. Any fractional numbers of shares of
Common Stock resulting from the application of the foregoing fractions
shall be rounded to next higher whole number of shares of Common Stock.
(b) In the event of a Change of Control (as defined
below), the Option shall become immediately and fully vested and
exercisable.
(c) In the event that the Optionee's service as
Chairman of the Company is terminated by the Company for Cause (as defined
below) or by the Optionee other than for Good Reason (as defined below)
(provided that for this purpose the death of the Optionee shall be deemed
to be Good Reason) prior to May 3, 2002, then the portion of the Option
that is not vested and exercisable as of the date of such termination shall
expire and be of no further force and effect as of such date.
(d) In the event the Optionee's service as the Chairman
of the Company is terminated prior to May 3, 2002 (i) as a result of the
Optionee's death, (ii) by the Company other than for Cause or (iii) by the
Optionee for Good Reason, the unexercised portion of the Option as of such
date shall become immediately and fully vested and exercisable; PROVIDED,
HOWEVER, that if the Optionee's service as the Chairman of the Company is
terminated prior to May 3, 2002 pursuant to clause (ii) or (iii) of this
paragraph (d), and PCP Directors (as defined in the Stockholders Agreement)
constitute a majority of the members of the Company's Board of Directors on
the date of such termination, then the portion of the Option that is not
vested and exercisable as of the date of such termination shall expire and
be of no further force or effect as of such date.
3. METHOD OF EXERCISING OPTIONS. (a) The Optionee may exercise
all or any portion of the vested and exercisable portion of the Option by
delivering to the Company a written notice stating the number of shares
that the Optionee 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.
(b) At the time of exercise, payment in cash of an
amount equal to that necessary to satisfy the Company's obligation to
withhold Federal, state or local income or other taxes incurred by reason
of the exercise of the Option or the transfer of shares thereupon shall be
made by the Optionee to the Company.
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 Optionee the number of shares as to which the
Options have been so exercised and shall deliver to the Optionee a
certificate or certificates therefor, registered in his name.
5. TERMS AND CONDITIONS OF EXERCISE. (i) The Option shall have a
term of ten years from the date hereof.
(ii) The Option shall not be transferable, except by
will or the laws of descent and distribution, provided that Optionee may at
any time transfer all or a portion of the Option to members of his
immediate family, trusts solely for the benefit of the Optionee and/or such
family members and partnerships in which the Optionee, such family members
and/or trusts are the only partners (each, a "Permitted Transferee" and,
collectively, the "Permitted Transferees"). For this purpose, "immediate
family" of a Person means the Person's spouse, parents, children,
stepchildren and grandchildren and the spouses of such parents, children,
stepchildren and grandchildren.
(iii) Whenever the word "Optionee" 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
"Optionee" shall be deemed to include such person or persons.
6. RIGHTS AS STOCKHOLDER. Neither the Optionee nor any transferee
of the Option shall have any rights as a stockholder with respect to any
shares of Common Stock covered by the Option until he shall have become the
holder of record of such shares.
7. RECAPITALIZATIONS, REORGANIZATIONS, ETC. (a) The existence of
the Option shall not affect the power of the Company or its stockholders to
accomplish adjustments, recapitalizations, reorganizations or other changes
in the Company's capital structure or its business, or any merger or
consolidation of the Company, or any issue of stock or of options, warrants
or rights to purchase stock or securities ahead of or affecting any of the
shares of Common Stock or the rights thereof or convertible into or
exchangeable for shares of Common Stock, or the dissolution or liquidation
of the Company, or any sale or transfer of all or any part of its assets or
business, or any other corporate act.
(b) Upon any change in the outstanding shares of Common
Stock by reason of any recapitalization, merger, consolidation, spin-off,
combination or exchange of shares or other corporate change, or any
distributions to common shareholders other than ordinary cash dividends,
the Company shall make such substitutions or adjustments as are appropriate
and equitable in order to preserve the economic value of the Option to the
Optionee, as to the number or kind of shares of Common Stock or other
securities covered by the Option and the purchase price thereof; such
substitution or adjustment shall be equivalent to the adjustment of the
conversion price for the Company's Series B Convertible Preferred Stock
pursuant to the Certificate of Designation as in effect as of the date
hereof.
8. NOTICE. Any notice required or permitted hereunder shall be in
writing and shall be sufficiently given if personally delivered or if sent
by telegram, telex, facsimile transmission or by registered or certified
mail, postage prepaid, with return receipt requested, as follows:
(a) If to the Company:
United Auto Group, Inc.
