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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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): MAY 3, 1999
UNITED AUTO GROUP, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 1-12297 22-3086739
(State or other jurisdiction of (Commission File Number) (IRS Employer
incorporation) Identification No.)
375 PARK AVENUE, NEW YORK, NEW YORK 10152
(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: (212) 223-3300
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ITEM 5. OTHER EVENTS.
On May 3, 1999, United Auto Group, Inc., a Delaware corporation (the
"Company"), International Motor Cars Group I, L.L.C. and International Motor
Cars Group II, L.L.C., Delaware limited liability companies controlled by Penske
Capital Partners, L.L.C. (together, the "Purchaser"), consummated the first step
(the "Initial Closing") of the transactions contemplated by the Securities
Purchase Agreement (the "Agreement"), by and between the Company and the
Purchaser, dated as of April 12, 1999, pursuant to which the Purchaser acquired
3,727.8696 shares of the Company's Series A Convertible Preferred Stock (the
"Series A Convertible Preferred Stock"), par value $0.0001 per share, for
consideration of approximately $33.55 million. The shares of Series A
Convertible Preferred Stock acquired entitle the Purchaser to dividends at a
rate of 6.5% per year, payable in kind for the first two years, and are
convertible into 3,727,869 shares of the Company's common stock, par value
$0.0001 per share (the "Common Stock").
The Initial Closing is the first step of the transactions contemplated
by the Agreement. Consummation of the second step is subject to customary
closing conditions, including approval by a majority of the Company's
stockholders and receipt of third-party consents. There can be no assurance when
or whether the second step of the transaction will occur. If the second step
does not occur by December 31, 1999, the Company may be required to repurchase
from the Purchaser the 3,727.8696 shares of Series A Convertible Preferred
Stock. There can be no assurance that the Company will have adequate funds to
make such repurchase.
In connection with the Initial Closing, the Board of Directors named
Roger S. Penske as Chairman and Chief Executive Officer. Mr. Penske succeeds
Marshall S. Cogan, the Company's founder who will remain as a Director of the
Company. In addition, on April 30, 1999, Mr. Richard Sinkfield resigned as a
Class II Director, and on May 3, 1999, Jules B. Kroll and Robert H. Nelson also
resigned as Class II Directors. John J. Hannan and Michael R. Eisenson, who
Class III Directors, were appointed as Class II Directors, and Roger Penske,
James A. Hislop and Richard J. Peters were appointed as Class III Directors,
subject to re-election at the 1999 annual meeting. In addition, Karl H. Winters
resigned as Executive Vice President-Finance and Chief Financial Officer and
Robert H. Nelson resigned as Executive Vice President-Operations. The Board also
named James R. Davidson as Executive Vice President-Finance.
Reference is made to the press release of the Company, dated May 3,
1999, attached hereto as Exhibit 99.1 and incorporated herein by 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
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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
4.5 Certificate of Designation of Series A Convertible Preferred
Stock of the Company, filed with the Secretary of State of the State of Delaware
on April 30, 1999.
10.20.5 Non-Competition and Standstill Agreement, dated as of
April 12, 1999, by and between Marshall S. Cogan and United Auto Group, Inc.
10.20.6 Stockholders Agreement, dated as of May 3, 1999, by and among
United Auto Group, Inc., Trace International Holdings, Inc., Aeneas Venture
Corporation, AIF II, L.P., International Motor Cars Group I, L.L.C. and
International Motor Cars Group II, L.L.C.
10.20.7 Registration Rights Agreement, dated as of May 3, 1999, by
and among United Auto Group, Inc., International Motor Cars Group I, L.L.C. and
International Motor Cars Group II, L.L.C.
99.1 Press Release, dated May 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: May 10, 1999
UNITED AUTO GROUP, INC.
By: /s/ James R. Davidson
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Name: James R. Davidson
Title: Executive Vice President - Finance
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UNITED AUTO GROUP, INC.
CERTIFICATE OF DESIGNATION
OF
SERIES A CONVERTIBLE PREFERRED STOCK
Pursuant to Section 151(g) of the General Corporation Law of
the State of Delaware, United Auto Group, Inc. (the "Corporation"), a
corporation organized and existing under the General Corporation Law of the
State of Delaware ("DGCL"), DOES HEREBY CERTIFY that:
Pursuant to the authority conferred upon the Board of
Directors of the Corporation by Section 1 of Article IV of the Certificate of
Incorporation of the Corporation (the "Certificate of Incorporation"), and in
accordance with the provisions of Section 151(g) of the DGCL, the Board of
Directors of the Corporation on April 9, 1999, adopted the following resolution
creating a series of Preferred Stock designated as Series A Convertible
Preferred Stock.
RESOLVED, that pursuant to the authority vested in the Board
of Directors of the Corporation in accordance with the DGCL and the provisions
of the Certificate of Incorporation, a series of the class of authorized
Preferred Stock, par value $0.0001 per share, of the Corporation is hereby
created and that the designation and number of shares thereof and the voting
powers, preferences and relative, participating, optional and other special
rights of the shares of such series, and the qualifications, limitations and
restrictions thereof, are as follows (capitalized terms used herein shall have
the meanings set forth in Section 11 hereto):
SECTION 1. DESIGNATION; NUMBER; RANK.
(a) Designation; Number. The shares of such series shall be
designated "Series A Convertible Preferred Stock" (the "Series A Preferred
Stock"). The number of shares constituting the Series A Preferred Stock shall
be 10,000. The Corporation may issue (i) up to 8,300 shares of the Series A
Preferred Stock as an original issuance and (ii) such number of additional
shares as may be required to pay dividends on the Series A Preferred Stock in
additional shares of Series A Preferred Stock pursuant to Section 2(b) or
pursuant to Section 8. The Corporation shall take all actions necessary or
advisable to increase the number of shares of Series A Preferred Stock
authorized to provide for additional issuance of Series A Preferred Stock
pursuant to clause (ii) of the preceding sentence.
(b) Rank. The Series A Preferred Stock shall, with respect to
dividend rights and rights on liquidation, dissolution or winding up, rank (i)
pari passu to the Series B Preferred Stock, par value $0.0001 per share of the
Corporation (the "Series B Preferred Stock"), and (ii) senior to the voting
Common Stock, par value $0.0001 per share, of the Corporation (the "Voting
Common Stock"), the non-voting Common Stock, par value $0.0001 per share, of
the Corporation (the "Non-Voting Common Stock") and together with the Voting
Common Stock,
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the "Common Stock") and all other capital stock of the Corporation issued prior
to or on or after the date hereof.
(c) The Corporation may issue fractions of shares of Series A
Preferred Stock.
SECTION 2. DIVIDENDS.
(a) Restricted Payments. No dividend or distribution in cash,
shares of stock or other property on the Common Stock or other capital stock of
the Corporation shall be declared or paid or set apart for payment without the
unanimous approval of the Board of Directors and unless all accumulated and
unpaid dividends on the Series A Preferred Stock have been declared and paid.
(b) Payment of Dividends. The holders of shares of Series A
Preferred Stock, on a pari passu basis with the Series B Preferred Stock, and
in preference to the holders of shares of Common Stock and of any shares of
other capital stock of the Corporation as to payment of dividends, shall be
entitled to receive, when, as and if declared by the Board of Directors, out of
the assets of the Corporation legally available therefor and subject to any
restrictions contained in the Indenture, cumulative dividends at an annual rate
equal to 6.50% of the Liquidation Preference from and after the respective
dates of issuance of applicable shares of Series A Preferred Stock (the "Issue
Date"), as long as the shares of Series A Preferred Stock remain outstanding.
Dividends shall be (i) computed on the basis of the Liquidation Preference;
(ii) accrue and be payable semi-annually, in arrears, on the last Business Day
of June and December in each year (each such date being referred to herein as a
"Semi-Annual Dividend Payment Date"), commencing on the first Semi-Annual
Dividend Payment Date following the Issue Date; and (iii) (X) with respect to
dividends paid on or prior to the second anniversary of the Issue Date, payable
in additional shares of Series A Preferred Stock valued as if the Second
Closing had already occurred unless and until such time as the Company shall
have made any payment or issued any shares pursuant to Section 7.4 of the
Securities Purchase Agreement, after which time such dividends will be valued
as if the Second Closing had not occurred (except for dividends to
International Motor Cars Group II, L.L.C., which will receive shares of Series
B Preferred Stock in lieu of Series A Preferred Stock) and (Y) with respect to
dividends paid after the second anniversary of the Issue Date, payable in cash.
Notwithstanding anything in the foregoing to the contrary, if, during any
calendar year, a dividend is paid with respect to the number of shares of
Voting Common Stock into which a share of Series A Preferred Stock is
convertible at the time such dividend is paid, which dividend, together with
all previous dividends paid during such year with respect to such number of
shares of Voting Common Stock, exceeds the aggregate amount of dividends paid
to such date during such year with respect to a share of Series A Preferred
Stock (including amounts paid in such calendar year pursuant to this sentence),
then (x) the shares of the Series A Preferred Stock shall be entitled to
receive the amount of such excess at the time of the Voting Common Stock
dividend and (y) any dividends otherwise payable on the Series A Preferred
Stock for the remainder of such calendar year shall be reduced (not below zero)
by the amount of the payment made pursuant to clause (x) above.
(c) Accrual of Dividends. Dividends payable pursuant to
clause (b) of this Section 2 shall begin to accrue and be cumulative
semi-annually from the Issue Date, whether or
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not declared. The amount of dividends so payable shall be determined on the
basis of twelve 30-day months and a 360-day year. Accrued dividends not paid on
any Semi-Annual Dividend Payment Date shall accrue additional dividends at an
annual dividend rate of 6.50% of the Liquidation Preference until paid in full.
Dividends paid on the shares of Series A Preferred Stock in an amount less than
the total amount of such dividends at the time accrued and payable on such
shares shall be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding. The Board of Directors may fix a record date
for the determination of holders of shares of Series A Preferred Stock entitled
to receive payment of a dividend declared thereon, which record date shall be
no more than 60 days or less than 10 days prior to the date fixed for the
payment thereof.
SECTION 3. VOTING RIGHTS.
In addition to any voting rights provided by law, the holders
of shares of Series A Preferred Stock shall have the voting rights set forth in
this Section 3:
(a) Right to Vote as a Single Class with Holders of Common
Stock. So long as any of the Series A Preferred Stock is outstanding, each
share of Series A Preferred Stock shall entitle the holder thereof to vote on
all matters submitted to a vote of the stockholders of the Corporation, voting
together as a single class with the holders of Common Stock. The holders of
each share of Series A Preferred Stock shall be entitled to vote with respect
to each share of Series A Preferred Stock held by each such holder a number of
votes equal to the number of votes which could be cast in such vote by a holder
of the number of shares of Common Stock into which such share of Series A
Preferred Stock is convertible (as adjusted pursuant to Section 8) on the
record date for such vote. Fractional votes shall not, however, be permitted
and any fractional voting rights available on an as-converted basis (after
aggregation of all shares of Common Stock into which shares of Series A
Preferred Stock held by each holder could be converted) shall be rounded to the
nearest whole number (with one-half being rounded upward).
(b) Actions Not to be Taken Without Vote of Holders of Series
A Preferred Stock. So long as any shares of Series A Preferred Stock issued
pursuant to the Securities Purchase Agreement are outstanding, the affirmative
vote of the holders of a majority of the shares of Series A Preferred Stock
outstanding at the time of such vote shall be required in order to:
(i) authorize, increase the authorized number of
shares of, or issue (including on conversion or exchange of any convertible or
exchangeable securities or by reclassification) any shares of any class or
classes or series within a class of the Corporation's capital stock ranking
prior to (either as to dividends or upon voluntary or involuntary liquidation,
dissolution or winding up), or pari passu with, the Series A Preferred Stock
(other than as contemplated herein);
(ii) increase the authorized number of shares of, or
issue (including on conversion or exchange of any convertible or exchangeable
securities or by reclassification) any shares of, Series A Preferred Stock
other than as required by this Certificate of Designation; or
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(iii) authorize, adopt or approve an amendment to
the Certificate of Incorporation or this Certificate of Designation which would
increase or decrease the par value of the shares of Series A Preferred Stock,
or alter or change the powers, preferences or special rights of the Series A
Preferred Stock.
(c) Exercise of Voting Rights. (i) The foregoing rights of
holders of shares of Series A Preferred Stock to take any actions as provided
in this Section 3 may be exercised at any annual meeting of stockholders or at
a special meeting of stockholders held for such purpose or at any adjournment
thereof, or by the written consent, delivered to the Secretary of the
Corporation, of the holders of a majority of all shares of Series A Preferred
Stock outstanding as of the record date of such written consent.
So long as such right to vote continues, the Chairman
of the Board of the Corporation may call, and if the holders of Series A
Preferred Stock are to vote separately as a single class, upon the written
request of holders of record of 20% of the outstanding shares of Series A
Preferred Stock, addressed to the Secretary of the Corporation, at the principal
office of the Corporation, the Chairman of the Board of the Corporation shall
call, a special meeting of the holders of shares of Series A Preferred Stock
entitled to vote as provided herein. The Corporation shall use its best efforts
to hold such meeting within 60, but in any event not later than 90, days after
delivery of such request to the Secretary, at the place and upon the notice
provided by law and in the By-Laws of the Corporation for the holding of
meetings of stockholders; provided that the Corporation shall not be required
to call such a special meeting if such request is received fewer than 90 days
before the date fixed for the next ensuing annual meeting of stockholders of
the Corporation; and provided, further, that if it is necessary for the
Corporation to solicit proxies for use at such special meeting, the
Corporation's obligation to conduct such special meeting shall be delayed for
such period of time as is necessary for the Corporation to prepare and file a
proxy statement and to obtain the Commission's clearance of such proxy
statement.
(ii) At each meeting of stockholders at which the
holders of shares of Series A Preferred Stock shall have the right, voting
separately as a single class, to take any action, the presence in person or by
proxy of the holders of record of one-half of the total number of shares of
Series A Preferred Stock then outstanding and entitled to vote on the matter
shall be necessary and sufficient to constitute a quorum. At any such meeting
or at any adjournment thereof, in the absence of a quorum of the holders of
shares of Series A Preferred Stock, a majority of the holders of such shares
present in person or by proxy shall have the power to adjourn the meeting as to
the actions to be taken by the holders of shares of Series A Preferred Stock
from time to time and place to place without notice other than announcement at
the meeting until a quorum shall be present.
(iii) For the taking of any action as provided in
clause (b) of this Section 3 by the holders of shares of Series A Preferred
Stock, each such holder shall have one vote for each share of such stock
standing in his name on the transfer books of the Corporation as of any record
date fixed for such purpose or, if no such date be fixed, at the close of
business on the Business Day next preceding the day on which notice is given,
or if notice is waived, at the close of business on the Business Day next
preceding the day on which the meeting is held.
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SECTION 4. CERTAIN RESTRICTIONS.
(a) Dividends or Distributions. Whenever any dividend payable
on the Series A Preferred Stock pursuant to Section 2 shall not have been paid
in full, whether in cash or in kind, the Corporation shall not declare or pay
dividends, or make any other distributions, on any shares of Parity Stock or
Junior Stock.
(b) Redemption and Purchase of Capital Stock. Whenever
dividends on the Series A Preferred Stock shall not have been paid in full,
whether in cash or in kind, the Corporation shall not redeem, purchase or
otherwise acquire for consideration any shares of Parity Stock or Junior Stock,
other than (i) pursuant to the exercise of outstanding options and warrants and
(ii) the repurchase of shares of capital stock or securities convertible into
or exchangeable for capital stock of the Corporation held by employees of the
Corporation upon the termination of their employment.
(c) Purchase of Capital Stock. The Corporation shall not
permit any subsidiaries of the Corporation to purchase or otherwise acquire for
consideration any shares of capital stock of the Corporation unless the
Corporation could, pursuant to clause (b) of this Section 4, purchase such
shares at such time and in such manner.
SECTION 5. REDEMPTION.
(a) Optional Redemption. The Corporation shall, following the
third anniversary of the initial Issue Date, have the right, at its sole option
and election made in accordance with clause (b) below, to redeem all or any
portion of the then outstanding shares of Series A Preferred Stock pro rata for
an amount per share equal to the Liquidation Preference as of the date of the
Redemption Date (the "Redemption Price") if the Current Market Price per share
of Common Stock for at least 20 out of 30 consecutive Trading Days immediately
preceding the date of the Redemption Notice is equal to or greater than 150% of
the Conversion Price as of the first day of such 30-day period.
(b) Notice of Redemption. Notice of any redemption of shares
of Series A Preferred Stock pursuant to clause (a) of this Section 5 shall be
mailed, first class postage prepaid, to each holder of shares of Series A
Preferred Stock, at such holder's address as it appears on the transfer books
of the Corporation, notifying such holder of the redemption to be effected,
specifying (i) the redemption date (the "Redemption Date") and (ii) the
Redemption Price; and calling upon such holder to surrender to the Corporation,
in the manner and at the place designated, such holder's certificate or
certificates representing the shares to be redeemed (the "Redemption Notice").
Each Redemption Notice shall be mailed not less than 20 and not more than 30
days prior to the proposed redemption date. The Redemption Date shall be
determined by the Company but in no event shall be earlier than the tenth day
following the date of the Redemption Notice or later than the thirtieth day
following the Redemption Notice.
