UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934*
United Auto Group, Inc.
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(Name of Issuer)
Common Stock (Par Value $ 0.0001 Per Share)
(Upon Conversion of Series A Convertible Preferred Stock,
Series B Preferred Stock or Exercise of Warrants)
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(Title of Class of Securities)
909440 10 9
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(CUSIP Number)
Robert C. Schwenkel, Esq.
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, NY 10004
212-859-8000
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(Name, Address and Telephone Number of Persons Authorized to Receive Notices
and Communications)
April 12, 1999
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check
the following box |_|.
*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities
Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of
that section of the Act but shall be subject to all other provisions of the
Act (however, see the Notes).
<PAGE>
SCHEDULE 13D
CUSIP No. 909440 10 9
1 NAME OF REPORTING PERSON/
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
International Motor Cars Group I, L.L.C.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [x]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS*
00 (See response to Item 3)
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
Not Applicable
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
NUMBER OF 7 SOLE VOTING POWER
SHARES 0 (See response to Item 5)
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY EACH 0
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH 0 (See response to Item 5)
10 SHARED DISPOSITIVE POWER
0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
0 (See response to Item 5)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [x]
EXCLUDES CERTAIN SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0% (See response to Item 5)
14 TYPE OF REPORTING PERSON*
00
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
CUSIP No. 909440 10 9
1 NAME OF REPORTING PERSON/
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
International Motor Cars Group II, L.L.C.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [x]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS*
00 (See response to Item 3)
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
NUMBER OF 7 SOLE VOTING POWER
SHARES 0 (See response to Item 5)
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY EACH 0
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH 0 (See response to Item 5)
10 SHARED DISPOSITIVE POWER
0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
0 (See response to Item 5)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [x]
EXCLUDES CERTAIN SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0% (See response to Item 5)
14 TYPE OF REPORTING PERSON*
00
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
CUSIP No. 909440 10 9
1 NAME OF REPORTING PERSON/
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Penske Capital Partners, L.L.C.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [x]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS*
Not Applicable
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
Not Applicable
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
NUMBER OF 7 SOLE VOTING POWER
SHARES 0 (See response to Item 5)
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY EACH 0
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH 0 (See response to Item 5)
10 SHARED DISPOSITIVE POWER
0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
0 (See response to Item 5)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [x]
EXCLUDES CERTAIN SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0% (See response to Item 5)
14 TYPE OF REPORTING PERSON*
00
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
CUSIP No. 909440 10 9
1 NAME OF REPORTING PERSON/
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
James A. Hislop
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [x]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS*
Not Applicable
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
Not Applicable
6 CITIZENSHIP OR PLACE OF ORGANIZATION
New Jersey
NUMBER OF 7 SOLE VOTING POWER
SHARES 0
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY EACH 0 (See response to Item 5)
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH 0
10 SHARED DISPOSITIVE POWER
0 (See response to Item 5)
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
0 (See response to Item 5)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [x]
EXCLUDES CERTAIN SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0% (See response to Item 5)
14 TYPE OF REPORTING PERSON*
IN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
CUSIP No. 909440 10 9
1 NAME OF REPORTING PERSON/
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Roger S. Penske
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [x]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS*
Not Applicable
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
Not Applicable
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Michigan
NUMBER OF 7 SOLE VOTING POWER
SHARES 0
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY EACH 0 (See response to Item 5)
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH 0
10 SHARED DISPOSITIVE POWER
0 (See response to Item 5)
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
0 (See response to Item 5)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [x]
EXCLUDES CERTAIN SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0% (See response to Item 5)
14 TYPE OF REPORTING PERSON*
IN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
ITEM 1. SECURITY AND ISSUER.
-------------------
This Schedule 13D is filed on behalf of International Motor Cars
Group I, L.L.C., a Delaware limited liability company ("IMCG I"),
International Motor Cars Group II, L.L.C., a Delaware limited liability
company ("IMCG II" and together with IMCG I, the "Purchasers"), Penske
Capital Partners, L.L.C., a Delaware limited liability company ("PCP"),
Roger S. Penske and James A. Hislop (all such persons, the "Reporting
Persons"), with the Securities and Exchange Commission on April 22, 1999
(the "Schedule 13D"), relating to the Voting Common Stock, par value
$0.0001 per share (the "Voting Common Stock") of United Auto Group, Inc., a
Delaware Corporation (the "Company"). This Schedule 13D is filed in
connection with the proposed acquisition by the Purchasers of (i) the
shares of the Company's Series A Convertible Preferred Stock, par value
$0.0001 per share (the "Series A Preferred Stock"), (ii) the shares of the
Company's Series B Convertible Preferred Stock, par value $0.0001 per share
(the "Series B Preferred Stock" and together with the Series A Preferred
Stock, the "Preferred Stock"), and (iii) warrants (the "Warrants") to
purchase shares of Voting Common Stock and shares of Non-Voting Common
Stock, par value $0.0001 per share, of the Company (the "Non-Voting Common
Stock" and together with the Voting Common Stock, the "Common Stock"). Such
purchases are governed by, and subject to the terms and conditions of, the
Securities Purchase Agreement, dated as of April 12, 1999, by and among the
Company, IMCG I and IMCG II (the "Purchase Agreement"). The Purchase
Agreement and the form of Warrants are attached hereto as Exhibit 1, 2 and
3 respectively and are incorporated in and made a part of this Schedule 13D
in their entirety by this reference. The Company's principal executive
offices are located at 375 Park Avenue, 22nd Floor, New York, New York
10022.
The Reporting Persons have entered into a Joint Filing Agreement,
dated as of April 22, 1999, a copy of which is attached hereto as Exhibit
4.
ITEM 2. IDENTITY AND BACKGROUND.
-----------------------
(a)-(f). The Managing Member of both IMCG I and IMCG II is PCP.
The Managing Members of PCP are Roger S. Penske and James A. Hislop. The
principal executive offices of IMCG I, IMCG II and PCP are located at 399
Park Avenue, New York, New York 10022. IMCG I, IMCG II and PCP are limited
liability companies organized to acquire businesses and to make investments
in debt or equity securities.
The principal occupation of Roger S. Penske is Chairman and Chief
Executive Officer of Penske Corporation. The principal occupation of James
A. Hislop is President and Chief Executive Officer of PCP. The business
address of Roger S. Penske is 13400 Outer Drive, West Detroit, Michigan
48239-4001. The business address of James A. Hislop is 399 Park Avenue, New
York, New York 10022.
During the past five years, to the best knowledge of the persons
named above, none of the persons named above has been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors)
or has been a party to a civil proceeding or a judicial or administrative
body of competent jurisdiction as a result of which such person was or is
subject to a judgment, decree or final order enjoining future violations
of, or prohibiting or mandating activities subject to, federal or state
securities laws or finding any violation with respect to such laws. All of
the persons named in this Item 2 are citizens of the United States.
The Purchasers intend to manage their investments in the Company
in concert, and therefore may be deemed to constitute a "group" (a "Group")
as such term is used in Section 13(d)(3) of the rules and regulations under
the Securities Exchange Act of 1934, as amended (together with such rules
and regulations, the "Exchange Act").
In addition, by reason of the Stockholders Agreement and the
Voting Agreements (each as defined in Item 4), Trace International
Holdings, Inc. ("Trace"), AIF II, L.P. ("AIF"), Aeneas Venture Corporation
("Aeneas", and together with Trace and AIF, the "Stockholder Parties"), and
the Purchasers may be deemed to constitute a Group. Neither the fact of
this filing nor anything contained herein shall be deemed an admission by
the Reporting Persons that such a Group exists, and the existence of any
such Group is hereby expressly disclaimed. In addition, the Reporting
Persons hereby expressly disclaim any beneficial ownership in any Voting
Common Stock beneficially owned by any of the Stockholder Parties. The
Reporting Persons have been advised that each of the Stockholder Parties
separately files statements on Schedule 13D or Schedule 13G with respect to
its beneficial ownership of the Company's securities.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
-------------------------------------------------
By reason of the execution and delivery of the Purchase Agreement
and the transactions contemplated thereby, upon the Initial Closing or upon
the satisfaction or waiver of certain conditions to the Initial Closing,
the Purchasers may be deemed to have acquired beneficial ownership of
shares of Voting Common Stock for purposes of Rule 13d-3(d) of the rules
and regulations under the Exchange Act. Because the acquisition of such
shares is subject to certain conditions contained in the Purchase Agreement
the satisfaction or waiver of which are not within the control of the
Reporting Persons, the Reporting Persons hereby expressly disclaim any
beneficial ownership in any securities of the Company the Purchasers have
agreed to acquire pursuant to the Purchase Agreement.
IMCG I. The total amount of funds required by IMCG I to purchase
the Series A Preferred Stock to be purchased by it at the Initial Closing
is $26,160,687.92. The total amount of funds required by IMCG I to purchase
the Series A Preferred Stock and Warrants to be purchased by it at the
Second Closing (as defined in Item 4) is $38,557,152.74. IMCG I expects to
obtain such funds from capital contributions by its members.
IMCG II. The total amount of funds required by IMCG II to
purchase the Series A Preferred Stock to be purchased by it at the Initial
Closing is $7,390,139.41. The total amount of funds required by ICMG II to
purchase the Series A Preferred Stock, the Series B Preferred Stock and the
Warrants to be purchased by it at the Second Closing is $10,892,019.93.
IMCG II expects to obtain such funds from capital contributions by its
Members.
ITEM 4. PURPOSE OF TRANSACTION.
----------------------
Pursuant to, and upon satisfaction or waiver of all of the
conditions to the Initial Closing set forth in, the Purchase Agreement,
including without limitation the termination or expiration of any required
waiting period pursuant to the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act"), at the Initial Closing the Purchasers
will purchase an aggregate of 3,727.8697 shares of Series A Preferred Stock
from the Company for cash in an aggregate amount equal to $33,550,827.33
(the consummation of such purchase, the "Initial Closing").
Pursuant to, and upon satisfaction or waiver of the conditions to
the Second Closing set forth in, the Purchase Agreement, including without
limitation the approval by the stockholders of the Company of the issuance
and sale of the Preferred Stock and the Warrants pursuant to the Purchase
Agreement and the other transactions contemplated thereby in accordance
with the rules of the New York Stock Exchange ("NYSE"), at the Second
Closing the Purchasers will purchase an aggregate of 4,175.25496 shares of
Series A Preferred Stock and 396.876 shares of Series B Preferred Stock,
and Warrants to purchase 3,898,665 shares of Voting Common Stock and
1,101,335 shares of Non-Voting Common Stock, from the Company for cash in
an amount equal to $49,449,172.67 (the consummation of such purchase, the
"Second Closing").
The purpose of the acquisition of the Preferred Stock and the
Warrants by the Purchasers is to acquire a significant equity interest in
the Company and to exercise control of the management and policies of the
Company.
Voting Agreements
- -----------------
Pursuant to the rules of the NYSE, stockholder approval is
required in connection with the transactions to be consummated at the
Second Closing. The Purchasers have entered into agreements (the "Voting
Agreements") with each of AIF, Aeneas and Trace requiring that, subject to
the terms and conditions of such agreements, each of such parties vote its
shares of Voting Common Stock in favor of the transactions contemplated by
the Purchase Agreement. The Voting Agreements are attached as Exhibits 5,
6, and 7 hereto, and are incorporated in and made a part of this Schedule
13D in their entirety by this reference.
Stockholders Agreement
- ----------------------
In connection with the transactions to be consummated at the
Initial Closing, the Stockholder Parties and the Purchasers will enter into
a Stockholders Agreement (the "Stockholders Agreement"). The Stockholders
Agreement is attached as Exhibit 8 hereto and is incorporated in and made a
part of this Schedule 13D in its entirety by this reference. Pursuant to
the Stockholders Agreement, from the Initial Closing to the Second Closing,
the Stockholder Parties and the Purchasers will agree to use their
reasonable best efforts to cause the Board of Directors of the Company to
consist of seven persons, as follows: (i) Roger S. Penske, (ii) two
individuals designated by the Purchasers, (iii) one individual designated
by Trace, (iv) the Company's Chief Operating Officer, and (v) two
independent directors. For the three year period following the Second
Closing, the Stockholder Parties and the Purchasers will agree to use their
reasonable best efforts to cause the Board of Directors to consist of nine
members, as follows: (i) Roger S. Penske, (ii) four individuals designated
by the Purchasers, (iii) one individual designated by Trace, and (iv) three
independent directors. In addition, the Stockholder Parties and the
Purchasers will agree to use their reasonable best efforts (i) from and
after the Initial Closing, to cause at least half of the members of the
Executive Committee of the Board of Directors to consist of directors that
were designated by the Purchasers, and to cause at least one designee of
the Purchasers to be appointed to each other committee of the Board of
Directors, and (ii) from and after the Second Closing, to cause the
Compensation Committee of the Board of Directors to consist of Roger S.
Penske, an individual designated by the Purchasers and two independent
directors.
In the event that the Purchasers cease to hold in the aggregate
beneficial ownership (as defined in Rule 13d-5 under the Exchange Act) of
at least 20% in the Company (excluding unexercised Warrants), their right
to designate individuals to be supported by the Stockholder Parties will be
reduced according to a formula contained in the Stockholders Agreement, and
in the event that the Purchasers or Trace cease to hold at least 10% of the
beneficial ownership in the Company (in the case of the Purchasers,
excluding unexercised Warrants), such party shall cease to be entitled to
designate any individuals to be supported by the other parties to the
Stockholders Agreement. In addition, the right of the Purchasers to
designate any individuals to be supported by the other parties to the
Stockholders Agreement will generally terminate if Roger S. Penske ceases
to serve as Chairman of the Company or, during the two-year period
following the Initial Closing, ceases to serve as Chief Executive Officer
of the Company other than as a result of his death, disability or capture
and detention.
Pursuant to the Stockholders Agreement, the Purchasers have
agreed to cause Roger S. Penske to serve as Chairman of the Company for a
three-year period and as Chief Executive Officer of the Company for a
two-year period, in each case from the Initial Closing, subject to his
death, disability or capture and detention. In connection with serving as
Chairman and Chief Executive Officer of the Company, Roger S. Penske will
be granted an option to purchase 400,000 shares of Voting Common Stock
which will vest in equal installments over three years and be exercisable
at a price of $10 per share.
The Stockholders Agreement contains certain restrictions on the
acquisition of the Company's equity securities and certain other actions by
the Stockholder Parties. At any time prior to the third anniversary of the
Initial Closing, no Stockholder Party will be permitted, directly or
indirectly, to: (a) except as described below, to acquire 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) to offer, seek,
or propose to enter into any transaction of merger, consolidation, sale of
substantial assets or any other business combination involving the Company;
(c) to 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
or any of its affiliates; (d) to 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
except as provided in the Stockholders Agreement propose any person for
election to the Board of Directors of the Company; (e) to 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) to form, join or in any
way participate in a group to take any actions otherwise prohibited by the
terms of the Stockholders Agreement; (g) to enter into any discussions,
negotiations, arrangements or understandings with any third party with
respect to any of the foregoing; or (h) to make any public announcement
with respect to any of the foregoing. In addition, the Purchasers will be
restricted from acquiring additional equity securities of the Company
except as described below.
Notwithstanding the foregoing, the Stockholders Agreement will
not prohibit: (a) any transaction by a Stockholder Party or either
Purchaser approved by either (i) a majority of the members of the Board of
Directors who are neither designated by or affiliated with such Stockholder
Party or Purchaser, or (ii) the holders of a majority of the voting stock
of the Company excluding shares held by such Stockholder Party or Purchaser
and its affiliates; (b) in the case of the Purchasers, the acquisition of
securities pursuant to the terms of the Purchase Agreement; (c) in the case
of the Purchasers, AIF and Aeneas, the acquisition of securities or of
beneficial ownership of securities if, after giving effect to such
acquisition, the beneficial ownership of such Stockholder Party or the
Purchasers in the Company is less than or equal to 49%; (d) in the case of
the Purchasers, a tender offer for all, but not less than all, of the
outstanding Common Stock of the Company or a merger of an entity with or
into the Company; (e) the granting by the Board of Directors of stock
options to affiliates of the Stockholder Parties or the Purchasers; or (f)
the exercise of stock options.
Pursuant to the Stockholders Agreement, until the third
anniversary of the Initial Closing, neither of the Purchasers nor Trace
will be permitted to sell or otherwise transfer its equity securities of
the Company except: (a) as part of a merger, consolidation or amalgamation
of the Company or a tender offer for Common Stock which is open to all
stockholders of the Company; (b) in the case of a Purchaser, a sale or
other transfer of Common Stock in which Aeneas and AIF are permitted to
participate; (c) to certain permitted transferees; (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 securities pursuant to a pledge (or other
security) agreement existing as of the date of this Agreement. In the event
the Purchasers sell or otherwise transfer equity securities of the Company
in accordance with clause (b) above, Aeneas and AIF will be entitled to
participate in such sale or other transfer on a pro rata basis.
Pursuant to the Stockholders Agreement, except for certain pro
rata transfers, until the second anniversary of the Initial Closing, each
of the Purchasers will not register or permit any sale or other transfer of
the membership interests in such entity by Penske Corporation or Penske
Capital Partners, L.L.C.
Pursuant to the Stockholders Agreement, the Company will be
obligated for three years following the Initial Closing to keep effective a
registration statement relating to the sale by Trace of its shares of
Common Stock. The cost to the Company of its reasonable out-of-pocket
expenses incurred in connection therewith will be reimbursed by Trace.
Certificates of Designation
- ---------------------------
Pursuant to the Purchase Agreement, the Company is required,
prior to or concurrently with the Initial Closing, to cause the Certificate
of Designation of the Series A Preferred Stock and Certificate of
Designation of the Series B Preferred Stock (collectively, the
"Certificates of Designation") to be filed with the Secretary of State of
the State of Delaware. The Certificates of Designation of the Series A
Preferred Stock and the Series B Preferred Stock are attached as Exhibits 9
and 10 hereto, respectively, and are incorporated in and made a part of
this Schedule 13D in their entirety by this reference. Pursuant to the
Certificate of Designation of the Series A Preferred Stock, the holders of
the Series A Preferred Stock will have the right to vote on an as-converted
basis together with the Voting Common Stock as a single class on all
matters, including the election of directors, submitted to the Company's
stockholders for a vote. The holders of the Series B Preferred Stock do not
have any voting rights except as described below.
Each share of Series B Preferred Stock may be converted at the
option of the holder into one share of Series A Preferred Stock at any time
unless as a result of the conversion, such holder would own, control or
have the right to vote a greater number of shares than such holder is
permitted to own, control or have the right to vote under any law,
regulation, rule or other requirement (a "Regulatory Problem"). In
addition, each share of Series A Preferred Stock may in certain cases be
converted at the option of the holder into one share of Series B Preferred
Stock to avoid a Regulatory Problem.
The Series B Preferred Stock will be acquired by IMCG II at the
Second Closing. Following the Second Closing the conversion of Series B
Preferred Stock into Series A Preferred Stock by IMCG II could result in a
Regulatory Problem; therefore, IMCG II does not currently anticipate
effecting such a conversion
As more fully discussed under Item 6, upon issuance, each share
of Series A Preferred Stock will be convertible into 1,000 shares of Voting
Common Stock, and each share of Series B Preferred Stock will be
convertible into 1,000 shares of Non-Voting Common Stock subject to
adjustment as provided in the Certificates of Designation.
Pursuant to the Certificates of Designation, the affirmative vote
of the holders of at least a majority of the outstanding shares of each of
the Series A Preferred Stock and Series B Preferred Stock at a meeting of
stockholders will be required (i) to 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 Company'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 or Series B Preferred Stock, (other than as
contemplated in the respective Certificates of Designation); (ii) to
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 or Series B
Preferred Stock, other than as required by the applicable Certificate of
Designation; or (iii) to authorize, adopt or approve an amendment to the
Certificate of Incorporation or the applicable Certificate of Designation
which would increase or decrease the par value of the shares of Series A
Preferred Stock or Series B Preferred Stock, or alter or change the powers,
preferences or special rights of the Series A Preferred Stock or Series B
Preferred Stock.
Pursuant to the Certificate of Designation of the Series B
Preferred Stock, the holders of Series B Preferred Stock will have the
right to vote as a separate class on any merger or consolidation of the
Company with or into another entity or entities, or any recapitalization or
reorganization, pursuant to which the holders of the Series B Preferred
Stock would receive or have their shares exchanged for Series A Preferred
Stock or their shares would be treated differently from the Series A
Preferred Stock, except that the holders of the Series B Preferred Stock
may, without a separate class vote, receive or have their shares exchanged
for non-voting securities which are otherwise identical on a per share
basis in amount and form to the voting securities received with respect to
or exchanged for the Series A Preferred Stock so long as (i) such
non-voting securities are convertible into such voting securities on the
same terms as the Series B Preferred Stock is convertible into the Series A
Preferred Stock and (ii) all other consideration is equal on a per share
basis.
Pursuant to the Certificates of Designation, the holders of the
Preferred Stock will be entitled to receive semi-annual dividends in the
amount of 6.50% per annum of the liquidation preference of their shares, as
determined in accordance with the Certificates of Designation. Until the
second anniversary of the Second Closing, such dividends will be payable in
kind, except that IMCG II's dividends will be paid in shares of Series B
Preferred Stock. Accordingly, upon each payment of a dividend in Series A
Preferred Stock, the beneficial ownership of Voting Common Stock will
increase. Following such period, dividends will be payable in cash and to
the extent not paid, will be cumulative.
Charter Amendment
- -----------------
Pursuant to the Purchase Agreement, the Company is required,
prior to or concurrently with the Second Closing, to cause an amendment to
the Company's Certificate of Incorporation to be filed with the Secretary
of State of the State of Delaware (the "Charter Amendment"). The Charter
Amendment is attached as Exhibit 11 hereto and is incorporated in and made
a part of this Schedule 13D in its entirety by this reference. Pursuant to
the Charter Amendment, the number of authorized shares of Non-Voting Common
Stock will be increased to an amount sufficient to satisfy the conversion
of the Series B Preferred Stock and the exercise of Warrants to purchase
Non-Voting Common Stock. The Charter Amendment will also provide holders of
Non-Voting Common Stock with the right to vote separately as a class on
certain specified transactions pursuant to which such holders would be
required, in exchange for their shares of Non-Voting Common Stock, to
accept (i) Voting Common Stock or (ii) non-voting securities with rights
that are not economically equivalent to the rights of the Voting Common
Stock.
Pursuant to the Certificate of Incorporation each share of
Non-Voting Common Stock may be converted, at the option of the holder, into
one share of Voting Common Stock at anytime, unless as a result of the
conversion, such conversion would result in a Regulatory Problem. In
addition each share of Voting Common Stock may in certain cases be
converted at the option of the holder into one share of Non-Voting Common
Stock to avoid a Regulatory Problem. The Charter Amendment contains
additional provisions permitting holders of Non-Voting Common Stock that
are subject to the Bank Holding Company Act to convert Non-Voting Common
Stock into Voting Common Stock where a Regulatory Problem would otherwise
result, so long as such stockholder disposes of its Non-Voting Common Stock
within 15 days following such conversion. The Series B Preferred Stock and
Warrants to purchase Non-Voting Common Stock will be acquired by IMCG II at
the Second Closing. Following the Second Closing, the conversion into
Voting Common Stock of Non-Voting Common Stock received by IMCG II upon
conversion of Series B Preferred Stock or the exercise of such Warrants by
IMCG II could result in a Regulatory Problem; therefore, IMCG II does not
currently anticipate effecting such a conversion.
Registration Rights Agreement
- -----------------------------
Pursuant to the Purchase Agreement, the Company and the
Purchasers will enter into a Registration Rights Agreement at the Initial
Closing. The Registration Rights Agreement is attached as Exhibit 12 hereto
and is incorporated in and made a part of this Schedule 13D in its entirety
by this reference. Pursuant to the Registration Rights Agreement, the
Company will grant the Purchasers the right, subject to certain limitations
and restrictions, (i) to require the Company at the request of the
Purchasers on three separate occasions to effect a registration of shares
of Voting Common Stock held by the Purchasers, and (ii) to require the
Company to include shares of Voting Common Stock then held by the
Purchasers (on a pro rata basis with other participating selling
stockholders) in any other registration by the Company of shares of its
Voting Common Stock under the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder. The Company will pay certain
expenses of the Purchasers in connection with such registrations as
provided in the Registration Rights Agreement.
Certain Redemption Rights
- -------------------------
Pursuant to the Purchase Agreement, in the event that such
agreement is terminated following the Initial Closing, the Purchasers will
have the right to require that the Company repurchase the Series A
Preferred Stock acquired by the Purchasers at the Initial Closing for an
amount in cash equal to the sum of the purchase price paid for such Series
A Preferred Stock plus any dividends thereon. If the Purchasers do not
exercise such right, the Company has the right to require that the
Purchaser sell such Series A Preferred Stock to the Company, provided that
the Purchaser will not be required to sell any shares of Preferred Stock
that are converted into shares of Voting Common Stock prior to such
redemption.
Pursuant to the Purchase Agreement, the Purchasers have the right
to sell the securities acquired by them at the Initial Closing and Second
Closing back to the Company in certain circumstances based on breaches of
certain representations and warranties contained in the Purchase Agreement.
The purchase price for such sale will be an amount in cash equal to the sum
of the purchase price paid for the securities being sold plus any dividends
thereon.
Other Plans and Proposals
- -------------------------
While the Purchasers do not have any current plans to sell any of
the securities acquired pursuant to the Purchase Agreement or to purchase
additional securities of the Company, the Purchasers may determine, based
on market and general economic conditions, the business affairs and
financial condition of the Company, the market price of the Common Stock
and other factors deemed relevant by them, to sell some or all of such
acquired securities, subject to the restrictions contained in the
Stockholders Agreement or to purchase additional securities of the Company.
Except as otherwise described in this Schedule 13D, the
Purchasers currently have no plans or proposals which relate to or would
result in any transaction, event or action enumerated in paragraphs (a)
through (j) of Item 4 of the form of Schedule 13D promulgated under the
Exchange Act.
ITEM 5. INTERESTS IN SECURITIES OF THE ISSUER.
-------------------------------------
(a) The Purchasers do not currently beneficially own any shares
of capital stock of the Company. Upon the Initial Closing or upon the
satisfaction of certain conditions to the Initial Closing, each of the
Purchasers may be deemed to be the beneficial owner of an aggregate of
3,727,869 shares of Voting Common Stock into which the 3,727.869 shares of
Series A Preferred Stock to be purchased by them at the Initial Closing
pursuant to the Purchase Agreement will be convertible. Such 3,727,869
shares of Voting Common Stock, if outstanding, would constitute
approximately 14.9% of the 25,017,488 shares of Voting Common Stock deemed
to be outstanding for this purpose, based upon the Company's
representations and warranties in the Purchase Agreement that 21,289,619
shares of Voting Common Stock are currently outstanding and including the
3,727,869 shares of Voting Common Stock into which the Series A Preferred
Stock to be acquired by the Purchasers at the Initial Closing will be
convertible. Because the acquisition of such shares is subject to certain
conditions contained in the Purchase Agreement the satisfaction or waiver
of which are not within the control of the Reporting Persons, the Reporting
Persons hereby expressly disclaim any beneficial ownership in any
securities of the Company the Purchasers have agreed to acquire pursuant to
the Purchase Agreement.
In the future, upon the Second Closing or upon the satisfaction
or waiver of certain conditions to the Second Closing, the Reporting
Persons may be deemed to be the beneficial owners of an aggregate of
8,473,920 shares of Voting Common Stock into which the Series A Preferred
Stock and the Warrants exercisable for Voting Common Stock to be purchased
by the Purchasers at the Second Closing and the options to be granted to
Roger S. Penske at the Second Closing are convertible or exercisable. Such
shares of Voting Common Stock, together with the shares of Voting Common
Stock issuable upon conversion of the Series A Preferred Stock to be
acquired at the Initial Closing, will constitute approximately 36.4% of
34,491,408 shares of Voting Common Stock deemed to be outstanding for this
purpose, based upon the Company's representations and warranties in the
Purchase Agreement that 21,289,619 shares of Voting Common Stock are
currently outstanding and including the shares of Voting Common Stock into
which the Series A Preferred Stock and the Warrants exercisable for Voting
Common Stock to be acquired by the Purchasers at the Initial Closing and
the Second Closing and the options to purchase shares of Voting Common
Stock to be granted to Roger S. Penske at the Second Closing will be
convertible or exchangeable, but excluding for this purpose Voting Common
Stock issuable upon conversion of Preferred Stock which may be paid to the
Purchasers in the form of dividends. Because the acquisition of such shares
is subject to certain conditions contained in the Purchase Agreement the
satisfaction or waiver of which are not within the control of the Reporting
Persons, the Reporting Persons hereby expressly disclaim any beneficial
ownership in any securities of the Company the Purchasers have agreed to
acquire pursuant to the Purchase Agreement.
Because the conversion by IMCG II of Series B Preferred Stock
into Series A Preferred Stock, or the conversion of shares of Non-Voting
Common Stock issued to IMCG II upon conversion of Series B Preferred Stock
or the exercise of Warrants into Voting Common Stock could result in a
Regulatory Problem, IMCG II does not currently anticipate converting any
such securities into Series A Preferred Stock or Voting Common Stock. In
the event that IMCG II were to effect such a conversion, the Reporting
Persons could be deemed to be the beneficial owners of an additional
aggregate of 1,498,211 shares of Voting Common Stock. Such shares of Voting
Common Stock, together with the shares of Voting Common Stock obtainable
upon conversion of the Series A Preferred Stock and the Warrants
exercisable for Voting Common Stock to be purchased by the Purchasers at
the Initial Closing and the Second Closing and the option being granted to
Roger S. Penske at the Second Closing, would constitute approximately 39.2%
of 34,989,619 shares of Voting Common Stock deemed to be outstanding for
this purpose, based upon the Company's representations and warranties in
the Purchase Agreement that 21,289,619 shares of Voting Common Stock are
currently outstanding and including the 13,700,000 shares of Voting Common
Stock into which the Preferred Stock and Warrants to be acquired by the
Purchasers at the Initial Closing and the Second Closing and the options to
purchase shares of Voting Common Stock to be granted to Roger S. Penske at
the Second Closing will be convertible or exercisable, but excluding for
this purpose Voting Common Stock issuable upon conversion of Preferred
Stock which may be paid to the Purchasers in the form of dividends.
Pursuant to the Certificates of Designation, each share of
Preferred Stock is convertible into the number of shares of Common Stock
obtained by dividing the liquidation preference by the conversion price of
such share of Preferred Stock. The liquidation preference of each share of
Preferred Stock will initially be $9,000 and will increase to $10,000 at
the Second Closing. The liquidation preference will also be adjusted over
time to reflect accrued and unpaid dividends. The conversion price of each
share of Preferred Stock will initially be $9.00 and will increase to
$10.00 at the Second Closing. The conversion price will also be adjusted in
accordance with certain antidilution provisions contained in the
Certificates of Designation. The Warrants may be exercised at a price of
$12.50 per share for the 30 months following the Second Closing, and for
$15.50 for the 30 months thereafter. These exercise prices will be adjusted
in accordance with certain antidilution provisions contained in the
Warrants.
(b) The Purchase Agreement provides that the Purchasers have the
right to acquire the Preferred Stock and the Warrants, subject to the terms
and conditions contained therein. See Items 4 and 6 of this Schedule 13D.
Until the Purchasers acquire such securities, such securities will remain
unissued by the Company.
The Purchasers currently do not own any shares of Voting Common
Stock, and therefore do not direct the voting or disposition of any shares
of Voting Common Stock. Upon the issuance of the Series A Preferred Stock
at the Initial Closing and assuming the conversion of the Series A
Preferred Stock into Voting Common Stock, IMCG I will have the sole power
to direct the vote and disposition of 2,906,743 shares of Voting Common
Stock, and IMCG II will have the sole power to direct the vote and
disposition of 821,126 shares of Voting Common Stock, in each case subject
to certain restrictions contained in the Stockholders Agreement and
described in Items 4 and 6 of this Schedule 13D.