375 Park Avenue
New York, New York 10022
Facsimile: (212) 223-5148
Attn: General Counsel
or to such other address or to the attention of such other person as the
Company shall designate by written notice to the Optionee; and
(b) If to the Optionee:
Mr. Roger S. Penske
Penske Corporation
13400 Outer Drive West
Detroit, MI 48239
or to such other address as the Optionee 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. CERTAIN DEFINITIONS. (a) For purposes of this Agreement, the
Company shall be deemed to have terminated the Optionee for "Cause" only in
the event the Company has terminated the Optionee's employment following
such time as the Optionee has (A) committed an act of fraud or embezzlement
against the Company or an act in which he knew to be in material violation
of his duties to the Company; (B) failed to perform in any material respect
the essential functions of his job as the Chairman of the Company, which
failure (I) amounts to gross neglect of his duties to the Company and (II)
is not remedied within 30 days after written notice thereof by the Company;
or (C) been convicted of a felony (other than with respect to traffic
violations).
No termination of the Optionee's service as the Chairman of the
Company shall be for Cause unless effected in accordance with the following
procedures. The Company shall give the Optionee written notice ("Notice of
Termination for Cause") of its intention to terminate the Optionee's
service as the Chairman of the Company for Cause, setting forth in
reasonable detail the specific conduct of the Optionee that it considers to
constitute Cause, and stating the date, time and place of the Special Board
Meeting for Cause (as defined below). The term "Special Board Meeting for
Cause" shall mean a meeting of the Board of Directors called and held
specifically for the purpose of considering termination of the Optionee's
service as the Chairman of the Company for Cause, that takes place not less
than ten (10) and not more than twenty (20) business days after the
Optionee receives the Notice of Termination for Cause. The Optionee shall
be given an opportunity, together with counsel and such others as the
Optionee reasonably desires, to be heard at the Special Meeting for Cause.
Termination of the Optionee's service as the Chairman of the Company for
Cause shall be effective when and if a resolution is duly adopted at the
Special Board Meeting for Cause by affirmative vote of a majority of the
entire membership of the Board of Directors (the "Termination Resolution")
and, thereafter, the Option will cease to vest and become exercisable;
PROVIDED, HOWEVER, that if within ten (10) business days after the Special
Board Meeting for Cause the Optionee in good faith notifies the Company
that he disputes the finding by the Board of Directors that his termination
was for Cause, and the dispute is finally resolved, either by mutual
written agreement of the parties or by a final judgment, order or decree of
any court of competent jurisdiction (the time for appeal therefrom having
expired and no appeal having been perfected), in favor of the Optionee,
then the unvested and unexercised portion of the Option as of the date of
the Termination Resolution shall be deemed to have become fully vested and
exercisable as of the date of the Termination Resolution.
(b) The term "Change of Control" shall mean the
acquisition of any voting securities of the Company (the "Voting
Securities") by any "Person" (as the term person is used for purposes of
Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) immediately after which such Person has "Beneficial
Ownership" (within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of seventy-five percent (75%) or more of the combined voting power of
the Company's then outstanding Voting Securities.
(c) For purposes of this Agreement, the Optionee
shall be deemed to have terminated his employment with the Company for
"Good Reason" in the event the Optionee has terminated his employment
following (A) any adverse change in the Optionee's position, duties,
responsibilities or status with the Company as the Chairman of the Company
(whether or not Optionee serves as Chief Executive Officer); for purposes
of this Agreement, an isolated, insubstantial, immaterial and inadvertent
action not taken in bad faith and which is promptly remedied after notice
shall not constitute a basis for termination for "Good Reason".
11. MODIFICATION. This Agreement may be modified, amended,
suspended or terminated, and any terms or conditions may be waived, but
only by a written instrument executed by the parties hereto.
12. SEVERABILITY. If any provision of this Agreement is held by a
court of competent jurisdiction to be unenforceable or invalid for any
reason, the remaining provisions of this Agreement shall not be affected by
such holding and shall continue in full force in accordance with their
terms.
13. GOVERNING LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
New York without giving effect to the conflicts of laws principles thereof.
14. SUCCESSORS IN INTEREST. This Agreement shall be binding upon
any successor to the Company. This Agreement shall inure to the benefit of
the Optionee's legal representatives.
15. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
UNITED AUTO GROUP, INC.
By: /s/ Tambra S. King
--------------------------
Name: Tambra S. King
Title: Vice President and
Secretary
/s/ Roger S. Penske
--------------------------
Roger S. Penske
Exhibit 10.4
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement") is dated as of August
3, 1999, and is entered into between United Auto Group, Inc., a Delaware
corporation (the "Company"), and Marshall S. Cogan ("Optionee").