(c) Payment of Redemption Price. On the Redemption Date, the
Corporation shall wire transfer to an account designated by each holder the
Redemption Price for each of its shares of Series A Preferred Stock.
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(d) Securities Purchase Agreement. Any purchase or conversion
effected pursuant to Section 7.2 or Section 7.4 of the Securities Purchase
Agreement by the Purchaser (as defined in the Securities Purchase Agreement) or
the Corporation shall apply to all shares of Series A Preferred Stock (and,
with respect to a purchase, any shares convertible therefor), whether or not
the holder thereof is the Purchaser.
SECTION 6. STATUS OF CONVERTED OR REDEEMED STOCK.
(a) Status of Converted or Redeemed Stock. Any shares of
Series A Preferred Stock converted, redeemed, purchased or otherwise acquired
by the Corporation in any manner whatsoever shall be retired and cancelled
promptly after the acquisition thereof. All such shares of Series A Preferred
Stock shall upon their cancellation, and upon the filing of any document
required by the DGCL, become authorized but unissued shares of Preferred Stock,
$0.0001 par value, of the Corporation and may be reissued as part of another
series of Preferred Stock, $0.0001 par value, of the Corporation.
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SECTION 7. LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) (i) If the Corporation shall (A) commence a voluntary
case under the Federal bankruptcy laws or any other applicable Federal or state
bankruptcy, insolvency or similar law, or (B) consent to the entry of an order
for relief in an involuntary case under such law or to the appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Corporation, or of any substantial part of its
property, or (C) make an assignment for the benefit of its creditors, or (D)
admit in writing its inability to pay its debts generally as they become due,
or (ii)(x) if a decree or order for relief in respect of the Corporation shall
be entered by a court having jurisdiction in the premises in an involuntary
case under the Federal bankruptcy laws or any other applicable Federal or state
bankruptcy, insolvency or similar law, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or other similar official) of the
Corporation or of any substantial part of its property, or ordering the winding
up or liquidation of its affairs, and (y) any such decree or order shall be
unstayed and in effect for a period of 60 consecutive days and on account of
any such event the Corporation shall liquidate, dissolve or wind up, or (iii)
if the Corporation shall otherwise liquidate, dissolve or wind up, after
payment or provision for the payment for the debts and other liabilities of the
Corporation (each, a "Liquidation"), no distribution shall be made to the
holders of shares of Junior Stock or Parity Stock unless, prior thereto, the
holders of shares of Series A Preferred Stock, subject to Section 8, shall have
received the Liquidation Preference with respect to each share held by holders
of the Series A Preferred Stock; provided, however, that, if the amount which
would have been paid upon any such Liquidation in respect of the aggregate
number of shares of Voting Common Stock into which the Series A Preferred Stock
is then convertible, divided by the number of shares of Series A Preferred
Stock issued by the Corporation and then outstanding, is greater than the
Liquidation Preference (without giving effect to any liquidation preference in
favor of the holders of Series A Preferred Stock), then the holders of Series A
Preferred Stock shall be entitled to receive in such Liquidation such greater
amount for each share of Series A Preferred Stock then issued and outstanding.
(b) If, upon any such Liquidation, whether voluntary or
involuntary, the assets to be distributed to the holders of the Series A
Preferred Stock and the Series B Preferred Stock shall be insufficient to
permit payment of the full amount of the Liquidation Preference with respect to
each share of Series A Preferred Stock and each share of Series B Preferred
Stock, then the entire assets of the Corporation to be distributed among the
holders of the Series A Preferred Stock and Series B Preferred Stock shall be
distributed ratably among such holders in accordance with the number of shares
of Series A Preferred Stock and Series B Preferred Stock held by each such
holder in proportion to the ratio that the Liquidation Preference payable on
each such share bears to the aggregate Liquidation Preference payable on all
such shares.
(c) After the payment to the holders of shares of the Series
A Preferred Stock of the full amount of any liquidating distribution to which
they are entitled under this Article 7, the holders of the Series A Preferred
Stock as such shall have no right or claim to any of the remaining assets of
the Corporation.
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(d) Whenever the distribution provided for in this Section 7
shall be payable in securities or property other than cash, the value of such
distribution shall be the Fair Market Value of such securities or property.
SECTION 8. CONVERSION.
(a) Right to Convert. Subject to the provisions for
adjustment hereinafter set forth, each share of Series A Preferred Stock shall
be convertible into such number of fully paid and nonassessable shares of
Voting Common Stock as is determined by dividing the Liquidation Preference as
of the Conversion Date by the Conversion Price as of the Conversion Date. The
Conversion Price shall initially be $9.00 (the "Initial Conversion Price"), and
shall be increased to $10.00 at the Second Closing (or such other economically
equivalent amount reflecting any adjustment to the Conversion Price between the
Initial Closing and the Second Closing) and shall be further subject to
adjustment as provided in clauses (f) and (g) of this Section 8. The conversion
right set forth in this clause (a) shall be exercisable at the option of the
holder at any time following the initial Issue Date.
(b) Mechanics of Conversion. Conversion of the Series A
Preferred Stock may be effected by any such holder upon the surrender to the
Corporation at the principal office of the Corporation in the State of New York
or at the office of any agent or agents of the Corporation, as may be
designated by the Board of Directors of the Corporation (the "Transfer Agent"),
of the certificate(s) for such Series A Preferred Stock to be converted,
accompanied by a written notice (the date of such notice being referred to as
the "Conversion Date") stating that such holder elects to convert all or a
specified whole number of such shares in accordance with the provisions of this
Section 8 and specifying the name or names in which such holder wishes the
certificate or certificates for shares of Voting Common Stock to be issued. In
case any holder's notice shall specify a name or names other than that of such
holder, such notice shall be accompanied by payment of all transfer taxes
payable upon the issuance of shares of Voting Common Stock in such name or
names. Other than such taxes, the Corporation will pay any and all transfer,
issue, stamp and other taxes (other than taxes based on income) that may be
payable in respect of any issue or delivery of shares of Voting Common Stock on
conversion of Series A Preferred Stock pursuant hereto. As promptly as
practicable, and in any event within five Business Days after the surrender of
such certificate or certificates and the receipt of such notice relating
thereto and, if applicable, payment of all transfer taxes which are the
responsibility of the holder as set forth above (or the demonstration to the
satisfaction of the Corporation that such taxes have been paid), the
Corporation shall deliver or cause to be delivered (i) certificates
representing the number of validly issued, fully paid and nonassessable full
shares of Voting Common Stock, to which the holder of shares of Series A
Preferred Stock being converted shall be entitled and (ii) if less than the
full number of shares of Series A Preferred Stock evidenced by the surrendered
certificate or certificates is being converted, a new certificate or
certificates, of like tenor, for the number of shares evidenced by such
surrendered certificate or certificates less the number of shares being
converted. Such conversion shall be deemed to have been made at the close of
business on the Conversion Date so that the rights of the holder thereof as to
the shares being converted shall cease except for the rights pursuant to
Section 8(c) to receive shares of Voting Common Stock, in accordance herewith,
and the person
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entitled to receive the shares of Voting Common Stock shall be treated for all
purposes as having become the record holder of such shares of Voting Common
Stock at such time.
In case any shares of Series A Preferred Stock are to be
redeemed pursuant to Section 5, such right of conversion shall cease and
terminate as to the shares of Series A Preferred Stock to be redeemed at the
close of business on the Business Day preceding the Redemption Date.
(c) Fractional Shares. In connection with the conversion of
any shares of Series A Preferred Stock into Voting Common Stock, no fractions
of shares of Voting Common Stock shall be issued, but in lieu thereof the
Corporation shall pay a cash adjustment in respect of such fractional interest
in an amount equal to such fractional interest multiplied by the Current Market
Price per share of Voting Common Stock on the Trading Day on which such shares
of Series A Preferred Stock are deemed to have been converted. If more than one
share of Series A Preferred Stock shall be surrendered for conversion by the
same holder at the same time, the number of full shares of Voting Common Stock
issuable on conversion thereof shall be computed on the basis of the total
number of shares of Series A Preferred Stock so surrendered. Promptly upon
conversion, the Corporation shall pay to the holder of shares of Series A
Preferred Stock so converted out of funds legally available, an amount equal to
any accrued and unpaid dividends on the shares of Series A Preferred Stock
surrendered for conversion to the date of such conversion, together with cash
in lieu of any fractional interest of such holder.
(d) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available for issuance upon the
conversion of the Series A Preferred Stock, free from any preemptive rights,
such number of its authorized but unissued shares of Voting Common Stock as
will from time to time be sufficient to permit the conversion of all
outstanding shares of Series A Preferred Stock issued or issuable pursuant to
the Securities Purchase Agreement into Voting Common Stock, and shall take all
actions required to increase the authorized number of shares of Voting Common
Stock if necessary to permit the conversion of all outstanding shares of Series
A Preferred Stock.
(e) Initial Conversion Price. The initial Conversion Price
shall equal $9.00 (the "Initial Conversion Price") (subject to adjustment from
time to time as provided in this Section 8).
(f) Adjustment to Conversion Price for Stock Dividends and
for Combinations or Subdivisions of Common Stock. (i) In case the Corporation
shall at any time or from time to time after the Closing Date (A) pay a
dividend or make a distribution on the Outstanding shares of Common Stock in
shares of Common Stock, (B) subdivide the Outstanding shares of Common Stock,
(C) combine the Outstanding shares of Common Stock into a smaller number of
shares or (D) issue by reclassification of the shares of Common Stock any
shares of capital stock of the Corporation, then, and in each such case, the
Conversion Price in effect immediately prior to such event or the record date
therefor, whichever is earlier, shall be adjusted so that the holder of any
shares of Series A Preferred Stock thereafter surrendered for conversion into
Voting Common Stock shall be entitled to receive the number of shares of Voting
Common Stock or other securities of the Corporation which such holder would
have
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<PAGE>
owned or have been entitled to receive after the happening of any of the events
described above, had such shares of Series A Preferred Stock been surrendered
for conversion immediately prior to the happening of such event or the record
date therefor, whichever is earlier. An adjustment made pursuant to this clause
(i) shall become effective (x) in the case of any such dividend or
distribution, on the date of such dividend or distribution retroactive to
immediately after the close of business on the record date for the
determination of holders of shares of Common Stock entitled to receive such
dividend or distribution, or (y) in the case of such subdivision,
reclassification or combination, at the close of business on the day upon which
such corporate action becomes effective. No adjustment shall be made pursuant
to this clause (i) in connection with any transaction to which clause (g)
applies.
(ii) In case the Corporation shall issue shares of
Common Stock (or rights, warrants or other securities convertible into or
exchangeable for shares of Common Stock) (collectively, "Additional Shares")
after the Closing Date at a price per share (or having a conversion price per
share) less than the Conversion Price as of the date of issuance of such shares
(or, in the case of convertible or exchangeable securities, less than the
Conversion Price as of the date of issuance of the rights, warrants or other
securities in respect of which shares of Common Stock were issued), then, and
in each such case, the Conversion Price shall be reduced to an amount
determined by multiplying (A) the Conversion Price in effect on the day
immediately prior to such date by (B) a fraction, the numerator of which shall
be the sum of (1) the number of shares of Common Stock Outstanding immediately
prior to such sale or issue multiplied by the then applicable Conversion Price
per share (the "Adjustment Price") and (2) the aggregate consideration
receivable by the Corporation for the total number of shares of Common Stock so
issued (or into or for which the rights, warrants or other convertible
securities may convert or be exercisable), and the denominator of which shall
be the sum of (x) the total number of shares of Common Stock Outstanding
immediately prior to such sale or issue and (y) the number of Additional Shares
issued (or into or for which the rights, warrants or convertible securities may
be converted or exercised), multiplied by the Adjustment Price. An adjustment
made pursuant to this clause (ii) shall be made on the next Business Day
following the date on which any such issuance is made and shall be effective
retroactively to the close of business on the date of such issuance. For
purposes of this clause (ii), the aggregate consideration receivable by the
Corporation in connection with the issuance of shares of Common Stock or of
rights, warrants or other securities convertible into shares of Common Stock
shall be deemed to be equal to the sum of the aggregate offering price (before
deduction of underwriting discounts or commissions and expenses payable to
third parties) of all such Common Stock, rights, warrants and convertible
securities plus the aggregate amount (as determined on the date of issuance),
if any, payable upon exercise or conversion of any such rights, warrants and
convertible securities into shares of Common Stock. If, subsequent to the date
of issuance of such right, warrants or other convertible securities, the
exercise or conversion price thereof is reduced, such aggregate amount shall be
recalculated and the Conversion Price shall be adjusted retroactively to give
effect to such reduction. On the expiration of any option or the termination of
any right to convert or exchange any securities into Additional Shares, the
Conversion Price then in effect hereunder shall forthwith be increased to the
Conversion Price which would have been in effect at the time of such expiration
or termination (but taking into account other adjustments made following the
time of issuance of such options or securities) had such option or security, to
the
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<PAGE>
extent outstanding immediately prior to such expiration or termination, never
been issued. If Common Stock is sold as a unit with other securities, the
aggregate consideration received for such Common Stock shall be deemed to be
net of the Fair Market Value of such other securities. The issuance or
reissuance of (i) any shares of Common Stock or rights, warrants or other
securities convertible into shares of Common Stock (whether treasury shares or
newly issued shares) (A) pursuant to a dividend or distribution on, or
subdivision, combination or reclassification of, the Outstanding shares of
Common Stock requiring an adjustment in the Conversion Price pursuant to clause
(i) of this clause (f); (B) pursuant to any restricted stock or stock option
plan or program of the Corporation involving the grant of options or rights to
acquire Common Stock to directors, officers and employees of the Corporation
and its Subsidiaries so long as the granting of such options or rights has been
approved by the full Board of Directors or a committee of the Board of
Directors on which a director designated by a majority of the holders of the
Series A Preferred Stock is a member; (C) pursuant to any option, warrant,
right, or convertible security outstanding as of the Closing Date, or (ii) the
Series A Preferred Stock, the Series B Preferred Stock, Warrants and any shares
of Common Stock issuable upon conversion or exercise thereof shall not be
deemed to constitute an issuance of Common Stock or convertible securities by
the Corporation to which this clause (ii) applies. No adjustment shall be made
pursuant to this clause (ii) in connection with any transaction to which clause
(g) applies.
(iii) The term "dividend," as used in this clause
(f), shall mean a dividend or other distribution upon the capital stock of the
Corporation.
(iv) Anything in this clause (f) to the contrary
notwithstanding, the Corporation shall not be required to give effect to any
adjustment in the Conversion Price (x) if, in connection with any event which
would otherwise require an adjustment pursuant to this clause (f), the holders
of Series A Preferred Stock have received the dividend or distribution to which
such holders are entitled under Section 2 hereof or (y) unless and until the
net effect of one or more adjustments (each of which shall be carried forward),
determined as above provided, shall have resulted in a change of the Conversion
Price such that the number of shares of Voting Common Stock receivable upon
conversion of each share of Series A Preferred Stock would differ by at least
one one-hundredth of one share of Voting Common Stock, and when the cumulative
net effect of more than one adjustment so determined shall be to change the
Conversion Price by at least one one-hundredth of one share of Voting Common
Stock, such change in Conversion Price shall thereupon be given effect.
(v) The certificate of any firm of independent
public accountants of recognized national standing selected by the Board of
Directors of the Corporation (which may be the firm of independent public
accountants regularly employed by the Corporation) shall be presumptively
correct for any computation made under this clause (f).
(vi) If the Corporation shall take a record of the
holders of its Common Stock for the purpose of entitling them to receive a
dividend or other distribution, and shall thereafter and before the
distribution to stockholders thereof legally abandon its plan to pay or deliver
such dividend or distribution, then thereafter no adjustment in the number of
shares of
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<PAGE>
Common Stock issuable upon exercise of the right of conversion granted by this
clause (f) or in the Conversion Price then in effect shall be required by
reason of the taking of such record.
(g) Adjustment to Conversion Price for Reclassification and
Reorganization. In the case of any consolidation or merger of the Corporation
with or into another corporation (a "Transaction") occurring at any time, each
share of Series A Preferred Stock then outstanding shall thereafter be
convertible into, in lieu of the Voting Common Stock issuable upon such
conversion prior to consummation of such Transaction, the kind and amount of
shares of stock and other securities and property receivable (including cash)
upon the consummation of such Transaction by a holder of that number of shares
of Voting Common Stock into which one share of Series A Preferred Stock was
convertible immediately prior to such Transaction. In case securities or
property other than Voting Common Stock shall be issuable or deliverable upon
conversion as aforesaid, then all references in this Section 8 shall be deemed
to apply, so far as appropriate and nearly as may be, to such other securities
or property.