Following the Second Closing, and assuming the conversion of the
Series A Preferred Stock into Voting Common Stock and the exercise of the
Warrants exercisable for shares of Voting Common Stock, IMCG I will have
the sole power to direct the vote and disposition of 10,370,449 shares of
Voting Common Stock, IMCG II will have the sole power to direct the vote
and disposition of 1,431,340 shares of Voting Common Stock, in each case
subject to certain restrictions contained in the Stockholders Agreement and
described in Items 4 and 6 of this Schedule 13D, and upon the exercise of
the options to be granted to Roger S. Penske following the Second Closing,
Roger S. Penske will have the sole power to direct the vote and disposition
of 400,000 shares of Voting Common Stock. Because conversion by IMCG II of
Series B Preferred Stock into Series A Preferred Stock, or the conversion
of shares of Non-Voting Common Stock issuable upon conversion of Series B
Preferred Stock or exercise of Warrants, into Voting Common Stock could
result in a Regulatory Problem, IMCG II does not currently anticipate
effecting any such conversion. In the event that IMCG II were to effect
such a conversion, IMCG II would have the sole power to direct the vote and
disposition of 2,929,251 shares of Voting Common Stock, subject to the
restrictions contained in the Stockholders Agreement and described in Items
4 and 6 of this Schedule 13D.
(c) Except as described in this Schedule 13D, none of the
Reporting Persons have effected any transactions in the Voting Common Stock
during the 60 days preceding the date of this Schedule 13D.
Based upon its most recently amended Schedule 13D filed April 21,
1998, Trace has reported beneficial ownership of 4,016,110 shares of Voting
Common Stock, constituting approximately 18.9% of the outstanding shares of
Voting Common Stock. Based upon its Schedule 13G filed on February 14,
1997, Aeneas has reported beneficial ownership of 2,843,656 shares of
Voting Common Stock, constituting approximately 13.4% of the outstanding
shares of Voting Common Stock. Based upon its Schedule 13G filed February
13, 1997, AIF has reported beneficial ownership of 1,843,656 shares of
Voting Common Stock, constituting approximately 8.7% of the outstanding
shares of Voting Common Stock. The Reporting Persons hereby disclaim any
beneficial ownership of the shares beneficially owned by any of the
Stockholder Parties.
(d) No person other than the Reporting Persons has the right to
receive or the power to direct the receipt of dividends from, or the
proceeds from the sale of, the Preferred Stock, the Warrants, or any shares
of Common Stock issuable upon conversion or exercise thereof.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
-------------------------------------------------------------
The responses set forth in Item 4 of this Schedule 13D are
incorporated herein by this reference in their entirety.
The Purchase Agreement contains customary representations,
warranties, covenants, agreements and conditions for transactions of the
type contemplated thereby.
In addition to the termination or expiration of any required
waiting period pursuant to the HSR Act described in Item 4, the
consummation of the Initial Closing and the Second Closing are each subject
to the satisfaction or waiver of certain customary conditions to closing,
including the approval of certain manufacturers doing business with the
Company and, in the case of the Second Closing, the approval of the
Company's lenders. In addition, the Second Closing is subject to the
approval of the stockholders of the Company as described in Item 4, and the
obligations of the Company to consummate the Initial Closing and the Second
Closing are conditioned, among other things, upon Roger S. Penske serving
as Chairman and Chief Executive Officer of the Company.
Pursuant to the Purchase Agreement, until the earlier of the
termination of the Purchase Agreement or the Second Closing, neither the
Company nor any of its subsidiaries may solicit, propose or facilitate
(including by way of providing information regarding the Company or any of
its subsidiaries or their respective businesses to any person), directly or
indirectly, any inquiries, discussions, offers or proposals for, continue
or enter into negotiations looking toward, or enter into or consummate any
commitment or understanding in connection with any offer or proposal
regarding, any purchase or other acquisition of all or any material portion
of the Company and its subsidiaries taken as a whole, the business or
assets of the Company and its subsidiaries taken as a whole, or a material
portion of the capital stock of or equity interests in (whether newly
issued or currently outstanding) the Company or any of its subsidiaries
(other than with respect to inquires or discussions (but not offers,
proposals, negotiations, or the entering into of commitments or
understandings) relating to proposed acquisitions by the Company of
businesses for which the Company would use its capital stock as
consideration, but only following the prior consent of the Purchasers), or
any merger, business combination or recapitalization involving the Company
or any of its material subsidiaries or their respective businesses.
However, in the event the Company receives a Takeover Proposal (as defined
below), the Company may review and act upon such Takeover Proposal solely
as it relates to such transaction and only in the event that the Board of
Directors determines in good faith, after consultation with and based upon
the advice of its financial and outside legal advisors, that failing to
review and act upon such Takeover Proposal would constitute a breach of the
Company's directors' fiduciary duties under applicable Law (a "Company
Fiduciary Out"). A "Takeover Proposal" means an unsolicited inquiry, offer
or proposal relating to the acquisition of all of the capital stock and
other equity interests in the Company, or all or substantially all of the
assets of the Company and its subsidiaries or the merger of the Company
with or into a third party.
The Purchase Agreement may be terminated at any time (a) by
mutual written consent of the Company and the Purchasers at any time prior
to the Second Closing; (b) by either the Purchasers or the Company if the
Second Closing is not consummated by December 31, 1999 (except that such
right to terminate the Purchase Agreement shall not be available to any
party whose failure to fulfill any obligation under the Purchase Agreement
was the cause of or resulted in the failure of the Second Closing to occur
on or before such date); (c) by either the Purchasers or the Company if a
court of competent jurisdiction or governmental, regulatory or
administrative agency or commission issues a nonappealable final order,
decree or ruling or takes any other action having the effect of permanently
restraining, enjoining or otherwise prohibiting the transactions
contemplated by the Purchase Agreement; (d) by the Purchasers or the
Company (i) if any representation or warranty of a party set forth in the
Purchase Agreement is untrue in any material respect when made to the
extent that the non-breaching party did not have actual knowledge of the
breach as of the date of the Purchase Agreement, or (ii) upon a breach in
any material respect of any covenant or agreement on the part of the other
set forth in the Purchase Agreement, in each case which would constitute a
failure of a condition to Closing, and subject to certain cure provisions;
(e) (i) by the Company in the event of the exercise by the Company of a
Company Fiduciary Out, but only if the Board of Directors has accepted a
Takeover Proposal (following valid exercise of a Company Fiduciary Out)
prior to the approval by the stockholders of the transactions contemplated
by the Purchase Agreement or (ii) by the Purchasers (x) following the
thirtieth day following the exercise by the Company of a Company Fiduciary
Out if the Company has not ceased all communications with the applicable
third party or third parties regarding a Takeover Proposal, or (y)
following the acceptance by the Company of a Takeover Proposal; (f) by
either the Purchasers or the Company in the event that the stockholders of
the Company fail to approve the transactions contemplated by the Purchase
Agreement, or by the Purchasers if the Company's Board of Directors fails
to recommend such approval, or withdraws, modifies or changes such
recommendation in a manner adverse to the Purchasers, or recommends to the
stockholders of the Company an alternative transaction, or if the Board of
Directors of the Company resolves to do any of the foregoing; or (g) by the
Company on the 90th day following the date of written notice from the
Antitrust Division of the Department of Justice or the Federal Trade
Commission that such entity will seek to enjoin the transactions
contemplated by the Purchase Agreement absent an agreement to divest
certain assets of either the Purchasers or the Company, unless the
Purchasers or the Company has agreed to divest assets in accordance with
such notice.
Upon consummation of the Initial Closing, the Company will pay to
the Purchasers their expenses not to exceed $750,000. Upon termination of
the Purchase Agreement, the Company may be obligated to pay to the
Purchasers their expenses not to exceed $750,000 and/or an aggregate
termination fee of $4,000,000, depending on the circumstances under which
the Purchase Agreement was terminated.
In connection with the transactions contemplated by the Purchase
Agreement, the Company entered into a Non-Competition and Standstill
Agreement with Marshall S. Cogan, the current Chairman and Chief Executive
Officer of the Company and an affiliate of Trace. This agreement is
attached as Exhibit 13 hereto and is incorporated in and made a part of
this Schedule 13D in its entirety by this reference.
Other than as set forth in this Item 6 and Items 3, 4, and 5
above, none of the Reporting Persons is a party to any contract,
arrangement, understanding or relationship with respect to any securities
of the Issuer, and none of the securities as to which this Schedule 13D
relates is pledged or is otherwise subject to a contingency the occurrence
of which would give another person voting power or investment power over
such securities.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
--------------------------------
Exhibit 1 -- Purchase Agreement, dated as of April 12, 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.
Exhibit 2 -- Form of Warrant to purchase shares of Voting Common
Stock of United Auto Group, Inc.
Exhibit 3 -- Form of Warrant to purchase shares of Non-Voting Common
Stock of United Auto Group, Inc.
Exhibit 4 -- Joint Filing Agreement
Exhibit 5 -- Form of Stockholder and Voting Agreements to be
entered into among International Motor Cars Group I,
L.L.C., International Motor Cars Group II, L.L.C. and
AIF II, L.P.
Exhibit 6 -- Form of Stockholder and Voting Agreements to be
entered into among International Motor Cars Group I,
L.L.C., International Motor Cars Group II, L.L.C. and
Aeneas Venture Corporation
Exhibit 7 -- Form of Stockholder and Voting Agreements to be
entered into among International Motor Cars Group I,
L.L.C., International Motor Cars Group II, L.L.C. and
Trace International Holdings, Inc.
Exhibit 8 -- Form of Stockholders Agreement by and among AIF II,
L.P., Aeneas Venture Corporation, Trace International
Holdings, Inc., United Auto Group, Inc., International
Motor Cars Group I, L.L.C. and International Motor
Cars Group II, L.L.C.
Exhibit 9 -- Certificate of Designations of the Series A
Convertible Preferred Stock of United Auto Group, Inc.
Exhibit 10 -- Certificate of Designations of the Series B
Convertible Preferred Stock of United Auto Group, Inc.
Exhibit 11 -- Proposed text of amendment to the Certificate of
Incorporation of United Auto Group, Inc.
Exhibit 12 -- Form of Registration Rights Agreement, by and among
United Auto Group, Inc., International Motor Cars
Group I, L.L.C. and International Motor Cars Group II,
L.L.C.
Exhibit 13 -- Non-Competition and Standstill Agreement, dated as of
April 12, 1999, between United Auto Group, Inc. and
Marshall S. Cogan
<PAGE>
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
April 22, 1999
INTERNATIONAL MOTOR CARS GROUP I, L.L.C.
By: PENSKE CAPITAL PARTNERS, L.L.C.
Its Managing Member
By: /s/ James A. Hislop
-------------------------
James A. Hislop
President
<PAGE>
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
April 22, 1999
INTERNATIONAL MOTOR CARS GROUP II, L.L.C.
By: PENSKE CAPITAL PARTNERS, L.L.C.
Its Managing Member
By: /s/ James A. Hislop
-------------------------
James A. Hislop
President
<PAGE>
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
April 22, 1999
PENSKE CAPITAL PARTNERS, L.L.C.
By: /s/ James A. Hislop
-----------------------------
James A. Hislop
President
<PAGE>
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
April 22, 1999
/s/ James A. Hislop
----------------------------------
James A. Hislop
<PAGE>
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
April 22, 1999
/s/ Roger S. Penske
----------------------------------
Roger S. Penske
<PAGE>
EXHIBIT INDEX
-------------
Exhibit 1 -- Purchase Agreement, dated as of April 12, 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.
Exhibit 2 -- Form of Warrant to purchase shares of Voting Common
Stock of United Auto Group, Inc.
Exhibit 3 -- Form of Warrant to purchase shares of Non-Voting Common
Stock of United Auto Group, Inc.
Exhibit 4 -- Joint Filing Agreement
Exhibit 5 -- Form of Stockholder and Voting Agreements to be
entered into among International Motor Cars Group I,
L.L.C., International Motor Cars Group II, L.L.C. and
AIF II, L.P.
Exhibit 6 -- Form of Stockholder and Voting Agreements to be
entered into among International Motor Cars Group I,
L.L.C., International Motor Cars Group II, L.L.C. and
Aeneas Venture Corporation
Exhibit 7 -- Form of Stockholder and Voting Agreements to be
entered into among International Motor Cars Group I,
L.L.C., International Motor Cars Group II, L.L.C. and
Trace International Holdings, Inc.
Exhibit 8 -- Form of Stockholders Agreement by and among AIF II,
L.P., Aeneas Venture Corporation, Trace International
Holdings, Inc., United Auto Group, Inc., International
Motor Cars Group I, L.L.C. and International Motor
Cars Group II, L.L.C.
Exhibit 9 -- Certificate of Designations of the Series A
Convertible Preferred Stock of United Auto Group, Inc.
Exhibit 10 -- Certificate of Designations of the Series B
Convertible Preferred Stock of United Auto Group, Inc.
Exhibit 11 -- Proposed text of amendment to the Certificate of
Incorporation of United Auto Group, Inc.
Exhibit 12 -- Form of Registration Rights Agreement, by and among
United Auto Group, Inc., International Motor Cars
Group I, L.L.C. and International Motor Cars Group II,
L.L.C.
Exhibit 13 -- Non-Competition and Standstill Agreement, dated as of
April 12, 1999, between United Auto Group, Inc. and
Marshall S. Cogan
EXHIBIT 1
SECURITIES PURCHASE AGREEMENT
by and among
UNITED AUTO GROUP, INC.,
and
INTERNATIONAL MOTOR CARS GROUP 1, L.L.C.
and
INTERNATIONAL MOTOR CARS GROUP 11, L.L.C.
dated as of
April 12, 1999
<PAGE>
Table of Contents
Page
ARTICLE I ISSUANCE AND SALE OF PREFERRED STOCK AND
WARRANTS
1.1. Issuance, Purchase and Sale
1.2. The Closing; Deliveries
ARTICLE 11 REPRESENTATIONS AND WARRANTIES OF THE
COMPANY .....................................................3
2.1. Organization; Subsidiaries...........................3
2.2. Due Authorization ...................................5
2.3. Capitalization.......................................5
2.4. SEC Reports .........................................6
2.5. Financial Statements ................................6
2.6. Absence of Certain Changes ..........................7
2.7. Litigation............................................
2.8. Title to Properties; Insurance.......................8
2.9. Consents, No Violations .............................9
2.10. Holding Company Act and Investment Company Act .....10
2.11. Taxes ..............................................10
2.12. Employee Benefit Plans .............................11
2.13. Intellectual Property ..............................14
2.14. Compliance with Laws ...............................14
2.15. Commitments ........................................17
2.16. Acquisitions .......................................18
2.17. Brokers or Finders; Opinion of Financial Advisor ...18
2.18. Proxy Statement ....................................19
2.19. Suppliers ..........................................19
2.20. Related Party Transactions .........................19
2.21. Products ...........................................20
2.22. Section 203 of the DGCL; Takeover Statute ..........20
2.23. Disclosure .........................................20
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE
PURCHASER ..................................................21
3.1. Acquisition for Investment..........................21
3.2. Restricted Securities ..............................21
3.3. No Brokers or Finders ..............................21
3.4. Accredited Investor.................................21
3.5 Organization........................................21
3.6. Due Authorization...................................21
3.7. Consents, No Violations.............................22
3.8. Availability of Funds ..............................22
3.9 Due Diligence.......................................22
ARTICLE IV COVENANTS
4.1. Conduct of Business by the Company Pending the
Closings ...........................................23
4.2. No Solicitation ....................................25
4.3. Press Releases; Interim Public Filings .............26
4.4. HSR Act.............................................27
4.5. Proxy Statement; Stockholders Meeting ..............27
4.6. Consents; Approvals ................................28
4.7. Listing.............................................28
4.8. Intentionally Omitted ..............................28
4.9. Certificates of Designation; Amendment to
Certificate of Incorporation .......................28
4.10 Cooperation...........................................
4.11. Access to Property; Records ........................29
4.12 Reserve Shares .....................................29
4.13 Notice of Breach....................................29
4.14 Transfer Taxes .....................................30
4.15 Indemnification.....................................30
4.16 Certain Limitations ................................30
4.17. Acquisition Entities ...............................30
ARTICLE V CONDITIONS
5.1. Conditions to Obligations of the Purchaser and the
Company ............................................31
5.2. Conditions to Obligations of the Purchaser .........31
5.3. Conditions to Obligations of the Company ...........33
ARTICLE VI TERMINATION
6.1. Termination ........................................34
6.2. Effect of Termination; Termination Fee .............36
ARTICLE VII SURVIVAL; CERTAIN REMEDIES .................................37
7.1. Survival . .........................................37
7.2. Right to Require Repurchase ........................37
7.3. Sole and Exclusive Remedy ..........................38
7.4. Termination Following Initial Closing ..............38
ARTICLE VIII MISCELLANEOUS ..............................................39
8.1. Defined Terms; Interpretations .....................39
8.2. Fees and Expenses ..................................47
8.3. Public Announcements ...............................47
8.4. Restrictive Legends ................................48
8.5. Further Assurances .................................48
8.6. Successors and Assigns .............................49
8.7. Entire Agreement ...................................49
8.8. Notice..............................................49
8.9. Amendments..........................................50
8.10 Counterparts........................................50
8.11 Headings............................................50
8.12. Nouns and Pronouns .................................50
8.13. GOVERNING LAW ......................................51
8.14. Submission to Jurisdiction .........................51
8.15. WAIVER OF JURY TRIAL ...............................51
8.16 Severability .......................................51
<PAGE>
Exhibits
Exhibit 1.2(b) Forms of Warrant
Exhibit 2.2 Forms of Certificates of Designation
Exhibit 4.5 Form of Certificate of Amendment
Exhibit 5.1(a)(iii) Consents (Initial Closing)
Exhibit 5.1(b)(ii) Consents (Second Closing)
Exhibit 5.2(a)(iv) Form of Stockholders Agreement
Exhibit 5.2(a)(v) Form of Registration Rights Agreement
Exhibit 5.2(a)(viii) Form of Opinion of Willkie Farr & Gallagher
<PAGE>
INDEX OF DEFINED TERMS
SECTION
1998 Balance Sheet .......................................................2.5
1998 Financial Statements ................................................2.5
Affiliate ................................................................8.1
Agreement ...........................................................preamble
Alternative Transaction ..................................................8.1
Board of Directors .......................................................8.1
Certificate of Amendment .................................................4.9
Certificate of Designation ...............................................2.2
Closing ...............................................................1.2(a)
Closing Date ..........................................................1.2(a)
Closings ..............................................................1.2(a)
Code .....................................................................8.1
Commitments .............................................................2.15
Common Stock ........................................................recitals
Company .............................................................preamble
Company Affiliates .......................................................4.2
Company Fiduciary Out ....................................................4.2
Compensation and Benefit Plans ...........................................8.1
Confidentiality Agreement ...............................................4.11
Consents .................................................................4.6
DGCL .....................................................................8.1
Encumbrances ........................................................2. 1 (b)
Environmental Laws .......................................................8.1
Environmental Matter .....................................................8.1
Environmental Permits ............................................2.14(d)(ii)
ERISA ....................................................................8.1
ERISA Affiliate ..........................................................8.1
Exchange Act..............................................................8.1
GAAP .....................................................................2.5
Governmental Entity.......................................................8.1
Hazardous Substances......................................................8.1
HSR Act...................................................................8.1
IMCG-l ..............................................................preamble
IMCG-1 Initial Closing Purchase Price .....................................1.1
IMCG-l Second Closing Purchase Price ......................................1.1
IMCG-11...............................................................preamble
<PAGE>
Independent Directors ...................................................4.16
Initial Closing .......................................................1.2(a)
Initial Closing Purchase Price ...........................................1.1
Initial Purchase .........................................................1.1
Intellectual Property ....................................................8.1
IRS ......................................................................8.1
Knowledge ................................................................8.1
Laws .....................................................................8.1
Leased Real Property .....................................................8.1
Licenses .............................................................2.14(a)
Litigation ............................................................2.7(a)
Losses ...................................................................8.1
Major Suppliers .........................................................2.19
Material Adverse Effect ..................................................8.1
Multi-Employer Plan ..................................................2.12(c)
Non-Voting Common Stock .............................................recitals
NYSE .....................................................................8.1
Owned Real Property ......................................................8.1
PCBs .....................................................................8.1
Permitted Encumbrances ...................................................8.1
Person ...................................................................8.1
Preferred Stock .....................................................recitals
Products ................................................................2.21
Proxy Statement .........................................................2.18
Purchase Price ......................................................recitals
Purchaser ...........................................................preamble
Purchaser Designees ......................................................4.5
Purchaser Expenses .......................................................8.2
Real Property ...................................................2.14(d)(iii)
Registration Rights Agreement ......................................5.2(a)(v)
Related Parties ..........................................................8.1
Release ..................................................................8.1
Return ...................................................................8.1
SEC ......................................................................8.1
SEC Reports ..............................................................2.4
Second Closing ........................................................1.2(a)
Second Closing Failures................................................5,2(a)
Second Closing Purchase Price.............................................1.1
Second Purchase...........................................................1.1
Section 7.2 Put Price.....................................................7.2
Section 7.4 Put Price ....................................................7.4
<PAGE>
Securities Act ...........................................................8.1
Series A Preferred Stock ............................................recitals
Series B Preferred Stock ............................................recitals
Shares ...................................................................8.1
Significant Shareholders .................................................8.1
Stockholders Agreement ............................................5.2(a)(iv)
Stockholders Meeting.....................................................2.18
Subsidiaries ........................................................2. 1 (b)
Subsidiary ..........................................................2. 1 (b)
Takeover Proposal ........................................................8.1
Tax ......................................................................8.1
Taxes ....................................................................8.1
Terminating Breach ..................................................6. 1 (d)
Third Party ..............................................................8.1
Transaction Documents ....................................................8.1
Warrants ............................................................recitals
<PAGE>
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as
of April 12, 1999, by and among UNITED AUTO GROUP, INC., a Delaware
corporation (the "Company"), INTERNATIONAL MOTOR CARS GROUP 1, L.L.C.
("IMCG-1") and INTERNATIONAL MOTOR CARS GROUP 11, L.L.C. ("IMCG-11"), each
a Delaware limited liability company (IMCG-I and IMCG-11 collectively, the
"Purchaser").
WITNESSETH:
WHEREAS, upon the terms and subject to the conditions set forth
in this Agreement, the Company wishes to sell to the Purchaser, and the
Purchaser wishes to purchase from the Company, an aggregate of 7,903.124
shares of Series A Convertible Preferred Stock, par value $0.0001 per share
(the "Series A Preferred Stock"), an aggregate of 396.876 shares of Series
B Convertible Preferred Stock, par value $0.0001 per share (the "Series B
Preferred Stock", and together with the Series A Preferred Stock, the
"Preferred Stock") and warrants (the "Warrants") to purchase an aggregate
of (i) 3,898,665 shares of the Company's voting Common Stock, par value
$0.0001 per share (the "Common Stock"), and (ii) 1, 101,335 shares of the
Company's non-voting Common Stock, par value $0.0001 per share (the
"Non-Voting Common Stock"), in two separate installments for an aggregate
purchase price of $83,000,000 in cash (the "Purchase Price");
WHEREAS, concurrently with the execution and delivery of this
Agreement, each of the Significant Shareholders are executing and
delivering a voting agreement with the Purchaser; and
WHEREAS, the Purchaser and the Company desire to provide for the
purchase and sale of the Preferred Stock and the Warrants and to establish
certain rights and obligations in connection therewith.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
ARTICLE I
ISSUANCE AND SALE OF PREFERRED STOCK AND WARRANTS
1. 1. Issuance, Purchase and Sale. Upon the terms set forth
herein,
<PAGE>
(a) at the Initial Closing, (i) the Company shall sell to IMCG-I,
and IMCG-I shall purchase from the Company, 2,906.743 shares of Series A
Preferred Stock for an aggregate purchase price of $26,160,687.92 in cash
(the "IMCG-1 Initial Closing Purchase Price"), subject to the conditions set
forth in Sections 5. 1 (a), 5.2(a) and 5.3, and (ii) the Company shall sell
to IMCG-11, and IMCG-11 shall purchase from the Company, 821.1266 shares of
Series A Preferred Stock for an aggregate purchase price of $7,390,139.41
in cash (such amount together with the IMCG-I Initial Closing Purchase
Price, the "Initial Closing Purchase Price"), subject to the conditions
set forth in Sections 5. 1 (a), 5.2(a) and 5.3 (the transactions to occur
at the Initial Closing, the "Initial Purchase"), and
(b) at the Second Closing, (i) the Company shall sell to IMCG-I,
and IMCG-1 shall purchase from the Company, 3,565.04096 shares of Series A
Preferred Stock and Warrants to purchase 3,898,665 shares of Common Stock
for an aggregate purchase price of $38,557,152.74 in cash (the "IMCG-1
Second Closing Purchase Price"), subject to the conditions set forth in
Article V, and (ii) the Company shall sell to IMCG-11, and IMCG-11 shall
purchase from the Company, 610.214 shares of Series A Preferred Stock,
396.876 shares of Series B Preferred Stock and Warrants to purchase 1, 101,
335 shares of Non-Voting Common Stock, for an aggregate purchase price
of $10,892,019.93 in cash (such amount together with the IMCG-l Second
Closing Purchase Price, the "Second Closing Purchase Price"), subject to
the conditions set forth in Article V (the transactions to occur at the
Second Closing, the "Second Purchase").
1.2. The Closing; Deliveries. (a) The closing of the Initial
Purchase (the "Initial Closing") and the closing of the Second Purchase
(the "Second Closing", and together with the Initial Closing, individually,
a "Closing" and collectively, the "Closings") shall take place at the
offices of Fried, Frank, Harris, Shriver & Jacobson, One New York Plaza,
New York, New York 10004 at 9:00 a.m. on the fourth business day following
the satisfaction or waiver of the conditions to each such Closing set forth
in Article V (other than those conditions that by their nature are to be
satisfied at such Closing, but subject to the satisfaction or waiver of
those conditions) or on such other place, time and/or date as shall be
mutually agreed by the Company and the Purchaser (the date of such Closing,
a "Closing Date").
(b) At each Closing, the Company shall deliver to the Purchaser
certificates representing the shares of Preferred Stock and the Warrants
being purchased by the Purchaser at such Closing, each registered in the
name of the Purchaser or its nominee or designee in such amounts as
Purchaser shall inform the Company prior to such Closing. Delivery of such
certificates shall be made against receipt by the Company of the portion of
the Purchase Price payable in connection with such Closing, which shall be
paid by wire transfer of immediately available funds to an account
designated at least
<PAGE>
three business days prior to the applicable Closing Date by the Company.
The Warrants shall be in the forms of Exhibit 1.2(b).
ARTICLE 11
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchaser, as
of the date hereof and as of each Closing Date, as follows:
2.1. Organization; Subsidiaries. (a) The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority to
carry on its business as it is now being conducted. The Company is duly
qualified and licensed as a foreign corporation to do business, and is in
good standing (and has paid all relevant franchise or analogous taxes), in
each jurisdiction where the character of its assets owned or held under
lease or the nature of its business makes such qualification necessary,
except where the failure to so qualify or be licensed could not
individually or in the aggregate reasonably be expected to have a Material
Adverse Effect. The minute books (containing the records of meetings of
stockholders, the Board of Directors, and any committees of the Board of
Directors), stock record books and certificate books of the Company contain
true, complete and accurate records in all material respects of all
corporate actions taken at any such meetings and other corporate governance
matters, the stock ownership of the Company and the transfer of the shares
of its capital stock since the date of inception of the Company. Complete
and correct copies of all of the foregoing (other than, as of the date
hereof, the minutes of the meeting of the Board of Directors on April 9,
1999, which have not yet been approved) have previously been made available
to the Purchaser.
(b) Schedule 2.1(b) sets forth a complete and correct list of
each corporation, limited liability company, partnership, business
association or other Person with respect to which the Company has, directly
or indirectly, ownership of or rights with respect to securities or other
interests having the power to elect a majority of such Person's board of
directors or analogous or similar governing body, or otherwise having the
power to direct the management, business or policies of that corporation,
limited liability company, partnership, business association or other
Person (each, a "Subsidiary" and, collectively, the "Subsidiaries") that is
required to be included in Exhibit 21 to the Company's Annual Report on
Form 10-K for the period ended December 31, 1998. Except as set forth on
Schedule 2.1(b), the Company owns, either directly or indirectly through
one or more Subsidiaries, all of the capital stock or other equity
interests of the Subsidiaries free and clear of all liens, charges, claims,
security interests, restrictions, options, proxies, voting trusts or other
encumbrances ("Encumbrances"), other than
<PAGE>
transfer restrictions imposed by applicable federal and state securities
Laws. All of the issued and outstanding shares of capital stock or other
equity interests of each Subsidiary held directly or indirectly by the
Company have been duly authorized and are validly issued, fully paid and
nonassessable. No shares of capital stock or other equity interests of any
Subsidiary are entitled to preemptive rights. Except as set forth on
Schedule 2.1(b) or disclosed in the SEC Reports, there are no outstanding
subscription rights, options, warrants, convertible or exchangeable
securities or other rights of any character whatsoever relating to issued
or unissued capital stock or other equity interests of any Subsidiary, or
any Commitments of any character whatsoever relating to issued or unissued
capital stock or other equity interests of any Subsidiary or pursuant to
which the Company or any Subsidiary is or may become bound to issue or
grant additional shares of its capital stock or other equity interests or
related subscription rights, options, warrants, convertible or exchangeable
securities or other rights, or to grant preemptive rights. Except as set
forth on Schedule 2.1(b) or disclosed in the SEC Reports, there are no
voting trusts, stockholders agreements, proxies or other Commitments or
understandings to which any Subsidiary is a party with respect to the
voting or transfer of any capital stock or other equity interest of any
Subsidiary. Except for (i) the Subsidiaries, (ii) assets held in benefit
plans, (iii) corporate treasury transactions and (iv) as set forth on
Schedule 2.1(b), the Company does not own, directly or indirectly, any
interest in any corporation, limited liability company, partnership,
business association or other Person.
(c) Each Subsidiary is a corporation, limited liability company,
partnership, business association or other Person duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization and has the requisite power and authority to carry on its
business as it is now being conducted. Except as set forth on Schedule 2. 1
(c), each Subsidiary is duly qualified and licensed to do business, and is
in good standing (and has paid all relevant franchise or analogous taxes),
in each jurisdiction where the character of its assets owned or held under
lease or the nature of the business conducted by it makes such
qualification necessary except where the failures of all of such
Subsidiaries to so qualify or be licensed individually or in the aggregate
could not reasonably be expected to have a Material Adverse Effect. The
minute books or other records (containing the records of meetings of
stockholders or other holders of other equity interests, the board of
directors or other similar governing body, and any committees thereof), the
stock ownership or analogous records and the certificate books of each of
UnitedAuto Finance, Inc., UnitedAuto Care, Inc. and UnitedAuto Care
Products, Inc. contain in all material respects true, complete and accurate
records of all actions taken at any such meetings and other governance
matters, the stock or other equity ownership of each of such Subsidiaries
and the transfer of the shares of its capital stock or other equity
interest since the date of inception of each such Subsidiary. Complete and
correct copies of all of the foregoing have previously been made available
to the Purchaser.
<PAGE>
2.2. Due Authorization. The Company has all right, corporate
power and authority to enter into this Agreement and each of the other
Transaction Documents to which it is a party and to consummate the
transactions contemplated hereby and thereby. The execution and delivery by
the Company of this Agreement and each of the other Transaction Documents
to which it is a party, the issuance and sale of the Preferred Stock and
the Warrants by the Company and the compliance by the Company with each of
the provisions of this Agreement and each of the other Transaction
Documents to which it is a party (including the reservation and issuance of
the Shares and the consummation by the Company of the transactions
contemplated hereby and thereby) (a) are within the corporate power and
authority of the Company and (b) have been duly authorized by all requisite
corporate proceedings on the part of the Company, except for the approval
by the stockholders of the Company referenced in Section 4.5. The Board of
Directors has determined that it is advisable and in the best interest of
the Company's stockholders for the Company to consummate the issuance and
sale of the Preferred Stock and the Warrants upon the terms and subject to
the conditions set forth in this Agreement, and has unanimously recommended
that the Company's stockholders approve and adopt this Agreement and the
other transactions referenced in Section 4.5; provided, however, any such
recommendation of the Board of Directors may be withdrawn, modified or
amended to the extent permitted by Section 4.5 of this Agreement. This
Agreement has been, and each of the other Transaction Documents to which
the Company is a party when executed and delivered by the Company will be,
duly and validly executed and delivered by the Company, and this Agreement
constitutes, and each of such other Transaction Documents when executed and
delivered by the Company will constitute, a valid and binding agreement of
the Company enforceable against the Company in accordance with its terms,
except as enforceability against the Company may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar Laws now or
hereafter in effect relating to the rights of creditors generally and by
legal and equitable limitations on the enforceability of specific remedies
(regardless of whether enforcement is considered in a proceeding in equity
or at law). The Shares have been validly reserved for issuance, and upon
payment of the Purchase Price and issuance in accordance with the
Certificates of Designation, or the Warrant, as the case may be, will be
duly and validly issued and outstanding, fully paid, and nonassessable. The
terms, designations, powers, preferences and relative participation,
optional and other special rights, qualifications, limitations and
restrictions of the Series A Preferred Stock and the Series B Preferred
Stock will be set forth in the Certificate of Designation of the Series A
Preferred Stock and the Certificate of Designation of the Series B
Preferred Stock, respectively (collectively, the "Certificates of
Designation"), the forms of which are attached as Exhibit 2.2.