W I T N E S S E T H:
WHEREAS, the Company and the Optionee entered into a
Non-Competition and Standstill Agreement, dated as of April 12, 1999 (the
"Cogan Agreement");
WHEREAS, in consideration for Optionee entering into the Cogan
Agreement, the Company is, among other things, granting Optionee an option
to purchase shares of the Company's voting Common Stock, par value $.0001
per share (the "Common Stock"), on the terms and subject to the conditions
set forth herein and in the Cogan Agreement.
NOW, THEREFORE, the parties hereby agree:
1. Grant of Options. The Company hereby grants to Optionee an
option (the "Option") to purchase, at the exercise price of $10.00 per
share, up to 400,000 shares of the Company's Voting Common Stock, par value
$0.0001 per share ("Common Stock"), such number to be adjusted as provided
in Section 7(b).
2. Exercisability of Options. The Option will fully vest and
become exercisable on the date hereof.
3. Method of Exercising Options. (a) Optionee may exercise the
Option by delivering to the Company a written notice stating the number of
shares that Optionee 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 (the "Exercise Price") 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.
(b) At the time of exercise, Optionee shall pay in cash 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 Optionee the number of shares as to which the Options
have been so exercised and shall deliver to Optionee a certificate or
certificates therefor, registered in his name.
5. Terms and Conditions of Exercise. (a) The Option shall have a
term expiring ten years from the date hereof.
(b) The Option shall not be transferable, except by will or
the laws of descent and distribution, provided that Optionee may at any
time transfer all or a portion of the Option to members of his immediate
family, trusts solely for the benefit of Optionee and/or such family
members and partnerships in which the Optionee, such family members and/or
trusts are the only partners (each, a "Permitted Transferee" and,
collectively, the "Permitted Transferees"). For this purpose, "immediate
family" of a Person or a Person's spouse means the Person's spouse,
parents, children, stepchildren and grandchildren and spouses of such
parents, children, stepchildren and grandchildren or trusts for the benefit
of Optionee or such persons, subject to all of the terms and conditions of
the Option.
(c) Whenever the word "Optionee" is used in any provision of
this Agreement under circumstances where the provision should logically be
construed to apply to the executors, the administrators, personal
representatives, or the person or persons to whom the Option may be
transferred pursuant to clause (iv) of this Section 5, the word "Optionee"
shall be deemed to include such person or persons.
6. Rights as Stockholder. Optionee or a transferee of the Option
shall have no rights as a stockholder with respect to any shares of Common
Stock covered by the Option until he shall have become the holder of record
of such shares.
7. Recapitalizations, Reorganizations, Etc. (a) The existence of
the Option shall not affect the power of the Company or its stockholders to
accomplish adjustments, recapitalizations, reorganizations or other changes
in the Company's capital structure or its business, or any merger or
consolidation of the Company, or any issue of stock or of options, warrants
or rights to purchase stock or securities ahead of or affecting any of the
shares of Common Stock or the rights thereof or convertible into or
exchangeable for shares of Common Stock, or the dissolution or liquidation
of the Company, or any sale or transfer of all or any part of its assets or
business, or any other corporate act.
(b) Upon any change in the outstanding shares of Common
Stock by reason of any recapitalization, merger, consolidation, spin-off,
combination or exchange of shares or other corporate change, or any
distributions to common shareholders other than ordinary cash dividends,
the Company shall make such substitutions or adjustments as are appropriate
and equitable to preserve the economic value of the Option to the Optionee,
as to the number or kind of shares of Common Stock or other securities
covered by the Option and the Exercise Price; provided that such
substitution or adjustment shall be equivalent to the adjustment of the
Conversion price for the Company's Series B Convertible Preferred Stock,
par value $.0001 per share, pursuant to the Certificate of Designation for
such preferred stock as in effect as of the date hereof.
8. Trace Shelf Registration Statement. The Company will approve
any request by the Optionee to include shares issued upon exercise of the
Option in the registration statement referred to in Section 5.4 of the
Stockholders Agreement, dated as of May 3, 1999, by and among AIF II, L.P.,
Aeneas Venture Corporation, International Motor Cars Group I, L.L.C.,
International Motor Cars Group II, L.L.C., Trace International Holdings,
Inc. ("Trace") and the Company, provided that the Optionee shall reimburse
the Company for its reasonable out-of-pocket expenses incurred in
connection with including such shares on such registration statement, to
the extent such expenses are not reimbursed by Trace. The foregoing shall
be subject to the approval, if any is required, of Trace or any other party
that holds rights with respect to any such registration statement. The
Optionee shall have the right to cause the Company to update a prospectus
relating to any such registration statement, subject to the expense
provision set forth in this Section 8.