(h) Notice of Record Date. In case at any time or from time
to time (i) the Corporation shall pay any stock dividend or make any other
non-cash distribution to the holders of its Common Stock, or offer for
subscription pro rata to the holders of its Common Stock any additional shares
of stock of any class or any other right, or (ii) there shall be any capital
reorganization or reclassification of the Common Stock of the Corporation or
consolidation or merger of the Corporation with or into another corporation, or
any sale or conveyance to another corporation of the property of the
Corporation as an entirety or substantially as an entirety, or (iii) there
shall be a voluntary or involuntary dissolution, liquidation or winding up of
the Corporation, then, in any one or more of said cases the Corporation shall
give at least 20 days' prior written notice (the time of mailing of such notice
shall be deemed to be the time of giving thereof) to the registered holders of
the Series A Preferred Stock at the addresses of each as shown on the books of
the Corporation maintained by the Transfer Agent thereof of the date on which
(A) a record shall be taken for such stock dividend, distribution or
subscription rights or (B) such reorganization, reclassification,
consolidation, merger, sale or conveyance, dissolution, liquidation or winding
up shall take place, as the case may be; provided that, in the case of any
Transaction to which clause (g) applies the Corporation shall give at least 30
days' prior written notice as aforesaid. Such notice shall also specify the
date as of which the holders of the Common Stock of record shall participate in
said dividend, distribution or subscription rights or shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, sale or
conveyance or participate in such dissolution, liquidation or winding up, as
the case may be. Failure to give such notice shall not invalidate any action so
taken.
(i) Conversion into Series B Preferred Stock. In addition to
the other provisions of this Section 8, the holders of Series A Preferred Stock
shall be entitled to convert their shares of Series A Preferred Stock into
shares of Series B Preferred Stock under the identical terms, procedures and
restrictions as a holder of shares of Non-Voting Common Stock may convert such
shares into shares of Voting Common Stock except that, for purposes of this
Certificate, the term "Regulated Stockholder" shall also include International
Motor Cars Group II, LLC, Chase Equity Associates, L.P. or any other
stockholder (x) that is subject to the
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<PAGE>
provisions of Regulation Y and (y) that holds shares of Common Stock or
Preferred Stock of the Corporation.
SECTION 9. REPORTS AS TO ADJUSTMENTS.
Upon any adjustment of the Conversion Price then in effect
and any increase or decrease in the number of shares of Voting Common Stock
issuable upon the operation of the conversion provisions set forth in Section
8, then, and in each such case, the Corporation shall promptly deliver to the
Transfer Agent of the Series A Preferred Stock and Voting Common Stock, a
certificate signed by the President or a Vice President and by the Treasurer or
an Assistant Treasurer or the Secretary or an Assistant Secretary of the
Corporation, setting forth in reasonable detail the event requiring the
adjustment and the method by which such adjustment was calculated and
specifying the Conversion Price then in effect following such adjustment and
the increased or decreased number of shares issuable upon a conversion
following such adjustment, and shall set forth in reasonable detail the method
of calculation of each and a brief statement of the facts requiring such
adjustment. Where appropriate, such notice to holders of the Series A Preferred
Stock may be given in advance and included as part of the notice required under
the provisions of Section 8(h).
SECTION 10. CERTAIN COVENANTS.
Any registered holder of Series A Preferred Stock may proceed
to protect and enforce its rights and the rights of such holders by any
available remedy by proceeding at law or in equity to protect and enforce any
such rights, whether for the specific enforcement of any provision in this
Certificate of Designation or in aid of the exercise of any power granted
herein, or to enforce any other proper remedy.
SECTION 11. DEFINITIONS.
For the purpose of this Certificate of Designation of Series
A Convertible Preferred Stock, the following terms shall have the meanings
indicated:
"Board of Directors" shall mean the board of directors of the
Corporation.
"Business Day" shall mean any day other than a Saturday,
Sunday, or a day on which banking institutions in the States of New
York are authorized or obligated by law or executive order to close.
"Closing Date" shall mean the date on which the closing of
the transactions contemplated by the Securities Purchase Agreement
occurred.
"Commission" shall mean the Securities and Exchange
Commission.
"Conversion Date" shall have the meaning as set forth in
Section 8(b) hereof.
"Conversion Price" shall mean the Initial Conversion Price,
subject to adjustment as provided in Section 8.
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<PAGE>
"Current Market Price," when used with reference to shares of
Common Stock or other securities on any date, shall mean the closing
sale price per share of Common Stock or such other securities on such
date and, when used with reference to shares of Common Stock or other
securities for any period shall mean the average of the daily closing
sale prices per share of Common Stock or such other securities for
such period. If the Common Stock is listed or admitted to trading on a
national securities exchange, the closing price shall be the closing
sale price, regular way, as reported in the principal consolidated
transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if the Common
Stock or such other securities are not listed or admitted to trading
on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the
Common Stock or such other securities are listed or admitted to
trading. The closing price for each day shall be the closing sale
price in the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc. Automated Quotation System or
such other system then in use, or, if on any such date the Common
Stock or such other securities are not quoted by any such
organization, the closing sale price as furnished by a professional
market maker making a market in the Common Stock or such other
securities selected by the Board of Directors of the Corporation. If
the Common Stock or such other securities are not publicly held or so
listed or publicly traded, "Current Market Price" shall mean the Fair
Market Value per share of Common Stock or of such other securities as
determined in good faith by the Board of Directors of the Corporation
based on an opinion of an independent investment banking firm
acceptable to holders of a majority of the shares of Series A
Preferred Stock, which opinion may be based on such assumptions as
such firm shall deem to be necessary and appropriate.
"Fair Market Value" shall mean, as to shares of Common Stock
or any other class of capital stock or securities of the Corporation
or any other issuer which are publicly traded, the average of the
Current Market Prices of such shares of securities for each day of the
Adjustment Period. The "Fair Market Value" of any security which is
not publicly traded or of any other property shall mean the fair value
thereof as determined by an independent investment banking or
appraisal firm experienced in the valuation of such securities or
property selected in good faith by the Board of Directors or a
committee thereof.
"Indenture" shall mean the Indenture, dated as of July 23,
1997, between United Auto Group, Inc., the Guarantors Party thereto
and the Bank of New York, as Trustee and the Indenture, dated as of
September 16, 1997, between United Auto Group, Inc., the Guarantors
Party thereto and the Bank of New York, as Trustee.
"Initial Closing" shall have the meaning ascribed to such
term in the Securities Purchase Agreement.
"Initial Conversion Price" shall have the meaning as set
forth in Section 8(e) hereof.
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<PAGE>
"Junior Stock" shall mean any capital stock of the
Corporation ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred
Stock.
"Liquidation Preference" with respect to a share of Series A
Preferred Stock shall mean $9,000.00 (which amount shall be increased
to $10,000.00 at the Second Closing, or such other economically
equivalent amount reflecting any adjustment to the Liquidation
Preference between the Initial Closing and the Second Closing) (as
adjusted for any stock dividends, combinations or splits with respect
to such share), plus an amount equal to all accrued but unpaid
dividends (whether or not declared) on such share.
"Outstanding" shall mean, when used with reference to Common
Stock, at any date as of which the number of shares thereof is to be
determined, fully diluted shares of Common Stock (calculated as
prescribed by generally accepted accounting principles), except shares
then owned or held by or for the account of the Company or any
subsidiary thereof.
"Parity Stock" shall mean any capital stock of the
Corporation ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred
Stock.
"Person" shall mean any individual, firm, corporation,
partnership or other entity, and shall include any successor (by
merger or otherwise) of such entity.
"Second Closing" shall have the meaning ascribed to such term
in the Securities Purchase Agreement.
"Securities Purchase Agreement" shall mean the securities
purchase agreement, dated as of April 12, 1999, between the
Corporation and International Motor Cars Group I, L.L.C. and
International Motor Cars Group II, L.L.C.
"Trading Day" means a Business Day or, if the Common Stock is
listed or admitted to trading on any national securities exchange, a
day on which such exchange is open for the transaction of business.
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<PAGE>
IN WITNESS WHEREOF, the officers named below, acting for and
on behalf of United Auto Group, Inc., have hereunto subscribed their names on
this 30th day of April, 1999.
UNITED AUTO GROUP, INC.
By: /s/ James Davidson
---------------------------------------------
Name: James Davidson
Title: Executive Vice President -- Accounting
and Fixed Operations
Attest:
By: /s/ Tambra S. King
------------------------------------
Name: Tambra S. King
Title: Vice President and Secretary
<PAGE>
EXECUTION COPY
NON-COMPETITION AND STANDSTILL AGREEMENT
THIS NON-COMPETITION AND STANDSTILL AGREEMENT (this "Agreement")
is entered into as of this 12th day of April, 1999, between United Auto Group,
Inc., a Delaware corporation (the "Company") and Marshall S. Cogan ("Cogan").
WHEREAS, on the date hereof, the Company has entered into a
Securities Purchase Agreement (the "Securities Purchase Agreement") with
International Motor Cars Group I, L.L.C. and International Motor Cars Group II,
L.L.C. (together, the "Purchaser");
WHEREAS, in connection with the transactions contemplated under
the Securities Purchase Agreement and the other agreements referred to therein,
the parties hereto wish to set forth the agreements herein.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, the parties hereto agree as follows:
1. Definitions. Capitalized terms used herein without being
otherwise defined shall have the meanings assigned thereto in the Securities
Purchase Agreement.
2. Resignation. Subject to Section 5(b) below, Cogan shall resign
as the Chief Executive Officer of the Company effective as of the date of the
Initial Closing.
3. Non-Competition.
(a) No Competing Business. Cogan acknowledges that (i) the
agreements and covenants contained in this Section 3 are essential to
protect the value of the Company's business and assets and (ii) by
virtue of his employment and affiliation with the Company, Cogan has
obtained knowledge, trade secrets, know-how, financial or other data,
business plans, customer and supplier lists, training and experience
(collectively, "Proprietary Information"), and there is a substantial
probability that such Proprietary Information could be used to the
substantial advantage of a competitor of the Company and to the
Company's substantial detriment. Cogan also acknowledges that the
Company has entered into this Agreement and that the Purchaser has
entered into the Securities Purchase Agreement in reliance, in part, on
the covenants made by Cogan in this Section 3. Therefore, Cogan agrees
that, for the period commencing on the date of the Initial Closing and
ending on December 31, 2005 (the
<PAGE>
"Restricted Period"), Cogan shall not, (a) in any location where the
Company or any subsidiary of the Company or any predecessor to the
business of the Company or such subsidiary has conducted business during
the Restricted Period, (b) in any location in which the Company or any
of its subsidiaries then specifically intends to conduct business, or
(c) within the continental United States or Puerto Rico, participate or
engage, directly or indirectly, for himself or on behalf of or in
conjunction with any person, corporation, partnership or other entity,
whether as an employee, agent, or investor with a greater than ten
percent (10%) equity interest, in any business activities (a
"Competitive Activity") if such activity constitutes the production,
distribution, sale, service or provision of products or services that
are similar to products or services then being produced, distributed,
sold, serviced or otherwise provided by the Company or any of its
subsidiaries as of the date of this Agreement.
(b) Nondisclosure of Confidential Information. From and after the
date hereof, Cogan shall not disclose to any person (other than members
of the Company's Board of Directors or persons in a confidential
relationship with him, such as his legal or financial advisors) or
entity or use any information not in the public domain, in any form,
acquired or developed by Cogan while employed by the Company, relating
to the Company or its Affiliates, including but not limited to the
Proprietary Information. Cogan agrees and acknowledges that all of such
information, in any form, and copies and extracts thereof are and shall
remain the sole and exclusive property of the Company, and Cogan shall,
promptly following the date of this Agreement, return to the Company the
originals and all copies of any such information provided to or acquired
by Cogan in connection with the performance of his duties for the
Company, in each case, other than such information reasonably necessary
for Cogan to fulfill his ongoing duties as a member of the Company's
Board of Directors.
(c) No Interference. During the Restricted Period, Cogan shall
not, whether for his own account or for the account of any other
individual, partnership, firm, corporation or other business
organization, intentionally solicit, endeavor to entice away from the
Company or any of its subsidiaries, or otherwise interfere with the
relationship of the Company or any of its subsidiaries with, any person
who, to the knowledge of Cogan, is employed by or otherwise engaged to
perform services for the Company or any of its subsidiaries.
4. Standstill. (a) Subject to Section 4(b), from and after the
date of this Agreement until the third anniversary of the date of the Initial
Closing, Cogan shall not, and shall cause his Affiliates and associates not to,
either alone or as part of
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<PAGE>
a "group" (as such term is used in Section 13d-5 (as such rule is currently in
effect) of the Exchange Act), directly or indirectly:
(i) acquire or seek to acquire, by purchase or otherwise,
ownership (including, but not limited to, Beneficial Ownership (such
term, as used herein, being used as defined in Rule 13d-5 promulgated
under the Exchange Act)) of (A) any capital stock of the Company, or
direct or indirect rights (including convertible securities) or options
to acquire such capital stock or (B) any of the assets or businesses of
the Company, or direct or indirect rights or options to acquire such
assets or businesses;
(ii) offer, seek or propose to enter into any transaction of
merger, consolidation, sale of substantial assets or any other business
combination involving the Company or any of its Affiliates;
(iii) make, or in any way participate, directly or indirectly, in
any "solicitation" of "proxies" (as such terms are defined or used in
Regulation 14A under the Exchange Act) or become a "participant" in any
"election contest" (as such terms are defined or used in Rule 14a-11
under the Exchange Act) to vote, or seek to advise or influence any
person or entity with respect to the voting of, any voting securities of
the Company of any of its Affiliates, except as set forth in Article II
of the Stockholders Agreement to be entered into on the date of the
Initial Closing by and among the Company, the Purchaser, and certain of
the Company's other stockholders (the "Stockholders Agreement");
(iv) initiate or propose any stockholder proposals for submission
to a vote of stockholders, whether by action at a stockholder meeting or
by written consent, with respect to the Company or any of its
Affiliates, or except as provided in the Stockholders Agreement propose
any person for election to the Board of Directors of the Company;
(v) disclose to any third party, or make any filing under the
Exchange Act, including, without limitation, under Section 13(d)
thereof, disclosing, any intention, plan or arrangement inconsistent
with the foregoing;
(vi) form, join or in any way participate in a group to take any
actions otherwise prohibited by the terms of this Agreement;
(vii) enter into any discussions, negotiations, arrangements or
understandings with any third party with respect to any of the
foregoing; or
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<PAGE>
(viii) make any public announcement with respect to any of the
foregoing.
(b) Notwithstanding Section 4(a) hereof, the provisions of such
Section 4(a) shall not prohibit:
(i) any transaction approved by either (A) a majority of the
members of the Company's Board of Directors who are neither designated
by or otherwise Affiliated with Trace International Holdings, Inc.
("Trace"), or (B) a majority of the stockholders of the Company other
than Trace and its Affiliates;
(ii) any shares of capital stock or options or other rights to
acquire such capital stock granted or to be granted pursuant to
agreements between the Company and Cogan or his Affiliates in effect on
the date hereof;
(iii) the issuance to Cogan of any shares of the Company's
capital stock or options or other rights to acquire such capital stock
pursuant to a dividend or other distribution to the holders of such
capital stock generally;
(iv) the issuance to Cogan of any shares of the Company's capital
stock or options or other rights to acquire such capital stock as
compensation for Cogan's service as a member of the Company's Board of
Directors or any committee thereof; or
(v) the issuance to Cogan of the options described in Section 6
of this Agreement and the receipt of Common Stock upon exercise of stock
options.
5. Termination. In the event that (i) the Second Closing does not
occur on or prior to December 31, 1999 or (ii) the Purchaser exercises its right
under Sections 7.2 or 7.4 of the Securities Purchase Agreement, then, in either
case: (a) this Agreement (including, without limitation, the Company's payment
obligations to Cogan pursuant to Section 6 hereof and the restrictions imposed
on Cogan in Section 3 hereof) shall terminate from and after the date of such
termination or such exercise as applicable, and thereafter shall be of no
further effect and (b) the Company shall reinstate Cogan as Chief Executive
Officer of the Company, with the same salary, bonus, benefits and other
compensation (in each case, commencing as of the date of such reinstatement) as
Cogan was entitled to for the 1999 fiscal year.
6. Consideration. In consideration for the terms herein, the
Company shall pay Cogan: (a) from and after the date of Cogan's resignation
pursuant to Section 2 above until December 31, 1999, Cogan's current base
salary; (b) from and after January 1, 2000 until December 31, 2005, an amount
equal to $750,000 per annum, payable bi-weekly; (c) on the date of the Second
Closing,
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<PAGE>
(i) a cash payment of $250,000 and (ii) fully vested options to purchase 400,000
shares of the Company's common stock at an exercise price of $10.00 per share.
In addition, the Company shall pay to Cogan 25% of any compensation or bonus
directly or indirectly paid by the Company to or applied for Mr. Roger Penske
during the Restricted Period in cash, stock, options, warrants or other
remuneration; provided however, that this provision shall not apply to the
initial grant of 400,000 options to Mr. Penske. Cogan acknowledges that no
amounts shall be payable to Cogan pursuant to the immediately preceding sentence
unless and until any such bonus payment is actually made to or applied for the
benefit of Mr. Penske. The Company shall, during the Restricted Period, provide
semi-annual statements to Cogan showing all compensation received by Mr. Penske
in the two preceding quarters not later than thirty (30) days after the
conclusion of such period. In the event that the Company defaults under this
Agreement, Cogan shall be entitled to accelerate and demand the immediate
payment of all remaining amounts due to him under this Agreement, provided that
such acceleration and demand shall not take place until 30 days following
receipt by the Company of written notice from or on behalf of Cogan specifying
such default, and only if such default is not cured as of the end of such 30-day
period. If such default is not so cured as of the end of such 30-day period,
Cogan shall thereafter no longer be subject to any obligations or restrictions
hereunder (including, without limitation, Cogan's covenants and agreements in
Section 3 and 4 hereof) until such time as the Company pays in full to Cogan all
amounts due (following acceleration, as described in the immediately preceding
sentence).