2.3. Capitalization. The authorized capital stock of the Company
consists of (1) 40,000,000 shares of voting Common Stock, par value $0.0001
per share, of which, as of March 24, 1999, 21,289,619 shares are issued and
outstanding; (ii) 1,125,000 shares
<PAGE>
of Non-Voting Common Stock, of which, as of March 24, 1999, 605,454 shares
are issued and outstanding; (iii) 20,000,000 shares of Class C Common
Stock, par value $0.0001 per share, of which, as of the date hereof, no
shares are issued and outstanding; and (iv) 100,000 shares of preferred
stock, par value $0.0001 per share, of which, as of the date hereof, no
shares are issued and outstanding. There have been no changes in such
numbers since March 24, 1999, except as a result of the transactions
contemplated by the Transaction Documents, and the issuance of Common Stock
upon the exercise of rights to acquire Common Stock and Non-Voting Common
Stock set forth on Schedule 2.3. All of the issued and outstanding shares
of Common Stock and Non-Voting Common Stock have been duly authorized and
are validly issued, fully paid and nonassessable. No shares of capital
stock of the Company are entitled to preemptive rights. Except as set forth
on Schedule 2.3 or disclosed in the SEC Reports, there are no outstanding
subscription rights, options, warrants, convertible or exchangeable
securities or other rights of any character whatsoever relating to issued
or unissued capital stock of the Company, or any Commitments of any
character whatsoever relating to issued or unissued capital stock of the
Company or pursuant to which the Company or any of the Subsidiaries is or
may become bound to issue or grant additional shares of its capital stock
or related subscription rights, options, warrants, convertible or
exchangeable securities or other rights, or to grant preemptive rights.
Except as set forth on Schedule 2.3 or disclosed in the SEC Reports, (1)
the Company has not agreed to register any securities under the Securities
Act or under any state securities law or granted registration rights to any
Person or entity and (ii) there are no voting trusts, stockholders
agreements, proxies or other Commitments or understandings in effect to
which the Company is a party or of which it has Knowledge with respect to
the voting or transfer of any of the shares of Common Stock or Non-Voting
Common Stock. To the extent that any options, warrants or any of the other
rights described above are outstanding, neither the issuance and sale of
the Preferred Stock and the Warrants nor any issuance of Shares will result
in an adjustment of the exercise or conversion price or number of shares
issuable upon the exercise or conversion of any such options, warrants or
other rights.
2.4. SEC Reports. The Company has timely filed all proxy
statements, reports and other documents required to be filed by it with the
SEC under the Exchange Act from and after October 23, 1996 (collectively,
the "SEC Reports"). Each SEC Report was on the date of its filing in
compliance as to form in all material respects with the requirements of its
respective report form and did not on the date of filing contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
2.5. Financial Statements. The audited consolidated balance sheet
of the Company and the Subsidiaries as of December 31, 1998 (the " 1998
Balance Sheet") and the related consolidated statements of operations,
changes in stockholders' equity (deficit)
<PAGE>
and cash flows for the 12-month period then ended, including the notes
thereto (collectively, the " 1998 Financial Statements"), and all of the
financial statements (including any related schedules and/or notes)
included in the SEC Reports, have been prepared in accordance with United
States generally accepted accounting principles ("GAAP") consistently
followed throughout the periods involved, except as may be noted therein,
and fairly present in all material respects the consolidated financial
condition, results of operations and changes in stockholders' equity of the
Company and the Subsidiaries as of the respective dates thereof and for the
respective periods then ended (in each case subject, as to interim
statements, to changes resulting from year-end adjustments). A complete and
correct copy of the 1998 Financial Statements is set forth on Schedule 2.5.
Except as set forth on Schedule 2.5 or disclosed in the SEC Reports,
neither the Company nor any Subsidiary has any liability or obligation
(whether accrued, absolute, contingent, unliquidated or otherwise, whether
known or unknown, whether due or to become due and regardless of when
asserted), except (i) liabilities and obligations in the respective amounts
reflected or reserved against in the 1998 Balance Sheet, (ii) liabilities
and obligations incurred in the ordinary course of business since December
31, 1998 which individually or in the aggregate could not reasonably be
expected to have a Material Adverse Effect, (iii) under Commitments in
accordance with the terms and conditions thereof which are not required by
GAAP to be reflected on the 1998 Balance Sheet except Commitments that are
required to be disclosed pursuant to Section 2.15 and are not so disclosed,
(iv) in respect of any Loss relating to any Environmental Matter except to
the extent required to be disclosed on Schedule 2.14 and not so disclosed,
or (v) arising out of or in connection with any claim by Person in respect
of any product sold, rented, leased, designed, distributed or marketed at
any time by the Company or its Subsidiaries resulting from an alleged
defect in the design or manufacture thereof, or any alleged failure to warn
with respect thereto, but only to the extent not subject to indemnification
or reimbursement by financially solvent entities.
2.6. Absence of Certain Changes. Except as set forth on Schedule
2.6, as disclosed the SEC Reports, or pursuant to the transactions
contemplated by this Agreement and the other Transaction Documents, since
December 31, 1998: (i) the business of the Company and the Subsidiaries
taken as a whole has been conducted in the ordinary course of business
consistent with past practice, (ii) the Company and its Subsidiaries have
not (a) suffered any change, event or development or series of changes,
events or developments which individually or in the aggregate has had or
could reasonably be expected to have a Material Adverse Effect, (b)
suffered any damage, destruction or casualty loss to its physical
properties (whether or not covered by insurance) which individually or in
the aggregate has resulted or could reasonably be expected to result in a
Material Adverse Effect or (c) been the subject of any material Litigation
or threatened or commenced investigation by a Governmental Entity, and
(iii) there has not been any transaction, act, development, circumstance or
event that if it
<PAGE>
had occurred on or after the date of this Agreement without the prior
consent of the Purchaser would constitute a breach of Section 4.1.
2.7. Litigation. (a) Except as set forth on Schedule 2.7(a) or as
disclosed in the SEC Reports, there is no material claim, action, suit,
investigation or proceeding ("Litigation") pending or, to the Knowledge of
the Company, threatened against the Company or any of the Subsidiaries or
involving any of their respective properties or assets by or before any
court, arbitrator or other Governmental Entity.
(b) Except as set forth on Schedule 2.7(b) or as disclosed in the
SEC Reports, neither the Company nor any of the Subsidiaries is in default
under or in breach of any order, judgment or decree of any court,
arbitrator or other Governmental Entity, and neither the Company nor any of
the Subsidiaries is a party or subject to any order, judgment or decree of
any court, arbitrator or other Governmental Entity, which has had or could
reasonably be expected to have a Material Adverse Effect.
2.8. Title to Properties; Insurance. (a) Except as set forth on
Schedule 2.8(a), the Company and the Subsidiaries have good and valid title
to, or, in the case of property leased by them, a valid and subsisting
leasehold interest in, their respective material properties and assets,
free of all Encumbrances except for Permitted Encumbrances.
(b) Schedule 2.8(b) sets forth the address of all Owned Real
Property. With respect to the Owned Real Property, (i) the Company and its
Subsidiaries have good and marketable title in fee simple to the Owned Real
Property, free and clear of all Encumbrances except for Permitted
Encumbrances, (ii) there are no outstanding options or rights of first
refusal in favor of any other Person to purchase the Owned Real Property or
any portion thereof or interest therein, and (iii) there are no leases,
subleases, licenses, options, rights, concessions or other Commitments
affecting any portion of the Owned Real Property.
(c) Schedule 2.8(c) sets forth a complete and correct list of all
material Leased Real Property. With respect to the Leased Real Property,
the Company and the Subsidiaries have good and valid leasehold estates in
the Leased Real Property, free and clear of all Encumbrances except for
Permitted Encumbrances and Encumbrances set forth on Schedule 2.8(a).
Except as set forth on Schedule 2.8(c), (A) each lease or sublease relating
to the Leased Real Property is legal, valid, binding and enforceable and in
full force and effect and (B) the execution and delivery of this Agreement
and the consummation of the transactions contemplated by this Agreement
will not cause a breach or require any third party consent or notification
under any such lease or sublease. The information set forth on Schedule
2.8(c) regarding the Leased Real Property is true and correct in all
material respects.
<PAGE>
(d) [Intentionally omitted]
(e) Schedule 2.8(e) sets forth a complete and correct list of all
insurance coverage carried by the Company and the Subsidiaries, including
for each policy the type and scope of coverage, the carrier and the amount
of coverage. All of the assets of the Company and the Subsidiaries and all
aspects of the Company's and the Subsidiaries' businesses that are of
insurable character are covered by insurance with reputable insurers
against risks of liability, casualty and fire and other losses and
liabilities customarily obtained to cover comparable businesses and assets
in amounts, scope and coverage (and with deductibles) which are consistent
with prudent industry practice. Neither the Company nor any of the
Subsidiaries is in default in a material respect with respect to any of its
obligations under any insurance policy maintained by it. All such policies
are in full force and effect and no premiums with respect thereto are past
due and owed. Except as set forth on Schedule 2.8(e), there are no claims
by the Company or any of the Subsidiaries under any of such policies to
which any insurance company is denying liability or defending under a
reservation of rights or similar clause. Except as set forth on Schedule
2.8(e), neither the Company nor any of the Subsidiaries has received notice
of any pending or threatened termination of any of such policies or any
premium increases for the current policy period with respect to any of such
policies, and the consummation of the transactions contemplated by this
Agreement or any of the other Transaction Documents will not result in any
such termination or premium increase. The Company maintains a Directors'
and Officers' insurance policy with National Union Fire Insurance Company,
a complete and correct copy of which has previously been delivered to the
Purchaser.
2.9. Consents, No Violations. Except as set forth on Schedule
2.9, neither the execution, delivery or performance by the Company of this
Agreement or any of the other Transaction Documents to which it is a party
nor the consummation of the transactions contemplated hereby or thereby
will (a) conflict with, or result in a breach or a violation of, any
provision of the certificate of incorporation or by-laws of the Company;
(b) constitute, with or without notice or the passage of time or both, a
breach, violation or default, create an Encumbrance, or give rise to any
right of termination, modification, cancellation, prepayment, suspension,
limitation, revocation or acceleration, under (i) any Law or (ii) any
Commitment to which the Company or any of the Subsidiaries is a party or
pursuant to which any of them or any of their assets or properties is
subject, except, with respect to the matters set forth in this clause (b),
for breaches, violations, defaults, Encumbrances, or rights of termination,
modification, cancellation, prepayment, suspension, limitation, revocation
or acceleration, which, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect or adversely
affect the ability of the Company to consummate the transactions
contemplated by this Agreement or any other Transaction Document to which
it is a party; or (c) except for any required filing under the HSR Act or
with respect
<PAGE>
to any Environmental Permits, require any consent, approval or
authorization of, notification to, filing with, or exemption or waiver by,
any Governmental Entity or any other Person on the part of the Company or
any of the Subsidiaries.
2. 10. Holding Company Act and Investment Company Act. Neither
the Company nor any of the Subsidiaries is: (i) a "public utility company"
or a "holding company," or an "affiliate" or a "subsidiary company" of a
"holding company," or an "affiliate" of such a "subsidiary company," as
such terms are defined in the Public Utility Holding Company Act of 1935,
as amended, or (ii) a "public utility," as defined in the Federal Power
Act, as amended, or (iii) an "investment company" or an "affiliated person"
thereof or an "affiliated person" of any such "affiliated person," as such
terms are defined in the Investment Company Act of 1940, as amended.
2.11. Taxes. (a) Except as disclosed in Schedule 2.11 (a), the
Company and each of the Subsidiaries has timely filed all Returns required
by Law to have been filed by it and has paid all Taxes shown to be due
thereon or which are otherwise due and payable (or made adequate provision
in accordance with GAAP for all such Taxes on the 1998 Balance Sheet)
including, without limitation, any Tax levied upon any of its properties,
assets, income or franchises. All such Returns were complete and correct in
all material respects. All amounts required to be collected or withheld by
the Company and each of the Subsidiaries has been collected or withheld and
any such amounts that are required to be remitted to any taxing authority
have been duly remitted. The accruals and reserves for Taxes on the 1998
Balance Sheet are complete and adequate in all material respects to cover
any liability of the Company and each of its Subsidiaries for Taxes for
periods through December 31, 1998. The accruals and reserves for deferred
tax liabilities on the 1998 Balance Sheet are adequate to cover any such
liability in accordance with GAAP.
(b) Schedule 2.11(b) contains a list of states, territories and
jurisdictions (whether foreign or domestic) in which the Company or any of
the Subsidiaries currently file an income, franchise, sales or use Return.
Except as set forth on Schedule 2.11 (b), (i) neither the IRS nor any other
taxing authority has asserted in writing any claim involving a material
amount of Taxes, or to the Knowledge of the Company, is threatening to
assert any claims involving a material amount of Taxes, against the Company
or any of the Subsidiaries, (ii) neither the Company nor any of the
Subsidiaries has been a member of a consolidated, combined or unitary group
for federal or state income tax purposes that included any member other
than the current members of the consolidated federal income tax group of
which the Company is the common parent, (iii) neither the Company nor any
of the Subsidiaries is or has been a party to any Tax sharing agreement
(except for agreements with Subsidiaries providing for the sharing of
liabilities on a pro rata basis) that will remain in effect and under which
the Company or any such Subsidiary could have any material liability for
Taxes, (iv) there are no liens for
<PAGE>
Taxes upon any assets of the Company or any of the Subsidiaries (other than
liens for Taxes not yet due and payable), except for liens which
individually or in the aggregate would not reasonably be expected to have a
Material Adverse Effect, (v) neither the Company nor any of the
Subsidiaries has agreed or is required to include in income during the
current year or any future taxable period any material adjustment pursuant
to Section 481 of the Code (or similar provisions of foreign, state or
local law) by reason of a change in accounting method or otherwise, and the
IRS has not proposed any such adjustment, and (vi) complete copies of all
income Tax Returns filed by the Company and each of the Subsidiaries for
taxable periods commencing on or after January 1, 1993 have been provided
to, or made available to, the Purchaser.
2.12. Employee Benefit Plans. (a) Schedule 2.12 sets forth a
complete and correct list of (i) all of the Compensation and Benefit Plans
that are intended to qualify with the applicable requirements of Article
401(a) of the Code and (ii) all employment, severance and change of control
agreements with employees, former employees, officers, former officers,
directors, former directors or the beneficiaries of any of the foregoing or
pursuant to which the Company or any Subsidiary has or may have any
liability in excess of $200,000. Except with respect to any Multi-Employer
Plans, the Company has heretofore delivered or made available to the
Purchaser true and complete copies of all Compensation and Benefit Plans
and any amendments thereto (or if a Compensation and Benefit Plan is not in
written form, a written description thereot), any related trust or other
funding agreement or vehicle, the most recent reports or summaries required
under ERISA or the Code and, with respect to each Compensation and Benefit
Plan intended to qualify under Article 401 of the Code, the most recent
determination letter received from the IRS.
(b) Except where the failure to do so could not individually or
in the aggregate reasonably be expected to have a Material Adverse Effect,
the Company and each Subsidiary have performed all obligations required to
be performed by them under each Compensation and Benefit Plan and neither
the Company nor any Subsidiary is in default under or in violation of, any
Compensation and Benefit Plan. Except with respect to any Multi-Employer
Plans or as otherwise set forth on Schedule 2.12, each Compensation and
Benefit Plan has in all material respects been established, operated,
maintained and administered, as the case may be, in accordance with its
terms and in compliance with all applicable laws, statutes, orders, rules
and regulations, including, but not limited to, ERISA and the Code.
(c) With respect to each Compensation and Benefit Plan which is a
"multi-employer plan" within the meaning of Sections 3(37) or 4001 (a)(3)
of ERISA (a "Multi-Employer Plan"): (i) neither the Company, any Subsidiary
nor any ERISA Affiliate has been required to contribute to, or incurred any
withdrawal liability (within the meaning of Section 4201 of ERISA) to any
such plan which liability has not been
<PAGE>
fully paid as of the date hereof, (ii) as of the Closing Date, the Company,
each Subsidiary and each ERISA Affiliate will not have completely or
partially withdrawn from any such plan and will not be subject to any
withdrawal liability as described in Section 4201 of ERISA for withdrawals
that have occurred on or prior to the Closing Date (including, without
limitation, any withdrawal deemed to have occurred as a result of the
transactions contemplated by this Agreement); (iii) no event has occurred
which could result in a "partial withdrawal" under Section 4205 of ERISA
with respect to any such plan and neither the Company, Parent, any
Subsidiary nor any ERISA Affiliate has any contingent liability under
Section 4204 of ERISA; (iv) if the Company, each Subsidiary and each ERISA
Affiliate were to incur a complete withdrawal (as described in Section 4203
of ERISA) from each such plan as of the Closing Date, no withdrawal
liability, as determined under Section 4201 of ERISA, could be incurred
with respect to all such plans that would individually or in the aggregate
have a Material Adverse Effect; and (v) neither the Company, any Subsidiary
nor any ERISA Affiliate has knowledge that any such plan fails to qualify
under Section 401 (a) of the Code, has been terminated, is insolvent or is
in reorganization within the meaning of Part 3 of Subtitle E of Title IV of
ERISA and, to the knowledge of the Company, no condition exists which
presents a risk of any such plan being terminated, becoming insolvent or
going into reorganization.
(d) Neither the Company, any Subsidiary, nor any ERISA Affiliate
presently sponsors, maintains or contributes to, nor is the Company, any
Subsidiary or any ERISA Affiliate required to sponsor, maintain or
contribute to, nor has the Company, any Subsidiary or any ERISA Affiliate
(other than where the Company, such Subsidiary or such ERISA Affiliate has
no continuing material obligation or liability) ever sponsored, maintained,
contributed to or been required to contribute to, any Compensation and
Benefit Plan (other than a Multi-Employer Plan) which is an "employee
pension benefit plan" within the meaning of Article 3(2) of ERISA and which
is subject to Title IV of ERISA.
(e) Neither the Company, any Subsidiary nor any ERISA Affiliate
(i) maintains or contributes to any Compensation and Benefit Plan which
provides, or has any liability to provide, life insurance, medical or
dental benefits to any employee upon his retirement or termination of
employment, except as may be required by Article 4980B of the Code or as
would not reasonably be expected to have individually or in the aggregate a
Material Adverse Effect; or (ii) has ever represented to, promised or
contracted with (whether in oral or written form) any employee (either
individually or to employees as a group) that such employee would be
provided with life insurance, medical or dental benefits upon retirement or
termination of employment, except to the extent required by Article 4980B
of the Code or as would not reasonably be expected to have individually or
in the aggregate a Material Adverse Effect.
<PAGE>
(f) There are no pending, or to the Knowledge of the Company,
threatened claims by or on behalf of any Compensation and Benefit Plan by
any employee or beneficiary covered under any such Compensation and Benefit
Plan, or otherwise involving any such Compensation and Benefit Plan, that
individually or in the aggregate could reasonably be expected to have a
Material Adverse Effect.
(g) Except as otherwise set forth on Schedule 2.12(g), there is
no Commitment covering any employee or former employee of the Company or
any Subsidiary that, individually or in the aggregate, would be reasonably
likely to give rise to the payment of any amount that would result in a
material loss of tax deductions pursuant to the terms of Article 162(m) of
the Code.
(h) Except where the failure to do so could not individually or
in the aggregate reasonably be expected to have a Material Adverse Effect,
the Company and each Subsidiary (i) is in compliance with all applicable
federal, state and local laws, rules and regulations (domestic and foreign)
respecting employment, employment practices, labor, terms and conditions of
employment and wages and hours, in each case, with respect to employees;
(ii) has withheld all amounts required by Law or by Commitment to be
withheld from the wages, salaries and other payments to employees; (iii) is
not liable for any arrears of wages or any taxes or any penalty for failure
to comply with any of the foregoing; and (iv) is not liable for any payment
to any trust or other fund or to any Governmental Entity with respect to
unemployment compensation benefits, social security or other benefits for
employees.
(i) No work stoppage or labor strike against the Company or any
Subsidiary by employees is pending, or to the knowledge of the Company,
threatened. Except for such matters that could not individually or in the
aggregate reasonably be expected to have a Material Adverse Effect, neither
the Company nor any Subsidiary (i) is involved in, or to the knowledge of
the Company, threatened with any labor dispute, grievance, or Litigation
relating to labor matters involving any employees, including, without
limitation, violation of any federal, state or local labor, safety or
employment laws (domestic or foreign), charges of unfair labor practices or
discrimination complaints or (ii) has engaged in any unfair labor practices
within the meaning of the National Labor Relations Act or the Railway Labor
Act.
(j) Except as set forth in Schedules 2.9, 2.12 and 2.15, the
execution, delivery and performance by the Company of the transactions
contemplated by this Agreement and the other Transaction Documents to which
it is a party will not (either alone or upon the occurrence of any
additional or subsequent events) constitute an event under any Compensation
and Benefit Plan, trust or loan that will or may result in any payment
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to
fund benefits with
<PAGE>
respect to any employee. No payment or benefit which will or may be made by
the Company, any Subsidiary, the Purchaser or any of their respective
Affiliates in connection with the transactions contemplated by this
Agreement or any of the other Transaction Documents with respect to any
employee will be characterized as an "excess parachute payment" within the
meaning of Article 28OG(b)(1) of the Code.
2.13. Intellectual Property. (a) Except as disclosed on Schedule
2.13(a), (1) the Company or a Subsidiary owns or has the right to use
pursuant to a valid license, sub-license or other agreement all of the
Intellectual Property used by it, except where the absence of any thereof
could not individually or in the aggregate reasonably be expected to have a
Material Adverse Effect and (ii) neither the Company nor any of the
Subsidiaries has interfered with, infringed upon or misappropriated any
Intellectual Property rights of third parties, except for interferences,
infringements and misappropriations which could not individually or in the
aggregate reasonably be expected to have a Material Adverse Effect, and
neither the Company nor any Subsidiary has received any written claim,
demand or notice alleging any such interference, infringement or
misappropriation. To the Knowledge of the Company, no third party has
interfered with, infringed upon or misappropriated any Intellectual
Property rights of the Company or any Subsidiary, except for interferences,
infringements and misappropriations which could not individually or in the
aggregate reasonably be expected to have a Material Adverse Effect.
(b) The disclosure contained under the heading "IMPACT OF YEAR
2000" in the Company's Annual Report on Form 10-K for the period ended
December 3 1, 1998 is true, correct and complete in all material respects.
2.14. Compliance with Laws. (a) Except as set forth on Schedule
2.14(a) or as disclosed in the SEC Reports, the Company and the
Subsidiaries are in compliance in all material respects with all Laws, and
since January 1, 1996, neither the Company nor any Subsidiary has received
any notice of any alleged violation of Law applicable to it. The Company
and the Subsidiaries have all material licenses, franchise permits,
consents, registrations, certificates, and other governmental or regulatory
permits, authorizations or approvals required for the operation of the
business as presently conducted and for the ownership, lease or operation
of the Company's and its Subsidiaries' properties (collectively,
"Licenses"). Except as set forth on Schedule 2.14(a), the Company and the
Subsidiaries have all Licenses, and all of such Licenses are valid and in
full force and effect, and the Company and the Subsidiaries have duly
performed and are in compliance in all material respects with all of their
obligations under such Licenses. No event has occurred with respect to any
of such Licenses that allows, or after notice or lapse of time or both
would allow, the suspension, limitation, revocation, non-renewal or
termination thereof that, individually or in the aggregate, has had or
would reasonably be expected to have a Material Adverse Effect, and no
terminations of any License or proceedings to
<PAGE>
suspend, limit, revoke or terminate any License have been threatened. The
Company has made available for inspection by the Purchaser copies of all
material correspondence between the Company or any of the Subsidiaries, on
the one hand, and the SEC on the other hand.
(b) Without limiting the generality of foregoing, except as set
forth on Schedule 2.14(b), the Company, the Subsidiaries and, to the extent
the Company or any Subsidiary would have any liability with respect
thereto, each of their respective employees, are in compliance in all
material respects with all material Laws relating to consumer financing and
leasing (including, without limitation, the financing and leasing of
vehicles and other consumer products), including, without limitation, (i)
the rules and regulations of any Governmental Entity, (ii) any applicable
federal, state, local or foreign Laws, and any rules or regulations
promulgated thereunder pertaining to unlawful discrimination in lending
(including, without limitation, equal credit opportunity, retail
installment sales, and fair credit reporting), truth-in-lending, truth-in-
leasing or consumer credit (including, without limitation, the Federal
Consumer Credit Protection Act, Federal Truth-in-Lending Act and
Regulation Z thereunder, and the Federal Equal Credit Opportunity Act and
Regulation B thereunder), and (iii) all applicable usury and interest
limitations Laws.
(c) Neither the Company nor any Subsidiary has offered or agreed
to offer anything of value to any government official, political party or
candidate for governmental or political office (or any person that the
Company knows or has reason to know, will offer anything of value to any
governmental official, political party or candidate for governmental or
political office), such that the Company or any of the Subsidiaries have
violated the Foreign Corrupt Practices Act of 1977, as amended.
(d) To the Knowledge of the Company:
(i) Except as set forth on Schedule 2.14(d), the Company and
the Subsidiaries have at all times been operated, and are currently
operated, in compliance in all material respects with all Environmental
Laws.
(ii) Except as set forth on Schedule 2.14(d), the Company
and the Subsidiaries (1) have obtained, and are in compliance in all
material respects with, all material permits, licenses, authorizations,
registrations and other governmental consents required by Environmental
Laws ("Environmental Permits"), and (2) have made all appropriate filings
for the issuance or renewal of such Environmental Permits (other than in
connection with the transactions contemplated hereby).
(iii) Except as set forth on Schedule 2.14(d), all of the
Owned Real Property and Leased Real Property (collectively, "Real
Property") is free of any
<PAGE>
material contamination arising out of, relating to, or resulting from the
Release by the Company or any of the Subsidiaries of any Hazardous
Substances, and there has been no material Release at any time of any
Hazardous Substances at, on, about, under or within any Real Property or,
to the Knowledge of the Company, any real property formerly owned, leased,
operated or controlled by the Company or any of the Subsidiaries or any
predecessor of any of the foregoing (other than pursuant to and in
accordance with Environmental Permits).
(iv) Except as set forth on Schedule 2.14(d), there are no
material claims, notices (including, without limitation, notices that the
Company or any of the Subsidiaries (or any predecessors thereof) is or may
be a potentially responsible person or otherwise liable in connection with
any waste disposal or other site containing Hazardous Substances), civil,
criminal or administrative actions, suits, hearings, investigations,
inquiries or proceedings pending or, to the Knowledge of the Company,
threatened that are based on or related to any Environmental Matters
(including, without limitation, the failure to comply with any
Environmental Law or the failure to have, or to comply with, any
Environmental Permits).
(v) Except as set forth on Schedule 2.14(d), there are no
present or past conditions, events, circumstances, facts, activities,
practices, incidents, actions, omissions or plans: (1) that are reasonably
likely to interfere with or prevent, in any material respect, continued
compliance by the Company or any of the Subsidiaries with Environmental
Laws or the requirements of Environmental Permits, or (2) that are
reasonably likely to give rise to any material liability under any
Environmental Laws, or (3) that are reasonably likely to form the basis of
any material claim, action, suit, proceeding, hearing, investigation or
inquiry against or involving the Company or any Subsidiary based on or
related to any Environmental Matter.
(vi) Except as set forth on Schedule 2.14(d), there are no
material Releases or material liabilities arising out of, relating to or
resulting from any underground or aboveground storage tanks, incinerators
or surface impoundments currently or formerly at, on, about, under or
within any Real Property.
(vii) Except as set forth on Schedule 2.14(d), neither the
Company nor any of the Subsidiaries (nor any predecessors thereof) have
used any waste disposal site, or otherwise disposed of, transported, or
arranged for the transportation of, any Hazardous Substances to any place
or location that is now, or was in the past, listed on the National
Priorities List of Superfund Sites or any analogous state lists.
(viii) Except as set forth on Schedule 2.14(d), no
Encumbrance other than Permitted Encumbrances exists, and no condition
exists which could reasonably be expected to result in the filing of an
Encumbrance other than Permitted
<PAGE>
Encumbrances, against any Real Property under any Environmental Law or
relating to any Environmental Matter.
(e) The Company has delivered or made available to the Purchaser
true and complete copies and results of any reports, studies, analyses,
tests, or monitoring in the possession of the Company or any of the
Subsidiaries, in each case relating to any Environmental Matters with
respect to the Company or any of the Subsidiaries (including without
limitation any Hazardous Substances at, on, about, under or within any Real
Property or any real property formerly owned, leased, operated or
controlled by the Company or any of the Subsidiaries or any predecessor of
any of the foregoing).
2.15. Commitments. Schedule 2.15 sets forth a complete and
correct list of each written and, if material, oral contract, agreement,
understanding, arrangement and commitment of any nature whatsoever,
including all amendments thereof and supplements thereto ("Commitments") of
the following types to which the Company or any Subsidiary is a party or by
or to which the Company or any Subsidiary or any of their properties may be
bound or subject as of the date hereof. (i) Commitments or related series
of Commitments which are service contracts or equipment leases involving
payments by the Company or any Subsidiary of more than $1,000,000 per year,
(ii) Commitments containing covenants purporting to limit the freedom of
the Company or any Subsidiary to compete in any line of business in any
geographic area or to hire any individual or group of individuals, (iii)
Commitments or related series of Commitments relating to capital
expenditures in excess of $ 1,000,000, (iv) (x) Commitments or related
series of Commitments relating to the lease or sublease of or sale or
purchase of personal property involving any annual expense or price in
excess of $ 1,000,000, and (y) each material lease or sublease of real
property or Commitments relating to the sale or purchase of material real
property, (v) Commitments relating to indentures, mortgages, promissory
notes, loan agreements, guarantees, letters of credit or other agreements
or instruments of the Company or any Subsidiary or Commitments for or
relating to the borrowing or the lending of money by or to the Company or
any Subsidiary in excess of $ 100,000 or providing for any right of first
refusal or the creation of any Encumbrance upon any of the assets or
properties of the Company or any Subsidiary, (vi) Commitments with or
relating to any automobile or other vehicle manufacturer, including,
without limitation, franchise and other dealership agreements, (vii)
Commitments relating to the acquisition or disposition of any operating
business or the capital stock of any Person that has not been consummated
or that has been consummated but contains representations, warranties,
covenants, guarantees, indemnities or other obligations that remain in
effect, (viii) Commitments relating to any material Litigation, (ix)
Commitments under which the Company or any Subsidiary agrees to indemnify
any Person, (x) Commitments in respect of any joint venture, partnership or
other similar arrangement, (xi) Commitments with any Governmental Entity;
(xii) other Commitments or related series of
<PAGE>
Commitments which involve payments of over $ 1,000,000, and (xiii) other
Commitments which are otherwise material. All such Commitments are valid
and binding obligations of the Company and each Subsidiary, as the case may
be, and, to the Knowledge of the Company, are the valid and binding
obligation of each other party thereto except such Commitments which if not
so valid and binding individually or in the aggregate could not reasonably
be expected to have a Material Adverse Effect. Neither the Company nor any
Subsidiary nor, to the Knowledge of the Company, any other party is in
material violation of or in material default in respect of, nor has there
occurred an event or condition which with the passage of time or giving of
notice (or both) would constitute a material default under, any such
Commitment which in the judgment of the management of the Company would
adversely affect the Company's or any Subsidiary's ability to retain, renew
or otherwise continue the Company's or Subsidiary's contractual
relationship with the parties thereto, except for the loss of contractual
relationships which individually or in the aggregate could not reasonably
be expected to have a Material Adverse Effect.