9. Notice. Any notice required or permitted hereunder shall be in
writing and shall be sufficiently given if personally delivered or if sent
by telegram, telex, facsimile transmission or by registered or certified
mail, postage prepaid, with return receipt requested, as follows:
(a) If to the Company:
United Auto Group, Inc.
375 Park Avenue
New York, New York 10022
Facsimile: (212) 223-5148
Attn: General Counsel
or to such other address or to the attention of such other person as the
Company shall designate by written notice to Optionee; and
(b) If to Optionee:
Mr. Marshall S. Cogan
810 Fifth Avenue
New York, NY 10021
or to such other address as Optionee 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.
10. Non-Qualified Option. The Option is not an "incentive stock
option" within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended.
11. Modification. This Agreement may be modified, amended,
suspended or terminated, and any conditions may be waived, but only by a
written instrument executed by the parties hereto.
12. Severability. If any provision of this Agreement is held by a
court of competent jurisdiction to be unenforceable or invalid for any
reason, the remaining provisions of this Agreement shall not be affected by
such holding and shall continue in full force in accordance with their
terms.
13. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
New York without giving effect to the conflicts of laws principles thereof.
14. Successors in Interest. This Agreement shall be binding upon
any successor to the Company. This Agreement shall inure to the benefit of
the Optionee's legal representatives.
15. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute on and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
UNITED AUTO GROUP, INC.
By:/s/ Tambra S. King
-------------------------------
Name: Tambra S. King
Title: Vice President and Secretary
/s/ Marshall S. Cogan
----------------------------------
Marshall S. Cogan
Exhibit 99.1
PRESS RELEASE
UNITEDAUTO
UnitedAuto Group, Inc.
375 Park Avenue, 11th
Floor
New York, NY 10152
Contact: Roger Penske Sam DiFeo Jim Davidson
Chairman President Executive Vice President -
Finance
(313) 592-5002 (212) 230-0475 (212) 230-0461
FOR IMMEDIATE RELEASE
- ---------------------
UNITEDAUTO SHAREHOLDERS APPROVE $49.5 MILLION SECOND
INSTALLMENT OF $83.0 MILLION PENSKE CAPITAL INVESTMENT
----------------------------------------------------------------------
DONALD J. HOFFMAN AND EUSTACE W. MITA APPOINTED TO BOARD OF DIRECTORS
----------------------------------------------------------------------
DETROIT, MI, AUGUST 3, 1999 - UnitedAuto Group, Inc. (NYSE: UAG), the
nation's second largest publicly traded automotive retailer, announced
today that Penske Capital Partners had funded the $49.5 million second
installment of the $83.0 million in new capital. The Company received the
investment following shareholder approval at the Company's Annual
Shareholder Meeting. Penske Capital Partners was issued approximately 4.6
million additional shares of Preferred Stock, which are convertible into
4.6 million shares of Common Stock. Assuming the conversion of the
Company's Preferred Stock, Penske Capital will hold approximately 28% of
the Company and, assuming the exercise in full of the Warrants and
including payment-in-kind dividends, will own approximately 40% of the
Company's voting and non-voting Common Stock.
The Company stated that the net proceeds from the investment will be
used to repay indebtedness and for general corporate purposes.
Roger S. Penske, Chairman, stated, "We are pleased to have executed
the second phase of our investment in UnitedAuto and are now in a position
to make operational and strategic changes which we believe will contribute
to UnitedAuto's long-term success. I am enthusiastic about the prospects
for UnitedAuto's future growth."
NEW BOARD MEMBERS ELECTED
The Company also announced that the shareholders had elected as
Directors Donald J. Hofmann, General Partner of Chase Capital Partners, and
Eustace W. Mita, President and Chief Executive of HAC Group, Inc., an
automotive training and consulting company. Roger Penske stated, "With the
increase in the number of Directors from seven to nine, we have broadened
the scope of our Board to include additional automotive industry
experience."
UnitedAuto, which has pursued a strategy based on internal growth from
its existing dealerships as well as from strategic acquisitions, operates
103 franchises in 16 states and Puerto Rico. UnitedAuto dealerships sell
new and used vehicles and market a complete line of after-market automotive
products and services.
Penske Capital Partners was formed in 1997 to make investments in the
transportation and transportation services industries.
This press release contains forward-looking information, and actual
results may materially vary from those expressed or implied herein.
Factors, including economic conditions, manufacturer approvals and
acquisition risks that could affect these results are described in reports
and documents filed by the Company with the Securities and Exchange
Commission.
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