7. Withholding of Taxes. The Company may withhold from any
amounts payable under this Agreement all federal, state, city or other taxes as
shall be required pursuant to any law or government regulation or ruling.
8. Notices. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given (a) when delivered
personally to the recipient, (b) when sent to the recipient by telecopy (receipt
electronically confirmed by sender's telecopy machine) if during normal business
hours of the recipient, otherwise on the next business day, (c) one business day
after the date when sent to the recipient by reputable express courier service
(charges prepaid), or (d) seven business days after the date when mailed to the
recipient by certified or registered mail, return receipt requested and postage
prepaid. Such notices, demands and other communications shall be sent to the
parties at the addresses indicated below:
If to Cogan, to:
810 Fifth Avenue
New York, New York 10021
-5-
<PAGE>
With a copy to:
Chester Salomon
919 Third Avenue
New York, New York 10022-3904
Telecopy: (212) 319-8505
(which shall not
constitute notice)
If to the Company, to:
United Auto Group, Inc.
375 Park Avenue
New York, New York 10152
Telecopy: (212) 593-1303
Attention: Philip N. Smith, Jr., Esq.
General Counsel
With a copy to:
(which shall not
constitute notice)
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019
Telecopy: (212) 728-8111
Attention: Maurice M. Lefkort, Esq.
9. Amendments; Waiver. The terms, provisions and conditions of
this Agreement may not be changed, modified, waived or amended in any manner
except by an instrument in writing duly executed by both of the parties hereto.
10. Prior Agreements. Effective upon the date of the Initial
Closing, any and all agreements relating to the subject matter hereof previously
entered into between the Company and Cogan are hereby mutually terminated and
canceled, and each of the parties mutually releases and discharges the other
from any and all obligations and liabilities whatsoever existing under it by
reason of any such agreements, it being the intention of the Company and Cogan
that this Agreement shall supersede and be in place of any and all prior
agreements or understandings between them other than those relating to
indemnification for acts as an officer or director.
-6-
<PAGE>
11. Descriptive Headings. The descriptive headings of the several
sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
12. Counterparts. For the convenience of the parties, any number
of counterparts of this Agreement may be executed by any one or more parties
hereto, and each such executed counterpart shall be, and shall be deemed to be,
an original, but all of which shall constitute, and shall be deemed to
constitute, in the aggregate but one and the same instrument.
13. Governing Law; Jurisdiction.
(a) This Agreement and the legal relations between the parties
hereto shall be governed by and construed in accordance with the laws of
the State of New York, applicable to contracts made and performed
therein.
(b) Each of the parties hereto hereby irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the
courts of the State of New York and the United States of America located
in the County of New York for any action or proceeding arising out of or
relating to this Agreement and the transactions contemplated hereby (and
agrees not to commence any action or proceeding relating thereto except
in such courts), and further agrees that service of any process,
summons, notice or document by U.S. registered mail to his or its
respective address set forth in Section 8 hereof shall be effective
service of process for any action or proceeding brought against it in
any such court. Each of the parties hereto hereby irrevocably and
unconditionally waives any objection to the laying of venue of any
action or proceeding arising out of this Agreement or the transactions
contemplated hereby in the courts of the State of New York or the United
States of America located in the County of New York, and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim
in any such court that any such action or proceeding brought in any such
court has been brought in an inconvenient forum.
14. Severability. In the event that any one or more of the
provisions contained in this Agreement or in any other instrument referred to
herein, shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument. Furthermore, in lieu of any such invalid
or unenforceable term or provision, the parties hereto intend that there shall
be added as a part of this Agreement a provision as similar in terms to such
invalid or unenforceable provision as may be possible and be valid and
enforceable. If any of the covenants set forth in Section 3 of this Agreement
are held to be unreasonable, arbitrary, or against
-7-
<PAGE>
public policy, such covenants will be considered divisible with respect to
scope, time, and geographic area, and in such lesser scope, time and geographic
area, will be effective, binding and enforceable against Cogan.
[The remainder of this page intentionally left blank.]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
UNITED AUTO GROUP, INC.
By: /s/ Samuel X. DiFeo
----------------------------
Name: Samuel X. DiFeo
Title: Senior Vice President
/s/ Marshall S. Cogan
----------------------------
Marshall S. Cogan
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<PAGE>
EXECUTION COPY
===============================================================================
UNITED AUTO GROUP, INC.
STOCKHOLDERS AGREEMENT
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.
Dated as of May 3, 1999
===============================================================================
<PAGE>
0583844
(ii)
TABLE OF CONTENTS
<TABLE>
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Page #
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<S> <C>
ARTICLE I. DEFINITIONS 1
Section 1.1. Definitions 1
Section 1.2. Rules of Construction............................................................................3
ARTICLE II. BOARD COMPOSITION AND VOTING AGREEMENTS..............................................................4
Section 2.1. Board Composition from the Initial Closing Date through the Second Closing Date..................4
Section 2.2. Board Composition from the Second Closing Date...................................................4
Section 2.3. Composition of Committees of the Board of Directors..............................................5
Section 2.4. Voting Agreement.................................................................................5
Section 2.5. Reduction in Right of PCP Entities to Designate Directors........................................5
Section 2.6. Suspension of Right to Designate Directors.......................................................6
Section 2.7. Replacement Directors............................................................................6
Section 2.8. Resignation of PCP Directors.....................................................................7
Section 2.9. Termination of Article II........................................................................7
ARTICLE III. STANDSTILL PROVISIONS...............................................................................7
Section 3.1. Standstill Provisions............................................................................7
Section 3.2. Exceptions to the Standstill Provisions..........................................................8
ARTICLE IV. TRANSFER RESTRICTIONS................................................................................9
Section 4.1. Restrictions on Transfer of Restricted Securities................................................9
Section 4.2. Tag-Along Rights.................................................................................9
Section 4.3. Transferees; Noncomplying Transfers.............................................................10
Section 4.4. Restrictions on Transfers of Interests in the PCP Entities......................................10
ARTICLE V. CERTAIN COVENANTS....................................................................................11
Section 5.1. Legend on Certificates..........................................................................11
Section 5.2. Roger Penske to Serve as Chairman and Chief Executive Officer...................................11
Section 5.3. Approval of Company Action Under the Securities Purchase Agreement.................................12
Section 5.4. Trace Shelf Registration Statement...............................................................12
Section 5.5. Further Assurances..............................................................................12
(i)
<PAGE>
ARTICLE VI. MUTUAL REPRESENTATIONS AND WARRANTIES...............................................................12
Section 6.1. Organization....................................................................................12
Section 6.2. Authorization, Validity and Enforceability......................................................12
Section 6.3. No Violation or Breach..........................................................................13
Section 6.4. Beneficial Ownership of Common Stock............................................................13
ARTICLE VII. TERM................................................................................................13
Section 7.1. Term............................................................................................13
Section 7.2. Effects of Termination..........................................................................14
ARTICLE VIII. MISCELLANEOUS PROVISIONS..........................................................................14
Section 8.1. Survival........................................................................................14
Section 8.2. Notices.........................................................................................14
Section 8.3. Amendments......................................................................................15
Section 8.4. Assignment and Parties in Interest..............................................................15
Section 8.5. Expenses........................................................................................16
Section 8.6. Entire Agreement................................................................................16
Section 8.7. Descriptive Headings............................................................................16
Section 8.8. Counterparts....................................................................................16
Section 8.9. Governing Law; Jurisdiction.....................................................................16
Section 8.10. Severability....................................................................................17
Section 8.11. Specific Performance............................................................................17
Schedule 6.3 - Conflicts
Schedule 6.4 - Equity Ownership
</TABLE>
(ii)
<PAGE>
STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT (the "Agreement") dated as of May 3,
1999 by and among AIF II, L.P., a Delaware limited partnership ("Apollo"),
Aeneas Venture Corporation, a Delaware corporation ("Harvard"), International
Motor Cars Group I, L.L.C. ("PCP I"), International Motor Cars Group II, L.L.C.
("PCP II" and, together with PCP I, the "PCP Entities"), Trace International
Holdings, Inc. ("Trace" and together with Apollo, Harvard and the PCP Entities,
the "Restricted Stockholders"), and United Auto Group, Inc. (the "Company").
WHEREAS, pursuant to the terms of a Securities Purchase
Agreement, between the Company and the PCP Entities, dated as of April 12, 1999
(the "Securities Purchase Agreement"), the PCP Entities are acquiring Series A
Convertible Preferred Stock, par value $.0001 per share, of the Company (the
"Series A Preferred Stock"), Series B Convertible Preferred Stock, par value
$.0001 per share (the "Series B Preferred Stock") and warrants (the "Warrants")
to acquire the Company's voting Common Stock, par value $.0001 per share, and
non-voting Common Stock, par value $.0001 per share (together, the "Common
Stock"), of the Company;
WHEREAS, Apollo, Harvard and Trace are existing stockholders
of the Company; and
WHEREAS, the parties wish to provide for certain matters
relating to the ownership and transfer of the Common Stock.
NOW, THEREFORE, in consideration of the premises, the mutual
covenants and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.1. DEFINITIONS. Unless otherwise defined herein,
the terms defined in the introductory paragraph and the Recitals to this
Agreement shall have the respective meanings specified therein, and the
following terms shall have the meanings specified below:
"Adjusted Beneficial Ownership" is defined in Section 2.5.
"Affiliate" means affiliate as defined in Rule 405
promulgated under the Securities Act.
"Apollo" has the meaning set forth in the preamble.
<PAGE>
"Beneficial Ownership" means "beneficial ownership" as
defined in Rule 13d-5 promulgated under the Exchange Act. The term
"Beneficial Owner" shall have a correlative meaning.
"Business Day" means a calendar day, other than (a) a
Saturday or Sunday and (b) a day on which commercial banks are
required or permitted by law or other governmental action to close in
New York, New York, United States of America.
"Common Stock" has the meaning set forth in the recitals
hereto, and includes any securities issued with respect to such shares
by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, amalgamation, merger,
consolidation or other reorganization or otherwise.
"Company" has the meaning set forth in the recitals hereto.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Harvard" has the meaning set forth in the recitals hereto.
"Independent Directors" (a) initially means two persons who
were members of the Audit Committee of the Company's Board of
Directors as of December 31, 1998 and who shall be selected by a
majority of said Audit Committee and (b) after the Initial Closing
Dates means persons nominated by the immediately preceding Independent
Directors who are not Affiliates of either the PCP Entities or their
respective Affiliates (other than the Company).
"Initial Closing Date" means the date of the "Initial
Closing" (as defined in the Securities Purchase Agreement).
"PCP Directors" has the meaning set forth in Section 2.1.
"PCP Entities" has the meaning set forth in the recitals
hereto.
"PCP I" has the meaning set forth in the recitals hereto.
"PCP II" has the meaning set forth in the recitals hereto.
"Permitted Transferee" of a person means (i) a corporation,
partnership or other entity wholly owned by such person; provided that
such corporation, partnership or
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<PAGE>
other entity shall agree in writing that it shall transfer to such
person any Restricted Securities which it holds prior to such time as
it ceases to be wholly owned by such person, and (ii) the equity
owners of such person to the extent such equity owners receive a pro
rata distribution of Restricted Securities.
"Restricted Securities" means any Common Stock or other
equity security of the Company Beneficially Owned by a Restricted
Stockholder and any securities convertible, exercisable or
exchangeable for Common Stock or such other equity securities,
including, without limitation, the Series A Preferred Stock and the
Warrants.
"Restricted Stockholder" has the meaning set forth in the
preamble.
"Second Closing Date" means the date of the "Second Closing"
(as defined in the Securities Purchase Agreement).
"Securities Act" means the Securities Act of 1933, as
amended.
"Securities Purchase Agreement" has the meaning set forth in
the recitals hereto.
"Series A Preferred Stock" has the meaning set forth in the
recitals hereto.
"Series B Preferred Stock" has the meaning set forth in the
recitals hereto.
"Tag-Along Notice" is defined in Section 4.2.
"Tag-Along Stockholders" is defined in Section 4.2.
"Trace" has the meaning set forth in the recitals hereto.
"Transfer" means any direct or indirect transfer, sale,
assignment, gift, pledge, mortgage, hypothecation or other disposition
of any interest. The term "Transferee" shall have a correlative
meaning.
"Warrants" has the meaning set forth in the recitals hereto.
SECTION 1.2. RULES OF CONSTRUCTION. Unless the context
otherwise requires: (a) a term has the meaning assigned to it by this
Agreement; (b) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting principles in
effect in the United States of America; (c) "or" is not exclusive; and (d)
words in
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<PAGE>
the singular include the plural, and in the plural include the singular. The
language used in this Agreement shall be deemed to be the language chosen by
the parties to express their mutual intent, and no rule of strict construction
shall be applied against any party. Any references to any statute or law shall
also refer to all rules and regulations promulgated thereunder, unless the
context requires otherwise.
ARTICLE II.
BOARD COMPOSITION AND VOTING AGREEMENTS
SECTION 2.1. BOARD COMPOSITION FROM THE INITIAL CLOSING DATE
THROUGH THE SECOND CLOSING DATE. From the Initial Closing Date through and
including the Second Closing Date, the Restricted Stockholders shall use their
reasonable best efforts to have the Board of Directors of the Company consist
of seven (7) persons as follows:
(a) Roger Penske, and two (2) additional directors nominated
by the PCP Entities (nominating as a single group) (Mr. Penske and any
additional directors nominated by the PCP Entities are collectively
referred to as the "PCP Directors").
(b) One (1) director nominated by Trace.
(c) The chief operating officer of the Company as of the date
immediately prior to the Initial Closing Date, or in his absence,
another person designated by the Independent Directors.
(d) Two (2) Independent Directors.
SECTION 2.2. BOARD COMPOSITION FROM THE SECOND CLOSING DATE.
The Restricted Stockholders shall use their reasonable best efforts to:
(a) Prior to the Second Closing Date:
(i) expand the size of the Board of Directors of the
Company to nine (9) persons effective as of the Second
Closing Date; and
(ii) nominate for election by the Company's
stockholders two additional PCP Directors to fill the
vacancies created by the expansion of the size of the Board
of Directors.
(b) On the Second Closing Date, fill the vacancies created by
the expansion of the size of the Board of Directors with the directors
elected by the stockholders.
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<PAGE>
(c) From and after the earlier of (x) the first meeting of
stockholders of the Company following the Second Closing Date, and (y)
the first vacancy on the Board of Directors following the Second
Closing Date, cause the Board of Directors to consist of:
(i) Roger Penske, and four (4) additional PCP
Directors.
(ii) One (1) director nominated by Trace.
(iii) Three (3) Independent Directors.
SECTION 2.3. COMPOSITION OF COMMITTEES OF THE BOARD OF
DIRECTORS.
(a) From the Initial Closing Date through the Second Closing
Date, the Restricted Stockholders shall use their reasonable best
efforts to have PCP Directors appointed to committees of the Board of
Directors of the Company as follows:
(i) PCP Directors shall be appointed to constitute
no less than one-half of the members of the Executive
Committee, if any.
(ii) One PCP Director shall be appointed to each
other committee of the Board of Directors and other members
of which not less than 2 (two) shall be Independent
Directors.
(b) From and after the Second Closing Date, the Restricted
Stockholders shall use their reasonable best efforts to have the
Compensation Committee of the Board of Directors of the Company
consist of four persons as follows:
(i) Roger Penske and one (1) additional PCP
Director.
(ii) Two (2) Independent Directors.
SECTION 2.4. VOTING AGREEMENT. Each of the Restricted
Stockholders agrees to vote all of the voting securities of the Company
Beneficially Owned by it in favor of the persons to be nominated as directors
pursuant to Section 2.1 or 2.2, and to take all other reasonable action to
cause such Persons to be elected as the only directors of the Company.
SECTION 2.5. REDUCTION IN RIGHT OF PCP ENTITIES TO DESIGNATE
DIRECTORS. Notwithstanding anything to the contrary contained in this
Agreement, at such time after the Second Closing Date as the percentage
Beneficial Ownership in the Company of the PCP Entities, taken together, and
excluding Common
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<PAGE>
Stock Beneficially Owned as a result of unexercised Warrants ("Adjusted
Beneficial Ownership") is reduced below 20% then the number of PCP Directors
shall be reduced to the applicable number in the chart below:
If such Adjusted
Beneficial Ownership No. of PCP Directors
is equal to or to be designated
greater than: but less than thereafter
- --------------------- ------------- --------------------
17.5% 20.0% 4
15.0% 17.5% 3
12.5% 15.0% 2
10.0% 12.5% 1
The number of PCP Directors to be designated shall be further reduced
as such Adjusted Beneficial Ownership is further reduced, as provided in the
chart above. Any reduction resulting from application of this Section 2.5 shall
take place on the earlier to occur of (x) the first meeting of stockholders of
the Company following the determination of such reduction, and (y) the first
vacancy on the Board of Directors following the determination of such
reduction.
SECTION 2.6. SUSPENSION OF RIGHT TO DESIGNATE DIRECTORS.