2.16. Acquisitions. Schedule 2.16 sets forth a list of all
acquisitions (by purchase of assets, purchase of stock, merger or
otherwise) of any Person or any businesses, business lines or material
assets pending or consummated or agreed to be consummated by the Company or
any of the Subsidiaries since December 31, 1998 or earlier to the extent
the Company or any Subsidiary has continuing liabilities or obligations
with respect to any acquisition. For each such acquisition, Schedule 2.16
also lists the consideration remaining to be paid in connection with such
acquisition (and the form or forms of such consideration), the amount and a
summary of the terms of any earn-out, claw-back, make-whole or similar
provision, the amount and a summary of the terms of any note payable issued
by the Company or any Subsidiary in connection therewith and the amount of
any consideration held in escrow on the date hereof. All continuing
material liabilities or other material obligations of the Company or any
Subsidiary in connection with any acquisition (including, without
limitation, arising out of indemnification, the granting of registration
rights or the terms of any earn-out or make-whole provisions) are
summarized on Schedule 2.16. In connection with any acquisition consummated
by the Company or any Subsidiary in which part or all of the consideration
consisted of shares of capital stock or any other securities (including,
without limitation, capital stock of the Company), such shares of capital
stock or other securities were issued in compliance with the registration
requirements of all applicable federal and state securities laws.
2.17. Brokers or Finders; Opinion of Financial Advisor. (a)
Except pursuant to the letter agreement with J.P. Morgan & Co., dated March
15, 1999, upon the consummation of the transactions contemplated by this
Agreement, no agent, broker, investment banker or other Person is or will
be entitled to any broker's or finder's fee or any other commission or
similar fee in connection with any of the transactions contemplated by this
Agreement or the other Transaction Documents based on
<PAGE>
arrangements made by or on behalf of the Company or any of the
Subsidiaries, or any Affiliate of any of the foregoing. A complete and
correct copy of all engagement letters and any other Commitment between the
Company or any Subsidiary and J.P. Morgan & Co. or any other Person
relating to the foregoing have previously been delivered to the Purchaser.
(b) The Company has been advised in writing by its financial
advisor, J.P. Morgan & Co., that in its opinion, as of the date hereof, the
transactions contemplated by this Agreement and the other Transaction
Documents are fair to the Company and its stockholders from a financial
point of view.
2.18. Proxy Statement. Any proxy statement to be sent to the
stockholders of the Company in connection with a meeting of the
stockholders of the Company in connection with the transactions
contemplated by this Agreement and the other Transaction Documents (the
"Stockholders Meeting"; such proxy statement as amended or supplemented is
referred to herein as the "Proxy Statement") will comply as to form in all
material respects with Article 14(a) of the Exchange Act and the rules
promulgated thereunder, and it shall not, on the date the Proxy Statement
(or any amendment thereof or supplement thereto) is first mailed to
stockholders or at the time of the Stockholders Meeting, contain any untrue
statement of a material fact, or, in light of the circumstances under which
made, omit to state any material fact necessary in order to make the
statements made therein not false or misleading. If at any time prior to
the Second Closing any event relating to the Company or any of the
Subsidiaries or any of their respective Affiliates, officers or directors
should be discovered by the Company which is required to be set forth in a
supplement to the Proxy Statement, the Company shall promptly inform the
Purchaser thereof.
2.19. Suppliers. Schedule 2.19 sets forth a list of the Company's
suppliers of $ 1,000,000 or more in materials (other than suppliers of used
cars) or services to the Company and the Subsidiaries taken as a whole
during the twelve month period ended December 31, 1998 ("Major Suppliers").
Since January 1, 1999, there has been no termination, cancellation or
limitation of, or any material adverse modification or change in, the
business relationships of the Company or any of the Subsidiaries with any
Major Supplier.
2.20. Related Party Transactions. Schedule 2.20 sets forth a list
of all transactions and Commitments between or involving the Company or any
of the Subsidiaries, on the one hand, and any Related Party, on the other
hand, engaged in or entered into since December 31, 1996 (including those
initiated prior to such date and continued or continuing following such
date).
<PAGE>
2.21. Products. Except as set forth on Schedule 2.21 and except
for any matter with respect to which the Company or any applicable
Subsidiary is indemnified or has the right to be reimbursed by a
financially solvent entity, there are no statements, citations or decisions
by any Governmental Entity stating that any product sold, rented, leased,
designed, distributed or marketed at any time by the Company or any
Subsidiary ("Products") is defective or unsafe or fails to meet any
standards promulgated by any Governmental Entity. Except as set forth on
Schedule 2.21 and except for any matter with respect to which the Company
or any applicable Subsidiary is indemnified or has the right to be
reimbursed by a financially solvent entity, there is no (i) fact relating
to any Product that, to the Knowledge of the Company, may impose upon the
Company or any Subsidiary a duty to recall any Product or a duty to warn
customers of a defect in any Product, (ii) latent or overt design,
manufacturing or other defect in any Product that could reasonably be
expected individually or in the aggregate to have a Material Adverse Effect
or (iii) material liability for warranty claims or returns with respect to
any Product.
2.22. Section 203 of the DGCL; Takeover Statute. The Board of
Directors has taken all actions necessary or advisable so that the
restrictions contained in Section 203 of the DGCL applicable to a "business
combination" (as defined in such Section) will not apply to the execution,
delivery or performance of this Agreement or any of the other Transaction
Documents or the consummation of the transactions contemplated hereby or
thereby. The execution, delivery and performance of this Agreement or any
of the other Transaction Documents and the consummation of the transactions
contemplated hereby or thereby will not cause to be applicable to the
Company any "fair price," "moratorium," "control share acquisition" or
other similar antitakeover statute or regulation enacted under state or
federal laws.
2.23. Disclosure. Neither this Agreement nor any other
Transaction Document, nor any schedule or exhibit hereto or thereto, nor
any certificate furnished to the Purchaser by or on behalf of the Company
in connection with the transactions contemplated hereby and thereby,
contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein or
therein not misleading.
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Company, as
of the date hereof and as of each Closing Date, as follows:
3.1. Acquisition for Investment. The Purchaser is acquiring the
Preferred Stock and the Warrants for its own account, for investment and
not with a view to the distribution thereof within the meaning of the
Securities Act.
3.2. Restricted Securities. The Purchaser understands that (i)
the Preferred Stock and the Warrants will not be registered under the
Securities Act or any state securities laws by reason of their issuance by
the Company in a transaction exempt from the registration requirements
thereof and (ii) shares of the Preferred Stock and the Warrants and the
Shares may not be sold unless such disposition is registered under the
Securities Act and applicable state securities laws or is exempt from
registration thereunder.
3.3. No Brokers or Finders. No agent, broker, investment banker
or other Person is or will be entitled to any broker's or finder's fee or
any other commission or similar fee in connection with the transactions
contemplated by this Agreement or the other Transaction Documents based on
arrangements made by or on behalf of the Purchaser.
3.4. Accredited Investor. Each of IMCG-l and IMCG-11 is an
"accredited investor" (as defined in Rule 501(a) under the Securities
Act).
3.5 Organization. Each of IMCG-l and IMCG-11 is a limited
liability company duly organized, validly existing and in good standing
under the laws of the State of Delaware and has the requisite power and
authority to carry on its business as it is now being conducted.
3.6. Due Authorization. Each of IMCG-l and IMCG-11 has all right,
power and authority to enter into this Agreement and the other Transaction
Documents to which it is a party and to consummate the transactions
contemplated hereby and thereby. The execution and delivery by each of
IMCG-1 and IMCG-11 of this Agreement and the other Transaction Documents to
which it is a party and the consummation by it of the transactions
contemplated hereby and thereby (a) are within its power and authority and
(b) have been duly authorized by all necessary action on the part of such
entity. This Agreement constitutes, and each of the other Transaction
Documents to which it is a party will constitute upon execution and
delivery by each of IMCG-1 and IMCG-11, a valid and
<PAGE>
binding agreement of such entity enforceable against such entity in
accordance with their respective terms.
3.7. Consents, No Violations. Neither the execution, delivery or
performance by each of IMCG-l and IMCG-11 of this Agreement and the other
Transaction Documents nor the consummation of the transactions contemplated
hereby or thereby will (a) conflict with, or result in a breach or a
violation of, any provision of the organizational documents of such entity;
(b) constitute, with or without notice or the passage of time or both, a
breach, violation or default, create an Encumbrance, or give rise to any
right of termination, modification, cancellation, prepayment, suspension,
limitation, revocation or acceleration, under (i) any Law, or (ii) any
Commitment of such entity, or to which such entity or any of its assets or
properties is subject, except, with respect to the matters set forth in
clause (ii), for breaches, violations, defaults, Encumbrances, or rights of
termination, modification, cancellation, prepayment, suspension,
limitation, revocation or acceleration, which, individually or in the
aggregate, could not have a material adverse effect on the ability of such
entity to consummate the transactions contemplated hereby; or (c) except
for any required filing under the HSR Act, require any consent, approval or
authorization of, notification to, filing with, or exemption or waiver by,
any Governmental Entity or any other Person on the part of such entity.
3.8. Availability of Funds. The Purchaser has or will have
available at the date due, sufficient funds to pay its obligations under
this Agreement or arising out of its breach. The Purchaser has delivered to
the Company a true and correct copy of the Limited Liability Agreement of
each of IMCG-l and IMCG-11. Each investor in each of IMCG-1 and IMCG-11 is
a financially solvent entity able to meet its obligations as they become
due.
3.9 Due Diligence. Purchaser has such knowledge and experience
in financial and business matters that it is capable of evaluating the
merits and risks of its investment in the Company as contemplated by this
Agreement, and is able to bear the economic risk of such investment for an
indefinite period of time. Purchaser has had the opportunity to ask
questions of and receive answers from representatives of the Company
concerning the terms and conditions of this Agreement and to obtain any
additional information Purchaser desires or deems relevant. Purchaser has
obtained, to the extent it has deemed necessary, professional advice with
respect to the risks inherent in the investment in the Company.
<PAGE>
ARTICLE IV
COVENANTS
4.1. Conduct of Business by the Company Pending the Closings. (a)
The Company covenants and agrees that, during the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Initial Closing, unless the Purchaser otherwise agrees in
writing, the Company shall, and shall cause each of the Subsidiaries to,
(i) conduct its business only in the ordinary course and consistent with
past practice; (ii) use reasonable best efforts to preserve and maintain
its assets and properties and its relationships with its customers,
suppliers, advertisers, distributors, agents, officers and employees and
other Persons with which it has significant business relationships; (iii)
use reasonable best efforts to maintain all of the material assets it owns
or uses in the ordinary course of business consistent with past practice;
(iv) maintain insurance in full force and effect substantially comparable
in amount, scope and coverage to that in effect on the date of this
Agreement; (v) use reasonable best efforts to preserve the goodwill and
ongoing operations of its business; (vi) maintain its books and records in
the usual, regular and ordinary manner, on a basis consistent with past
practice; (vii) perform and comply in all material respects with its
Commitments; and (viii) comply in all material respects with applicable
Laws. Except as expressly contemplated by this Agreement or as set forth on
Schedule 4.1, between the date of this Agreement and the Initial Closing,
the Company shall not, and shall cause each of the Subsidiaries not to, do
any of the following without the prior written consent of the Purchaser:
(A) create any Encumbrance other than (i) Permitted Encumbrances
and (ii) Encumbrances securing indebtedness permitted by clause (D) of this
Section 4.1 (a);
(B) (i) except for inventory in the ordinary course of business
or assets in any transaction or series of related transactions with a book
value of less than $50,000, sell, assign, transfer, lease or otherwise
dispose of or agree to sell, assign, transfer, lease or otherwise dispose
of any assets of the Company or any Subsidiary or (ii) cancel any
indebtedness owed to the Company or any Subsidiary except for indebtedness
owed by Persons that are not Affiliates of the Company or its Affiliates in
the ordinary course of business not in excess of $250,000 in the aggregate;
(C) acquire or dispose of (by merger, consolidation, or
acquisition of stock or assets) any Person, business, business line or any
material amount of assets;
(D) (i) incur any additional indebtedness other than (aa)
endorsements of items for collections, (bb) working capital borrowings in
the ordinary course of business, (cc) purchase money indebtedness not to
exceed $50,000 in any single
<PAGE>
transaction or series of related transactions, (dd) revolving floor plan
financing arrangements entered into in order to finance the Company's new
and used vehicle inventory or (ee) any other indebtedness incurred in the
ordinary course of business not to exceed $250,000 in the aggregate, or
(ii) make any loans, advances or capital contributions to, or investments
in, any Person other than (x) to a Subsidiary or (y) advances in the
ordinary course of business to Persons that are not Related Parties not
exceeding $ 10,000 to any one such Person;
(E) change any method of accounting or accounting practice used
by the Company or any Subsidiary, other than such changes required by GAAP;
(F) (i) enter into or adopt or amend any existing agreement or
arrangement relating to severance in which annual payments exceed $ 100,000
individually or $300,000 in the aggregate, (ii) enter into or adopt or
amend any existing severance plan in which annual payments exceed $100,000
individually or $300,000 in the aggregate, (iii) enter into or adopt or
amend any Compensation and Benefit Plans or employee agreement in which
annual payments exceed $ 100,000 individually or $300,000 in the aggregate
or (iv) grant any increases in compensation, except compensation increases
for non-executive employees associated with promotions and annual reviews
in the ordinary course of business;
(G) except as set forth in Schedule 2.20, enter into any
transaction or Commitment with any Related Party;
(H) modify, terminate, amend or grant any waiver in respect of
any material Commitment outside of the ordinary course of business, or
enter into any Commitment with any original equipment manufacturer other
than with respect to obtaining a Consent in accordance with Section 4.6;
(I) allow the lapse of any of the Company's or any Subsidiary's
rights of ownership or use of any material Intellectual Property right
except in the ordinary course of business consistent with past practice;
(J) repurchase, redeem or otherwise acquire or exchange any share
of Common Stock or Non-Voting Common Stock or other equity interests;
except for issuances of Common Stock pursuant to the exercise of options to
purchase Common Stock or pursuant to existing Commitments outstanding on
the date hereof, in each case listed on Schedule 2.3, issue or sell any
additional shares of the capital stock of, or other equity interests in,
the Company or any Subsidiary, or securities convertible into or
exchangeable for such shares or other equity interests, or issue or grant
any subscription rights, options, warrants or other rights of any character
relating to shares of such capital stock, such other equity interests or
such securities; or declare, set aside, make or pay any
<PAGE>
dividend, or make any distribution, in respect of any shares of capital
stock of the Company;
(K) amend the Company's certificate of incorporation or by-laws,
except with respect to the filing of the Certificates of Designation and
the Certificate of Amendment, or amend any Subsidiary's charter or by-laws
or other organizational documents in any respect materially adverse to the
Company;
(L) make any material change in the Company's or any Subsidiary's
Tax accounting methods, any material new election with respect to Taxes or
any material modification or revocation of any existing election with
respect to Taxes or settle or otherwise dispose of any material Tax audit,
dispute, or other Tax proceeding, without the consent of the Purchaser,
which consent will not be unreasonably withheld or delayed;
(M) take any action that is reasonably likely to result in any of
the representations and warranties set forth in Article 11 becoming false
or inaccurate in any material respect as of any Closing Date; provided,
however, that (i) the suffering of a condition to exist by the Company
shall not be a breach of this Section 4.1(a)(M) and (ii) for purposes of
Section 7.1 this Section 4.1(a)(M) (and Section 4.1(a)(N) as it relates
to this Section 4.1(a)(M)) shall be deemed a representation and warranty
of the Company and not a covenant of the Company; or
(N) agree to take any of the actions restricted by this Section
4. 1.
(b) Except as expressly contemplated by this Agreement or as set
forth on Schedule 4.1, between the Initial Closing and the Second Closing,
the Company shall not and shall cause each of the Subsidiaries not to, take
any of the actions described in clauses (C), (D), (E), (F), (G), (I), (J),
(K) or (L) of Section 4.1 (a) or clause (N) of Section 4.1 (a) as it
relates to such clauses without the prior written consent of the Purchaser.
4.2. No Solicitation. From the date of this Agreement until the
earlier of the termination of this Agreement or the Second Closing, other
than in connection with the transactions contemplated hereby, neither the
Company nor any of the Subsidiaries shall solicit, propose or facilitate
(including by way of providing information regarding the Company or any of
the Subsidiaries or their respective businesses to any Person), directly or
indirectly, any inquiries, discussions, offers or proposals for, continue
or enter into negotiations looking toward, or enter into or consummate any
Commitment or understanding in connection with any offer or proposal
regarding, any purchase or other acquisition of all or any material portion
of the Company and the Subsidiaries taken as a whole, the business or
assets of the Company and the Subsidiaries taken as a whole, or a material
portion of the capital stock of or equity interests in (whether newly
issued or
<PAGE>
currently outstanding) the Company or any of the Subsidiaries (other than
with respect to inquires or discussions (but not offers, proposals,
negotiations, or the entering into of Commitments or understandings)
relating to proposed acquisitions by the Company of businesses for which
the Company would use its capital stock as consideration, but only
following the prior consent of the Purchaser), or any merger, business
combination or recapitalization involving the Company or any of the
material Subsidiaries or their respective businesses; and the Company shall
cause the Subsidiaries and the officers, directors, employees,
representatives and agents of the Company and the Subsidiaries
(collectively, "Company Affiliates") to refrain from engaging in any of the
above activities that the Company is restricted from engaging in.
Notwithstanding the foregoing, the parties agree that in the event the
Company receives a Takeover Proposal by any other Person, the Company may
review and act upon such Takeover Proposal solely as it relates to such
transaction and only in the event that the Board of Directors determines in
good faith, after consultation with and based upon the advice of its
financial and outside legal advisors, that failing to review and act upon
such Takeover Proposal would constitute a breach of the Company's
directors' fiduciary duties under applicable Law (a "Company Fiduciary
Out"). A "Takeover Proposal" shall mean an unsolicited inquiry, offer or
proposal relating to the acquisition of all of the capital stock and other
equity interests in the Company, or all or substantially all of the assets
of the Company and its Subsidiaries or the merger of the Company with or
into a third party. The Company agrees to promptly inform the Purchaser of
the identity of any Person making any inquiry, offer or proposal and the
nature and terms of any such inquiry, offer or proposal, including without
limitation any Takeover Proposal, and to keep the Purchaser promptly and
fully informed as to the status thereof. In addition, the Company shall
promptly inform the Purchaser in writing of any decision to exercise a
Company Fiduciary Out. The Company shall, and shall cause the Company
Affiliates to, promptly cease and cause to be terminated, any inquiry,
discussion, offer or proposal of a type described in this Section 4.2 which
was initiated prior to the date hereof and shall abide, and shall cause the
Company Affiliates to abide, by the provisions of the first sentence of
this Section 4.2 with respect to any such inquiry, discussion, offer or
proposal and the maker or makers thereof. The Company shall be liable to
the Purchaser for any breach of the covenants set forth in this Section 4.2
by any Company Affiliate.
4.3. Press Releases; Interim Public Filings. Subject to Section
8.3, the Company shall deliver to the Purchaser complete and correct copies
of all press releases and public filings relating to the Transaction
Documents, the transactions contemplated thereby and Company corporate
matters made between the date hereof and the Initial Closing, and shall
give the Purchaser the reasonable opportunity to review and comment on such
releases and filings, in each case prior to release in the form in which it
will be issued.
<PAGE>
4.4. HSR Act. Each of the Purchaser and the Company shall
cooperate with the other in making filings under the HSR Act and shall use
its best efforts to take, or cause to be taken, all actions necessary,
proper or advisable to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement, including
using its reasonable best efforts to resolve such objections, if any, as
the Antitrust Division of the Department of Justice or the Federal Trade
Commission or state antitrust enforcement or other Governmental Entities
may assert under antitrust Laws with respect to the transactions
contemplated hereby. In the event an action is instituted by any Person
challenging the transactions contemplated hereby as violative of the
antitrust laws, each of the Purchaser and the Company shall use its
reasonable best efforts to resist or resolve such action.
4.5. Proxy Statement; Stockholders Meeting. The Company shall
hold a meeting of its stockholders as soon as practicable after the date
hereof for the purpose of acting upon this Agreement and the transactions
contemplated hereby and by the other Transaction Documents to the extent
requiring stockholder approval, including, without limitation, the issuance
and sale of Preferred Stock and Warrants to the Purchaser in connection
with the Second Purchase, the amendment of the certificate of incorporation
of the Company as set forth on Exhibit 4.5, and the election to the Board
of Directors of a number of persons designated by the Purchaser who will
constitute a majority of the Board of Directors of the Company immediately
following the Second Closing (the "Purchaser Designees"). Unless the Board
of Directors shall have determined in good faith, after consultation with
and based upon the advice of its financial and outside legal advisors, that
doing so would constitute a breach of their fiduciary duty under applicable
Law, the Company shall recommend that its stockholders approve this
Agreement and such transactions. The Board of Directors shall give the
Purchaser prompt written notice of any determination by the Board of
Directors not to recommend this Agreement and such transactions, or any
determination to withdraw, modify or change any such recommendation. The
Company and the Purchaser shall cooperate in the preparation of the Proxy
Statement to be mailed to the Company's stockholders in connection with the
solicitation of their approval of this Agreement and the transactions
described above, and shall use their reasonable best efforts to take, or
cause to be taken, all actions necessary to prepare the Proxy Statement,
file the Proxy Statement with the SEC and respond to any comments it may
have, and distribute the Proxy Statement to the Company's stockholders as
expeditiously as practicable. At least ten days prior to the filing of the
Proxy Statement with the SEC, Purchaser shall notify the Company of the
identity of the Purchaser Designees designated by the Purchaser to serve on
the Board of Directors at and following the Initial Closing. The Company
shall give the Purchaser a reasonable opportunity to review and comment on
the Proxy Statement and related communications with stockholders of the
Company, and the Purchaser shall have the right to consent to any
descriptions of or references to (i) the Purchaser or the Purchaser
Designees or any
<PAGE>
Affiliate of any of the foregoing, and (ii) the Transaction Documents and
the other agreements executed concurrently therewith and the transactions
contemplated thereby in the Proxy Statement or such communications, which
consent shall not be unreasonably withheld or delayed.
4.6. Consents; Approvals. The Company shall use its reasonable
best efforts, not requiring the expenditure of a material sum or the making
of some other material accommodation, to obtain all consents, waivers,
exemptions, approvals, authorizations or orders (collectively, "Consents")
(including, without limitation (i) Consents required to avoid any breach,
violation, default, encumbrance or right of termination, modification,
cancellation, prepayment, suspension, limitation, revocation or
acceleration set forth on Schedule 2.9 or required to be set forth thereon,
(ii) all Consents pursuant to the Company's or any Subsidiary's financing
documents, including without limitation, all indentures and credit
agreements of the Company or any Subsidiary, and (iii) all United States
and foreign governmental and regulatory rulings and approvals), and the
Company shall make all filings (including, without limitation, all filings
with United States and foreign governmental or regulatory agencies),
required or desirable in connection with the authorization, execution and
delivery of this Agreement and the other Transaction Documents and the
consummation of the transactions contemplated hereby and thereby, in each
case as promptly as practicable but in any event prior the Second Closing
if permitted to be filed prior thereto; provided, however, no payment
(other than filing fees related to the matters contemplated hereby) or
other accommodation shall be made by the Company in connection with
obtaining any of the foregoing without the Purchaser's prior written
consent. The Purchaser shall cooperate with the Company in obtaining such
Consents. The Company also shall use its reasonable best efforts, not
requiring the expenditure of a material sum or the making of some other
material accommodation, to obtain all necessary state securities laws or
blue sky permits and approvals required to carry out the transactions
contemplated hereby and shall furnish all information as may be reasonably
requested in connection with any such action.
4.7. Listing. The Company shall use its best efforts to continue
to be listed on the NYSE or a national securities exchange during the term
of this Agreement and for so long as any shares of Preferred Stock,
Warrants or any Shares are outstanding. Prior to the Initial Closing, the
Company shall prepare and submit to the NYSE a listing application covering
the shares of Common Stock issuable upon conversion of the Preferred Stock
and exercise of the Warrants and shall obtain approval for the listing of
such shares, subject to official notice of issuance.
4.8. Intentionally Omitted.
4.9. Certificates of Designation; Amendment to Certificate of
Incorporation. The Company shall, prior to or concurrently with the Initial
Closing, cause
<PAGE>
the Certificates of Designation to be filed with the Secretary of State of
the State of Delaware. Subject to the approval of the Company's
stockholders at the Stockholder Meeting, the Company shall, prior to or
concurrently with the Second Closing, cause the Certificate of Amendment to
the certificate of incorporation of the Company providing for the amendment
to the certificate of incorporation of the Company referenced in Section
4.5 (the "Certificate of Amendment") to be filed with the Secretary of
State of the State of Delaware.
4. 10. Cooperation. Each of the Purchaser and the Company agrees
to use its reasonable best efforts to take, or cause to be taken, as
promptly as practicable all such further actions as shall be necessary to
make effective and consummate the transactions contemplated by this
Agreement.
4.11. Access to Property; Records. Between the date hereof and
the Second Closing the Company shall give the Purchaser and its employees,
counsel, accountants, members, investors, financing sources and other
authorized representatives reasonable access, during normal business hours,
to the assets, properties, offices and other facilities, Commitments and
books and records of the Company and of the Subsidiaries, and to the
outside auditors of the Company and their work papers relating to the
Company and the Subsidiaries. The parties hereto agree that except as
expressly set forth herein no investigation by the Purchaser or its
representatives shall affect or limit the scope of the representations and
warranties of the Company contained in this Agreement or in any other
Transaction Document delivered pursuant hereto or limit the liability for
breach of any such representation or warranty. Purchaser agrees to hold all
information obtained pursuant to this Section 4.11 confidential pursuant to
the letter agreement, dated February 27, 1999, between the Company and
Penske Capital Partners, L.L.C. (the "Confidentiality Agreement") as if it
were a party thereto in lieu of Penske Capital Partners, L.L.C.
4.12. Reserve Shares. The Company will at all times reserve and
keep available, solely for issuance and delivery upon conversion of the
Preferred Stock or the exercise of the Warrants, the number of shares of
Common Stock and Non-Voting Common Stock from time to time issuable upon
conversion of all shares of the Preferred Stock and exercise of the
Warrants at the time outstanding. All shares of Common Stock and Non-Voting
Common Stock issuable upon conversion of the Preferred Stock or the
exercise of the Warrants shall be duly authorized and, when issued upon
such conversion or exercise, shall be validly issued, fully paid and
nonassessable.
4.13. Notice of Breach. From the date hereof through the Second
Closing, as promptly as practicable, and in any event not later than two
business days after senior management of the Company becomes aware thereof,
the Company shall provide the Purchaser with written notice of (a) any
representation or warranty of the Company
<PAGE>
contained in this Agreement or any other Transaction Document being untrue
or inaccurate in any material respect at any time from the date hereof to
the Second Closing, or (b) any failure of the Company to comply with or
satisfy any covenant, condition or agreement to be complied with or
satisfied by the Company under this Agreement or any other Transaction
Document; provided, however, that (i) any breach of this Section 4.13 shall
be deemed to be a breach of a representation and warranty of the Company
and not a covenant of the Company and (ii) the delivery of any notice
pursuant to this Section 4.13 shall not limit or otherwise affect the
remedies available to the Purchaser, or modify in any way any disclosure
made in this Agreement or any other Transaction Document or the schedules
hereto or thereto as of the date hereof.
4.14. Transfer Taxes. The Company shall be responsible for
liability with respect to any transfer, stamp or similar Taxes which may be
payable in connection with the execution, delivery and performance of this
Agreement including, without limitation, any such Taxes with respect to the
issuance of the Preferred Stock, the Warrant or the Shares.
4.15. Indemnification. From and after the Initial Closing to the
sixth year anniversary of the Initial Closing, except for amendments or
modifications required by Law, the Company shall not amend or modify any
rights to indemnification now existing in favor of the present and former
directors, officers or employees of the Company and its Subsidiaries
provided in the certificate of incorporation and by-laws of the Company or
any Subsidiary in a manner adverse to any such director, officer or
employee, and such parties shall be third party beneficiaries of this
Section 4.15.
4.16. Certain Limitations. Notwithstanding anything to the
contrary contained in this Article IV, a covenant of the Company contained
in this Article IV shall be deemed breached during the period following the
Initial Closing only to the extent the action or omission giving rise to
such potential breach (i) is not authorized, approved or recommended by the
Chief Executive Officer of the Company and (ii) is authorized or approved
by a majority of the members of the Board of Directors not designated by
the Purchaser pursuant to the Stockholders Agreement or otherwise (the
"Independent Directors").
4.17. Acquisition Entities. The Company will cause each entity
over which the Company or a Subsidiary has operational control pursuant to
a management agreement or pending acquisition agreement to not take any
action that would constitute a breach of any covenant of the Company under
this Agreement if such entity were a Subsidiary to the extent it may do so
under the applicable management agreement or acquisition agreement.
<PAGE>
ARTICLE V
CONDITIONS
5.1. Conditions to Obligations of the Purchaser and the Company.
(a) The respective obligations of the Purchaser and the Company to
consummate the Initial Purchase and the Second Purchase shall be subject to
the satisfaction or waiver at or prior to the Initial Closing (in the case
of the Initial Purchase) or the Second Closing (in the case of the Second
Purchase) of each of the following conditions:
(i) No statute, rule or regulation or order of any court or
administrative agency shall be in effect which prohibits the
consummation of the transactions to be consummated at such
Closing;
(ii) Any waiting period (and any extension thereof) under
the HSR Act applicable to this Agreement and the transactions
contemplated hereby shall have expired or been terminated; and
(iii) The Consents set forth on Exhibit 5.1(a) (iii) shall
have been obtained or made by the Company.
(b) The respective obligations of the Purchaser and the Company
to consummate the Second Purchase shall be subject to the satisfaction or
waiver at or prior to the Second Closing of the following conditions:
(i) The issuance and sale of the Preferred Stock and the
Warrants to the Purchaser, the amendment to the certificate of
incorporation of the Company referenced in Section 4.5 and the
election to the Board of Directors of the Purchaser Designees
shall have been approved and adopted by the requisite vote of the
stockholders of the Company in accordance with applicable Law,
the applicable rules of the NYSE, unless the NYSE shall have
waived such requirement, and the Company's certificate of
incorporation and by-laws; and
(ii) The Consents set forth on Exhibit 5.1(b) (ii) shall
have been obtained or made by the Company.
5.2. Conditions to Obligations of the Purchaser. (a) The
obligation of the Purchaser to consummate the Initial Purchase and the
Second Purchase shall be subject to the satisfaction or waiver at or prior
to the Initial Closing (in the case of the Initial Purchase) or the Second
Closing (in the case of the Second Purchase) of each of the following
conditions:
<PAGE>
(i) Each of the representations and warranties of the
Company contained in this Agreement shall be true and correct
(disregarding for this purpose all references in such
representations and warranties to any materiality, Material
Adverse Effect or Knowledge qualifications) as of the Initial
Closing (except to the extent such representations and warranties
are made as of a particular date, in which case such
representations and warranties shall have been true and correct
in all material respects as of such date), except for failures to
be true and correct which individually or in the aggregate would
not reasonably be expected to have a Material Adverse Effect
(and, for purposes of the Second Closing, this condition shall be
automatically deemed to be satisfied unless both (A) the Company
had Knowledge on or prior to the Initial Closing of matters that
would result in such representations and warranties failing to be
true and correct as of the Initial Closing except for such
failures to be true and correct which individually or in the
aggregate would not have a Material Adverse Effect, and (B) the
Purchaser did not have actual knowledge of such failures as of
the Initial Closing or the Purchaser had such knowledge and
advised the Company in writing and such failures were not waived
by the Purchaser in connection with waiving the satisfaction of
this condition at the Initial Closing (such failures to be true
and correct complying with both of clauses (A) and (B) of this
clause (i), "Second Closing Failures"); and only Second Closing
Failures which continue to fail to be true and correct as of the
Second Closing shall be considered in determining whether this
condition is satisfied at the Second Closing)),
(ii) The Company in all material respects shall have
performed, satisfied and complied with each of its covenants and
agreements (provided that in the case of the Second Closing such
covenants and agreements shall not include those contained in
Sections 4.3, 4.7, 4.9, 4.13, 4.14 and 4.15 and the first
sentence of Section 4.12, subject to Section 4.16) set forth in
this Agreement to be performed, satisfied and complied with prior
to or at such Closing;
(iii) The Company shall have delivered to the Purchaser an
officer's certificate certifying as to the Company's compliance
with the conditions set forth in clauses (i) and (ii) of this
Section 5.2(a);
(iv) The Significant Shareholders and the Company shall have
executed and delivered an agreement in the form of Exhibit
5.2(a) (iv) (the "Stockholders Agreement"), and the Stockholders
Agreement shall be in full force and effect;
(v) The Company shall have executed and delivered a
Registration Rights Agreement in the form of Exhibit 5.2(a)(v)
(the "Registration
<PAGE>
Rights Agreement"), and the Registration Rights Agreement shall
be in full force and effect;
(vi) The Certificate of Designation shall have been duly
filed with the Secretary of State of the State of Delaware and
shall be in full force and effect;
(vii) The Shares initially issuable upon conversion or
exercise, as the case may be, of the Preferred Stock and the
Warrants shall have been duly authorized and reserved for
issuance and such Shares shall have been listed on the NYSE,
subject to official notice of issuance;
(viii) The Purchaser shall have received at the Initial
Closing an opinion of Willkie Farr & Gallagher, outside counsel
to the Company, in the form of Exhibit 5.2(a)(viii); and
(ix) In the case of the Initial Closing only, except to the
extent set forth on Schedule 2.6, there shall not have occurred
after December 31, 1998 any change or development or series of
changes or developments (including without limitation as a result
of any change in the Law) which has resulted in or could
reasonably be expected to result individually or in the aggregate
in a Material Adverse Effect.