Notwithstanding anything to the contrary contained in this Agreement, the right
of the PCP Entities or Trace to designate directors of the Company shall be
suspended at such time as either:
(a) such Restricted Stockholder's Beneficial Ownership in the
Company (with respect to the PCP Entities, their Adjusted Beneficial
Ownership) is reduced below 10%; or
(b) in the case of the PCP Entities, if either (i) they are
in default of Section 5.2(b) other than as a result of the death,
incapacity, or capture and detention of Mr. Penske, or (ii) one or
both of the PCP Entities has requested that the Company repurchase all
or a portion of its Restricted Securities pursuant to the terms of the
Securities Purchase Agreement.
SECTION 2.7. REPLACEMENT DIRECTORS . During such time as the
right of either the PCP Entities or Trace to nominate directors is reduced or
suspended pursuant to Section 2.5 or 2.6, the Restricted Stockholders shall use
their reasonable best efforts to have the successors to such directors both:
(a)be selected by a majority of the remaining Board of Directors,
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<PAGE>
excluding the director whose position is no longer entitled to be designated by
Trace or the PCP Entities, and (b) not be Affiliates of the PCP Entities and
their Affiliates (other than the Company and its subsidiaries).
SECTION 2.8. RESIGNATION OF PCP DIRECTORS . Upon exercise by
the PCP Entities of their right pursuant to Section 7.2 or 7.4 of the
Securities Purchase Agreement, the PCP Entities shall cause all of the PCP
Directors to immediately resign as members of the Board of Directors of the
Company.
SECTION 2.9. TERMINATION OF ARTICLE II. The provisions
contained in this Article II shall terminate and be of no further effect from
and after the third anniversary of the Initial Closing Date.
ARTICLE III.
STANDSTILL PROVISIONS
SECTION 3.1. STANDSTILL PROVISIONS. Subject to Section 3.2,
at any time prior to the third anniversary of the Initial Closing Date, each
Restricted Stockholder shall not, and shall cause its Affiliates not to, either
alone or as part of a "group" (as such term is used in Section 13d-5 (as such
rule is currently in effect) of the Exchange Act), directly or indirectly:
(a) acquire or seek to acquire, by purchase or otherwise,
ownership (including, but not limited to, Beneficial Ownership) of (i)
any capital stock of the Company, or direct or indirect rights
(including convertible securities) or options to acquire such capital
stock or (ii) any of the assets or businesses of the Company, or
direct or indirect rights or options to acquire such assets or
businesses;
(b) offer, seek or propose to enter into any transaction of
merger, consolidation, sale of substantial assets or any other
business combination involving the Company or any of its Affiliates,
whether or not any parties other than such Restricted Stockholder and
its Affiliates are involved;
(c) make, or in any way participate, directly or indirectly,
in any "solicitation" of "proxies" (as such terms are defined or used
in Regulation 14A under the Exchange Act) or become a "participant" in
any "election contest" (as such terms are defined or used in Rule
14a-11 under the Exchange Act) to vote, or seek to advise or influence
any person or entity with respect to the voting of, any voting
securities of the Company of any of its
- 7 -
<PAGE>
Affiliates, except as set forth in Article II of this Agreement;
(d) initiate or propose any stockholder proposals for
submission to a vote of stockholders, whether by action at a
stockholder meeting or by written consent, with respect to the Company
or any of its Affiliates, or except as provided in this Agreement
propose any person for election to the Board of Directors of the
Company;
(e) disclose to any third party, or make any filing under the
Exchange Act, including, without limitation, under Section 13(d)
thereof, disclosing, any intention, plan or arrangement inconsistent
with the foregoing;
(f) form, join or in any way participate in a group to take
any actions otherwise prohibited by the terms of this Agreement;
(g) enter into any discussions, negotiations, arrangements or
understandings with any third party with respect to any of the
foregoing; or
(h) make any public announcement with respect to any of the
foregoing.
SECTION 3.2. EXCEPTIONS TO THE STANDSTILL PROVISIONS.
Notwithstanding the foregoing, the provisions of Section 3.1 shall not
prohibit:
(a) any transaction by a Restricted Stockholder approved by
either (i) a majority of the members of the Board of Directors who are
neither designated by such Restricted Stockholder nor otherwise
affiliated with such Restricted Stockholder, or (ii) a majority of the
stockholders of the Company other than such Restricted Stockholder and
its Affiliates;
(b) in the case of the PCP Entities, the acquisition of
securities pursuant to the terms of the Securities Purchase Agreement;
(c) in the case of the PCP Entities, Harvard and Apollo, the
acquisition of securities or of Beneficial Ownership of securities if,
after giving effect to such acquisition, the Beneficial Ownership of
such Restricted Stockholder in the Company is less than or equal to
49%;
(d) in the case of the PCP Entities, a tender offer for all,
but not less than all, of the outstanding Common Stock of the Company
or a merger with or into the Company;
(e) the granting by the Board of Directors of options to
Affiliates of Restricted Stockholders; or
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<PAGE>
(f) the exercise of stock options.
ARTICLE IV.
TRANSFER RESTRICTIONS
SECTION 4.1. RESTRICTIONS ON TRANSFER OF RESTRICTED
SECURITIES. Until the third anniversary of the Initial Closing Date, neither of
the PCP Entities nor Trace shall Transfer any of its Restricted Securities
except:
(a) as part of a merger, consolidation or amalgamation of the
Company or a tender offer for Common Stock of the Company which is
open to all stockholders of the Company;
(b) in the case of a PCP Entity, a Transfer of Common Stock
in compliance with Section 4.2 of this Agreement to a Transferee that
has agreed to comply with the provisions of Section 4.2.
(c) to a Permitted Transferee who shall have become a party
to this Agreement by executing a signature page hereto and delivering
such signature page to the Company and the other Restricted
Stockholders, which execution and delivery shall constitute an
agreement by such Permitted Transferee that it and the Restricted
Securities that it acquires shall be bound by and entitled to the
benefits of this Agreement;
(d) pursuant to a Brokers' Transaction (as such term is
defined in Rule 144(g) under the Securities Act) or pursuant to an
underwritten public offering of Common Stock; or
(e) to a pledgee of the Restricted Securities pursuant to a
pledge (or other security) agreement existing as of the date of this
Agreement.
SECTION 4.2. TAG-ALONG RIGHTS
(a) In the event either or both of the PCP Entities desires
to Transfer any Restricted Securities pursuant to Section 4.1(b) at
any time prior to the third anniversary of the Initial Closing Date,
such PCP Entity shall notify Apollo and Harvard (the "Tag-Along
Stockholders") in writing, of such proposed Transfer and its terms and
conditions (the "Tag-Along Notice").
(b) Within ten (10) Business Days of the date of the
Tag-Along Notice, each Tag-Along Stockholder shall notify the PCP
Entities if it elects to participate in such Transfer. Any such
Tag-Along Stockholder that fails to notify either PCP Entity within
such ten (10) Business Day period shall be deemed to have waived its
rights to
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<PAGE>
participate in such Transfer. Each such Tag-Along Stockholder that so
notifies the PCP Entities shall have the right to Transfer, at the
same price per share of Common Stock and on the same terms and
conditions as the applicable PCP Entity or Entities, an amount of
shares equal to the shares the Transferee actually proposes to
purchase multiplied by a fraction, the numerator of which shall be the
number of shares of Common Stock issued and owned by such Tag-Along
Stockholder and the denominator of which shall be the aggregate number
of shares of Common Stock issued and owned by such PCP Entity (or both
PCP Entities, if both are selling pursuant to such transaction) and
each other Tag-Along Stockholder exercising its rights under this
Section (assuming for purposes of calculating such fraction the
conversion of all convertible securities and the exercise of all
options and warrants held by the PCP Entities and each other Tag-Along
Stockholder exercising its rights under this Section).
SECTION 4.3. TRANSFEREES; NONCOMPLYING TRANSFERS. In the
event of any purported Transfer of any Restricted Securities in violation of
Article IV of this Agreement, such purported Transfer shall be void and of no
effect, and no dividend of any kind whatsoever nor any distribution pursuant to
liquidation or otherwise shall be paid by the Company to the purported
transferee in respect of such Restricted Securities (all such dividends and
distributions being deemed waived), and the voting rights of such Restricted
Securities, if any, on any matter whatsoever shall remain vested in the
Transferor, and the Transferor shall not be relieved of any of its obligations
hereunder as the holder of such Restricted Securities. In the event of such a
non-complying Transfer, the Company shall not Transfer any such Restricted
Securities on its books or recognize the purported Transferee as a stockholder,
for any purpose, until all applicable provisions of this Agreement have been
complied with.
SECTION 4.4. RESTRICTIONS ON TRANSFERS OF INTERESTS IN THE
PCP ENTITIES. Until the second anniversary of the Initial Closing Date:
(a) Each of the PCP Entities shall not register or permit any
Transfer of the membership interests in such entity by Penske
Corporation or Penske Capital Partners, L.L.C., except pursuant to a
pro rata Transfer by all of the members of interests valued at up to
$15 million to certain members of the Company's management (a
"Management Incentive Transfer").
(b) Penske Corporation and Penske Capital Partners, L.L.C.
each agrees not to Transfer any interest in the PCP Entities or
Restricted Securities, except for a Management Incentive Transfer.
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<PAGE>
ARTICLE V.
CERTAIN COVENANTS
SECTION 5.1. LEGEND ON CERTIFICATES. Each certificate for
Restricted Securities of PCP shall be stamped or otherwise imprinted with a
legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
RESTRICTED BY THAT CERTAIN STOCKHOLDERS AGREEMENT, BY AND
AMONG UNITED AUTO GROUP, INC., TRACE INTERNATIONAL HOLDINGS,
INC., INTERNATIONAL MOTOR CARS GROUP I, L.L.C., INTERNATIONAL
MOTOR CARS GROUP II, L.L.C., AIF II, L.P. AND AENEAS VENTURE
CORPORATION, A COUNTERPART OF WHICH STOCKHOLDERS AGREEMENT
HAS BEEN PLACED ON FILE BY THE COMPANY AT ITS PRINCIPAL PLACE
OF BUSINESS AND ITS REGISTERED OFFICE. A COPY OF SUCH
STOCKHOLDERS AGREEMENT WILL BE FURNISHED WITHOUT CHARGE BY
THE COMPANY TO THE RECORD HOLDER HEREOF UPON WRITTEN REQUEST
TO THE COMPANY AT THE PRINCIPAL PLACE OF BUSINESS OF THE
COMPANY."
SECTION 5.2. ROGER PENSKE TO SERVE AS CHAIRMAN AND CHIEF
EXECUTIVE OFFICER.
(a) On the Initial Closing Date, the Restricted Stockholders
shall use their reasonable best efforts to have Roger Penske appointed
as Chairman and Chief Executive Officer of the Company.
(b) From and after the Initial Closing Date, the PCP Entities
shall cause Roger Penske:
(i) to serve as the Chairman of the Company until
the third anniversary of the Second Closing Date and as Chief
Executive Officer of the Company until the second anniversary
of the Second Closing Date; provided, however, such
obligation shall cease if pursuant to Sections 2.5 or 2.6,
PCP Directors shall no longer constitute a majority of the
Company's Board of Directors, and provided further, that upon
exercise by the PCP Entities of their right pursuant to
Section 7.2 or 7.4 of the Securities Purchase Agreement,
Roger Penske shall promptly, but in no event later than the
Business Day immediately following such exercise, resign as
Chairman, as a Director and as Chief Executive Officer;
(ii) to receive compensation payable by the Company
no greater than: (x) salary of $1 per annum, (y) a bonus
determined by the Compensation Committee of the Board of
Directors, and (z) options for 400,000 shares of Common Stock
with an exercise price of $10.00
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<PAGE>
per share to be granted on the Second Closing Date. Such
options shall vest in equal installments over a three year
period from and after the Initial Closing Date, so long as
Mr. Penske continues to serve as Chairman of the Board of
Directors.
SECTION 5.3. APPROVAL OF COMPANY ACTION UNDER THE SECURITIES
PURCHASE AGREEMENT. From and after the Initial Closing Date, all consents,
waivers, amendments or other actions on the part of the Company under the
Securities Purchase Agreement and the other agreements with the PCP Entities
contemplated by the Securities Purchase Agreement shall be undertaken under the
direction of a majority of the Board of Directors (excluding for such purposes
the PCP Directors and any other directors Affiliated with either PCP Entity).
SECTION 5.4. TRACE SHELF REGISTRATION STATEMENT.
(a) From the date hereof through the third anniversary of the
Initial Closing Date, the Company shall use its reasonable best
efforts to maintain effective a registration statement relating to the
sale by Trace of its Restricted Securities, including, without
limitation, filing accountants' consents and updating the disclosure
for material developments.
(b) Trace shall reimburse the Company for its reasonable
out-of-pocket expenses incurred in connection with keeping such
registration statement effective.
SECTION 5.5. FURTHER ASSURANCES. Each of the parties hereto
shall use commercially reasonable efforts to do such additional things and
execute such documents as are reasonably necessary or proper to carry out and
effectuate the intent of this Agreement or any part hereof.
ARTICLE VI.
MUTUAL REPRESENTATIONS AND WARRANTIES
Each of the parties hereto represents and warrants to the
others as follows:
SECTION 6.1. ORGANIZATION. It is duly organized, validly
existing and in good standing under the laws of its jurisdiction of formation,
and has all requisite power and authority to own, lease and operate its assets
and properties and to conduct its business as currently being conducted.
SECTION 6.2. AUTHORIZATION, VALIDITY AND ENFORCEABILITY. It
has full power and authority to execute, deliver and perform its obligations
under this Agreement. The execution, delivery and performance by it of this
Agreement and
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<PAGE>
the consummation by it of the transactions contemplated hereby have been duly
authorized by its board of directors or other governing body and no other
proceedings on its part are necessary to authorize this Agreement or the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by it, and constitutes the legal, valid and binding obligation of it,
enforceable against it in accordance with the terms hereof, except as such
enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting rights of creditors
generally and by general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).
SECTION 6.3. NO VIOLATION OR BREACH. Except as set forth on
Schedule 6.3, the execution, delivery and performance by it of this Agreement
and the consummation of the transactions contemplated hereby, do not and will
not conflict with, result in a violation or breach of, constitute a default (or
an event which with the giving of notice or the lapse of time or both would
constitute a default) or give rise to any right of termination or acceleration
of any right or obligation of it under, or result in the creation or imposition
of any lien, mortgage, pledge, security interest, claim, right of first refusal
or other limitation on transfer or other encumbrance upon any of its Restricted
Securities by reason of the terms of, (a) its memorandum of association,
certificate of incorporation, by-laws or other charter or organizational
document, (b) any contract, agreement, lease, license, mortgage, note, bond,
debenture, indenture or other instrument or obligation to which it is a party
or by or to which it or its assets or properties may be bound or subject, (c)
any order, writ, judgment, injunction, award, decree, law, statute, rule or
regulation applicable to it or (d) any license, permit, order, consent,
approval, registration, authorization or qualification with or under any
governmental agency, other than in the case of clauses (b), (c) or (d) above
any conflict, violation, breach or default which would not, individually or in
the aggregate together with all other such conflicts, violations, breaches or
defaults, have a material adverse effect on it or have a material adverse
effect on its ability to perform its obligations, or consummate the
transactions contemplated, hereunder.
SECTION 6.4. BENEFICIAL OWNERSHIP OF COMMON STOCK. As of the
Initial Closing Date, such Restricted Stockholder Beneficially Owns the shares
of Common Stock set forth opposite its name on Schedule 6.4.
ARTICLE VII.
TERM
SECTION 7.1. TERM. This Agreement shall commence on the date
hereof, and shall terminate on the earliest of (a) the
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<PAGE>
termination of the Securities Purchase Agreement, (b) in the event that the
Second Closing Date does not occur on or prior to December 31, 1999, January 1,
2000 and (c) December 31, 2009. This Agreement shall terminate with respect to
a Restricted Stockholder at such time as it ceases to Beneficially Own any
Restricted Securities.
SECTION 7.2. EFFECTS OF TERMINATION. Upon termination of this
Agreement, this Agreement (other than Section 8.9) shall thereafter become void
and have no effect, and no party hereto shall have any liability or obligation
to any other party hereto in respect of this Agreement.
ARTICLE VIII.
MISCELLANEOUS PROVISIONS
SECTION 8.1. SURVIVAL. All of the representations,
warranties, covenants, and agreements of the parties contained in this
Agreement shall survive the Initial Closing Date and the Second Closing Date
and shall continue in full force and effect forever thereafter.
SECTION 8.2. NOTICES. All notices, demands or other
communications to be given or delivered under or by reason of the provisions of
this Agreement shall be in writing and shall be deemed to have been given (a)
when delivered personally to the recipient, (b) when sent to the recipient by
telecopy (receipt electronically confirmed by sender's telecopy machine) if
during normal business hours of the recipient, otherwise on the next Business
Day, (c) one Business Day after the date when sent to the recipient by
reputable express courier service (charges prepaid), or (d) seven Business Days
after the date when mailed to the recipient by certified or registered mail,
return receipt requested and postage prepaid. Such notices, demands and other
communications shall be sent to the parties at the addresses indicated below:
If to Apollo Apollo Advisors, L.P.
1999 Avenue of the Stars
Los Angeles, CA 90067
Attention: Michael Weiner
Telecopy: (310) 201-4166
If to Harvard Aeneas Venture Corporation
c/o Charlesbank Capital Partners, LLC
600 Atlantic Avenue, 26th Floor
Boston, MA 02210
Attention: Mark A. Rosen
Facsimile No. (617) 619-5402
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<PAGE>
With a copy to: Ropes & Gray
(which shall not One International Place
constitute notice) Boston, MA 02110
Attention: Larry Jordan Rowe
Facsimile No. (617) 951-7050
If to either
PCP Entity
c/o Penske Capital Partners, L.L.C.
399 Park Avenue
New York, NY 10022
With a copy to: Fried, Frank, Harris, Shriver &
(which shall not Jacobson
constitute notice) One New York Plaza
New York, NY 10004
If to Trace: Trace International Holdings, Inc.
375 Park Avenue
11th Floor
New York, NY 10152
Attention: Philip N. Smith, Jr.
Facsimile No.: (212) 593-1363
If to the Company United Auto Group, Inc.
375 Park Avenue
New York, NY 10152
Attention: Philip N. Smith, Jr., Esq.
Telecopy: (212) 593-1303
With a copy to: Willkie Farr & Gallagher
(which shall not 787 Seventh Avenue
constitute notice) New York, NY 10019
Attention: Maurice M. Lefkort, Esq.
Telecopy: (212) 728-8111
or to such other address as either party hereto may, from time to time,
designate in writing delivered pursuant to the terms of this Section 8.2.
SECTION 8.3. AMENDMENTS. The terms, provisions and conditions
of this Agreement may not be changed, modified or amended in any manner except
by an instrument in writing duly executed by all of the parties hereto.
SECTION 8.4. ASSIGNMENT AND PARTIES IN INTEREST.
(a) Except as provided in Section 4.1(c), neither this
Agreement nor any of the rights, duties, or obligations of
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<PAGE>
any party hereunder may be assigned or delegated (by operation of law
or otherwise) by any party hereto except with the prior written
consent of the other parties hereto.
(b) This Agreement shall not confer any rights or remedies
upon any person or entity other than the parties hereto and their
respective permitted successors and assigns; provided, however, that
(i) the rights set forth in Article II hereof shall not inure to the
benefit of any transferee (other than a Permitted Transferee) without
the prior written consent of each Restricted Stockholder (other than
the Transferor) and (ii) the provisions of this Agreement shall not be
binding on any Transferee of Restricted Securities except as set forth
in Sections 4.1(c) and 4.2.
SECTION 8.5. EXPENSES. Each party to this Agreement shall
bear all of its legal, accounting, investment banking, and other expenses
incurred by it or on its behalf in connection with the transactions
contemplated by this Agreement, whether or not such transactions are
consummated.
SECTION 8.6. ENTIRE AGREEMENT. This Agreement constitutes the
entire agreement among the parties hereto with respect to the subject matter
hereof and supersedes and is in full substitution for any and all prior
agreements and understandings among them relating to such subject matter, and
no party shall be liable or bound to the other party hereto in any manner with
respect to such subject matter by any warranties, representations, indemnities,
covenants, or agreements except as specifically set forth herein.
SECTION 8.7. DESCRIPTIVE HEADINGS. The descriptive headings
of the several sections of this Agreement are inserted for convenience only and
shall not control or affect the meaning or construction of any of the
provisions hereof.
SECTION 8.8. COUNTERPARTS. For the convenience of the
parties, any number of counterparts of this Agreement may be executed by any
one or more parties hereto, and each such executed counterpart shall be, and
shall be deemed to be, an original, but all of which shall constitute, and
shall be deemed to constitute, in the aggregate but one and the same
instrument.
SECTION 8.9. GOVERNING LAW; JURISDICTION.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, applicable to
contracts made and performed therein.
(b) Each of the parties hereto hereby irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of
the courts of the State of New York and the
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<PAGE>
United States of America located in the County of New York for any
action or proceeding arising out of or relating to this Agreement and
the transactions contemplated hereby (and agrees not to commence any
action or proceeding relating thereto except in such courts), and
further agrees that service of any process, summons, notice or
document by U.S. registered mail to is respective address set forth in
Section 8.2 shall be effective service of process for any action or
proceeding brought against it in any such court. Each of the parties
hereto hereby irrevocably and unconditionally waives any objection to
the laying of venue of any action or proceeding arising out of this
Agreement or the transactions contemplated hereby in the courts of the
State of New York or the United States of America located in the
County of New York, and hereby further irrevocably and unconditionally
waives and agrees not to plead or claim in any such court that any
such action or proceeding brought in any such court has been brought
in an inconvenient forum.
SECTION 8.10. SEVERABILITY. In the event that any one or more
of the provisions contained in this Agreement or in any other instrument
referred to herein, shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, then to the maximum extent permitted by law, such
invalidity, illegality or unenforceability shall not affect any other provision
of this Agreement or any other such instrument. Furthermore, in lieu of any
such invalid or unenforceable term or provision, the parties hereto intend that
there shall be added as a part of this Agreement a provision as similar in
terms to such invalid or unenforceable provision as may be possible and be
valid and enforceable.
SECTION 8.11. SPECIFIC PERFORMANCE.
(a) The parties hereto acknowledge and agree that irreparable
damage would occur in the event that any provision of this Agreement
was not performed in accordance with its specific terms or was
otherwise breached, and further acknowledge and agree that money
damages are an inadequate remedy for the breach of this Agreement
because of the difficulty of ascertaining the amount of damage that
would be suffered in the event of such breach. The parties hereto
accordingly agree that they each shall be entitled to obtain specific
performance of any provision of this Agreement and injunctive or other
equitable relief to prevent or cure breaches of any provision of this
Agreement, this being in addition to any other remedy to which they
may be entitled by law or equity.
(b) The parties hereto further agree that they shall not be
permitted or have the right to terminate or suspend performance of any
provision of this Agreement, it being agreed that all provisions of
this Agreement shall continue
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<PAGE>
and be specifically enforceable in all events and under all
circumstances regardless of any events, occurrences, actions or
omissions before or after the date hereof. In furtherance of the
foregoing, the parties hereto agree that they shall not be permitted
to, and shall not, bring any claim seeking to terminate or suspend
performance of any provision of this Agreement or seeking any
determination that any provision of this Agreement (including, without
limitation, this Section 8.11) is invalid, inapplicable or
unenforceable.
[The remainder of this page intentionally left blank.]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
AIF II, L.P.
By: /s/ John J. Hannan
----------------------------
Name: John J. Hannan
Title: Authorized Signatory
AENEAS VENTURE CORPORATION
By: /s/ Michael R. Eisenson
----------------------------
Name: Michael R. Eisenson
Title: Authorized Signatory
INTERNATIONAL MOTOR CARS GROUP, I, L.L.C.
By: /s/ James A. Hislop
----------------------------
Name: James A. Hislop
Title: Chairman
INTERNATIONAL MOTOR CARS GROUP, II, L.L.C.
By: /s/ James A. Hislop
----------------------------
Name: James A. Hislop
Title: Chairman
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<PAGE>
TRACE INTERNATIONAL HOLDINGS, INC.
By: /s/ Philip N. Smith, Jr.
-----------------------------
Name: Philip N. Smith, Jr.
Title: Senior Vice President
UNITED AUTO GROUP, INC.
By: /s/ James Davidson
-----------------------------
Name: James Davidson
Title: Executive Vice President
Solely for the purposes
of Section 4.4 hereof:
PENSKE CORPORATION
By: /s/ James A. Hislop
-------------------------------
Name: James A. Hislop
Title: Director
PENSKE CAPITAL PARTNERS, L.L.C.
By: /s/ James A. Hislop
-------------------------------
Name: James A. Hislop
Title: President &
Chief Executive Officer
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<PAGE>
SCHEDULE 6.3
CONTRAVENTIONS
Trace -- Trace has pledged its Common Stock in the Company to the Bank of
Nova Scotia.
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<PAGE>
SCHEDULE 6.4
BENEFICIAL OWNERSHIP AS OF INITIAL CLOSING DATE
RESTRICTED STOCKHOLDER BENEFICIAL OWNERSHIP
Apollo 1,843,656
Harvard 2,843,656
PCP I 0 (*)
PCP II 0 (*)
Trace 4,016,110
- ----------------------------------
(*) Without giving effect to the acquisition of 2,906.743 shares of Series
A Preferred Stock by PCP-I and 821.1266 shares of Series A Preferred
Stock by PCP-II, in each case in connection with the Initial Closing.
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<PAGE>
REGISTRATION RIGHTS AGREEMENT
among
UNITED AUTO GROUP, INC.,
INTERNATIONAL MOTOR CARS GROUP I, L.L.C.
and
INTERNATIONAL MOTOR CARS GROUP II, L.L.C.
May 3, 1999
<PAGE>
REGISTRATION RIGHTS AGREEMENT, dated as of May 3, 1999 among
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"), each a Delaware limited liability company (IMCG-I and
IMCG-II collectively, "IMCG").
The Company and IMCG are entering into a Securities Purchase
Agreement (the "Purchase Agreement") pursuant to which, among other things,
IMCG is purchasing (i) shares of Series A Convertible Preferred Stock, par
value $0.0001 per share, of the Company (the "Series A Preferred Stock"), which
Series A Preferred Stock is convertible into shares of Common Stock, (ii)
shares of Series B Convertible Preferred Stock, par value $0.0001 per share, of
the Company (the "Series B Preferred Stock", and together with the Series A
Preferred Stock, the "Preferred Stock"), which Series B Preferred Stock is
convertible into shares of Non-Voting Common Stock and (iii) warrants (the
"Warrants") to purchase shares of Common Stock and Non-Voting Common Stock.
If IMCG, after conversion of the Preferred Stock or exercise
of the Warrants, desires to sell shares of Common Stock, it may be desirable to
register such shares under the Securities Act (as defined below).
As part of, and as consideration for, the acquisition of
shares of the Preferred Stock and the Warrants by IMCG from the Company on the
date hereof and from time to time hereafter, the Company hereby grants to IMCG
certain registration and other rights with respect to its shares of Common
Stock and Non-Voting Common Stock as more fully set forth herein.
Accordingly, the parties hereto agree as follows:
1. Definitions. As used herein, unless the context otherwise
requires, the following terms have the following respective meanings:
"Certificate of Incorporation" means the Certificate of
Incorporation of the Company, as it may be amended or restated hereafter from
time to time.
"Commission" means the Securities and Exchange Commission or
any other Federal agency at the time administering the Securities Act.
"Common Stock" means any shares of voting common stock, par
value $0.0001 per share, of the Company, now or hereafter authorized to be
issued, and, any and all securities of any kind whatsoever of the Company which
may be issued on or after the date hereof in respect of, in exchange for, or
upon conversion of shares of Common Stock pursuant to a merger, consolidation,
stock split, stock dividend, recapitalization of the Company or otherwise.
Notwithstanding anything to the contrary contained in this
<PAGE>
Agreement, the Company shall not be obligated to register any Preferred Stock,
Warrants or Non-Voting Common Stock.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar Federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
Reference to a particular section of the Exchange Act shall include a reference
to the comparable section, if any, of any such similar Federal statute.
"Non-Voting Common Stock" means any shares of non-voting
common stock, par value $0.0001 per share, of the Company, now or hereafter
authorized to be issued, and any and all securities of any kind whatsoever of
the Company which may be exchanged for or converted into Non-Voting Common
Stock, any and all securities of any kind whatsoever of the Company which may
be issued on or after the date hereof in respect of, in exchange for, or upon
conversion of shares of Non-Voting Common Stock pursuant to a merger,
consolidation, stock split, stock dividend, recapitalization of the Company or
otherwise.
"Person" means a corporation, an association, a partnership,
an organization, a business, a trust, an individual, or any other entity or
organization, including a government or political subdivision or an
instrumentality or agency thereof.
"Registrable Securities" means (i) any shares of Common Stock
owned by IMCG, (ii) any shares of Common Stock issued or issuable upon the
conversion, exercise or exchange of any shares of Preferred Stock, Warrants or
any other Common Stock equivalents held by IMCG, and (iii) any shares of Common
Stock issued with respect to the Common Stock referred to in clauses (i), (ii)
or (iii) by way of a stock dividend, stock split or reverse stock split or in
connection with a combination of shares, recapitalization, merger,
consolidation or otherwise. As to any particular Registrable Securities, such
securities shall cease to be Registrable Securities (a) when a registration
statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been disposed
of in accordance with such registration statement, (b) when such securities
shall have been otherwise transferred, new certificates for them not bearing a
legend restricting further transfer shall have been delivered by the Company
and subsequent public distribution of them shall not require registration of
them under the Securities Act, or (c) when such securities shall have been sold
as permitted by, and in compliance with, the Securities Act. Any certificate
evidencing the Registrable Securities shall bear a legend stating that the
securities have not been registered under the Securities Act and setting forth
or referring to the restrictions on transferability and sale of the securities.
"Registration Expenses" means all expenses incident to the
registration and disposition of the Registrable Securities pursuant to Section
2 hereof, including, without
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<PAGE>
limitation, all registration, filing and applicable national securities
exchange fees, all fees and expenses of complying with state securities or blue
sky laws (including fees and disbursements of counsel to the underwriters or
IMCG in connection with "blue sky" qualification of the Registrable Securities
and determination of their eligibility for investment under the laws of the
various jurisdictions), all word processing, duplicating and printing expenses,
all messenger and delivery expenses, the fees and disbursements of counsel for
the Company and of its independent public accountants, including the expenses
of "cold comfort" letters or any special audits required by, or incident to,
such registration, all fees and disbursements of underwriters (other than
underwriting discounts and commissions), all transfer taxes, and all fees and
expenses of counsel to IMCG up to a maximum of $50,000 per registration;
provided, however, that Registration Expenses shall exclude, and IMCG shall
pay, underwriting discounts and commissions in respect of the Registrable
Securities being registered.
"Securities Act" means the Securities Act of 1933, as
amended, or any similar Federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
References to a particular section of the Securities Act shall include a
reference to the comparable section, if any, of any such similar Federal
statute.
2. Registration Under Securities Act, etc.
2.1 Registration on Request.
(a) Request. IMCG shall have the right to
require the Company to effect the registration under the Securities Act of all
or part of the Registrable Securities, by delivering a written request therefor
to the Company specifying the number of shares of Registrable Securities and
the intended method of distribution. The Company shall (i) use its reasonable
best efforts to effect the registration under the Securities Act (including by
means of a shelf registration pursuant to Rule 415 under the Securities Act if
so requested in such request and if the Company is then eligible to use such a
registration) of the Registrable Securities which the Company has been so
requested to register by IMCG, for distribution in accordance with the intended
method of distribution set forth in the written request delivered by IMCG, such
registration to be effected as expeditiously as possible, and (ii) if requested
by IMCG, use its reasonable best efforts to obtain acceleration of the
effective date of the registration statement relating to such registration.
(b) Registration of Other Securities. Whenever
the Company shall effect a registration pursuant to this Section 2.1, the
Company may include other securities of the Company or which are held by
Persons who, by virtue of agreements with the Company, are entitled to include
their securities in any such registration. In the case of an underwritten
offering pursuant to Section 2.1, if holders of
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<PAGE>
securities of the Company other than Registrable Securities who are entitled,
by contract with the Company, to have securities included in such a
registration (the "Other Stockholders") request such inclusion, the Company
shall offer to include the securities of such Other Stockholders in the
underwriting and may condition such offer on their acceptance of the further
applicable provisions of this Agreement. The Company and the Other Stockholders
shall enter into an underwriting agreement in customary form with the
representative of the underwriter or underwriters selected pursuant to Section
2.1(f). Notwithstanding any other provision of this Section 2, if the
representative advises IMCG in writing that marketing factors require a
limitation on the number of shares to be underwritten, the securities of the
Company held by Other Stockholders shall be excluded from such registration to
the extent so required by such limitation.
(c) Registration Statement Form. Registrations
under this Section 2.1 shall be on such appropriate registration form of the
Commission as, subject to clause (a)(i) above, shall be selected by the Company
and as shall be reasonably acceptable to IMCG.
(d) Expenses. The Company shall pay all
Registration Expenses in connection with any registration requested pursuant to
this Section 2.1.
(e) Effective Registration Statement. A
registration requested pursuant to this Section 2.1 shall not be deemed to have
been effected (including for purposes of paragraph (h) of this Section 2.1) (i)
unless a registration statement with respect thereto has become effective and
has been kept continuously effective for a period of at least 180 days (or such
shorter period which shall terminate when all the Registrable Securities
covered by such registration statement have been sold pursuant thereto), (ii)
if after it has become effective, such registration is interfered with by any
stop order, injunction or other order or requirement of the Commission or other
governmental agency or court for any reason not attributable to IMCG and has
not thereafter become effective, or (iii) if the conditions to closing
specified in the underwriting agreement, if any, entered into in connection
with such registration are not satisfied or waived.
(f) Selection of Underwriters. The
underwriters of each underwritten offering of the Registrable Securities so to
be registered shall be selected by IMCG and shall be subject to the approval of
the Company, not to be unreasonably withheld or delayed.