(b) In addition to the conditions set forth in paragraph (a)
above, the obligation of the Purchaser to consummate the Second Purchase
shall be subject to the satisfaction or waiver at or prior to the Second
Closing of the following conditions:
(i) the Certificate of Amendment shall have been duly filed
with the Secretary of State of the State of Delaware and shall be
in full force and effect, and the certificate of incorporation of
the Company shall not have been otherwise amended, modified or
waived, and
(ii) each of the representations and warranties of the
Company contained in Section 2.4 of this Agreement shall be true
and correct (disregarding for this purpose all references in such
representations and warranties as to materiality) as of the
Initial Closing, except for (i) failures to be true and correct
which individually or in the aggregate would not reasonably be
expected to have a Material Adverse Effect and (ii) failures to
be true and correct which (A) were known to the Purchaser as of
the Initial Closing, (B) were not disclosed in writing by the
Purchaser to the Company, and (C) could have been asserted by the
Purchaser as a basis for the failure of the condition set forth
in Section 5.2(a)(i).
5.3. Conditions to Obligations of the Company. The obligation of
the Company to consummate the Initial Purchase and the Second Purchase
shall be subject to
<PAGE>
the satisfaction or waiver at or prior to the Initial Closing (in the case
of the Initial Purchase) or the Second Closing (in the case of the Second
Purchase) of each of the following conditions:
(a) Each of the representations and warranties of both of IMCG-I
and IMCG-II contained in this Agreement shall be true and correct
(disregarding for this purpose all references in such representations and
warranties to any materiality, material adverse effect or knowledge
qualifications) as of such Closing (except to the extent such
representations and warranties are made as of a particular date, in which
case such representations and warranties shall have been true and correct
in all material respects as of such date), except for failures to be true
and correct which individually or in the aggregate would not reasonably be
expected to have a material adverse effect on the ability of the Purchaser
to fulfill its obligations hereunder;
(b) Both of IMCG-I and IMCG-II in all material respects shall
have performed, satisfied and complied with each of its covenants and
agreements set forth in this Agreement to be performed, satisfied and
complied with prior to or at such Closing, disregarding for this purpose
all references in such covenants and agreements to any materiality or
similar qualifications;
(c) Both of IMCG-I and IMCG-II shall have delivered to the
Company an officer's certificate certifying as to the Purchaser's
compliance with the conditions set forth in clauses (a) and (b) of this
Section 5.3; and
(d) Roger S. Penske shall be serving as the Chief Executive
Officer of the Company as of and since the consummation of the Initial
Closing and as of the Second Closing.
ARTICLE VI
TERMINATION
6.1. Termination. This Agreement may be terminated at any time
prior to the Second Closing, notwithstanding approval thereof by the
stockholders of the Company (other than as set forth in clause (e) below),
upon written notice of such termination by the terminating party to the
other party setting forth the basis for such termination:
(a) by mutual written consent of the Company and the Purchaser at
any time prior to the Closing; or
<PAGE>
(b) by either the Purchaser or the Company if the Second Closing
shall not have been consummated by December 31, 1999 (provided that the
right to terminate this Agreement under this Section 6.1(b) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of or resulted in the failure of the Second
Closing to occur on or before such date); or
(c) by either the Purchaser or the Company if a court of
competent jurisdiction or governmental, regulatory or administrative agency
or commission shall have issued a nonappealable final order, decree or
ruling or taken any other action having the effect of permanently
restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement; or
(d) by the Purchaser or the Company, (i) if any representation or
warranty of the other set forth in this Agreement shall be untrue in any
material respect when made to the extent that such first party did not have
actual knowledge of such breach as of the date of this Agreement, or (ii)
upon a breach in any material respect of any covenant or agreement on the
part of the other set forth in this Agreement, in each case which would
constitute a failure of the condition to Closing of the first party (either
(i) or (ii) above being a "Terminating Breach"); provided, that, if such
Terminating Breach is curable within ten business days after notice of a
party's intent to terminate this Agreement, through the exercise of
reasonable efforts, and for so long as the other party continues to
exercise such reasonable efforts during such ten business day cure period,
the termination shall be effective immediately following notice and such
ten business day cure period and only if the Terminating Breach is not
cured as of such time; or
(e) (i) by the Company in the event of the exercise by the
Company of a Company Fiduciary Out, but only if the Board of Directors has
accepted a Takeover Proposal (following valid exercise of a Company
Fiduciary Out) prior to the approval by the stockholders of this Agreement
and the transactions described in Section 4.5 at the Stockholder Meeting or
(ii) by the Purchaser (x) following the thirtieth day following the
exercise by the Company of a Company Fiduciary Out if the Company has not
ceased all communications with the applicable third party or third parties
regarding a Takeover Proposal or (y) following the acceptance by the
Company of a Takeover Proposal; provided, that the Company agrees that it
shall not exercise a Company Fiduciary Out more than once with respect to
any third party or group of third parties (or any Affiliate of any of the
foregoing);
(f) by either the Company or the Purchaser in the event that the
stockholders of the Company fail to approve this Agreement and the
transactions described in Section 4.5 at the Stockholder Meeting, or by the
Purchaser if the Company's Board of Directors shall fail to recommend that
the stockholders of the Company approve this Agreement and such
transactions, or withdraw, modify or change such
<PAGE>
recommendation in a manner adverse to the Purchaser, or shall have
recommended to the stockholders of the Company an Alternative Transaction,
or if the Board of Directors has resolved to do any of the foregoing; or
(g) by the Company on the 90th day following the date of written
notice from the Antitrust Division of the Department of Justice or the
Federal Trade Commission that such entity will seek to enjoin the
transactions contemplated by this Agreement absent an agreement to divest
certain assets of either the Purchaser or the Company, unless the Purchaser
or the Company has agreed to divest assets in accordance with such notice.
6.2. Effect of Termination; Termination Fee. In the event of the
termination of this Agreement pursuant to Section 6.1, this Agreement
shall forthwith become void and there shall be no liability on the part of
any party hereto except as set forth in this Section 6.2, provided that
Sections 7.2, 7.4, 8.3, 8.8, 8.13, 8.14 and 8.15 and this Section 6.2 and
the last sentence of Section 4.11 shall survive any termination of this
Agreement. In addition, in the event of a termination of this Agreement
pursuant to Section 6.1(d)(ii) as a result of a breach by the Company of
the covenants or agreements contained in Article 1, clauses (C), (D), (E),
(F), (G), (I), (J), (K) or (L) of Section 4.1(a) or clause (N) of Section
4.1(a) as it relates to such clauses, Sections 4.2, 4.4, 4.5, 4.6, or 4.
10, or the second sentence of Section 4.12 (but in any such case, to the
extent such breach occurs prior to the Initial Closing, and only to the
extent the action or omission underlying such breach is either authorized
or approved by the Board of Directors or is an action or omission primarily
of the Company, and not of any Subsidiary) in the event the Purchaser is
the terminating party or Section 6.1(e) or Section 6.1(f) regardless of
the terminating party, the Company shall pay to the Purchaser within five
business days following the date of termination $4,000,000 in cash plus the
Purchaser Expenses in an amount not to exceed $750,000, which payments,
together with any rights of the Purchaser contemplated by Section 7.4,
shall constitute the sole and exclusive remedy of Purchaser in the event of
such a termination. In the event of any other termination by the Purchaser
pursuant to Section 6.1(d), the Company shall pay the Purchaser the
Purchaser Expenses in an amount not to exceed $750,000 within five business
days following the date of termination. Following any termination of this
Agreement by the Company with respect to which the Purchaser is not
entitled to receive the $4,000,000 termination payment and so long as at
the time of such termination the Purchaser had the right to terminate this
Agreement pursuant to Section 6.1(d), the Company shall, without
duplication, pay the Purchaser the Purchaser Expenses in an amount not to
exceed $750,000 within five business days following the date of
termination. With respect to any breach of this Agreement by either party,
the other party shall have the right, which each of the parties hereto
hereby acknowledges and accepts, to obtain specific performance of this
Agreement and injunctive or other equitable relief to cure any such breach
and the parties acknowledge and agree that irreparable damage would occur
in the event that any
<PAGE>
related provision of this Agreement is not performed in accordance with its
specific terms or is otherwise breached, and further acknowledge and agree
that money damages are an inadequate remedy for any such breach because of
the difficulty of ascertaining the amount of damage that would be suffered
in the event of such breach.
ARTICLE VII
SURVIVAL; CERTAIN REMEDIES
7.1. Survival. The representations, warranties, covenants and
agreements of the parties hereto contained in this Agreement shall expire
at the Second Closing, except that the parties shall have no rights with
respect to representations and warranties following the Initial Closing
other than pursuant to Sections 5.2(a)(i), 5.2(b)(ii) and 5.3(a), and
except as set forth in Article VII, unless this Agreement is terminated in
accordance with Article VI following the Initial Closing.
7.2. Right to Require Repurchase. Notwithstanding anything to the
contrary contained in Section 7.1, in the event the Company (a) had
breached the representations or warranties contained in Section 2.4 and
such breach or breaches, without giving effect to any qualification as to
materiality contained in such representations and warranties, have had, or
could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect, and the Purchaser makes a written claim against
the Company on or before March 31, 2000 relating thereto, then the Company
shall purchase all of the outstanding Preferred Stock, Warrants and Shares
for an amount in cash equal to the sum of (x) the Purchase Price plus (y)
an amount equal to the liquidation preference of any Preferred Stock
received by the Purchaser as a dividend prior to the consummation of the
purchase plus (z) without duplication, all accrued and unpaid dividends
(which if in shares of Preferred Stock shall be valued at the liquidation
preference thereof) on such securities prior to the consummation of the
purchase (the "Section 7.2 Put Price"); provided that a breach shall not be
taken into account for such determination if (i) such breach were actually
known to the Purchaser at either Closing, (ii) were not disclosed in
writing by the Purchaser to the Company, and (iii) constituted a failure of
a condition to such Closing set forth in Section 5.2(a)(i) or 5.2(b)(ii)
hereof. Any such purchase shall be consummated as promptly as reasonably
practicable following the date of such written claim, but in any event
within six months, following receipt of such written claim from the
Purchaser, provided that the Section 7.2 Put Price shall be automatically
due and payable upon a payment default in respect of, or an acceleration
of, any indebtedness of the Company or any Subsidiary for borrowed money in
excess of $5,000,000 in the aggregate.
<PAGE>
7.3. Sole and Exclusive Remedy. From the Initial Closing to the
date of any termination of this Agreement in accordance with Article VI, or
if this Agreement is not so terminated, from and after the Initial Closing,
the provisions of Section 7.2 shall constitute the sole and exclusive
recourse and remedy available to the Purchaser with respect to the breach
of any representation, warranty, covenant or agreement contained in this
Agreement or in any related certificate delivered pursuant to this
Agreement, except for matters involving fraud.
7.4. Termination Followina Initial Closing. (a) In the event that
this Agreement is terminated in accordance with Article VI for any reason
by either or both parties following the Initial Closing, the Purchaser
shall have the right, exercisable by written notice to the Company within
15 days following the date of termination, to require that the Company
purchase all of the outstanding Preferred Stock and any outstanding Shares
for an amount in cash equal to the sum of (x) the Initial Closing Purchase
Price plus (y) an amount equal to 111% of the liquidation preference of
any Preferred Stock received as a dividend prior to the consummation of the
purchase plus (z) without duplication, all accrued and unpaid dividends
(which if in shares of Preferred Stock shall be valued at 111% of the
liquidation preference thereof) on the securities being purchased prior to
the consummation of the purchase (the "Section 7.4 Put Price"). Any such
purchase shall be consummated as promptly as reasonably practicable, but in
any event within six months, following receipt of such written claim from
the Purchaser, provided that the Section 7.4 Put Price shall be
automatically due and payable upon a payment default in respect of, or an
acceleration of, any indebtedness of the Company or any Subsidiary for
borrowed money in excess of $5,000,000 in the aggregate.
(b) If the Purchaser does not exercise such right, the Company
shall have the right exercisable within 15 days following the last day the
Purchaser could have given notice under the first sentence of this Section
7.4, to purchase the shares of Preferred Stock that have not been, or in
connection with the exercise by the Company of such purchase right are not,
converted into Shares, at a price equal to the Section 7.4 Put Price within
the time period and subject to the same acceleration as provided in the
immediately preceding sentence. Upon such notice, holders of Preferred
Stock shall have a 15-day period in which to convert any of its outstanding
Preferred Stock into Common Stock in accordance with the Certificate of
Designation for the Series A Preferred Stock.
(c) In the event that both the Purchaser and the Company do not
elect to exercise their purchase right under this Section 7.4, the Company
shall issue to the Purchaser a number of shares of Preferred Stock equal to
11% of the number of shares of Preferred Stock that were received as
dividends or were accrued as dividends and not paid as of the date of
issuance contemplated by this sentence.
<PAGE>
(d) Prior to the Second Closing the Purchaser shall not transfer
any of the Preferred Stock unless the transferee shall agree in writing,
which shall have been delivered to the Company, that the shares of
Preferred Stock that it is acquiring shall be subject to this Section 7.4.
(e) Notwithstanding anything in this Section 7.4 to the contrary,
the Section 7.4 Put Price shall be reduced by an amount equal to the
portion of the Initial Purchase Price the Chief Executive Officer of the
Company has approved, authorized or recommended the release or transfer of
from any segregated account set up by the Company to hold the Initial
Purchase Price, which release or transfer was made without the prior
written consent of a majority of the Independent Directors following the
Initial Closing. In the event of any reduction of the Section 7.4 Put Price
pursuant to the immediately preceding sentence, the number of securities
which the Purchaser may require the Company to purchase at such reduced
Section 7.4 Put Price shall be equal to the product of (x) the number of
securities otherwise subject to purchase, and (y) a fraction, the numerator
of which is the Section 7.4 Put Price as reduced pursuant to the
immediately preceding sentence, and the denominator of which is the Section
7.4 Put Price.
ARTICLE VIII
MISCELLANEOUS
8.1. Defined Terms; Intemretations. The following terms, as used
herein, shall have the following meanings:
"1998 Balance Sheet" shall have the meaning ascribed thereto in
Section 2.5.
"1998 Financial Statements" shall have the meaning ascribed
thereto in Section 2.5.
"Affiliate" shall have the meaning ascribed to such term in Rule
12b-2 of the General Rules and Regulations under the Exchange Act.
"Agreement" shall have the meaning ascribed thereto in the
preamble.
"Alternative Transaction" shall mean any of (i) the acquisition,
in one transaction or a series of transactions by any Third Party of more
than 10% of the outstanding shares of Common Stock (or securities
convertible or exchangeable therefor), whether from the Company or pursuant
to a tender offer or exchange offer or otherwise, (ii) a merger or other
business combination involving the Company pursuant to which any
<PAGE>
Third Party acquires more than 10% of the voting power of the outstanding
equity securities of the Company or the entity surviving such merger or
business combination, or (iii) any other transaction pursuant to which any
Third Party acquires or would acquire control of assets (including for this
purpose the outstanding equity securities of the Company's Subsidiaries,
and the entity surviving any merger or business combination including any
of them) of the Company or the Subsidiaries having a fair market value
equal to more than 10% of the fair market value of all the assets of the
Company and the Subsidiaries, taken as a whole, immediately prior to such
transaction.
"Board of Directors" shall mean the Board of Directors of the
Company.
"Certificate of Amendment" shall have the meaning ascribed
thereto in Section 4.9.
"Certificate of Designation" shall have the meaning ascribed
thereto in Section 2.2.
"Closing" shall have the meaning ascribed thereto in Section
1.2(a).
"Closing Date" shall have the meaning ascribed thereto in Section
1.2(a).
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commitments" shall have the meaning ascribed thereto in Section
2.15.
"Common Stock" shall have the meaning ascribed thereto in the
recitals.
"Company" shall have the meaning ascribed thereto in the
preamble.
"Company Affiliates" shall have the meaning ascribed thereto in
Section 4.2.
"Company Fiduciary Out" shall have the meaning ascribed thereto
in Section 4.2.
"Compensation and Benefit Plans" shall mean all material bonus,
vacation, deferred compensation, pension, retirement, profit-sharing,
thrift, savings, employee stock ownership, stock bonus, stock purchase,
restricted stock and stock option plans, all employment or severance
contracts, all medical, dental, disability, health and life insurance
plans, all other material employee benefit and fringe benefit plans,
contracts or arrangements and any applicable "change of control" or similar
provisions in any plan, contract or arrangement sponsored, maintained or
contributed to by the Company or any of its Subsidiaries for the benefit of
officers, former officers, employees, former employees, directors, former
directors, or the beneficiaries of any of the foregoing or
<PAGE>
pursuant to which the Company or any of its Subsidiaries or ERISA
Affiliates has or may have any liability, contingent or otherwise.
"Confidentiality Agreement" shall have the meaning ascribed
thereto in Section 4.11.
"Consents" shall have the meaning ascribed thereto in Section
4.6.
"DGCL" shall mean the Delaware General Corporation Law.
"Encumbrances" shall have the meaning ascribed thereto in Section
2.1(b).
"Environmental Laws" shall mean, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. ss.ss. 9601 et seq., the Emergency Planning and Community
Right-to-Know Act of 1986, 42 U.S.C. ss.ss. 11001 et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. ss.ss. 6901 et seq., the Toxic
Substances Control Act, 15 U.S.C. ss.ss. 2601 et seq., the Federal
Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. ss.ss. 136 et seq.,
the Clean Air Act, 42 U.S.C. ss.ss. 7401 et seq., the Clean Water Act
(Federal Water Pollution Control Act), 33 U.S.C. ss.ss. 1251 et seq., the
Safe Drinking Water Act, 42 U.S.C. ss.ss. 300f et seq., the Occupational
Safety and Health Act, 29 U.S.C. ss.ss. 641, et seq., the Hazardous
Materials Transportation Act, 49 U. S.C. ss. ss. 1801, et seq., as any of
the above statutes shall be in effect as of each Closing Date, all rules
and regulations promulgated pursuant to any of the above statutes, and any
other foreign, federal, state or local law, statute, ordinance, rule or
regulation governing Environmental Matters, as the same shall be in effect
as of each Closing Date, including any common law cause of action providing
any right or remedy relating to Environmental Matters, and all applicable
judicial and administrative decisions, orders, and decrees relating to
Environmental Matters.
"Environmental Matter" shall mean any matter arising out of,
relating to, or resulting from pollution, contamination, protection of the
environment, human health or safety, health or safety of employees,
sanitation, and any matters relating to emissions, discharges, Releases or
threatened Releases of Hazardous Substances into the air (indoor and
outdoor), surface water, groundwater, soil, land surface or subsurface, or
otherwise arising out of, relating to, or resulting from the manufacture,
processing, distribution, use, treatment, storage, disposal, transport,
handling, release or threatened release of Hazardous Substances.
"Environmental Permits" shall have the meaning ascribed thereto
in Section 2.14(d)(ii).
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
<PAGE>
"ERISA Affiliate" shall mean each business or entity which is a
member of a "controlled group of corporations," under "common control" or a
member of an "affiliated service group" with the Company or any of its
Subsidiaries within the meaning of Articles 414(b), (c) or (m) of the
Code, or required to be aggregated with the Company under Article 414(o) of
the Code, or is under "common control" with the Company, within the meaning
of Article 4001(a)(14) of ERISA, and the regulations promulgated and
proposed thereunder.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of
the SEC thereunder, all as the same shall be in effect at the time.
Reference to a particular section of the Exchange Act shall include
reference to the comparable section, if any, of any such successor federal
statute.
"GAAP" shall have the meaning ascribed thereto in Section 2.5.
"Governmental Entity" shall mean any supernational, national,
foreign, federal, state or local judicial, legislative, executive,
administrative or regulatory body or authority.
"Hazardous Substances" shall mean any pollutants, contaminants,
toxic or hazardous or extremely hazardous substances, materials, wastes,
constituents, compounds, chemicals (including, without limitation,
petroleum or any by-products or fractions thereof, any form of natural gas,
lead, asbestos and asbestos-containing materials, building construction
materials and debris, polychlorinated biphenyls (PCBs") and PCB-containing
equipment, radon and other radioactive elements, ionizing radiation,
electromagnetic field radiation and other non-ionizing radiation,
pesticides, defoliants, explosives, flammables, corrosives and urea
formaldehyde foam insulation) that are regulated by, or form the basis of
liability under, any Environmental Laws.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations
thereunder.
"IMCG-1" shall have the meaning ascribed thereto in the preamble.
"IMCG-1 Initial Closing Purchase Price" shall have the meaning
ascribed thereto in Section 1.1.
"IMCG-1 Second Closina Purchase Price" shall have the meaning
ascribed thereto in Section 1.1.
"IMCG-11" shall have the meaning ascribed thereto in the
preamble.
<PAGE>
"Independent Directors" shall have the meaning ascribed thereto
in Section 4.16.
"Initial Closing" shall have the meaning ascribed thereto in
Section 1.2(a).
"Initial Closing Purchase Price" shall have the meaning ascribed
thereto in Section 1.1.
"Initial Purchase" shall have the meaning ascribed thereto in
Section 1.1.
"Intellectual Property" shall mean (i) all patentable inventions
and discoveries (whether patentable or unpatentable and whether or not
reduced to practice), all improvements thereto, and all patents and patent
applications, together with all reissuances, continuations, continuations-
in-part, revisions, extensions and reexaminations thereof, (ii) all
trademarks, service marks, trade dress, logos, trade names and corporate
names, together with all translations, derivations and combinations thereof
and including all goodwill associated therewith, and all applications,
registrations and renewals in connection therewith, (iii) all copyrightable
works, all copyrights and all applications, registrations and renewals in
connection therewith, (iv) all mask works and all applications,
registrations and renewals in connection therewith, (v) all know-how, trade
secrets and confidential business information (including ideas, research
and development, formulas, compositions, manufacturing and production
process and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information and business and
marketing plans and proposals), (vi) all computer software (including data
and related documentation), (vii) all management information systems,
(viii) all other proprietary rights, (ix) all copies and tangible
embodiments thereof (in whatever form or medium) and (x) all licenses and
agreements in connection therewith.
"IRS" shall mean the Internal Revenue Service.
"Knowled~ze", with respect to the Company, shall mean the actual
knowledge of each member of the board of directors of the Company and each
executive officer of the Company.
"Laws" shall include all foreign, federal, state, and local laws,
statutes, ordinances, rules, regulations, orders, judgments, decrees and
bodies of law, including, without limitation, (i) any of the foregoing
promulgated by any Governmental Entity, (ii) Environmental Laws, (iii) the
Federal Truth-in-Lending Act, (iv) Regulation Z, (v) the Equal Credit
Opportunity Act, (vi) the Federal Fair Debt Collection Practices Act and
(vii) state laws, rules and regulations relating to consumer protection,
installment sales, collection and usury.
<PAGE>
"Leased Real Property" shall mean the real property leased or
subleased by the Company or any Subsidiary, together with, to the extent
leased or subleased by the Company or any Subsidiary, all buildings and
other structures, facilities or improvements currently or hereafter located
thereon, all fixtures, systems, equipment and items of personal property of
the Company or any Subsidiary attached or appurtenant thereto, and all
easements, licenses, rights and appurtenances relating to the foregoing.
"Licenses" shall have the meaning ascribed thereto in Section
2.14(a).
"Litigation" shall have the meaning ascribed thereto in Section
2.7.
"Losses" shall mean each and all of the following items: claims,
losses, (including, without limitation, losses of earnings) liabilities,
obligations, payments, damages (actual, punitive or consequential),
charges, judgments, fines, penalties, amounts paid in settlement, costs and
expenses (including, without limitation, interest which may be imposed in
connection therewith, costs and expenses of investigation, actions, suits,
proceedings, demands, assessments and fees, expenses and disbursements of
counsel, consultants and other experts).
"Major Suppliers" shall have the meaning ascribed thereto in
Section 2.19.
"Material Adverse Effect" shall mean, subject to Schedule 2.6, a
material adverse effect of at least $ 10,000,000 on the properties,
business, results of operations, or financial condition of the Company and
its Subsidiaries taken as a whole.
"Multi-Employer Plan" shall have the meaning ascribed thereto in
Section 2.12(c).
"Non-Voting Common Stock" shall have the meaning ascribed thereto
in the recitals.
"NYSE" shall meanThe New York Stock Exchange, Inc.
"Owned Real Property" shall mean the real property owned by the
Company or any Subsidiary, together with all buildings and other
structures, facilities or improvements currently or hereafter located
thereon, all fixtures, systems, equipment and items of personal property of
the Company or any Subsidiary attached or appurtenant thereto and all
easements, licenses, rights and appurtenances relating to the foregoing.
"Permitted Encumbrances" shall mean, with respect to any asset,
(i) any imperfection of title with respect to such asset which does not
materially interfere with the present occupancy or use of such asset and
the continuation of the present occupancy or use of such asset; (ii) such
covenants, conditions, restrictions, easements,
<PAGE>
encroachments or Encumbrances that are not created pursuant to mortgages or
other financing or security documents, and any other state of facts, which
do not, individually or in the aggregate, materially interfere with the
present occupancy or use of such asset; (111) mechanic's, materialmen's and
similar Encumbrances with respect to amounts not yet due and payable or
which are being contested in good faith through appropriate proceedings;
(iv) Encumbrances for Taxes not yet delinquent or which are being contested
in good faith through appropriate proceedings; and (vi) Encumbrances
securing rental payments under capital lease arrangements.
"Person" shall mean any individual, firm, corporation, limited
liability company, partnership, company or other entity, and shall include
any successor (by merger or otherwise) of such entity.
"Preferred Stock" shall have the meaning ascribed thereto in the
recitals.
"Products" shall have the meaning ascribed thereto in Section 2.21.
"Proxy Statement" shall have the meaning ascribed thereto in
Section 2.18.
"Purchase Price" shall have the meaning ascribed thereto in the
recitals.
"Purchaser" shall have the meaning ascribed thereto in the
preamble.
"Purchaser Designees" shall have the meaning ascribed thereto in
Section 4.5.
"Purchaser Expenses" shall have the meaning ascribed thereto in
Section 8.2.
"Real Property" shall have the meaning ascribed thereto in
Section 2.14(d)(iii).
"Registration Rights Agreement" shall have the meaning ascribed
thereto in Section 5.2(g).
"Related Parties" shall mean (i) Affiliates of the Company and
(ii) directors or officers of the Company and their Affiliates (including
any family members of directors and officers), but shall not include the
Subsidiaries or the directors or officers of the Subsidiaries (except for
directors or officers of the Subsidiaries who are also directors or
officers of the Company).
"Release" shall have the meaning set forth in Section 1021(22) of
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, 42 U.S.C. ss.9601(22).
<PAGE>
"Return" shall mean any report, return, statement, estimate,
declaration, notice, form or other information required to be supplied to a
taxing authority in connection with Taxes.
"SEC" shall mean the Securities and Exchange Commission.
"Second Closing" shall have the meaning ascribed thereto in
Section 1.2(a).
"Second Closing Failures" shall have the meaning ascribed thereto
in Section 5.2(a).
"Second Closing Purchase Price" shall have the meaning ascribed
thereto in Section 1.1.
"Second Purchase" shall have the meaning ascribed thereto in
Section 1.1.
"SEC Reports" shall have the meaning ascribed thereto in Section
2.4.
"Section 7.2 Put Price" shall have the meaning ascribed thereto
in Section 7.2.
"Section 7.4 Put Price" shall have the meaning ascribed thereto
in Section 7.4.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any successor federal statute, and the rules and regulations of
the SEC thereunder, all as the same shall be in effect at the time.
Reference to a particular section of the Securities Act shall include
reference to the comparable section, if any, of such successor federal
statute.
"Series A Preferred Stock" shall have the meaning ascribed
thereto in the recitals.
"Series B Preferred Stock" shall have the meaning ascribed
thereto in the recitals.
"Shares" shall mean the shares of Common Stock issuable upon
conversion of shares of Preferred Stock and exercise of the Warrants.
"Significant Shareholders" shall mean Trace International
Holdings, Inc., Aeneas Venture Corporation and AIF II, L.P.
"Stockholders Agreement" shall have the meaning ascribed thereto
in Section 5.2(a)(iv).
<PAGE>
"Stockholders Meeting" shall have the meaning ascribed thereto in
Section 2. 18.
"Subsidiaries" shall have the meaning ascribed thereto in Section
2. 1 (b).
"Subsidiary" shall have the meaning ascribed thereto in Section 2.
1 (b).
"Takeover Proposal" shall have the meaning ascribed thereto in
Section 4.2.
"Tax" and "Taxes" shall mean any federal, state, local or foreign
income, gross receipts, property, sales, use, value added, license, excise,
franchise, capital, net worth, estimated, withholding, employment, payroll,
premium, withholding, alternative or added minimum, ad valorem, inventory,
asset, gains, transfer or excise tax, or any other tax, levy, custom, duty,
impost, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest, penalty or additions to tax,
imposed by any Governmental Entity.
"Terminatina Breach" shall have the meaning ascribed thereto in
Section 6. 1 (d).
"Third Party" shall mean any Person (or group of Persons) other
than the Purchaser.
"Transaction Documents" shall mean this Agreement, the
Stockholders Agreement, the Voting Agreement, the Certificate of
Designation, the Warrants and all other contracts, agreements, schedules,
certificates and other documents being delivered pursuant to or in
connection with this Agreement or such other documents or the transactions
contemplated hereby or thereby.
"Warrants" shall have the meaning ascribed thereto in the
recitals.
8.2. Fees and Expenses. At the Initial Closing or as set forth on
Section 6.2, the Company shall reimburse the Purchaser in cash for its fees
and expenses incurred in connection with this Agreement and the
transactions contemplated hereby (including, without limitation, the fees
and disbursements of its attorneys, accountants, consultants and other
advisors) (collectively, "Purchaser Expenses"); provided, however, that the
portion of the Purchaser Expenses for which Purchaser is reimbursed shall
not exceed $750,000 in the aggregate.
8.3. Public Announcements. The Purchaser and the Company shall
consult with each other before issuing any press release with respect to
this Agreement or the transactions contemplated hereby and neither shall
issue any such press release or make any such public statement without the
prior consent of the other, which consent
<PAGE>
shall not be unreasonably withheld; provided, however, that a party may,
without the prior consent of the other party, issue such press release or
make such public statement as may upon the advice of counsel be required by
Law or the rules and regulations of the NYSE, if it has used reasonable
efforts to consult with the other party prior thereto.
8.4. Restrictive Leizends. No shares of Preferred Stock, Warrants
or Shares may be transferred without registration under the Securities Act
and applicable state securities laws unless counsel to the Company shall
advise the Company that such transfer may be effected without such
registration. Each certificate representing any of the foregoing shall bear
legends in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES
LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT AND APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE
EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH
LAWS.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ISSUED
PURSUANT TO, AND THE HOLDER HEREOF IS ENTITLED TO CERTAIN RIGHTS
AND SUBJECT TO CERTAIN OBLIGATIONS CONTAINED IN, A SECURITIES
PURCHASE AGREEMENT DATED AS OF APRIL 12,1999, A COPY OF WHICH IS
AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE ISSUER
HEREOF, AND WILL BE FURNISHED WITHOUT CHARGE TO THE HOLDER OF
SUCH SECURITIES UPON WRITTEN REQUEST.
8.5. Further Assurances. At any time or from time to time after
the Initial Closing, the Company, on the one hand, and the Purchaser, on
the other hand, agree to cooperate with each other, and at the request of
the other party, to execute and deliver any further instruments or
documents and to take all such further action as the other party may
reasonably request in order to evidence or effectuate the consummation of
the transactions contemplated hereby or by the other Transaction Documents
and to otherwise carry out the intent of the parties hereunder or
thereunder.
<PAGE>
8.6. Successors and Assians. This Agreement shall bind and inure
to the benefit of the Company and the Purchaser and the respective
successors, permitted assigns, heirs and personal representatives of the
Company and the Purchaser, provided that the Company may not assign its
rights or obligations under this Agreement to any Person without the prior
written consent of the Purchaser, and provided further that the Purchaser
may not assign its rights or obligations under this Agreement to any Person
(other than a direct or indirect wholly-owned subsidiary of the Purchaser)
without the prior written consent of the Company, which consent shall not
be unreasonably withheld or delayed. In addition, and whether or not any
express assignment has been made, the provisions of this Agreement which
are for the Purchaser's benefit as a purchaser or holder of Preferred
Stock, Warrants or Shares are also for the benefit of, and enforceable by,
any subsequent holder of such Preferred Stock, Warrants or Shares.
8.7. Entire Aareement. This Agreement and the other Transaction
Documents and the Confidentiality Agreement contain the entire agreement
among the parties with respect to the subject matter hereof and supersede
all prior and contemporaneous arrangements or understandings with respect
thereto.
8.8. Notices. All notices, requests, consents and other
communications hereunder to any party shall be deemed to be sufficient if
contained in a written instrument delivered in person or sent by telecopy,
nationally recognized overnight courier or first class registered or
certified mail, return receipt requested, postage prepaid, addressed to
such party at the address set forth below or such other address as may
hereafter be designated in writing by such party to the other parties:
(i) 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. Letkort, Esq.
<PAGE>
(ii) if to the Purchaser,
c/o Penske Capital Partners, L.L.C.
399 Park Avenue
New York, New York 10022
Telecopy: (212) 207-9653
Attention: Mr. James A. Hislop
with copies to (which shall not constitute notice):
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Telecopy: (212) 859-8587
Attention: Valerie Ford Jacob, Esq.
Robert C. Schwenkel, Esq.
All such notices, requests, consents and other communications
shall be deemed to have been given or made if and when delivered personally
or by overnight courier to the parties at the above addresses or sent by
electronic transmission, with confirmation received, to the telecopy
numbers specified above (or at such other address or telecopy number for a
party as shall be specified by like notice).
8.9. Amendments. The terms and provisions of this Agreement may
be modified or amended, or any of the provisions hereof waived, temporarily
or permanently, in a writing executed and delivered by the Company and the
Purchaser. No waiver of any of the provisions of this Agreement shall be
deemed to or shall constitute a waiver of any other provision hereof
(whether or not similar). No delay on the part of any party in exercising
any right, power or privilege hereunder shall operate as a waiver thereof.
8.10. Countetparts. This Agreement may be executed in any number
of counterparts, and each such counterpart hereof shall be deemed to be an
original instrument, but all such counterparts together shall constitute
but one agreement.
8.11. Headings. The headings of the sections of this Agreement
have been inserted for convenience of reference only and shall not be
deemed to be a part of this Agreement.
8.12. Nouns and Pronouns. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of names and pronouns shall include the
plural and vice versa.
<PAGE>
8.13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAW.
8.14. Submission to Jurisdiction. 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 of the United
States of America, in each case located in the County of New York, for any
Litigation arising out of or relating to this Agreement or the other
Transaction Documents and the transactions contemplated hereby and thereby
(and agrees not to commence any Litigation relating hereto or 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 this Agreement shall be effective service of process
for any Litigation 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 Litigation 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, in each case located in the County of New
York, hereby further irrevocably and unconditionally waives and agrees not
to plead or claim in any such court that any such Litigation brought in any
such court has been brought in an inconvenient forum.
8.15. WAIVER OF JURY TRIAL. THE COMPANY AND THE PURCHASER HEREBY
WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECTOF ANY ACTION,
PROCEEDING OR LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT OR THE TRANSACTION DOCUMENTS.
8.16. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid,
but if any provision of this Agreement is held to be invalid or
unenforceable in any respect, such invalidity or unenforceability shall not
render invalid or unenforceable any other provision of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
UNITED AUTO GROUP, INC.
By: /s/ Samuel X. DeFeo
------------------------------
Name: Samuel X. DeFeo
Title: President and Chief
Operating Officer
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
EXHIBIT 2
WARRANT
To Purchase Shares of Common Stock of
UNITED AUTO GROUP, INC.
Warrant No. 1
No. of Shares of Voting Common Stock: 3,898,665
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
1. DEFINITIONS.............................................................2
2. EXERCISE OF WARRANT.....................................................5
2.1. Manner of Exercise................................................5
2.2. Payment of Taxes..................................................6
2.3. Fractional Shares.................................................6
3. TRANSFER, DIVISION AND COMBINATION......................................7
3.1. Transfer..........................................................7
3.2. Division and Combination..........................................7
3.3. Expenses..........................................................7
3.4. Maintenance of Books..............................................7
4. ADJUSTMENTS.............................................................7
4.1. Stock Dividends, Subdivisions and Combinations....................7
4.2. Issuance of Additional Shares of Common Stock.....................8
4.3. Other Provisions Applicable to Adjustments under
Sections 4.1 and 4.2..............................................9
4.4. Adjustment for Reclassification and
Reorganization...................................................10
4.5. Notice of Record Date............................................10
5. REPORTS AS TO ADJUSTMENTS..............................................11
6. RIGHTS OF HOLDERS......................................................11
6.1. No Impairment....................................................11
6.2. Registration Rights..............................................12
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION
WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY.........................12
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS.....................12
9. RESTRICTIONS ON TRANSFERABILITY........................................12
10. LOSS OR MUTILATION.....................................................13
11. LIMITATION OF LIABILITY; NO RIGHTS AS STOCKHOLDER......................13
12. MISCELLANEOUS..........................................................13
12.1. Nonwaiver and Expenses...........................................13
12.2. Notice Generally.................................................13
12.3. Remedies.........................................................14
12.4. Successors and Assigns...........................................14
12.5. Amendment........................................................14
12.6. Severability.....................................................14
12.7. Headings.........................................................14
12.9. Governing Law....................................................15
EXHIBITS
Exhibit A............................................................A-1
Exhibit B............................................................B-2
<PAGE>
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE AND
MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS
OR AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH ACT OR
SUCH LAWS.
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY WERE ISSUED PURSUANT TO,
AND THE HOLDER HEREOF IS ENTITLED TO CERTAIN RIGHTS AND SUBJECT TO CERTAIN
OBLIGATIONS CONTAINED IN, A SECURITIES PURCHASE AGREEMENT DATED AS OF APRIL
12, 1999, AND A STOCKHOLDERS AGREEMENT DATED AS OF ______, 1999, A COPY OF
WHICH IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE ISSUER
HEREOF, AND WILL BE FURNISHED WITHOUT CHARGE TO THE HOLDER OF SUCH
SECURITIES UPON WRITTEN REQUEST.
No. of Shares of Voting Common Stock: 3,898,665 Warrant No. 1
WARRANT
To Purchase Shares of Voting Common Stock of
UNITED AUTO GROUP, INC.
THIS IS TO CERTIFY THAT International Motor Cars Group I, L.L.C.
("PCP"), or its registered assigns, is entitled, at any time prior to the
Expiration Date (as hereinafter defined), to purchase from United Auto
Group, Inc., a Delaware corporation (the "Company"), 3,898,665 shares of
Voting Common Stock (as hereinafter defined and subject to adjustment as
provided herein), in whole or in part, at the Current Warrant Price (as
hereinafter defined), all on the terms and conditions and pursuant to the
provisions hereinafter set forth.
<PAGE>
1. DEFINITIONS
As used in this Warrant, the following terms have the respective
meanings set forth below:
"Additional Shares" shall have the meaning set forth in Section
4.2.
"Adjustment Price" shall have the meaning set forth in Section
4.2.
"Board of Directors" shall mean the board of directors of the
Company.
"Business Day" shall mean any day other than a Saturday or Sunday
or a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
"Closing Date" shall have the meaning set forth in the Securities
Purchase Agreement.
"Common Stock" shall mean the Voting Common Stock and the
Non-Voting Common Stock.
"Company" shall have the meaning set forth in the preamble.
"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
Company. 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 Company based on
an opinion of an independent investment banking firm acceptable to the
Majority Holders, which opinion may be based on such assumptions as such
firm shall deem to be necessary and appropriate.
"Current Warrant Price" shall mean, as at any date, the price at
which a share of Voting Common Stock may be purchased pursuant to this
Warrant on such date, which price shall equal the Initial Warrant Price, as
adjusted from time to time as provided herein; provided, that for the
period following [the 30 month anniversary of the Issue Date], the Current
Warrant Price shall be readjusted taking into consideration the change in
the Initial Warrant Price in effect for such period.
"Expiration Date" shall mean the fifth anniversary of the Closing
Date.
"Fair Market Value" shall mean, as to shares of Common Stock or
any other class of capital stock or securities of the Company or any other
issuer which are publicly traded, the Current Market Price of such shares
of securities. 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 and acceptable
to the Majority Holders.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as from time to time in effect.
"Holder" shall mean, as at any date, the Person in whose name
this Warrant is registered on the books of the Company maintained for such
purpose. "Holders" shall mean, collectively, each Holder of a Warrant, in
the event of any division of this Warrant.
"Initial Warrant Price" shall mean the price at which a share of
Voting Common Stock may initially be purchased pursuant to this Warrant,
which price shall equal (i) $12.50 for the period up to and including
_________ __, 2001 [30 months from Issue Date] and (ii) $15.50 thereafter.
"Issue Date" shall mean _________ __, 1999 [Date of Warrant
issuance].
"Majority Holders" shall mean the Holders of Warrants exercisable
for in excess of 50% of the aggregate number of shares of Warrant Stock
then purchasable upon exercise of all Warrants.
"Non-Voting Common Stock" shall mean the non-voting Common Stock,
$0.0001 par value, of the Company as constituted on the Closing Date, and
any capital stock into which such Non-Voting Common Stock may thereafter be
changed, and shall also include (i) capital stock of the Company of any
other class (regardless of how denominated) issued to the holders of shares
of Non-Voting Common Stock upon any reclassification thereof and (ii)
shares of common stock of any successor or acquiring corporation received
by or distributed to the holders of Non-Voting Common Stock in the
circumstances contemplated by Section 4.5.
"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 GAAP) outstanding on such date, except shares then owned or held by or
for the account of the Company or any subsidiary thereof, and shall include
all shares (i) issuable in respect of outstanding scrip or any certificates
representing fractional interests in shares of Common Stock and (ii)
issuable in respect of options or warrants to purchase, or securities
convertible into, shares of Common Stock.
"PCP" shall have the meaning set forth in the preamble.
"Permitted Issuances" shall mean the issuance or reissuance of
(a) any shares of Common Stock or rights, warrants or other securities
convertible into shares of Common Stock (whether treasury shares or newly
issued shares) (i) pursuant to a dividend or distribution on, or
subdivision, combination or reclassification of, the Outstanding shares of
Common Stock requiring an adjustment in the Current Warrant Price pursuant
to Section 4.1; (ii) pursuant to any restricted stock or stock option plan
or program of the Company involving the grant of options or rights to
acquire Common Stock to directors, officers and employees of the Company
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 directors designated by the Majority Holders constitute
a majority of the members; (iii) pursuant to any option, warrant, right, or
convertible security outstanding as of the date hereof, or (b) the
Preferred Stock, Warrants and any shares of Common Stock issuable upon
conversion or exercise thereof.
"Person" shall mean any individual, firm, corporation,
partnership or other entity, and shall include any successor (by merger or
otherwise) of such entity.
"Preferred Stock" shall mean the Company's Series A Convertible
Preferred Stock, par value $0.0001 per share.
"Registration Rights Agreement" shall mean the registration
rights agreement, dated as of the Closing Date, between the Company and
PCP.
"Securities Purchase Agreement" shall mean the securities
purchase agreement, dated as of April 12, 1999, between the Company and
PCP.
"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.
"Transaction" shall have the meaning set forth in Section 4.4.
"Voting Common Stock" shall mean the voting Common Stock, $0.0001
par value, of the Company as constituted on the Closing Date, and any
capital stock into which such Voting Common Stock may thereafter be
changed, and shall also include (i) capital stock of the Company of any
other class (regardless of how denominated) issued to the holders of shares
of Voting Common Stock upon any reclassification thereof and (ii) shares of
common stock of any successor or acquiring corporation received by or
distributed to the holders of Voting Common Stock in the circumstances
contemplated by Section 4.5.
"Warrants" shall mean this Warrant (as adjusted pursuant to
Section 4) and all warrants issuable upon transfer, division or combination
of, or in substitution for, any of the foregoing. All Warrants shall at all
times be identical as to terms and conditions and date, except as to the
number of shares of Voting Common Stock for which they may be exercised.
"Warrant Price" shall mean an amount equal to (i) the number of
shares of Common Stock being purchased upon exercise of this Warrant
pursuant to Section 2.1, multiplied by (ii) the Current Warrant Price as of
the date of such exercise.
"Warrant Stock" shall mean the shares of Voting Common Stock
purchased by the holders of the Warrants upon the exercise thereof.
2. EXERCISE OF WARRANT
2.1. Manner of Exercise. (a) At any time or from time to time
from and after the Closing Date and until 5:00 P.M., New York time, on the
Expiration Date, Holder may exercise this Warrant, on any Business Day, for
all or any part of the number of shares of Warrant Stock.
(b) In order to exercise this Warrant, in whole or in part,
Holder shall deliver to the Company at its principal office at its address
set forth in Section 12.2 of this Agreement, as such address may be changed
pursuant to such Section: (i) a written notice of Holder's election to
exercise this Warrant, which notice shall specify the number of shares of
Voting Common Stock to be purchased; (ii) payment of the Warrant Price; and
(iii) this Warrant. Such notice shall be substantially in the form
appearing at the end of this Warrant as Exhibit A, duly executed by Holder.
(c) As promptly as practicable, and in no event later than five
Business Days after the receipt of the items specified in paragraph (b) of
this Section 2.1, the Company shall execute or cause to be executed and
deliver or cause to be delivered to Holder a certificate or certificates
representing the aggregate number of full shares of Voting Common Stock
issuable upon such exercise, together with cash in lieu of any fraction of
a share, as hereinafter provided. The stock certificate or certificates so
delivered shall be in such denomination or denominations as Holder shall
request in the notice and shall be registered in the name of Holder or such
other name as shall be designated in the notice. This Warrant shall be
deemed to have been exercised and such certificate or certificates shall be
deemed to have been issued, and Holder or any other Person so designated
shall be deemed to have become a holder of record of such shares for all
purposes, as of the date the notice, together with the Warrant Price and
this Warrant, are received by the Company as described above. If this
Warrant shall have been exercised in part, the Company shall, at the time
of delivery of the certificate or certificates representing Warrant Stock,
deliver to Holder a new Warrant evidencing the right of Holder to purchase
the unpurchased shares of Voting Common Stock called for by this Warrant,
which new Warrant shall in all other respects be identical with this
Warrant, or, at the request of Holder, appropriate notation may be made on
this Warrant and the same returned to Holder.
(d) Payment of the Warrant Price shall be made at the option of
Holder by (i) certified or official bank check or (ii) wire transfer of
immediately available funds.
2.2. Payment of Taxes. All shares of Voting Common Stock issuable
upon the exercise of this Warrant shall be validly issued, fully paid and
nonassessable. The Company shall pay all expenses of the Company in
connection with, and all taxes and other governmental charges that may be
imposed with respect to, the issue or delivery thereof to Holder; provided,
however, that the Company shall not be required to pay any tax or taxes
which may be payable with respect to any secondary transfer of the Warrant
or the Warrant Stock.
2.3. Fractional Shares. The Company shall not be required to
issue a fractional share of Voting Common Stock upon exercise of this
Warrant. As to any fraction of a share which Holder would otherwise be
entitled to purchase upon such exercise, the Company shall pay a cash
adjustment in respect of such fraction in an amount equal to the same
fraction of the Current Market Price per share of Common Stock on the date
of exercise. If the Warrant shall be exercised for more than one share of
Warrant Stock, the number of full shares of Warrant Stock shall be computed
on the basis of the total number of shares to be issued in connection with
such exercise.
3. TRANSFER, DIVISION AND COMBINATION
3.1. Transfer. Transfer of this Warrant and all rights hereunder,
in whole or in part, shall be registered on the books of the Company to be
maintained for such purpose, upon surrender of this Warrant at the
principal office of the Company referred to in Section 2.1, together with a
written assignment of this Warrant substantially in the form of Exhibit B
hereto duly executed by Holder and funds sufficient to pay any transfer
taxes payable upon the making of such transfer. Upon such surrender and, if
required, such payment, the Company shall execute and deliver a new Warrant
or Warrants in the name of the assignee or assignees and in the
denomination specified in such instrument of assignment, and shall issue to
the assignor a new Warrant evidencing the portion of this Warrant not so
assigned, and this Warrant shall promptly be canceled. A Warrant may be
exercised by a new Holder for the purchase of shares of Voting Common Stock
without having a new Warrant issued.
3.2. Division and Combination. This Warrant may be divided into
multiple Warrants or combined with other Warrants upon presentation hereof
at the aforesaid office or agency of the Company, together with a written
notice specifying the names and denominations in which new Warrants are to
be issued, signed by Holder. Subject to compliance with Section 3.1, as to
any transfer which may be involved in such division or combination, the
Company shall execute and deliver a new Warrant or Warrants in exchange for
the Warrant or Warrants to be divided or combined in accordance with such
notice.
3.3. Expenses. The Company shall prepare, issue and deliver at
its own expense the new Warrant or Warrants under this Section 3.
3.4. Maintenance of Books. The Company agrees to maintain, at its
aforesaid office, books for the registration and the registration of
transfer of the Warrants.
4. ADJUSTMENTS
The number of shares of Voting Common Stock for which this
Warrant is exercisable and/or the Current Warrant Price shall be subject to
adjustment from time to time as set forth in this Section 4. The Company
shall give each Holder notice, in accordance with Section 5, of any event
described below which requires an adjustment pursuant to this Section 4 at
the time of such event.
4.1. Stock Dividends, Subdivisions and Combinations. In case the
Company shall at any time or from time to time:
(a) pay a dividend or make a distribution on the Outstanding
shares of Common Stock in shares of Common Stock, or
(b) subdivide the Outstanding shares of Common Stock, or
(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 Company,
then, and in each such case, (i) the number of shares of Voting Common
Stock for which this Warrant is exercisable immediately prior to such event
or the record date therefor, whichever is earlier, shall be adjusted to
equal the number of shares of Voting Common Stock or other securities of
the Company which a record holder of the same number of shares of Voting
Common Stock for which this Warrant is exercisable immediately prior to the
occurrence of such event would have owned or have been entitled to receive
after the happening of any of the events described above, and (ii) the
Current Warrant Price shall be adjusted to equal (A) the Current Warrant
Price multiplied by the number of shares of Voting Common Stock for which
this Warrant is exercisable immediately prior to the adjustment divided by
(B) the number of shares of Voting Common Stock or other securities for
which this Warrant is exercisable immediately after such adjustment. Any
adjustments made pursuant to this Section 4.1 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 Section 4.1 in connection with
any transaction to which Section 4.4 applies.
4.2. Issuance of Additional Shares of Common Stock. In case
(except for Permitted Issuances) the Company 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 Current Warrant Price as of the
date of issuance of such shares (or, in the case of convertible or
exchangeable securities, less than the Current Warrant 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, (i) the
Current Warrant Price shall be reduced to an amount determined by
multiplying (X) the Current Warrant Price in effect on the day immediately
prior to such date by (Y) 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 Current
Warrant Price (the "Adjustment Price") and (2) the aggregate consideration
receivable by the Company 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; and (ii) the number of shares of Voting Common Stock for
which this Warrant is exercisable shall be adjusted to equal (A) the
product obtained by (1) multiplying the Current Warrant Price in effect
immediately prior to such issue or sale by the number of shares of Voting
Common Stock for which this Warrant is exercisable immediately prior to
such issue or sale, divided by (2) the Current Warrant Price resulting from
the adjustment made pursuant to clause (i) above. An adjustment made
pursuant to this Section 4.2 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 Section 4.2, the aggregate consideration
receivable by the Company 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 Current Warrant Price and the number of
shares of Voting Common Stock for which this Warrant is exercisable shall
be adjusted retroactively to give effect to such reduction. On the
expiration of any such option or the termination of any such right to
convert or exchange any securities, the Current Warrant Price and the
number of shares of Voting Common Stock for which this Warrant is
exercisable shall be adjusted to such amounts 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 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. No adjustment
shall be made pursuant to this Section 4.2 in connection with any
transaction to which Section 4.4 applies.
4.3. Other Provisions Applicable to Adjustments under Sections
4.1 and 4.2. The following provisions shall be applicable to the making of
adjustments of the number of shares of Voting Common Stock for which this
Warrant is exercisable and the Current Warrant Price provided for in
Sections 4.1 and 4.2.
(a) The term "dividend" shall mean a dividend or other
distribution upon the capital stock of the Company.
(b) The certificate of any firm of independent public accountants
of recognized national standing selected by the Board of Directors of the
Company (which may be the firm of independent public accountants regularly
employed by the Company) shall be presumptively correct for any computation
made under Sections 4.1 or 4.2.
(c) If the Company 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 Common Stock issuable upon exercise of the Warrant or in the
Current Warrant Price then in effect shall be required by reason of the
taking of such record.
4.4. Adjustment for Reclassification and Reorganization. In the
case of any consolidation or merger of the Company with or into another
corporation (a "Transaction") occurring at any time, this Warrant shall
thereafter be exercisable for, in lieu of the Voting Common Stock issuable
upon such exercise 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 for which the Warrant was
exercisable 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 4 shall
be deemed to apply, so far as appropriate and nearly as may be, to such
other securities or property.
4.5. Notice of Record Date. In case at any time or from time to
time (i) the Company 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
Company or consolidation or merger of the Company with or into another
corporation, or any sale or conveyance to another corporation of the
property of the Company as an entirety or substantially as an entirety, or
(iii) there shall be a voluntary or involuntary dissolution, liquidation or
winding up of the Company, then, in any one or more of said cases the
Company 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
Holder at the addresses shown on the books of the Company 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 Section
4.4 applies the Company 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.
5. REPORTS AS TO ADJUSTMENTS
Upon any adjustment of the number of shares of Voting Common
Stock for which this Warrant is exercisable or the Current Warrant Price
then in effect, then, and in each such case, the Company shall promptly
deliver to Holder 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 Company, setting forth in reasonable detail the
event requiring the adjustment and the method by which such adjustment was
calculated and specifying the number of shares of Voting Common Stock for
which this Warrant is exercisable and the Current Warrant Price then in
effect 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 Holder may be
given in advance and included as part of the notice required under the
provisions of Section 4.5.
6. RIGHTS OF HOLDERS
6.1. No Impairment. The Company shall not by any action,
including, without limitation, amending its Certificate of Incorporation or
comparable governing instruments or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking
of all such actions as may be necessary or appropriate to protect the
rights of Holder against impairment. Without limiting the generality of the
foregoing, the Company will (a) not increase the par value of any shares of
Common Stock receivable upon the exercise of this Warrant above the amount
payable therefor upon such exercise immediately prior to such increase in
par value, (b) enter into any transaction which, by reason of any
adjustment hereunder, would cause the Current Warrant Price to be less than
the par value of the per share of Common Stock, (c) take all such action as
may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of Voting Common Stock
upon the exercise of this Warrant, and (d) use its reasonable best efforts
to obtain all such authorizations, exemptions or consents from any public
regulatory body having jurisdiction thereof as may be necessary to enable
the Company to perform its obligations under this Warrant.
Upon the request of Holder, the Company will at any time during
the period this Warrant is outstanding acknowledge in writing, in form
reasonably satisfactory to Holder, the continuing validity of this Warrant
and the obligations of the Company hereunder.
6.2. Registration Rights. The holders of Warrants and Warrant
Stock shall have the registration rights set forth in the Registration
Rights Agreement.
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH OR
APPROVAL OF ANY GOVERNMENTAL AUTHORITY
From and after the Closing Date, the Company shall at all times
reserve and keep available for issue upon the exercise of Warrants such
number of its authorized but unissued shares of Voting Common Stock as will
be sufficient to permit the exercise in full of all outstanding Warrants.
All shares of Voting Common Stock which shall be so issuable, when issued
upon exercise of any Warrant and payment therefor in accordance with the
terms of such Warrant, shall be duly and validly issued and fully paid and
nonassessable.
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS
In the case of all dividends or other distributions by the
Company to the holders of its Common Stock with respect to which any
provision of Section 4 refers to the taking of a record of such holders,
the Company will in each such case take such a record and will take such
record as of the close of business on a Business Day. The Company will not
at any time, except upon dissolution, liquidation or winding up of the
Company, close its stock transfer books or Warrant transfer books so as to
result in preventing or delaying the exercise or transfer of any Warrant.
9. RESTRICTIONS ON TRANSFERABILITY
Subject to the terms of the Stockholders Agreement and applicable
securities laws, the Warrants and the Warrant Stock are fully transferable;
provided, however, that each Warrant and each certificate for Warrant Stock
initially issued upon the exercise of a Warrant, and each certificate for
Warrant Stock issued to any subsequent transferee of any such certificate,
shall be stamped or otherwise imprinted with the legend required by Section
8.4 of the Securities Purchase Agreement.
10. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of this Warrant and indemnity reasonably
satisfactory to it, and in case of mutilation upon surrender and
cancellation hereof, the Company will execute and deliver in lieu hereof a
new Warrant of like tenor to such Holder; provided, that in the case of
mutilation, no indemnity shall be required if this Warrant in identifiable
form is surrendered to the Company for cancellation.
11. LIMITATION OF LIABILITY; NO RIGHTS AS STOCKHOLDER
No provision hereof, in the absence of affirmative action by
Holder to purchase shares of Voting Common Stock, and no enumeration herein
of the rights or privileges of Holder hereof, shall give rise to any
liability of such Holder for the purchase price of any Voting Common Stock
or as a stockholder of the Company, whether such liability is asserted by
the Company or by creditors of the Company. Nothing contained in this
Warrant shall be construed as conferring upon Holder any rights as a
stockholder of the Company prior to the issuance of the Warrant Stock.
12. MISCELLANEOUS
12.1. Nonwaiver and Expenses. No course of dealing or any delay
or failure to exercise any right hereunder on the part of Holder shall
operate as a waiver of such right or otherwise prejudice Holder's rights,
powers or remedies. If the Company fails to make, when due, any payments
provided for hereunder, or fails to comply with any other provision of this
Warrant, the Company shall pay to Holder such amounts as shall be
sufficient to cover any costs and expenses including, but not limited to,
reasonable attorneys' fees, including those of appellate proceedings,
incurred by Holder in collecting any amounts due pursuant hereto or in
otherwise enforcing any of its rights, powers or remedies hereunder.
12.2. Notice Generally. Any notice, demand, request, consent,
approval, declaration, delivery or other communication hereunder to be made
pursuant to the provisions of this Warrant shall be sufficiently given or
made if in writing and either delivered in person with receipt acknowledged
or sent by registered or certified mail, return receipt requested, postage
prepaid, or by telecopy and confirmed by telecopy answerback, addressed as
follows:
(a) If to any Holder or holder of Warrant Stock, at its last
known address appearing on the books of the Company maintained for
such purpose.
(b) If to the Company at
375 Park Avenue
New York, New York 10152
Attention: General Counsel
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in
writing by the party entitled to receive such notice. Every notice, demand,
request, consent, approval, declaration, delivery or other communication
hereunder shall be deemed to have been duly given or served on the date on
which personally delivered, with receipt acknowledged, telecopied and
confirmed by telecopy answerback, or three Business Days after the same
shall have been deposited in the United States mail.
12.3. Remedies. Each holder of Warrant and Warrant Stock, in
addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under this Warrant. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of
the provisions of this Warrant and hereby agrees to waive the defense in
any action for specific performance that a remedy at law would be adequate.
12.4. Successors and Assigns. Subject to the provisions of
Section 3.1, this Warrant and the rights evidenced hereby shall inure to
the benefit of and be binding upon the successors of the Company and the
successors and assigns (including any transferee of any Holder) of Holder.
The provisions of this Warrant are intended to be for the benefit of all
Holders from time to time of this Warrant and holders of Warrant Stock, and
shall be enforceable by any such Holder or holder of Warrant Stock.
12.5. Amendment. This Warrant and all other Warrants may be
modified or amended or the provisions hereof waived with the written
consent of the Company and the Majority Holders; provided, that no such
Warrant may be modified or amended to reduce the number of shares of Voting
Common Stock for which such Warrant is exercisable or to increase the price
at which such shares may be purchased upon exercise of such Warrant (before
giving effect to any adjustment as provided therein) without the prior
written consent of the Holder thereof.
12.6. Severability. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Warrant shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Warrant.
12.7. Headings. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a
part of this Warrant.
12.8. Securities Purchase Agreement. Any purchase effected
pursuant to Section 7.2 of the Securities Purchase Agreement by the
Purchaser (as defined in the Securities Purchase Agreement) or the Company
shall apply to all Warrants and Warrant Stock whether or not the holder
thereof is the Purchaser.
12.9. Governing Law. This Warrant 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 12.2 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.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed and its corporate seal to be impressed hereon and attested by
its Secretary or an Assistant Secretary.
Dated: , 1999
----------- --
UNITED AUTO GROUP, INC.
By:
----------------------------
Name:
Title:
Agreed to and accepted:
INTERNATIONAL MOTOR CARS
GROUP I, L.L.C.
By:
----------------------
Name:
Title:
<PAGE>
EXHIBIT A
EXERCISE FORM
[To be executed only upon exercise of Warrant]
Net Issue Exercise No Yes
----- ------
The undersigned registered owner of this Warrant irrevocably
exercises this Warrant for the purchase of _____ shares of Voting Common
Stock of United Auto Group, Inc. and herewith makes payment therefor, all
at the price and on the terms and conditions specified in this Warrant and
requests that certificates for the shares of Voting Common Stock hereby
purchased (and any securities or other property issuable upon such
exercise) be issued in the name of and delivered to
________________________ whose address is ____________________________ and,
if such shares of Voting Common Stock shall not include all of the shares
of Voting Common Stock issuable as provided in this Warrant, that a new
Warrant of like tenor and date for the balance of the shares of Voting
Common Stock issuable hereunder be delivered to the undersigned.
---------------------------------------
(Name of Registered Owner)
---------------------------------------
(Signature of Registered Owner)
---------------------------------------
(Street Address)
---------------------------------------
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the
name as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatsoever.
<PAGE>
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this
Warrant hereby sells, assigns and transfers unto the Assignee named below
all of the rights of the undersigned under this Warrant, with respect to
the number of shares of Voting Common Stock set forth below:
Name and Address of Assignee No. of Shares of Voting Common Stock
- ---------------------------- ------------------------------------
and does hereby irrevocably constitute and appoint ________________
attorney-in-fact to register such transfer on the books of United Auto
Group, Inc. maintained for the purpose, with full power of substitution in
the premises.
Dated: Print Name:
---------------- -------------------------------
Signature:
-------------------------------
Witness:
-------------------------------
NOTICE: The signature on this assignment must correspond with the name
as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatsoever.
EXHIBIT 3
WARRANT
To Purchase Shares of Non-Voting Common Stock of
UNITED AUTO GROUP, INC.