(g) Right to Withdraw. If the managing
underwriter of any underwritten offering shall advise IMCG that the Registrable
Securities covered by the registration statement cannot be sold in such
offering within a price range acceptable to IMCG, then IMCG shall have the
right to notify the Company in writing that they have determined that the
registration statement be abandoned or withdrawn, in which event the
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<PAGE>
Company shall abandon or withdraw such registration statement. In the event of
such abandonment or withdrawal, such request shall not be counted for purposes
of the requests for registration to which IMCG is entitled pursuant to this
Section 2.1.
(h) Limitations on Registration on Request.
IMCG shall be entitled to require the Company to effect, and the Company shall
be required to effect, three registrations in the aggregate pursuant to this
Section 2.1, provided, however, that the aggregate offering value of the shares
to be registered pursuant to any such registration shall be at least
$10,000,000 unless IMCG then owns shares with an aggregate value less than
$10,000,000 (in which case such lesser number of shares may be registered).
(i) Postponement. The Company shall be
entitled once in any six-month period to postpone for a reasonable period of
time (but not exceeding 90 days) (the "Postponement Period") the filing of any
registration statement required to be prepared and filed by it pursuant to this
Section 2.1 if the Company determines, in its reasonable judgment, that such
registration and offering would materially interfere with any material
financing, corporate reorganization or other material transaction involving the
Company or any subsidiary, or would require premature disclosure thereof, and
promptly gives IMCG written notice of such determination, containing a general
statement of the reasons for such postponement and an approximation of the
anticipated delay. If the Company shall so postpone the filing of a
registration statement, (i) the Company shall use its reasonable best efforts
to limit the delay to as short a period as is practicable and (ii) IMCG shall
have the right to withdraw the request for registration by giving written
notice to the Company at any time and, in the event of such withdrawal, such
request shall not be counted for purposes of the requests for registration to
which IMCG is entitled pursuant to this Section 2.1.
2.2 Incidental Registration.
(a) Right to Include Registrable Securities.
If the Company at any time proposes to register any of its securities under the
Securities Act by registration on Form S-1, S-2 or S-3 or any successor or
similar form(s) (except registrations on any such Form or similar form(s)
solely for registration of securities in connection with an employee benefit
plan or dividend reinvestment plan or a merger or consolidation), whether or
not for sale for its own account, it will each such time give prompt written
notice to IMCG of its intention to do so and of IMCG's rights under this
Section 2.2. Upon the written request of IMCG (which request shall specify the
maximum number of Registrable Securities intended to be disposed of by IMCG),
made as promptly as practicable and in any event within 30 days after the
receipt of any such notice (15 days if the Company states in such written
notice or gives telephonic notice to IMCG, with written confirmation to follow
promptly thereafter, stating that (i) such registration will be on Form S-3 and
(ii) such shorter period of time is required because of
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a planned filing date), the Company shall use its reasonable best efforts to
include in such registration under the Securities Act of all Registrable
Securities which the Company has been so requested to register by IMCG.
Notwithstanding anything to the contrary contained in this Agreement, the
Company may in its discretion withdraw any registration commenced pursuant to
this Section 2.2 without liability to the holders of Registrable Securities. No
registration effected under this Section 2.2 shall relieve the Company of its
obligation to effect any registration upon request under Section 2.1. The
Company will pay all Registration Expenses in connection with any registration
of Registrable Securities requested pursuant to this Section 2.2.
(b) Right to Withdraw. IMCG shall have the
right to withdraw its request for inclusion of its Registrable Securities in
any registration statement pursuant to this Section 2.2 at any time prior to
the execution of an underwriting agreement with respect thereto by giving
written notice to the Company of its request to withdraw.
(c) Priority in Incidental Registrations. If
the managing underwriter of any underwritten offering shall inform the Company
by letter of its belief that the number of Registrable Securities requested to
be included in such registration, when added to the number of other securities
to be offered in such registration, would materially adversely affect such
offering, then the Company shall include in such registration, to the extent of
the number and type which the Company is so advised can be sold in (or during
the time of) such offering without so materially adversely affecting such
offering (the "Section 2.2 Sale Amount"), (i) all of the securities proposed by
the Company to be sold for its own account or by an Other Stockholder
exercising "demand" registration rights; and (ii) thereafter, to the extent the
Section 2.2 Sale Amount is not exceeded, the Registrable Securities requested
by IMCG to be included in such registration pursuant to Section 2.2(a) and any
other securities of the Company requested to be included in such registration
by any Other Stockholder having the right to include securities on a pro rata
basis, with the amount of securities of IMCG and each such Other Stockholder to
be included based on the pro rata amount of shares of Common Stock held, or
obtainable by exercise or conversion of other securities of the Company, by
IMCG or such Other Stockholder.
(d) Plan of Distribution. Any participation by
holders of Registrable Securities in a registration by the Company shall be in
accordance with the Company's plan of distribution.
2.3 Registration Procedures. If and whenever the
Company is required to use its reasonable best efforts to effect the
registration of any Registrable Securities under the Securities Act as provided
in Sections 2.1 and 2.2 hereof, the Company shall as expeditiously as possible:
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(a) prepare and file with the Commission as soon as
practicable the requisite registration statement to effect
such registration (and shall include all financial statements
required by the Commission to be filed therewith) and
thereafter use its reasonable best efforts to cause such
registration statement to become effective; provided,
however, that before filing such registration statement
(including all exhibits) or any amendment or supplement
thereto or comparable statements under securities or blue sky
laws of any jurisdiction, the Company shall as promptly as
practicable furnish such documents to IMCG and each
underwriter, if any, participating in the offering of the
Registrable Securities and their respective counsel, which
documents will be subject to the reasonable review and
comments of IMCG, each underwriter and their respective
counsel; and provided, further, however, that the Company may
discontinue any registration of its securities pursuant to
Section 2.2 or which are not Registrable Securities at any
time prior to the effective date of the registration
statement relating thereto;
(b) notify IMCG of the Commission's requests for
amending or supplementing the registration statement and the
prospectus, and prepare and file with the Commission such
amendments and supplements to such registration statement and
the prospectus used in connection therewith as may be
necessary to keep such registration statement effective and
to comply with the provisions of the Securities Act with
respect to the disposition of all Registrable Securities
covered by such registration statement for such period as
shall be required for the disposition of all of such
Registrable Securities in accordance with the intended method
of distribution thereof; provided, that except with respect
to any such registration statement filed pursuant to Rule 415
under the Securities Act, such period need not exceed 180
days;
(c) furnish, without charge, to IMCG and each
underwriter such number of conformed copies of such
registration statement and of each such amendment and
supplement thereto (in each case including all exhibits),
such number of copies of the prospectus contained in such
registration statement (including each preliminary prospectus
and any summary prospectus) and any other prospectus filed
under Rule 424 under the Securities Act, in conformity with
the requirements of the Securities Act, and such other
documents, as IMCG and such underwriters may reasonably
request;
(d) use its reasonable best efforts (i) to register or
qualify all Registrable Securities and other securities
covered by such registration
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statement under such securities or blue sky laws of such
States of the United States of America where an exemption is
not available and as IMCG or any managing underwriter shall
reasonably request, (ii) to keep such registration or
qualification in effect for so long as such registration
statement remains in effect, and (iii) to take any other
action which may be reasonably necessary or advisable to
enable IMCG to consummate the disposition in such
jurisdictions of the securities to be sold by IMCG, except
that the Company shall not for any such purpose be required
to qualify generally to do business as a foreign corporation
in any jurisdiction wherein it would not but for the
requirements of this subsection (d) be obligated to be so
qualified or to consent to general service of process in any
such jurisdiction;
(e) furnish to IMCG and each underwriter, if any,
participating in the offering of the securities covered by
such registration statement, a signed counterpart of (i) an
opinion of counsel for the Company, and (ii) a "comfort"
letter signed by the independent public accountants who have
certified the Company's or any other entity's financial
statements included or incorporated by reference in such
registration statement, covering substantially the same
matters with respect to such registration statement (and the
prospectus included therein) and, in the case of the
accountants' comfort letter, with respect to events
subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer's counsel and in
accountants' comfort letters delivered to the underwriters in
underwritten public offerings of securities (and dated the
dates such opinions and comfort letters are customarily
dated) and, in the case of the legal opinion, such other
legal matters, and, in the case of the accountants' comfort
letter, such other financial matters, as the underwriters,
may reasonably request;
(f) promptly notify IMCG and each managing underwriter, if
any, participating in the offering of the securities covered
by such registration statement (i) when such registration
statement, any pre-effective amendment, the prospectus or any
prospectus supplement related thereto or post-effective
amendment to such registration statement has been filed, and,
with respect to such registration statement or any
post-effective amendment, when the same has become effective;
(ii) of any request by the Commission for amendments or
supplements to such registration statement or the prospectus
related thereto or for additional information; (iii) of the
issuance by the Commission of any stop order suspending the
effectiveness of such registration statement or the
initiation of any proceedings for that purpose; (iv) of the
receipt by the Company of any notification with respect to
the
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suspension of the qualification of any of the Registrable
Securities for sale under the securities or blue sky laws of
any jurisdiction or the initiation of any proceeding for such
purpose; (v) at any time when a prospectus relating thereto
is required to be delivered under the Securities Act, upon
discovery that, or upon 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 any material fact required
to be stated therein or necessary to make the statements
therein not misleading, in the light of the circumstances
under which they were made, and in the case of this clause
(v), at the request of IMCG promptly prepare and furnish to
IMCG and each managing underwriter, if any, participating in
the offering of the Registrable Securities, 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 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 in the light of the circumstances under which
they were made; and (vi) at any time when the representations
and warranties of the Company contemplated by Section 2.4(a)
or (b) hereof cease to be true and correct;
(g) otherwise comply with all applicable rules and
regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve
months beginning with the first full calendar month after the
effective date of such registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of
the Securities Act and Rule 158 promulgated thereunder, and
promptly furnish to IMCG a copy of any amendment or
supplement to such registration statement or prospectus;
(h) provide and cause to be maintained a transfer
agent and registrar (which, in each case, may be the Company)
for all Registrable Securities covered by such registration
statement from and after a date not later than the effective
date of such registration;
(i) (i) use its reasonable best efforts to cause all
Registrable Securities covered by such registration statement
to be listed on the principal securities exchange on which
similar securities issued by the Company are then listed (if
any), if the listing of such Registrable Securities is then
permitted under the rules of such exchange, or (ii) if no
similar securities are then so listed, use its reasonable
best efforts to (x) cause all such Registrable Securities to
be listed on a national securities exchange or
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(y) failing that, secure designation of all such Registrable
Securities as a NASDAQ "national market system security"
within the meaning of Rule 11Aa2-1 of the Commission or (z)
failing that, to secure NASDAQ authorization for such shares
and, without limiting the generality of the foregoing, to
arrange for at least two market makers to register as such
with respect to such shares with the National Association of
Securities Dealers, Inc.;
(j) deliver promptly to counsel to IMCG and each
underwriter, if any, participating in the offering of the
Registrable Securities, copies of all correspondence between
the Commission and the Company, its counsel or auditors;
(k) use its reasonable best efforts to obtain the
withdrawal of any order suspending the effectiveness of the
registration statement;
(l) provide a CUSIP number for all Registrable
Securities, no later than the effective date of the
registration statement; and
(m) make available its employees and personnel and
otherwise provide reasonable assistance to the underwriters
(taking into account the needs of the Company's business) in
their marketing of Registrable Securities.
The Company may require IMCG to furnish the Company such information regarding
IMCG and the distribution of the Registrable Securities as the Company may from
time to time reasonably request in writing. The Company shall be released from
any obligation to IMCG hereunder for so long as IMCG has not delivered such
information to the extent required for purposes of the registrations.
IMCG agrees that upon receipt of any notice from the Company
of the happening of any event of the kind described in paragraph (f) (iii),
(iv) or (v) of this Section 2.3, IMCG will, to the extent appropriate,
discontinue its disposition of Registrable Securities pursuant to the
registration statement relating to such Registrable Securities until, in the
case of paragraph (f)(v) of this Section 2.3, its receipt of the copies of the
supplemented or amended prospectus contemplated by paragraph (f)(v) of this
Section 2.3 and, if so directed by the Company, will deliver to the Company (at
the Company's expense) all copies, other than permanent file copies, then in
its possession, of the prospectus relating to such Registrable Securities
current at the time of receipt of such notice. If the disposition by IMCG of
its securities is discontinued pursuant to the foregoing sentence, the Company
shall extend the period of effectiveness of the registration statement required
pursuant to Section 2.1(e) by the number of days during the period from and
including the date of the giving of notice to and including the date
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when IMCG shall have received copies of the supplemented or
amended prospectus contemplated by paragraph (f)(v) of this
Section 2.3; and, if the Company shall not so extend such
period, IMCG's request pursuant to which such registration
statement was filed shall not be counted for purposes of the
requests for registration to which IMCG is entitled pursuant
to Section 2.1 hereof.
2.4 Underwritten Offerings.
(a) Requested Underwritten Offerings. If
requested by the underwriters for any underwritten offering by IMCG pursuant to
a registration requested under Section 2.1, the Company shall enter into a
customary underwriting agreement (in the form of underwriting agreement used at
such time by the managing underwriter(s)) with a managing underwriter or
underwriters selected pursuant to Section 2.1(f) which shall contain such terms
as are generally prevailing in agreements of the managing underwriter(s),
including, without limitation, their customary provisions relating to
indemnification and contribution (the "Customary Terms"). IMCG shall be party
to such underwriting agreement and may, at its option, require that any or all
of the representations and warranties by, and the other agreements on the part
of, the Company to and for the benefit of such underwriters shall also be made
to and for the benefit of IMCG and that any or all of the conditions precedent
to the obligations of such underwriters under such underwriting agreement be
conditions precedent to the obligations of IMCG. IMCG shall not be required to
make any representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding
IMCG, its ownership of and title to the Registrable Securities, and its
intended method of distribution and other representations that constitute
Customary Terms, and any liability of IMCG to any underwriter or other person
under such underwriting agreement shall be limited to liability arising from
breach of its representations and warranties and shall be limited to an amount
equal to the proceeds (net of expenses and underwriting discounts and
commissions) that it derives from such registration.
(b) Incidental Underwritten Offerings. In the
case of a registration pursuant to Section 2.2 hereof, if the Company shall
have determined to enter into any underwriting agreements in connection
therewith, all of the Registrable Securities to be included in such
registration shall be subject to such underwriting agreements.
2.5 Preparation; Reasonable Investigation. In
connection with the preparation and filing of each registration statement under
the Securities Act pursuant to this Agreement, the Company will give IMCG, its
underwriters, if any, and its respective counsel, accountants and other
representatives and agents the opportunity to participate in the preparation of
such registration statement, each prospectus included therein or filed with the
Commission, and each amendment thereof or supplement thereto, and give each
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of them such reasonable access to its books and records and such reasonable
opportunities to discuss the business of the Company with its officers and
employees and the independent public accountants who have certified its
financial statements, and supply all other information reasonably requested by
each of them, as shall be necessary or appropriate, in the opinion of IMCG and
such underwriters' respective counsel, to conduct a reasonable investigation
within the meaning of the Securities Act.
2.6 Indemnification.
(a) Indemnification by the Company. The
Company agrees that in the event of any registration of any securities of the
Company under the Securities Act, the Company shall indemnify and hold harmless
IMCG, its respective directors, officers, members, partners, agents and
affiliates and each other Person who participates as an underwriter in the
offering or sale of such securities and each other Person, if any, who controls
IMCG or any such underwriter within the meaning of the Securities Act, against
any losses, claims, damages, or liabilities, joint or several, to which IMCG or
any such director, officer, member, partner, agent or affiliate or underwriter
or controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities, joint or several (or
actions or proceedings, whether commenced or threatened, in respect thereof),
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in any registration statement under
which such securities were registered under the Securities Act, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto or (ii) any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein in light of the circumstances in which they were
made not misleading, and the Company shall reimburse IMCG and each such
director, officer, member, partner, agent or affiliate, underwriter and
controlling Person for any legal or any other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided that the Company shall not be liable
in any such case to IMCG or any such director, officer, member, partner, agent,
affiliate, or controlling person to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written information
furnished to the Company by or on behalf of IMCG, specifically stating that it
is for use in the preparation thereof; provided, however, that the foregoing
indemnity agreement with respect to any preliminary prospectus shall not inure
to the benefit of any person from whom the person asserting any such losses,
claims, damages or liabilities (the "Claimant") purchased securities, or any
person controlling such person, if a copy of the prospectus (as then amended or
supplemented if the Company shall have furnished
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any amendment or supplement thereto) was not sent or given by or on behalf of
such person to such Claimant, if required by law to have been so delivered, at
or prior to the written confirmation of the sale of the securities sold to such
Claimant, and if the prospectus (as so amended and supplemented) would have
cured the defect giving rise to such losses, claims, damages or liabilities.
Such indemnity shall remain in full force regardless of any investigation made
by or on behalf of IMCG or any such director, officer, member, partner, agent,
affiliate, underwriter or controlling Person and shall survive the transfer of
such securities by IMCG.