Warrant No. 2
No. of Shares of Non-Voting Common Stock: 1,101,335
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
1. DEFINITIONS.............................................................2
2. EXERCISE OF WARRANT.....................................................5
2.1. Manner of Exercise................................................5
2.2. Payment of Taxes..................................................6
2.3. Fractional Shares.................................................6
3. TRANSFER, DIVISION AND COMBINATION......................................7
3.1. Transfer..........................................................7
3.2. Division and Combination..........................................7
3.3. Expenses..........................................................7
3.4. Maintenance of Books..............................................7
4. ADJUSTMENTS.............................................................7
4.1. Stock Dividends, Subdivisions and Combinations....................7
4.2. Issuance of Additional Shares of Common Stock.....................8
4.3. Other Provisions Applicable to Adjustments under
Sections 4.1 and 4.2..............................................9
4.4. Adjustment for Reclassification and
Reorganization...................................................10
4.5. Notice of Record Date............................................10
5. REPORTS AS TO ADJUSTMENTS..............................................11
6. RIGHTS OF HOLDERS......................................................11
6.1. No Impairment....................................................11
6.2. Registration Rights..............................................12
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION
WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY.........................12
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS.....................12
9. RESTRICTIONS ON TRANSFERABILITY........................................12
10. LOSS OR MUTILATION.....................................................13
11. LIMITATION OF LIABILITY; NO RIGHTS AS STOCKHOLDER......................13
12. MISCELLANEOUS..........................................................13
12.1. Nonwaiver and Expenses...........................................13
12.2. Notice Generally.................................................13
12.3. Remedies.........................................................14
12.4. Successors and Assigns...........................................14
12.5. Amendment........................................................14
12.6. Severability.....................................................14
12.7. Headings.........................................................14
12.9. Governing Law....................................................15
EXHIBITS
Exhibit A............................................................A-1
Exhibit B............................................................B-2
<PAGE>
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE AND
MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS
OR AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH ACT OR
SUCH LAWS.
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY WERE ISSUED PURSUANT TO,
AND THE HOLDER HEREOF IS ENTITLED TO CERTAIN RIGHTS AND SUBJECT TO CERTAIN
OBLIGATIONS CONTAINED IN, A SECURITIES PURCHASE AGREEMENT DATED AS OF APRIL
12, 1999, AND A STOCKHOLDERS AGREEMENT DATED AS OF ______, 1999, A COPY OF
WHICH IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE ISSUER
HEREOF, AND WILL BE FURNISHED WITHOUT CHARGE TO THE HOLDER OF SUCH
SECURITIES UPON WRITTEN REQUEST.
No. of Shares of Non-Voting Common Stock: 1,101,335 Warrant No. 2
WARRANT
To Purchase Shares of Non-Voting Common Stock of
UNITED AUTO GROUP, INC.
THIS IS TO CERTIFY THAT International Motor Cars Group II, L.L.C.
("PCP"), or its registered assigns, is entitled, at any time prior to the
Expiration Date (as hereinafter defined), to purchase from United Auto
Group, Inc., a Delaware corporation (the "Company"), 1,101,335 shares of
Non-Voting Common Stock (as hereinafter defined and subject to adjustment
as provided herein), in whole or in part, at the Current Warrant Price (as
hereinafter defined), all on the terms and conditions and pursuant to the
provisions hereinafter set forth.
<PAGE>
1. DEFINITIONS
As used in this Warrant, the following terms have the respective
meanings set forth below:
"Additional Shares" shall have the meaning set forth in Section
4.2.
"Adjustment Price" shall have the meaning set forth in Section
4.2.
"Board of Directors" shall mean the board of directors of the
Company.
"Business Day" shall mean any day other than a Saturday or Sunday
or a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
"Closing Date" shall have the meaning set forth in the Securities
Purchase Agreement.
"Common Stock" shall mean the Voting Common Stock and the
Non-Voting Common Stock
"Company" shall have the meaning set forth in the preamble.
"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
Company. 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 Company based on
an opinion of an independent investment banking firm acceptable to the
Majority Holders, which opinion may be based on such assumptions as such
firm shall deem to be necessary and appropriate.
"Current Warrant Price" shall mean, as at any date, the price at
which a share of Non-Voting Common Stock may be purchased pursuant to this
Warrant on such date, which price shall equal the Initial Warrant Price, as
adjusted from time to time as provided herein; provided, that for the
period following [the 30 month anniversary of the Issue Date], the Current
Warrant Price shall be readjusted taking into consideration the change in
the Initial Warrant Price in effect for such period.
"Expiration Date" shall mean the fifth anniversary of the Closing
Date.
"Fair Market Value" shall mean, as to shares of Common Stock or
any other class of capital stock or securities of the Company or any other
issuer which are publicly traded, the Current Market Price of such shares
of securities. 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 and acceptable
to the Majority Holders.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as from time to time in effect.
"Holder" shall mean, as at any date, the Person in whose name
this Warrant is registered on the books of the Company maintained for such
purpose. "Holders" shall mean, collectively, each Holder of a Warrant, in
the event of any division of this Warrant.
"Initial Warrant Price" shall mean the price at which a share of
Non-Voting Common Stock may initially be purchased pursuant to this
Warrant, which price shall equal (i) $12.50 for the period up to and
including _________ __, 2001 [30 months from Issue Date] and (ii) $15.50
thereafter.
"Issue Date" shall mean _________ __, 1999 [Date of Warrant
issuance].
"Majority Holders" shall mean the Holders of Warrants exercisable
for in excess of 50% of the aggregate number of shares of Warrant Stock
then purchasable upon exercise of all Warrants.
"Non-Voting Common Stock" shall mean the non-voting Common Stock,
$0.0001 par value, of the Company as constituted on the Closing Date, and
any capital stock into which such Non-Voting Common Stock may thereafter be
changed, and shall also include (i) capital stock of the Company of any
other class (regardless of how denominated) issued to the holders of shares
of Non-Voting Common Stock upon any reclassification thereof and (ii)
shares of common stock of any successor or acquiring corporation received
by or distributed to the holders of Non-Voting Common Stock in the
circumstances contemplated by Section 4.5.
"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 GAAP) outstanding on such date, except shares then owned or held by or
for the account of the Company or any subsidiary thereof, and shall include
all shares (i) issuable in respect of outstanding scrip or any certificates
representing fractional interests in shares of Common Stock and (ii)
issuable in respect of options or warrants to purchase, or securities
convertible into, shares of Common Stock.
"PCP" shall have the meaning set forth in the preamble.
"Permitted Issuances" shall mean the issuance or reissuance of
(a) any shares of Common Stock or rights, warrants or other securities
convertible into shares of Common Stock (whether treasury shares or newly
issued shares) (i) pursuant to a dividend or distribution on, or
subdivision, combination or reclassification of, the Outstanding shares of
Common Stock requiring an adjustment in the Current Warrant Price pursuant
to Section 4.1; (ii) pursuant to any restricted stock or stock option plan
or program of the Company involving the grant of options or rights to
acquire Common Stock to directors, officers and employees of the Company
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 directors designated by the Majority Holders constitute
a majority of the members; (iii) pursuant to any option, warrant, right, or
convertible security outstanding as of the date hereof, or (b) the
Preferred Stock, Warrants and any shares of Common Stock issuable upon
conversion or exercise thereof.
"Person" shall mean any individual, firm, corporation,
partnership or other entity, and shall include any successor (by merger or
otherwise) of such entity.
"Preferred Stock" shall mean the Company's Series B Convertible
Preferred Stock, par value $0.0001 per share.
"Registration Rights Agreement" shall mean the registration
rights agreement, dated as of the Closing Date, between the Company and
PCP.
"Securities Purchase Agreement" shall mean the securities
purchase agreement, dated as of April 12, 1999, between the Company and
PCP.
"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.
"Transaction" shall have the meaning set forth in Section 4.4.
"Voting Common Stock" shall mean the voting Common Stock, $0.0001
par value, of the Company as constituted on the Closing Date, and any
capital stock into which such Voting Common Stock may thereafter be
changed, and shall also include (i) capital stock of the Company of any
other class (regardless of how denominated) issued to the holders of shares
of Voting Common Stock upon any reclassification thereof and (ii) shares of
common stock of any successor or acquiring corporation received by or
distributed to the holders of Voting Common Stock in the circumstances
contemplated by Section 4.5.
"Warrants" shall mean this Warrant (as adjusted pursuant to
Section 4) and all warrants issuable upon transfer, division or combination
of, or in substitution for, any of the foregoing. All Warrants shall at all
times be identical as to terms and conditions and date, except as to the
number of shares of Non-Voting Common Stock for which they may be
exercised.
"Warrant Price" shall mean an amount equal to (i) the number of
shares of Non-Voting Common Stock being purchased upon exercise of this
Warrant pursuant to Section 2.1, multiplied by (ii) the Current Warrant
Price as of the date of such exercise.
"Warrant Stock" shall mean the shares of Non-Voting Common Stock
purchased by the holders of the Warrants upon the exercise thereof.
2. EXERCISE OF WARRANT
2.1. Manner of Exercise. (a) At any time or from time to time
from and after the Closing Date and until 5:00 P.M., New York time, on the
Expiration Date, Holder may exercise this Warrant, on any Business Day, for
all or any part of the number of shares of Warrant Stock.
(b) In order to exercise this Warrant, in whole or in part,
Holder shall deliver to the Company at its principal office at its address
set forth in Section 12.2 of this Agreement, as such address may be changed
pursuant to such Section: (i) a written notice of Holder's election to
exercise this Warrant, which notice shall specify the number of shares of
Non-Voting Common Stock to be purchased; (ii) payment of the Warrant Price;
and (iii) this Warrant. Such notice shall be substantially in the form
appearing at the end of this Warrant as Exhibit A, duly executed by Holder.
(c) As promptly as practicable, and in no event later than five
Business Days after the receipt of the items specified in paragraph (b) of
this Section 2.1, the Company shall execute or cause to be executed and
deliver or cause to be delivered to Holder a certificate or certificates
representing the aggregate number of full shares of Non-Voting Common Stock
issuable upon such exercise, together with cash in lieu of any fraction of
a share, as hereinafter provided. The stock certificate or certificates so
delivered shall be in such denomination or denominations as Holder shall
request in the notice and shall be registered in the name of Holder or such
other name as shall be designated in the notice. This Warrant shall be
deemed to have been exercised and such certificate or certificates shall be
deemed to have been issued, and Holder or any other Person so designated
shall be deemed to have become a holder of record of such shares for all
purposes, as of the date the notice, together with the Warrant Price and
this Warrant, are received by the Company as described above. If this
Warrant shall have been exercised in part, the Company shall, at the time
of delivery of the certificate or certificates representing Warrant Stock,
deliver to Holder a new Warrant evidencing the right of Holder to purchase
the unpurchased shares of Non-Voting Common Stock called for by this
Warrant, which new Warrant shall in all other respects be identical with
this Warrant, or, at the request of Holder, appropriate notation may be
made on this Warrant and the same returned to Holder.
(d) Payment of the Warrant Price shall be made at the option of
Holder by (i) certified or official bank check or (ii) wire transfer of
immediately available funds.
2.2. Payment of Taxes. All shares of Non-Voting Common Stock
issuable upon the exercise of this Warrant shall be validly issued, fully
paid and nonassessable. The Company shall pay all expenses of the Company
in connection with, and all taxes and other governmental charges that may
be imposed with respect to, the issue or delivery thereof to Holder;
provided, however, that the Company shall not be required to pay any tax or
taxes which may be payable with respect to any secondary transfer of the
Warrant or the Warrant Stock.
2.3. Fractional Shares. The Company shall not be required to
issue a fractional share of Non-Voting Common Stock upon exercise of this
Warrant. As to any fraction of a share which Holder would otherwise be
entitled to purchase upon such exercise, the Company shall pay a cash
adjustment in respect of such fraction in an amount equal to the same
fraction of the Current Market Price per share of Common Stock on the date
of exercise. If the Warrant shall be exercised for more than one share of
Warrant Stock, the number of full shares of Warrant Stock shall be computed
on the basis of the total number of shares to be issued in connection with
such exercise.
3. TRANSFER, DIVISION AND COMBINATION
3.1. Transfer. Transfer of this Warrant and all rights hereunder,
in whole or in part, shall be registered on the books of the Company to be
maintained for such purpose, upon surrender of this Warrant at the
principal office of the Company referred to in Section 2.1, together with a
written assignment of this Warrant substantially in the form of Exhibit B
hereto duly executed by Holder and funds sufficient to pay any transfer
taxes payable upon the making of such transfer. Upon such surrender and, if
required, such payment, the Company shall execute and deliver a new Warrant
or Warrants in the name of the assignee or assignees and in the
denomination specified in such instrument of assignment, and shall issue to
the assignor a new Warrant evidencing the portion of this Warrant not so
assigned, and this Warrant shall promptly be canceled. A Warrant may be
exercised by a new Holder for the purchase of shares of Non-Voting Common
Stock without having a new Warrant issued.
3.2. Division and Combination. This Warrant may be divided into
multiple Warrants or combined with other Warrants upon presentation hereof
at the aforesaid office or agency of the Company, together with a written
notice specifying the names and denominations in which new Warrants are to
be issued, signed by Holder. Subject to compliance with Section 3.1, as to
any transfer which may be involved in such division or combination, the
Company shall execute and deliver a new Warrant or Warrants in exchange for
the Warrant or Warrants to be divided or combined in accordance with such
notice.
3.3. Expenses. The Company shall prepare, issue and deliver at
its own expense the new Warrant or Warrants under this Section 3.
3.4. Maintenance of Books. The Company agrees to maintain, at its
aforesaid office, books for the registration and the registration of
transfer of the Warrants.
4. ADJUSTMENTS
The number of shares of Non-Voting Common Stock for which this
Warrant is exercisable and/or the Current Warrant Price shall be subject to
adjustment from time to time as set forth in this Section 4. The Company
shall give each Holder notice, in accordance with Section 5, of any event
described below which requires an adjustment pursuant to this Section 4 at
the time of such event.
4.1. Stock Dividends, Subdivisions and Combinations. In case the
Company shall at any time or from time to time:
(a) pay a dividend or make a distribution on the Outstanding
shares of Common Stock in shares of Common Stock, or
(b) subdivide the Outstanding shares of Common Stock, or
(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 Company,
then, and in each such case, (i) the number of shares of Non-Voting Common
Stock for which this Warrant is exercisable immediately prior to such event
or the record date therefor, whichever is earlier, shall be adjusted to
equal the number of shares of Non-Voting Common Stock or other securities
of the Company which a record holder of the same number of shares of
Non-Voting Common Stock for which this Warrant is exercisable immediately
prior to the occurrence of such event would have owned or have been
entitled to receive after the happening of any of the events described
above, and (ii) the Current Warrant Price shall be adjusted to equal (A)
the Current Warrant Price multiplied by the number of shares of Non-Voting
Common Stock for which this Warrant is exercisable immediately prior to the
adjustment divided by (B) the number of shares of Non-Voting Common Stock
or other securities for which this Warrant is exercisable immediately after
such adjustment. Any adjustments made pursuant to this Section 4.1 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
Section 4.1 in connection with any transaction to which Section 4.4
applies.
4.2. Issuance of Additional Shares of Common Stock. In case
(except for Permitted Issuances) the Company 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 Current Warrant Price as of the
date of issuance of such shares (or, in the case of convertible or
exchangeable securities, less than the Current Warrant 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, (i) the
Current Warrant Price shall be reduced to an amount determined by
multiplying (X) the Current Warrant Price in effect on the day immediately
prior to such date by (Y) 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 Current
Warrant Price (the "Adjustment Price") and (2) the aggregate consideration
receivable by the Company 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; and (ii) the number of shares of Non-Voting Common Stock
for which this Warrant is exercisable shall be adjusted to equal (A) the
product obtained by (1) multiplying the Current Warrant Price in effect
immediately prior to such issue or sale by the number of shares of
Non-Voting Common Stock for which this Warrant is exercisable immediately
prior to such issue or sale, divided by (2) the Current Warrant Price
resulting from the adjustment made pursuant to clause (i) above. An
adjustment made pursuant to this Section 4.2 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 Section 4.2, the aggregate
consideration receivable by the Company 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 Current Warrant Price and the number of
shares of Non-Voting Common Stock for which this Warrant is exercisable
shall be adjusted retroactively to give effect to such reduction. On the
expiration of any such option or the termination of any such right to
convert or exchange any securities, the Current Warrant Price and the
number of shares of Non-Voting Common Stock for which this Warrant is
exercisable shall be adjusted to such amounts 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 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. No adjustment
shall be made pursuant to this Section 4.2 in connection with any
transaction to which Section 4.4 applies.
4.3. Other Provisions Applicable to Adjustments under Sections
4.1 and 4.2. The following provisions shall be applicable to the making of
adjustments of the number of shares of Non-Voting Common Stock for which
this Warrant is exercisable and the Current Warrant Price provided for in
Sections 4.1 and 4.2.
(a) The term "dividend" shall mean a dividend or other
distribution upon the capital stock of the Company.
(b) The certificate of any firm of independent public accountants
of recognized national standing selected by the Board of Directors of the
Company (which may be the firm of independent public accountants regularly
employed by the Company) shall be presumptively correct for any computation
made under Sections 4.1 or 4.2.
(c) If the Company 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 Common Stock issuable upon exercise of the Warrant or in the
Current Warrant Price then in effect shall be required by reason of the
taking of such record.
4.4. Adjustment for Reclassification and Reorganization. In the
case of any consolidation or merger of the Company with or into another
corporation (a "Transaction") occurring at any time, this Warrant shall
thereafter be exercisable for, in lieu of the Non-Voting Common Stock
issuable upon such exercise 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 Non-Voting Common Stock for which the
Warrant was exercisable immediately prior to such Transaction. In case
securities or property other than Non-Voting Common Stock shall be issuable
or deliverable upon conversion as aforesaid, then all references in this
Section 4 shall be deemed to apply, so far as appropriate and nearly as may
be, to such other securities or property.
4.5. Notice of Record Date. In case at any time or from time to
time (i) the Company 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
Company or consolidation or merger of the Company with or into another
corporation, or any sale or conveyance to another corporation of the
property of the Company as an entirety or substantially as an entirety, or
(iii) there shall be a voluntary or involuntary dissolution, liquidation or
winding up of the Company, then, in any one or more of said cases the
Company 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
Holder at the addresses shown on the books of the Company 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 Section
4.4 applies the Company 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.
5. REPORTS AS TO ADJUSTMENTS
Upon any adjustment of the number of shares of Non-Voting Common
Stock for which this Warrant is exercisable or the Current Warrant Price
then in effect, then, and in each such case, the Company shall promptly
deliver to Holder 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 Company, setting forth in reasonable detail the
event requiring the adjustment and the method by which such adjustment was
calculated and specifying the number of shares of Non-Voting Common Stock
for which this Warrant is exercisable and the Current Warrant Price then in
effect 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 Holder may be
given in advance and included as part of the notice required under the
provisions of Section 4.5.
6. RIGHTS OF HOLDERS
6.1. No Impairment. The Company shall not by any action,
including, without limitation, amending its Certificate of Incorporation or
comparable governing instruments or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking
of all such actions as may be necessary or appropriate to protect the
rights of Holder against impairment. Without limiting the generality of the
foregoing, the Company will (a) not increase the par value of any shares of
Common Stock receivable upon the exercise of this Warrant above the amount
payable therefor upon such exercise immediately prior to such increase in
par value, (b) enter into any transaction which, by reason of any
adjustment hereunder, would cause the Current Warrant Price to be less than
the par value of the per share of Common Stock, (c) take all such action as
may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of Non-Voting Common
Stock upon the exercise of this Warrant, and (d) use its reasonable best
efforts to obtain all such authorizations, exemptions or consents from any
public regulatory body having jurisdiction thereof as may be necessary to
enable the Company to perform its obligations under this Warrant.
Upon the request of Holder, the Company will at any time during
the period this Warrant is outstanding acknowledge in writing, in form
reasonably satisfactory to Holder, the continuing validity of this Warrant
and the obligations of the Company hereunder.
6.2. Registration Rights. The holders of Warrants and Warrant
Stock shall have the registration rights set forth in the Registration
Rights Agreement.
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH OR
APPROVAL OF ANY GOVERNMENTAL AUTHORITY
From and after the Closing Date, the Company shall at all times
reserve and keep available for issue upon the exercise of Warrants such
number of its authorized but unissued shares of Non-Voting Common Stock as
will be sufficient to permit the exercise in full of all outstanding
Warrants. All shares of Non-Voting Common Stock which shall be so issuable,
when issued upon exercise of any Warrant and payment therefor in accordance
with the terms of such Warrant, shall be duly and validly issued and fully
paid and nonassessable.
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS
In the case of all dividends or other distributions by the
Company to the holders of its Common Stock with respect to which any
provision of Section 4 refers to the taking of a record of such holders,
the Company will in each such case take such a record and will take such
record as of the close of business on a Business Day. The Company will not
at any time, except upon dissolution, liquidation or winding up of the
Company, close its stock transfer books or Warrant transfer books so as to
result in preventing or delaying the exercise or transfer of any Warrant.
9. RESTRICTIONS ON TRANSFERABILITY
Subject to the terms of the Stockholders Agreement and applicable
securities laws, the Warrants and the Warrant Stock are fully transferable;
provided, however, that each Warrant and each certificate for Warrant Stock
initially issued upon the exercise of a Warrant, and each certificate for
Warrant Stock issued to any subsequent transferee of any such certificate,
shall be stamped or otherwise imprinted with the legend required by Section
8.4 of the Securities Purchase Agreement.
10. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of this Warrant and indemnity reasonably
satisfactory to it, and in case of mutilation upon surrender and
cancellation hereof, the Company will execute and deliver in lieu hereof a
new Warrant of like tenor to such Holder; provided, that in the case of
mutilation, no indemnity shall be required if this Warrant in identifiable
form is surrendered to the Company for cancellation.
11. LIMITATION OF LIABILITY; NO RIGHTS AS STOCKHOLDER
No provision hereof, in the absence of affirmative action by
Holder to purchase shares of Non-Voting Common Stock, and no enumeration
herein of the rights or privileges of Holder hereof, shall give rise to any
liability of such Holder for the purchase price of any Non-Voting Common
Stock or as a stockholder of the Company, whether such liability is
asserted by the Company or by creditors of the Company. Nothing contained
in this Warrant shall be construed as conferring upon Holder any rights as
a stockholder of the Company prior to the issuance of the Warrant Stock.
12. MISCELLANEOUS
12.1. Nonwaiver and Expenses. No course of dealing or any delay
or failure to exercise any right hereunder on the part of Holder shall
operate as a waiver of such right or otherwise prejudice Holder's rights,
powers or remedies. If the Company fails to make, when due, any payments
provided for hereunder, or fails to comply with any other provision of this
Warrant, the Company shall pay to Holder such amounts as shall be
sufficient to cover any costs and expenses including, but not limited to,
reasonable attorneys' fees, including those of appellate proceedings,
incurred by Holder in collecting any amounts due pursuant hereto or in
otherwise enforcing any of its rights, powers or remedies hereunder.
12.2. Notice Generally. Any notice, demand, request, consent,
approval, declaration, delivery or other communication hereunder to be made
pursuant to the provisions of this Warrant shall be sufficiently given or
made if in writing and either delivered in person with receipt acknowledged
or sent by registered or certified mail, return receipt requested, postage
prepaid, or by telecopy and confirmed by telecopy answerback, addressed as
follows:
(a) If to any Holder or holder of Warrant Stock, at its last
known address appearing on the books of the Company maintained for
such purpose.
(b) If to the Company at
375 Park Avenue
New York, New York 10152
Attention: General Counsel
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in
writing by the party entitled to receive such notice. Every notice, demand,
request, consent, approval, declaration, delivery or other communication
hereunder shall be deemed to have been duly given or served on the date on
which personally delivered, with receipt acknowledged, telecopied and
confirmed by telecopy answerback, or three Business Days after the same
shall have been deposited in the United States mail.
12.3. Remedies. Each holder of Warrant and Warrant Stock, in
addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under of this Warrant. The Company agrees that monetary damages would not
be adequate compensation for any loss incurred by reason of a breach by it
of the provisions of this Warrant and hereby agrees to waive the defense in
any action for specific performance that a remedy at law would be adequate.
12.4. Successors and Assigns. Subject to the provisions of
Section 3.1, this Warrant and the rights evidenced hereby shall inure to
the benefit of and be binding upon the successors of the Company and the
successors and assigns (including any transferee of any Holder) of Holder.
The provisions of this Warrant are intended to be for the benefit of all
Holders from time to time of this Warrant and holders of Warrant Stock, and
shall be enforceable by any such Holder or holder of Warrant Stock.
12.5. Amendment. This Warrant and all other Warrants may be
modified or amended or the provisions hereof waived with the written
consent of the Company and the Majority Holders; provided, that no such
Warrant may be modified or amended to reduce the number of shares of
Non-Voting Common Stock for which such Warrant is exercisable or to
increase the price at which such shares may be purchased upon exercise of
such Warrant (before giving effect to any adjustment as provided therein)
without the prior written consent of the Holder thereof.
12.6. Severability. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Warrant shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Warrant.
12.7. Headings. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a
part of this Warrant.
12.8. Securities Purchase Agreement. Any purchase effected
pursuant to Section 7.2 of the Securities Purchase Agreement by the
Purchaser (as defined in the Securities Purchase Agreement) or the Company
shall apply to all Warrants and Warrant Stock whether or not the holder
thereof is the Purchaser.
12.9. Governing Law. This Warrant 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 12.2 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.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed and its corporate seal to be impressed hereon and attested by
its Secretary or an Assistant Secretary.
Dated: , 1999
----------- --
UNITED AUTO GROUP, INC.
By:
---------------------------
Name:
Title:
Agreed to and accepted:
INTERNATIONAL MOTOR CARS
GROUP II, L.L.C.
By:
-------------------------
Name:
Title:
<PAGE>
EXHIBIT A
EXERCISE FORM
[To be executed only upon exercise of Warrant]
Net Issue Exercise No Yes
----- ------
The undersigned registered owner of this Warrant irrevocably
exercises this Warrant for the purchase of _____ shares of Non-Voting
Common Stock of United Auto Group, Inc. and herewith makes payment
therefor, all at the price and on the terms and conditions specified in
this Warrant and requests that certificates for the shares of Non-Voting
Common Stock hereby purchased (and any securities or other property
issuable upon such exercise) be issued in the name of and delivered to
________________________ whose address is ________________________________
and, if such shares of Non-Voting Common Stock shall not include all of the
shares of Non-Voting Common Stock issuable as provided in this Warrant,
that a new Warrant of like tenor and date for the balance of the shares of
Non-Voting Common Stock issuable hereunder be delivered to the undersigned.
--------------------------------------
(Name of Registered Owner)
--------------------------------------
(Signature of Registered Owner)
--------------------------------------
(Street Address)
--------------------------------------
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the
name as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatsoever.
<PAGE>
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this
Warrant hereby sells, assigns and transfers unto the Assignee named below
all of the rights of the undersigned under this Warrant, with respect to
the number of shares of Non-Voting Common Stock set forth below:
Name and Address of Assignee No. of Shares of Non-Voting Common
Stock -----------------------------------
- ----------------------------
and does hereby irrevocably constitute and appoint __________________
attorney-in-fact to register such transfer on the books of United Auto
Group, Inc. maintained for the purpose, with full power of substitution in
the premises.
Dated: Print Name:
---------------- -------------------------------
Signature:
-------------------------------
Witness:
----------------------------------
NOTICE: The signature on this assignment must correspond with the name
as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatsoever.
EXHIBIT 4
Joint Filing Agreement
The undersigned hereby agree that the Statement on Schedule 13D filed
herewith (and any amendments thereto), relating to the common stock, par
value $0.0001 per share, of United Auto Group, Inc., is being filed jointly
with the Securities and Exchange Commission pursuant to Rule 13d-1(k)(1)
under the Securities Exchange Act of 1934, as amended, on behalf of each
such person.
Dated: April 22, 1999
INTERNATIONAL MOTOR CARS GROUP I, L.L.C.
By: PENSKE CAPITAL PARTNERS, L.L.C.
Its Managing Member
By: /s/ James A. Hislop
------------------------------
James A. Hislop
Managing Member
INTERNATIONAL MOTOR CARS GROUP II, L.L.C.
By: PENSKE CAPITAL PARTNERS, L.L.C.
Its Managing Member
By: /s/ James A. Hislop
------------------------------
James A. Hislop
Managing Member
PENSKE CAPITAL PARTNERS, L.L.C.
By: /s/ James A. Hislop
------------------------------
James A. Hislop
Managing Member
/s/ James A. Hislop
------------------------------
James A. Hislop
/s/ Roger S. Penske
------------------------------
Roger S. Penske
EXHIBIT 5
STOCKHOLDER VOTING AGREEMENT
STOCKHOLDER VOTING AGREEMENT, dated April 12, 1999 (this
"Agreement"), among AIF II, L.P. ("Stockholder"), International Motor Cars
Group I, L.L.C. and International Motor Cars Group II, L.L.C.
(collectively, the "Purchaser").
WHEREAS, United Auto Group, Inc., a Delaware corporation (the
"Company"), and Purchaser, are contemporaneously herewith entering into a
Securities Purchase Agreement, dated as of the date hereof (the "Purchase
Agreement"), which provides, among other things, for the acquisition by
Purchaser of shares of Preferred Stock and Warrants to purchase shares of
Common Stock upon the terms and subject to the conditions set forth
therein;
WHEREAS, as a condition to its willingness to enter into the
Purchase Agreement, Purchaser has requested that Stockholder make certain
agreements with respect to the shares of Common Stock beneficially owned by
Stockholder and listed under Stockholder's name on the signature page
hereto (the "Stockholder Shares"), upon the terms and subject to the
conditions hereof; and
WHEREAS, in order to induce Purchaser to enter into the Purchase
Agreement, Stockholder is willing to make certain agreements with respect
to the Stockholder Shares;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, the parties hereto agree as
follows:
1. Voting Agreements; Proxy.
------------------------
(a) For so long as this Agreement is in effect, in any meeting of
stockholders of the Company, however called, and in any action by consent
of the stockholders of the Company, Stockholder shall vote, or, if
applicable, give consents with respect to, all of the Stockholder Shares
(and any other shares of Common Stock over which Stockholder has voting
power) (collectively, "Shares") that are held on the record date applicable
thereto in favor of (i) the Purchase Agreement, (ii) the transactions
contemplated by the Purchase Agreement and (iii) any actions required in
furtherance thereof. Any such vote shall be cast or consent shall be given
in accordance with such procedures relating thereto as shall ensure that it
is duly counted for purposes of determining that a quorum is present and
for purposes of recording the results of such vote or consent.
(b) Upon the written request of Purchaser, Stockholder, in
furtherance of the transactions contemplated hereby and by the Purchase
Agreement, and in order to secure the performance by Stockholder of its
duties under this Agreement, shall promptly execute, in accordance with the
provisions of Section 212 of the Delaware General Corporation Law, and
deliver to Purchaser an irrevocable proxy, substantially in the form
attached as Exhibit A hereto, and irrevocably appoint Purchaser or its
designees, with full power of substitution, its attorney and proxy to vote
or, if applicable, to give consent with respect to, all Shares with regard
to any of the matters referred to in Section 1(a) at any meeting of the
stockholders of the Company, however called, or in connection with any
action by written consent by the stockholders of the Company. Stockholder
acknowledges and agrees that (i) such proxy, if and when given, shall be
coupled with an interest, shall constitute, among other things, an
inducement for Purchaser to enter into the Purchase Agreement, shall be
irrevocable and shall not be terminated by operation of law or otherwise
upon the occurrence of any event, except as provided in Section 14 hereof,
and (ii) that no subsequent proxies with respect to the Shares shall be
given (and if given shall not be effective), with respect to any of the
matters referred to in Section 1(a).
2. Covenants. (a) From and after the date of this Agreement,
Stockholder agrees not to: (i) sell, transfer, pledge, assign, hypothecate,
encumber, tender or otherwise dispose of, or enter into any contract with
respect to the sale, transfer, pledge, assignment, hypothecation,
encumbrance, tender or other disposition of, any Stockholder Shares; (ii)
grant any proxies with respect to any Shares, deposit any Shares into a
voting trust or enter into a voting or option agreement with respect to any
Shares; (iii) take any action, directly or indirectly through any of its
affiliates (other than the Company or any of its subsidiaries), which the
Company is prohibited from taking under Section 4.2 of the Purchase
Agreement; (iv) vote in any manner (i.e. by ballot, proxy, written consent
or otherwise) any Shares in favor of any other transaction that is proposed
by any Person (including the Company) as an alternative to the transactions
contemplated by the Purchase Agreement; or (v) take any action which would
make any representation or warranty of Stockholder herein untrue or
incorrect or prevent, burden or materially delay the consummation of the
transactions contemplated by this Agreement; provided, however, that
Stockholder may take any action described in clause (i) or (ii) above if
any third party which obtains the right to vote any Shares as a result of
such action assumes (in a writing executed by any such third party and
delivered to Purchaser) Stockholder's obligations under this Agreement with
respect to such Shares.