(b) Indemnification by IMCG. As a condition to
including any Registrable Securities in any registration statement, IMCG shall
indemnify and hold harmless (in the same manner and to the same extent as set
forth in paragraph (a) of this Section 2.6) the Company, and each director of
the Company, each officer of the Company and each other Person, if any, who
controls the Company within the meaning of the Securities Act, with respect to
any statement or alleged statement in or omission or alleged omission from such
registration statement, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, but only
to the extent such statement or alleged statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished to the Company by or on behalf of IMCG specifically stating that it
is for use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement;
provided, however, that the liability of such indemnifying party under this
Section 2.6(b) shall be limited to the amount of proceeds (net of expenses and
underwriting discounts and commissions) received by such indemnifying party in
the offering giving rise to such liability. Such indemnity shall remain in full
force and effect, regardless of any investigation made by or on behalf of the
Company or any such director, officer or controlling Person and shall survive
the transfer of such securities by IMCG.
(c) Notices of Claims, etc. Promptly after
receipt by an indemnified party of notice of the commencement of any action or
proceeding involving a claim referred to in the preceding subsections of this
Section 2.6, such indemnified party shall, if a claim in respect thereof is to
be made against an indemnifying party, give written notice to the latter of the
commencement of such action or proceeding; provided, however, that the failure
of any indemnified party to give notice as provided herein shall not relieve
the indemnifying party of its obligations under the preceding subsections of
this Section 2.6, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice, and shall not relieve the
indemnifying party from any liability which it may have to the indemnified
party otherwise than under this Section 2.6. In case any such action or
proceeding is brought against an indemnified party, the indemnifying party
shall be entitled to participate therein and, unless in the opinion of outside
counsel to the indemnified party a conflict of interest between such
indemnified and indemnifying
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parties may exist in respect of such claim, to assume the defense thereof,
jointly with any other indemnifying party similarly notified to the extent that
it may wish, with counsel reasonably satisfactory to such indemnified party;
provided, however, that if the defendants in any such action or proceeding
include both the indemnified party and the indemnifying party and if in the
opinion of outside counsel to the indemnified party there may be legal defenses
available to such indemnified party and/or other indemnified parties which are
in conflict with or in addition to those available to the indemnifying party,
the indemnified party or parties shall have the right to select separate
counsel to defend such action or proceeding on behalf of such indemnified party
or parties, provided, however, that the indemnifying party shall be obligated
to pay for only one counsel and one local counsel for all indemnified parties.
After notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof and approval by the indemnified party
of such counsel, the indemnifying party shall not be liable to such indemnified
party for any legal expenses subsequently incurred by the latter in connection
with the defense thereof (unless the first proviso in the preceding sentence
shall be applicable). No indemnifying party shall be liable for any settlement
of any action or proceeding effected without its written consent. No
indemnifying party shall, without the consent of the indemnified party, consent
to entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation.
(d) Contribution. If the indemnification
provided for in this Section 2.6 shall for any reason be held by a court to be
unavailable to an indemnified party under subsection (a) or (b) hereof in
respect of any loss, claim, damage or liability, or any action in respect
thereof, then, in lieu of the amount paid or payable under subsection (a) or
(b) hereof, the indemnified party and the indemnifying party under subsection
(a) or (b) hereof shall contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in
connection with investigating the same), (i) in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the one
hand, and the indemnified party on the other, which resulted in such loss,
claim, damage or liability, or action in respect thereof, with respect to the
statements or omissions which resulted in such loss, claim, damage or
liability, or action in respect thereof, as well as any other relevant
equitable considerations, or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as shall be
appropriate to reflect not only the relative fault but also the relative
benefits received by the indemnifying party and the indemnified party from the
offering of the securities covered by such registration statement as well as
any other relevant equitable considerations. The parties hereto agree that it
would not be just and equitable if contributions pursuant to this Section
2.6(d) were to be determined by pro rata allocation or by any other method of
allocation which does not take into account the equitable considerations
referred to in the preceding sentence of this Section 2.6(d). No
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Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation. In addition, no Person
shall be obligated to contribute hereunder any amounts in payment for any
settlement of any action or claim effected without such Person's consent, which
consent shall not be unreasonably withheld. Notwithstanding anything in this
subsection (d) to the contrary, no indemnifying party (other than the Company)
shall be required to contribute any amount in excess of the proceeds (net of
expenses and underwriting discounts and commissions) received by such party
from the sale of the Registrable Securities in the offering to which the
losses, claims, damages or liabilities of the indemnified parties relate.
(e) Other Indemnification. Indemnification and
contribution similar to that specified in the preceding subsections of this
Section 2.6 (with appropriate modifications) shall be given by the Company and
IMCG with respect to any required registration or other qualification of
securities under any federal, state or blue sky law or regulation of any
governmental authority other than the Securities Act. The indemnification
agreements contained in this Section 2.6 shall be in addition to any other
rights to indemnification or contribution which any indemnified party may have
pursuant to law or contract and shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of any indemnified
party and shall survive the transfer of any of the Registrable Securities by
IMCG.
(f) Indemnification Payments. The
indemnification and contribution required by this Section 2.6 shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills are received or expense, loss, damage or
liability is incurred.
2.7 Unlegended Certificates. In connection with the
offering of any Registrable Securities registered pursuant to this Section 2,
the Company shall promptly after the sale of such Registrable Securities (i)
facilitate the timely preparation and delivery to IMCG and the underwriters, if
any, participating in such offering, of unlegended certificates representing
ownership of such Registrable Securities being sold in such denominations and
registered in such names as requested by IMCG or such underwriters and (ii)
instruct any transfer agent and registrar of such Registrable Securities to
release any stop transfer orders with respect to any such Registrable
Securities.
2.8 Limitation on Sale of Securities. The Company
hereby agrees that if it shall previously have received a request for
registration pursuant to Section 2.1 hereof, and if such previous registration
shall not have been withdrawn or abandoned, (i) the Company shall not effect
any public or private offer, sale or distribution of its securities or effect
any registration of any of its equity securities under the Securities Act
(other than a registration on Form S-8 or any successor or similar form which
is then in
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effect), for sale for its own account, until a period of 120 days (or such
shorter period as the Company shall be advised by the managing underwriter)
shall have elapsed from the effective date of such previous registration, and
the Company shall so provide in any registration rights agreements hereafter
entered into with respect to any of its securities; and (ii) the Company shall
use its reasonable best efforts to cause each holder of its equity securities
purchased from the Company other than as part of a public offering at any time
after the date of this Agreement to agree not to effect any public sale or
distribution of any such securities during such period, including a sale
pursuant to Rule 144 under the Securities Act.
2.9 No Required Sale. Nothing in this Agreement
shall be deemed to create an independent obligation on the part of IMCG to sell
any Registrable Securities pursuant to any effective registration statement.
3. Rule 144. The Company shall take all actions reasonably
necessary to enable holders of Registrable Securities to sell such securities
without registration under the Securities Act within the limitation of the
exemptions provided by (i) Rule 144, or (ii) any similar rule or regulation
hereafter adopted by the Commission including, without limiting the generality
of the foregoing, filing on a timely basis all reports required to be filed by
the Exchange Act. Upon the request of IMCG, the Company will deliver to such
holder a written statement as to whether it has complied with such
requirements.
4. Amendments and Waivers. This Agreement may be amended,
modified or supplemented only by written agreement of the party against whom
enforcement of such amendment, modification or supplement is sought.
5. Adjustments. In the event of any change in the
capitalization of the Company as a result of any stock split, stock dividend,
reverse split, combination, recapitalization, merger, consolidation, or
otherwise, the provisions of this Agreement shall be appropriately adjusted.
6. Notice. All notices and other communications hereunder
shall be in writing and, unless otherwise provided herein, shall be deemed to
have been given when received by the party to whom such notice is to be given
at its address set forth below, or such other address for the party as shall be
specified by notice given pursuant hereto:
(a) If to IMCG, to:
c/o Penske Capital Partners, L.L.C.
399 Park Avenue
New York, New York 10022
Attention: Mr. James A. Hislop
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With a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Attention: Valerie Ford Jacob, Esq.
Robert C. Schwenkel, Esq.
(b) If to the Company, to it at:
United Auto Group
375 Park Avenue
New York, New York 10152
Attention: General Counsel
With a copy to:
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019
Attention: Maurice M. Lefkort, Esq.
7. Assignment; Third Party Beneficiaries; Majority Controls.
This Agreement shall be binding upon and inure to the benefit of and be
enforceable by the parties hereto and their respective successors and permitted
assigns. This Agreement may not be assigned by the Company, without the prior
written consent of IMCG. IMCG may, at its election, at any time or from time to
time, assign its rights under this Agreement, in whole or in part, to any
purchaser or other transferee of Registrable Securities held by it; provided,
however, that any rights to withdraw shares from inclusion in a registration
statement pursuant to Section 2 shall be made only by IMCG for itself and all
such purchasers and transferees; and provided, further, that any decision
hereunder made by the holders of the majority of the Registrable Securities
shall be binding on all other holders of Registrable Securities.
8. Remedies. The parties hereto agree that money damages or
other remedy at law would not be sufficient or adequate remedy for any breach
or violation of, or a default under, this Agreement by them and that, in
addition to all other remedies available to them, each of them shall be
entitled to an injunction restraining such breach, violation or default or
threatened breach, violation or default and to any other equitable relief,
including without limitation specific performance, without bond or other
security being required. In any action or proceeding brought to enforce any
provision of this Agreement (including the indemnification provisions thereof),
the successful party shall
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<PAGE>
be entitled to recover reasonable attorneys' fees in addition to its costs and
expenses and any other available remedy.
9. No Inconsistent Agreements. The Company will not, on or
after the date of this Agreement, enter into any agreement with respect to its
securities which is inconsistent with the rights granted to IMCG in this
Agreement or otherwise conflicts with the provisions hereof. The Company
represents and warrants to IMCG that it has not previously entered into any
agreement with respect to its securities granting any registration rights to
any Person except as set forth on Schedule 9.
10. Descriptive Headings. The descriptive headings of the
several sections and paragraphs of this Agreement are inserted for reference
only and shall not control or otherwise affect the meaning hereof.
11. Governing Law. This Agreement shall be construed and
enforced in accordance with, and the rights and obligations of the parties
hereto shall be governed by, the laws of the State of New York, without giving
effect to the conflicts of law principles thereof. Each of the parties hereto
hereby irrevocably and unconditionally consents to submit to the exclusive
jurisdiction of the courts of the State of New York and the United States of
America located in the County of New York for any action or proceeding arising
out of or relating to this Agreement and the transactions contemplated hereby
(and agrees not to commence any action or proceeding relating thereto except in
such courts), and further agrees that service of any process, summons, notice
or document by U.S. registered mail to its respective address set forth in
Section 6 hereof shall be effective service of process for any action or
proceeding brought against it in any such court. Each of the parties hereto
hereby irrevocably and unconditionally waives any objection to the laying of
venue of any action or proceeding arising out of this Agreement or the
transactions contemplated hereby in the courts of the State of New York or the
United States of America located in the County of New York, and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in any
such court that any such action or proceeding brought in any such court has
been brought in an inconvenient forum.
12. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.
13. Invalidity of Provision. The invalidity or
unenforceability of any provision of this Agreement in any jurisdiction shall
not affect the validity or enforceability of the remainder of this Agreement in
that jurisdiction or the validity or enforceability of this Agreement,
including that provision, in any other jurisdiction. If any restriction or
provision of this Agreement is held unreasonable, unlawful or unenforceable in
any respect, such restriction or provision shall be interpreted, revised or
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<PAGE>
applied in a manner that renders it lawful and enforceable to the fullest
extent possible under law.
14. Further Assurances. Each party hereto shall do and
perform or cause to be done and performed all further acts and things and shall
execute and deliver all other agreements, certificates, instruments, and
documents as any other party hereto reasonably may request in order to carry
out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
15. Entire Agreement; Effectiveness. This Agreement
constitutes the entire agreement, and supersedes all prior agreements and
understandings, oral and written, between the parties hereto with respect to
the subject matter hereof.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed and delivered by their respective officers thereunto duly
authorized.
UNITED AUTO GROUP, INC.
By: /s/ James Davidson
-------------------------------
Name: James Davidson
Title: Executive Vice President
INTERNATIONAL MOTOR CARS
GROUP I, L.L.C.
By: /s/ James A. Hislop
-------------------------
Name: James A. Hislop
Title: Chairman
INTERNATIONAL MOTOR CARS
GROUP II, L.L.C.
By: /s/ James A. Hislop
-------------------------
Name: James A. Hislop
Title: Chairman
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<PAGE>
Press Release
[UnitedAuto Logo]
UnitedAuto Group, Inc.
375 Park Avenue, 11th Floor
New York, NY 10152
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Contact: Sam DiFeo Jim Davidson David Bright
President and Chief Operating Executive Vice President- Director, Communications
Officer Finance
212 230-0475 212 230-0461 212 230-0488
</TABLE>
FOR IMMEDIATE RELEASE
UNITEDAUTO RECEIVES $33.5 MILLION FIRST INSTALLMENT OF $83.0 MILLION
INVESTMENT FROM PENSKE CAPITAL PARTNERS
------------------------------------------------------------
ROGER S. PENSKE NAMED CHAIRMAN, SUCCEEDING MARSHALL S. COGAN
------------------------------------------------------------
JAMES A. HISLOP AND RICHARD J. PETERS APPOINTED TO BOARD OF DIRECTORS
------------------------------------------------------------
NEW YORK, NY, MAY 3, 1999 - UnitedAuto Group, Inc. (NYSE: UAG), the
nation's second largest publicly traded automotive retailer, announced today
that Penske Capital Partners, L.L.C. had completed the $33.5 million first
installment of the $83.0 million in new capital funding obtained by UnitedAuto.
Penske Capital Partners is an organization formed in 1997 to make investments
in the transportation and transportation services industries.
Under the terms of the agreement announced on April 12, 1999,
UnitedAuto today received the first installment of approximately $33.5 million.
The Company issued approximately 3,728 shares of Series A Preferred Stock,
which are convertible into approximately 3.7 million shares of common stock, to
two affiliates of Penske Capital Partners.
The Board of Directors named Roger S. Penske as Chairman and Chief
Executive Officer. Mr. Penske succeeds Marshall S. Cogan, the Company's founder
who will remain as a Director of the Company. The Board also named James A.
Hislop, Chairman and Chief Executive Officer of Penske Capital Partners, and
Richard J. Peters, President and Chief Executive Officer of R.J. Peters &
Company, L.L.C., as Directors. Messrs. Hislop, Penske and Peters succeed Jules
B. Kroll, Robert H. Nelson and Richard H. Sinkfield as Directors. In addition,
Karl H. Winters resigned as Executive Vice President-Finance and Chief
Financial Officer and Robert H. Nelson resigned as Executive Vice
President-Operations. The Board named James R. Davidson as Executive Vice
President-Finance.
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Upon completion of the second installment of approximately $49.5
million, Penske Capital Partners and its affiliates will designate a majority
of the Company's nominees to its Board of Directors. At that time, two
additional directors are expected to be named, increasing the number of
Directors who serve on the Company's Board from seven to nine.
Roger S. Penske, Chairman and Chief Executive, stated, "We are pleased
to have executed the first phase of our investment in UnitedAuto. We are now
positioned to initiate certain operational and strategic changes we feel will
enhance UnitedAuto's profitability and support our objective of maximizing
shareholder value over the longer-term. We look forward to completing phase two
of the transaction as soon as possible."
As announced on April 12, 1999, in exchange for its investment, Penske
Capital Partners will receive preferred stock convertible into UnitedAuto
common stock at an average price of $10.00 per share. Penske Capital Partners
will also receive warrants to purchase five million shares of common stock,
exercisable at $12.50 for a period of 30 months, with any unexercised warrants
after 30 months to become exercisable at $15.50 for a successive 30-month
period. The convertible preferred stock dividend will be 6.5 percent. The
dividend will be paid in kind for the first two years from date of issuance.
Upon conversion of the preferred stock and exercise of the warrants in full,
the Penske Capital Partners' affiliates will hold approximately 38% of the
Company's common stock.
The second installment of the investment will be received by
UnitedAuto at the second closing of the transaction and is subject to a number
of conditions, including approval by a majority of UnitedAuto's shareholders
and the receipt of third party consents. There can be no assurance when or
whether the second installment will occur. If the second installment and the
second closing do not occur by December 31, 1999, the Company may be required
to repurchase from Penske Capital Partners the investment made at the initial
closing. If such shares are not repurchased, the conversion price of the
preferred stock will be $9.00 per share.
The Company stated that it has amended its bank credit agreements and
is in compliance with its covenants.
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<PAGE>
UnitedAuto, which has pursued a strategy based on internal growth from
its existing dealerships as well as from strategic acquisitions, operates
dealerships representing 30 brands in Arizona, Arkansas, California,
Connecticut, Florida, Georgia, Illinois, Indiana, Louisiana, Nevada, New
Jersey, New York, North Carolina, Puerto Rico, South Carolina, Tennessee and
Texas. UnitedAuto dealerships sell new and used vehicles and market a complete
line of aftermarket automotive products and services through UnitedAuto Care,
Inc. and UnitedAuto Care Products, Inc.
Investors in Penske Capital Partners include Penske Corporation and
Chase Capital Partners. JP Morgan served as the financial advisor to UnitedAuto
on the transaction.
This press release contains forward-looking information, and actual
results may materially vary from those expressed or implied herein. Other
factors, including, economic conditions, manufacturer approvals and acquisition
risks that could affect these results are described in the reports and other
documents filed by the Company with the Securities and Exchange Commission.
# # #