(b) Stockholder agrees that from and after the date of this
Agreement through and including the date this Agreement is terminated,
without the prior written consent of Purchaser, which may be withheld in
Purchaser's sole discretion, Stockholder shall not vote or give any consent
with respect to any Shares in favor of an Alternative Transaction (as
defined in the Purchase Agreement) other than an Alternative Transaction
involving the sale of all or substantially all of the capital stock or
assets of the Company.
3. Representations and Warranties of Stockholder. Stockholder
represents and warrants to Purchaser that:
(a) Capacity; No Violations. Stockholder has the legal capacity
to enter into this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Stockholder, and constitutes a valid and binding agreement of Stockholder
enforceable against Stockholder in accordance with its terms, except as
enforceability against Stockholder may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws now or hereafter in
effect relating to the rights of creditors generally and other general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law) and such execution and delivery and
performance by Stockholder of this Agreement will not (i) conflict with,
require a consent, waiver or approval under, or result in a breach or
default under, any of the terms of any contract, commitment or other
obligation to which Stockholder is a party or by which Stockholder is
bound; (ii) violate any order, writ, injunction, decree or statute, or any
law, rule or regulation applicable to Stockholder or the Shares; or (iii)
result in the creation of, or impose any obligation on Stockholder to
create, any Encumbrance other than transfer restrictions imposed by
applicable Federal and state securities laws upon the Shares.
(b) Shares. As of the date of this Agreement, Stockholder is the
record holder of, and has good and valid title to, the Shares free and
clear of all Encumbrances other than transfer restrictions imposed by
applicable Federal and state securities laws. The Shares are the only
shares of any class of capital stock of the Company which Stockholder has
the right, power or authority (sole or shared) to sell or vote, and
Stockholder does not have any right to acquire, nor is it the beneficial
owner of, any other shares of any class of capital stock of the Company or
any securities convertible into or exchangeable or exercisable for any
shares of any class of capital stock of the Company. There are no options
or rights to acquire, or other contracts (including proxies, voting trusts
or voting agreements) relating to, the Shares to which Stockholder is a
party.
4. Adjustments; Additional Shares. In the event (i) of any stock
dividend, stock split, recapitalization, reclassification, combination or
exchange of Shares on, of or affecting the Shares, or (ii) Stockholder
shall become the beneficial owner of any additional Shares or other
securities entitling the holder thereof to vote or give consent with
respect to the matters set forth in Section 1(a) hereof, then the terms of
this Agreement shall apply to the Shares held by Stockholder immediately
following the effectiveness of the events described in clause (i) above or
Stockholder becoming the beneficial owner of the Shares or other
securities, as described in clause (ii) above, in each case as though they
were Shares hereunder.
5. Expenses. Each party hereto shall pay its own expenses
incurred in connection with this Agreement.
6. Specific Performance. Stockholder acknowledges and agrees that
if it fails to perform any of its obligations under this Agreement,
immediate and irreparable harm or injury would be caused to Purchaser for
which money damages would not be an adequate remedy. In such event,
Stockholder agrees that Purchaser shall have the right, in addition to any
other rights it may have, to specific performance of this Agreement.
Accordingly, if Purchaser should institute an action or proceeding seeking
specific enforcement of the provisions hereof, Stockholder hereby waives
the claim or defense that Purchaser has an adequate remedy at law and
hereby agrees not to assert in any such action or proceeding the claim or
defense that such a remedy at law exists. Stockholder further agrees to
waive any requirements for the securing or posting of any bond in
connection with obtaining any such equitable relief.
7. Notices. All notices or other communications under this
Agreement shall be in writing and shall be deemed duly given, effective (i)
three business days later, if sent by registered or certified mail, return
receipt requested, postage prepaid, (ii) when sent, if sent by telecopier
or fax, provided that the telecopy or fax is promptly confirmed by
telephone confirmation thereof, (iii) when served, if delivered personally
to the intended recipient, and (iv) one business day later, if sent by
overnight delivery via a national courier service, and in each case,
addressed to the intended recipient at the address set forth as follows:
If to the Purchaser:
-------------------------
c/o Penske Capital Partners, L.L.C.
399 Park Avenue
New York, New York 10022
Telecopy: (212) 207-9653
Attention: Mr. James A. Hislop
with a copy to:
-------------------------
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, NY 10004
Telecopy: (212) 859-8587
Attention: Robert C. Schwenkel, Esq.
if to Stockholder:
-------------------------
c/o Apollo Advisors, L.P.
1999 Avenue of the Stars
Los Angeles, CA 90067
Telecopy: (310) 201-4166
Attention: Michael Weiner
8. Parties in Interest. This Agreement shall inure to the benefit
of and be binding upon the parties named herein and their respective
successors and assigns; provided, however, that each such successor in
interest or assign shall agree to be bound by the provisions of this
Agreement. Nothing in this Agreement, express or implied, is intended to
confer upon any person or entity other than Purchaser, Stockholder and
their respective successors and assigns, any rights or remedies under or by
reason of this Agreement.
9. Entire Agreement; Amendments. This Agreement contains the
entire agreement between Stockholder and Purchaser with respect to the
subject matter hereof and supersedes all prior and contemporaneous
agreements and understandings, oral or written, with respect to such
subject matter. This Agreement may not be changed, amended or modified
orally, but may be changed only by an agreement in writing signed by the
party against whom any waiver, change, amendment, modification or discharge
may be sought.
10. Assignment. No party to this Agreement may assign any of its
rights or obligations under this Agreement without the prior written
consent of the other party hereto, except that: (i) Purchaser may assign
its rights and obligations hereunder to any of its affiliates or direct or
indirect wholly owned subsidiaries, but no such transfer shall relieve
Purchaser of its obligations hereunder if such transferee does not perform
such obligations; and (ii) Stockholder may assign its rights and
obligations hereunder without the consent of Purchaser in accordance with
Section 2.
11. Defined Terms; Headings. Capitalized terms not otherwise
defined herein shall have the meaning ascribed to such terms in the
Purchase Agreement. The section headings herein are for convenience only
and shall not affect the construction of this Agreement.
12. Counterparts. This Agreement may be executed in any number of
counterparts, each of which, when executed, shall be deemed to be an
original and all of which together shall constitute one and the same
document.
13. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware (regardless
of the laws that might otherwise govern under applicable Delaware
principles of conflicts of law).
14. Termination. This Agreement shall terminate at the earlier of
(i) the date the Second Closing occurs under the Purchase Agreement, (ii)
December 31, 1999, and (iii) on the date the Purchase Agreement is
terminated pursuant to the terms thereof; provided, that the parties shall
continue to be liable for any breach of this Agreement following any such
termination. In addition, Stockholder may terminate this Agreement on or
after the 2-month anniversary of the date of the Initial Closing (as
defined in the Securities Purchase Agreement) by written notice to
Purchaser if the Proxy Statement (as defined in the Purchase Agreement) has
not been filed with the Securities and Exchange Commission prior to such
date, and the parties are not working reasonably diligently to file the
Proxy Statement with the Securities and Exchange Commission.
<PAGE>
IN WITNESS WHEREOF, Purchaser and Stockholder have caused this
Agreement to be duly executed and delivered on the day and year first above
written.
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
AIF II, L.P.
By:/s/ John J. Hannan
-------------------------------------
Name: John J. Hannan
Title:
Number of Shares Subject to this Agreement:
1,843,656
<PAGE>
EXHIBIT A
IRREVOCABLE PROXY
In order to secure the performance of the duties of the
undersigned pursuant to the Stockholder Voting Agreement, dated as of April
12, 1999 (the "Voting Agreement"), among the undersigned, International
Motor Cars Group I, L.L.C. and International Motor Cars Group II, L.L.C.,
each a Delaware limited liability company ("Purchaser"), a copy of such
agreement being attached hereto and incorporated by reference herein, the
undersigned hereby irrevocably appoints ______________________ and
___________________ and _____________________, and each of them, attorneys,
agents and proxies, with full power of substitution, for the undersigned
and in the name, place and stead of the undersigned, to vote or, if
applicable, to give written consent, in such manner as each such attorney,
agent and proxy or his substitute shall in his sole discretion deem proper
to record such vote or consent in the manner set forth in Section 1(a) of
the Voting Agreement with respect to all shares of Common Stock, par value
$.0001 per share (the "Shares"), of United Auto Group, Inc., a Delaware
corporation (the "Company"), (i) which the undersigned is or may be
entitled to vote at any meeting of the Company held after the date hereof,
whether annual or special and whether or not an adjourned meeting, or, if
applicable, with respect to which the undersigned is or may be entitled to
give written consent in connection with any action by written consent by
the stockholders of the Company to give written consent with respect
thereto. This Proxy is coupled with an interest, shall be irrevocable and
binding on any successor in interest of the undersigned and shall not be
terminated by operation of law or otherwise upon the occurrence of any
event (except as provided in Section 14 of the Voting Agreement),
including, without limitation, the death or incapacity of the undersigned.
This Proxy shall operate to revoke any prior proxy as to the Shares
heretofore granted by the undersigned. This Proxy shall terminate upon the
date on which the Voting Agreement shall terminate in accordance with
Section 14 of the Voting Agreement. This Proxy has been executed in
accordance with Section 212 of the Delaware General Corporation Law.
Dated:
-----------------------
AIF II, L.P.
By:
-----------------------------------
Name:
Title:
EXHIBIT 6
STOCKHOLDER VOTING AGREEMENT
STOCKHOLDER VOTING AGREEMENT, dated April 12, 1999 (this
"Agreement"), among Aeneas Venture Corporation ("Stockholder"),
International Motor Cars Group I, L.L.C. and International Motor Cars Group
II, L.L.C. (collectively, the "Purchaser").
WHEREAS, United Auto Group, Inc., a Delaware corporation (the
"Company"), and Purchaser, are contemporaneously herewith entering into a
Securities Purchase Agreement, dated as of the date hereof (the "Purchase
Agreement"), which provides, among other things, for the acquisition by
Purchaser of shares of Preferred Stock and Warrants to purchase shares of
Common Stock upon the terms and subject to the conditions set forth
therein;
WHEREAS, as a condition to its willingness to enter into the
Purchase Agreement, Purchaser has requested that Stockholder make certain
agreements with respect to the shares of Common Stock beneficially owned by
Stockholder and listed under Stockholder's name on the signature page
hereto (the "Stockholder Shares"), upon the terms and subject to the
conditions hereof; and
WHEREAS, in order to induce Purchaser to enter into the Purchase
Agreement, Stockholder is willing to make certain agreements with respect
to the Stockholder Shares;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, the parties hereto agree as
follows:
1. Voting Agreements; Proxy.
------------------------
(a) For so long as this Agreement is in effect, in any meeting of
stockholders of the Company, however called, and in any action by consent
of the stockholders of the Company, Stockholder shall vote, or, if
applicable, give consents with respect to, all of the Stockholder Shares
(and any other shares of Common Stock over which Stockholder has voting
power) (collectively, "Shares") that are held on the record date applicable
thereto in favor of (i) the Purchase Agreement, (ii) the transactions
contemplated by the Purchase Agreement and (iii) any actions required in
furtherance thereof. Any such vote shall be cast or consent shall be given
in accordance with such procedures relating thereto as shall ensure that it
is duly counted for purposes of determining that a quorum is present and
for purposes of recording the results of such vote or consent.
(b) Upon the written request of Purchaser, Stockholder, in
furtherance of the transactions contemplated hereby and by the Purchase
Agreement, and in order to secure the performance by Stockholder of its
duties under this Agreement, shall promptly execute, in accordance with the
provisions of Section 212 of the Delaware General Corporation Law, and
deliver to Purchaser an irrevocable proxy, substantially in the form
attached as Exhibit A hereto, and irrevocably appoint Purchaser or its
designees, with full power of substitution, its attorney and proxy to vote
or, if applicable, to give consent with respect to, all Shares with regard
to any of the matters referred to in Section 1(a) at any meeting of the
stockholders of the Company, however called, or in connection with any
action by written consent by the stockholders of the Company. Stockholder
acknowledges and agrees that (i) such proxy, if and when given, shall be
coupled with an interest, shall constitute, among other things, an
inducement for Purchaser to enter into the Purchase Agreement, shall be
irrevocable and shall not be terminated by operation of law or otherwise
upon the occurrence of any event, except as provided in Section 14 hereof,
and (ii) that no subsequent proxies with respect to the Shares shall be
given (and if given shall not be effective), with respect to any of the
matters referred to in Section 1(a).
2. Covenants. (a) From and after the date of this Agreement,
Stockholder agrees not to: (i) sell, transfer, pledge, assign, hypothecate,
encumber, tender or otherwise dispose of, or enter into any contract with
respect to the sale, transfer, pledge, assignment, hypothecation,
encumbrance, tender or other disposition of, any Stockholder Shares; (ii)
grant any proxies with respect to any Shares, deposit any Shares into a
voting trust or enter into a voting or option agreement with respect to any
Shares; (iii) take any action, directly or indirectly through any of its
affiliates (other than the Company or any of its subsidiaries), which the
Company is prohibited from taking under Section 4.2 of the Purchase
Agreement; (iv) vote in any manner (i.e. by ballot, proxy, written consent
or otherwise) any Shares in favor of any other transaction that is proposed
by any Person (including the Company) as an alternative to the transactions
contemplated by the Purchase Agreement; or (v) take any action which would
make any representation or warranty of Stockholder herein untrue or
incorrect or prevent, burden or materially delay the consummation of the
transactions contemplated by this Agreement; provided, however, that
Stockholder may take any action described in clause (i) or (ii) above if
any third party which obtains the right to vote any Shares as a result of
such action assumes (in a writing executed by any such third party and
delivered to Purchaser) Stockholder's obligations under this Agreement with
respect to such Shares.
(b) Stockholder agrees that from and after the date of this
Agreement through and including the date this Agreement is terminated,
without the prior written consent of Purchaser, which may be withheld in
Purchaser's sole discretion, Stockholder shall not vote or give any consent
with respect to any Shares in favor of an Alternative Transaction (as
defined in the Purchase Agreement) other than an Alternative Transaction
involving the sale of all or substantially all of the capital stock or
assets of the Company.
3. Representations and Warranties of Stockholder. Stockholder
represents and warrants to Purchaser that:
(a) Capacity; No Violations. Stockholder has the legal capacity
to enter into this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Stockholder, and constitutes a valid and binding agreement of Stockholder
enforceable against Stockholder in accordance with its terms, except as
enforceability against Stockholder may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws now or hereafter in
effect relating to the rights of creditors generally and other general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law) and such execution and delivery and
performance by Stockholder of this Agreement will not (i) conflict with,
require a consent, waiver or approval under, or result in a breach or
default under, any of the terms of any contract, commitment or other
obligation to which Stockholder is a party or by which Stockholder is
bound; (ii) violate any order, writ, injunction, decree or statute, or any
law, rule or regulation applicable to Stockholder or the Shares; or (iii)
result in the creation of, or impose any obligation on Stockholder to
create, any Encumbrance other than transfer restrictions imposed by
applicable Federal and state securities laws upon the Shares.
(b) Shares. As of the date of this Agreement, Stockholder is the
record holder of, and has good and valid title to, the Shares free and
clear of all Encumbrances other than transfer restrictions imposed by
applicable Federal and state securities laws. The Shares are the only
shares of any class of capital stock of the Company which Stockholder has
the right, power or authority (sole or shared) to sell or vote, and
Stockholder does not have any right to acquire, nor is it the beneficial
owner of, any other shares of any class of capital stock of the Company or
any securities convertible into or exchangeable or exercisable for any
shares of any class of capital stock of the Company. There are no options
or rights to acquire, or other contracts (including proxies, voting trusts
or voting agreements) relating to, the Shares to which Stockholder is a
party.
4. Adjustments; Additional Shares. In the event (i) of any stock
dividend, stock split, recapitalization, reclassification, combination or
exchange of Shares on, of or affecting the Shares, or (ii) Stockholder
shall become the beneficial owner of any additional Shares or other
securities entitling the holder thereof to vote or give consent with
respect to the matters set forth in Section 1(a) hereof, then the terms of
this Agreement shall apply to the Shares held by Stockholder immediately
following the effectiveness of the events described in clause (i) above or
Stockholder becoming the beneficial owner of the Shares or other
securities, as described in clause (ii) above, in each case as though they
were Shares hereunder.
5. Expenses. Each party hereto shall pay its own expenses
incurred in connection with this Agreement.
6. Specific Performance. Stockholder acknowledges and agrees that
if it fails to perform any of its obligations under this Agreement,
immediate and irreparable harm or injury would be caused to Purchaser for
which money damages would not be an adequate remedy. In such event,
Stockholder agrees that Purchaser shall have the right, in addition to any
other rights it may have, to specific performance of this Agreement.
Accordingly, if Purchaser should institute an action or proceeding seeking
specific enforcement of the provisions hereof, Stockholder hereby waives
the claim or defense that Purchaser has an adequate remedy at law and
hereby agrees not to assert in any such action or proceeding the claim or
defense that such a remedy at law exists. Stockholder further agrees to
waive any requirements for the securing or posting of any bond in
connection with obtaining any such equitable relief.
7. Notices. All notices or other communications under this
Agreement shall be in writing and shall be deemed duly given, effective (i)
three business days later, if sent by registered or certified mail, return
receipt requested, postage prepaid, (ii) when sent, if sent by telecopier
or fax, provided that the telecopy or fax is promptly confirmed by
telephone confirmation thereof, (iii) when served, if delivered personally
to the intended recipient, and (iv) one business day later, if sent by
overnight delivery via a national courier service, and in each case,
addressed to the intended recipient at the address set forth as follows:
If to the Purchaser:
-------------------------
c/o Penske Capital Partners, L.L.C.
399 Park Avenue
New York, New York 10022
Telecopy: (212) 207-9653
Attention: Mr. James A. Hislop
with a copy to:
-------------------------
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, NY 10004
Telecopy: (212) 859-8587
Attention: Robert C. Schwenkel, Esq.
if to Stockholder:
-------------------------
Aeneas Venture Corporation
c/o Charlesbank Capital Partners, L.L.C.
600 Atlantic Avenue, 26th Floor
Boston, MA 02210
Telecopy: (617) 619-5402
Attention: Mark A. Rosen
with a copy to:
-------------------------
Ropes & Gray
One International Place
Boston, MA 02110
Telecopy: (617) 951-7050
Attention: Larry Jordan Rowe
8. Parties in Interest. This Agreement shall inure to the benefit
of and be binding upon the parties named herein and their respective
successors and assigns; provided, however, that each such successor in
interest or assign shall agree to be bound by the provisions of this
Agreement. Nothing in this Agreement, express or implied, is intended to
confer upon any person or entity other than Purchaser, Stockholder and
their respective successors and assigns, any rights or remedies under or by
reason of this Agreement.
9. Entire Agreement; Amendments. This Agreement contains the
entire agreement between Stockholder and Purchaser with respect to the
subject matter hereof and supersedes all prior and contemporaneous
agreements and understandings, oral or written, with respect to such
subject matter. This Agreement may not be changed, amended or modified
orally, but may be changed only by an agreement in writing signed by the
party against whom any waiver, change, amendment, modification or discharge
may be sought.
10. Assignment. No party to this Agreement may assign any of its
rights or obligations under this Agreement without the prior written
consent of the other party hereto, except that: (i) Purchaser may assign
its rights and obligations hereunder to any of its affiliates or direct or
indirect wholly owned subsidiaries, but no such transfer shall relieve
Purchaser of its obligations hereunder if such transferee does not perform
such obligations; and (ii) Stockholder may assign its rights and
obligations hereunder without the consent of Purchaser in accordance with
Section 2.
11. Defined Terms; Headings. Capitalized terms not otherwise
defined herein shall have the meaning ascribed to such terms in the
Purchase Agreement. The section headings herein are for convenience only
and shall not affect the construction of this Agreement.
12. Counterparts. This Agreement may be executed in any number of
counterparts, each of which, when executed, shall be deemed to be an
original and all of which together shall constitute one and the same
document.
13. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware (regardless
of the laws that might otherwise govern under applicable Delaware
principles of conflicts of law).
14. Termination. This Agreement shall terminate at the earlier of
(i) the date the Second Closing occurs under the Purchase Agreement, (ii)
December 31, 1999, and (iii) on the date the Purchase Agreement is
terminated pursuant to the terms thereof; provided, that the parties shall
continue to be liable for any breach of this Agreement following any such
termination. In addition, Stockholder may terminate this Agreement on or
after the 2-month anniversary of the date of the Initial Closing (as
defined in the Securities Purchase Agreement) by written notice to
Purchaser if the Proxy Statement (as defined in the Purchase Agreement) has
not been filed with the Securities and Exchange Commission prior to such
date, and the parties are not working reasonably diligently to file the
Proxy Statement with the Securities and Exchange Commission.
<PAGE>
IN WITNESS WHEREOF, Purchaser and Stockholder have caused this
Agreement to be duly executed and delivered on the day and year first above
written.
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
AENEAS VENTURE CORPORATION
By:/s/ Michael R. Eisenson
-------------------------------------
Name: Michael R. Eisenson
Title:
Number of Shares Subject to this Agreement:
2,843,656
<PAGE>
EXHIBIT A
IRREVOCABLE PROXY
In order to secure the performance of the duties of the
undersigned pursuant to the Stockholder Voting Agreement, dated as of April
12, 1999 (the "Voting Agreement"), among the undersigned, International
Motor Cars Group I, L.L.C. and International Motor Cars Group II, L.L.C.,
each a Delaware limited liability company ("Purchaser"), a copy of such
agreement being attached hereto and incorporated by reference herein, the
undersigned hereby irrevocably appoints ______________________ and
___________________ and _____________________, and each of them, attorneys,
agents and proxies, with full power of substitution, for the undersigned
and in the name, place and stead of the undersigned, to vote or, if
applicable, to give written consent, in such manner as each such attorney,
agent and proxy or his substitute shall in his sole discretion deem proper
to record such vote or consent in the manner set forth in Section 1(a) of
the Voting Agreement with respect to all shares of Common Stock, par value
$.0001 per share (the "Shares"), of United Auto Group, Inc., a Delaware
corporation (the "Company"), (i) which the undersigned is or may be
entitled to vote at any meeting of the Company held after the date hereof,
whether annual or special and whether or not an adjourned meeting, or, if
applicable, with respect to which the undersigned is or may be entitled to
give written consent in connection with any action by written consent by
the stockholders of the Company to give written consent with respect
thereto. This Proxy is coupled with an interest, shall be irrevocable and
binding on any successor in interest of the undersigned and shall not be
terminated by operation of law or otherwise upon the occurrence of any
event (except as provided in Section 14 of the Voting Agreement),
including, without limitation, the death or incapacity of the undersigned.
This Proxy shall operate to revoke any prior proxy as to the Shares
heretofore granted by the undersigned. This Proxy shall terminate upon the
date on which the Voting Agreement shall terminate in accordance with
Section 14 of the Voting Agreement. This Proxy has been executed in
accordance with Section 212 of the Delaware General Corporation Law.
Dated:
--------------------------
AENEAS VENTURE CORPORATION
By:
----------------------------------
Name:
Title:
EXHIBIT 7
STOCKHOLDER VOTING AGREEMENT
STOCKHOLDER VOTING AGREEMENT, dated April 12, 1999 (this
"Agreement"), among Trace International Holdings, Inc. ("Stockholder"),
International Motor Cars Group I, L.L.C. and International Motor Cars Group
II, L.L.C. (collectively, the "Purchaser").
WHEREAS, United Auto Group, Inc., a Delaware corporation (the
"Company"), and Purchaser, are contemporaneously herewith entering into a
Securities Purchase Agreement, dated as of the date hereof (the "Purchase
Agreement"), which provides, among other things, for the acquisition by
Purchaser of shares of Preferred Stock and Warrants to purchase shares of
Common Stock upon the terms and subject to the conditions set forth
therein;
WHEREAS, as a condition to its willingness to enter into the
Purchase Agreement, Purchaser has requested that Stockholder make certain
agreements with respect to the shares of Common Stock beneficially owned by
Stockholder and listed under Stockholder's name on the signature page
hereto (the "Stockholder Shares"), upon the terms and subject to the
conditions hereof; and
WHEREAS, in order to induce Purchaser to enter into the Purchase
Agreement, Stockholder is willing to make certain agreements with respect
to the Stockholder Shares;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, the parties hereto agree as
follows:
1. Voting Agreements; Proxy.
------------------------
(a) For so long as this Agreement is in effect, in any meeting of
stockholders of the Company, however called, and in any action by consent
of the stockholders of the Company, Stockholder shall vote, or, if
applicable, give consents with respect to, all of the Stockholder Shares
(and any other shares of Common Stock over which Stockholder has voting
power) (collectively, "Shares") that are held on the record date applicable
thereto in favor of (i) the Purchase Agreement, (ii) the transactions
contemplated by the Purchase Agreement and (iii) any actions required in
furtherance thereof. Any such vote shall be cast or consent shall be given
in accordance with such procedures relating thereto as shall ensure that it
is duly counted for purposes of determining that a quorum is present and
for purposes of recording the results of such vote or consent.
(b) Upon the written request of Purchaser, Stockholder, in
furtherance of the transactions contemplated hereby and by the Purchase
Agreement, and in order to secure the performance by Stockholder of its
duties under this Agreement, shall promptly execute, in accordance with the
provisions of Section 212 of the Delaware General Corporation Law, and
deliver to Purchaser an irrevocable proxy, substantially in the form
attached as Exhibit A hereto, and irrevocably appoint Purchaser or its
designees, with full power of substitution, its attorney and proxy to vote
or, if applicable, to give consent with respect to, all Shares with regard
to any of the matters referred to in Section 1(a) at any meeting of the
stockholders of the Company, however called, or in connection with any
action by written consent by the stockholders of the Company. Stockholder
acknowledges and agrees that (i) such proxy, if and when given, shall be
coupled with an interest, shall constitute, among other things, an
inducement for Purchaser to enter into the Purchase Agreement, shall be
irrevocable and shall not be terminated by operation of law or otherwise
upon the occurrence of any event, except as provided in Section 14 hereof,
and (ii) that no subsequent proxies with respect to the Shares shall be
given (and if given shall not be effective), with respect to any of the
matters referred to in Section 1(a).
2. Covenants. (a) From and after the date of this Agreement,
Stockholder agrees not to: (i) sell, transfer, pledge, assign, hypothecate,
encumber, tender or otherwise dispose of, or enter into any contract with
respect to the sale, transfer, pledge, assignment, hypothecation,
encumbrance, tender or other disposition of, any Stockholder Shares; (ii)
grant any proxies with respect to any Shares, deposit any Shares into a
voting trust or enter into a voting or option agreement with respect to any
Shares; (iii) take any action, directly or indirectly through any of its
affiliates (other than the Company or any of its subsidiaries), which the
Company is prohibited from taking under Section 4.2 of the Purchase
Agreement; (iv) vote in any manner (i.e. by ballot, proxy, written consent
or otherwise) any Shares in favor of any other transaction that is proposed
by any Person (including the Company) as an alternative to the transactions
contemplated by the Purchase Agreement; or (v) take any action which would
make any representation or warranty of Stockholder herein untrue or
incorrect or prevent, burden or materially delay the consummation of the
transactions contemplated by this Agreement; provided, however, that
Stockholder may take any action described in clause (i) or (ii) above if
any third party which obtains the right to vote any Shares as a result of
such action assumes (in a writing executed by any such third party and
delivered to Purchaser) Stockholder's obligations under this Agreement with
respect to such Shares.
(b) Stockholder agrees that from and after the date of this
Agreement through and including the date this Agreement is terminated,
without the prior written consent of Purchaser, which may be withheld in
Purchaser's sole discretion, Stockholder shall not vote or give any consent
with respect to any Shares in favor of an Alternative Transaction (as
defined in the Purchase Agreement) other than an Alternative Transaction
involving the sale of all or substantially all of the capital stock or
assets of the Company.
3. Representations and Warranties of Stockholder. Stockholder
represents and warrants to Purchaser that, except as set forth on Schedule
3:
(a) Capacity; No Violations. Stockholder has the legal capacity
to enter into this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Stockholder, and constitutes a valid and binding agreement of Stockholder
enforceable against Stockholder in accordance with its terms, except as
enforceability against Stockholder may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws now or hereafter in
effect relating to the rights of creditors generally and other general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law) and such execution and delivery and
performance by Stockholder of this Agreement will not (i) conflict with,
require a consent, waiver or approval under, or result in a breach or
default under, any of the terms of any contract, commitment or other
obligation to which Stockholder is a party or by which Stockholder is
bound; (ii) violate any order, writ, injunction, decree or statute, or any
law, rule or regulation applicable to Stockholder or the Shares; or (iii)
result in the creation of, or impose any obligation on Stockholder to
create, any Encumbrance other than transfer restrictions imposed by
applicable Federal and state securities laws upon the Shares.
(b) Shares. As of the date of this Agreement, Stockholder is the
record holder of, and has good and valid title to, the Shares free and
clear of all Encumbrances other than transfer restrictions imposed by
applicable Federal and state securities laws. The Shares are the only
shares of any class of capital stock of the Company which Stockholder has
the right, power or authority (sole or shared) to sell or vote, and
Stockholder does not have any right to acquire, nor is it the beneficial
owner of, any other shares of any class of capital stock of the Company or
any securities convertible into or exchangeable or exercisable for any
shares of any class of capital stock of the Company. There are no options
or rights to acquire, or other contracts (including proxies, voting trusts
or voting agreements) relating to, the Shares to which Stockholder is a
party.
4. Adjustments; Additional Shares. In the event (i) of any stock
dividend, stock split, recapitalization, reclassification, combination or
exchange of Shares on, of or affecting the Shares, or (ii) Stockholder
shall become the beneficial owner of any additional Shares or other
securities entitling the holder thereof to vote or give consent with
respect to the matters set forth in Section 1(a) hereof, then the terms of
this Agreement shall apply to the Shares held by Stockholder immediately
following the effectiveness of the events described in clause (i) above or
Stockholder becoming the beneficial owner of the Shares or other
securities, as described in clause (ii) above, in each case as though they
were Shares hereunder.
5. Expenses. Each party hereto shall pay its own expenses
incurred in connection with this Agreement.
6. Specific Performance. Stockholder acknowledges and agrees that
if it fails to perform any of its obligations under this Agreement,
immediate and irreparable harm or injury would be caused to Purchaser for
which money damages would not be an adequate remedy. In such event,
Stockholder agrees that Purchaser shall have the right, in addition to any
other rights it may have, to specific performance of this Agreement.
Accordingly, if Purchaser should institute an action or proceeding seeking
specific enforcement of the provisions hereof, Stockholder hereby waives
the claim or defense that Purchaser has an adequate remedy at law and
hereby agrees not to assert in any such action or proceeding the claim or
defense that such a remedy at law exists. Stockholder further agrees to
waive any requirements for the securing or posting of any bond in
connection with obtaining any such equitable relief.
7. Notices. All notices or other communications under this
Agreement shall be in writing and shall be deemed duly given, effective (i)
three business days later, if sent by registered or certified mail, return
receipt requested, postage prepaid, (ii) when sent, if sent by telecopier
or fax, provided that the telecopy or fax is promptly confirmed by
telephone confirmation thereof, (iii) when served, if delivered personally
to the intended recipient, and (iv) one business day later, if sent by
overnight delivery via a national courier service, and in each case,
addressed to the intended recipient at the address set forth as follows:
If to the Purchaser:
-------------------------
c/o Penske Capital Partners, L.L.C.
399 Park Avenue
New York, New York 10022
Telecopy: (212) 207-9653
Attention: Mr. James A. Hislop
with a copy to:
-------------------------
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, NY 10004
Telecopy: (212) 859-8587
Attention: Robert C. Schwenkel, Esq.
if to Stockholder:
-------------------------
Trace International Holdings, Inc.
375 Park Avenue
New York, NY 10152
Telecopy: (212) 593-1303
Attention: Philip N. Smith, Jr., Esq.
8. Parties in Interest. This Agreement shall inure to the benefit
of and be binding upon the parties named herein and their respective
successors and assigns; provided, however, that each such successor in
interest or assign shall agree to be bound by the provisions of this
Agreement. Nothing in this Agreement, express or implied, is intended to
confer upon any person or entity other than Purchaser, Stockholder and
their respective successors and assigns, any rights or remedies under or by
reason of this Agreement.
9. Entire Agreement; Amendments. This Agreement contains the
entire agreement between Stockholder and Purchaser with respect to the
subject matter hereof and supersedes all prior and contemporaneous
agreements and understandings, oral or written, with respect to such
subject matter. This Agreement may not be changed, amended or modified
orally, but may be changed only by an agreement in writing signed by the
party against whom any waiver, change, amendment, modification or discharge
may be sought.
10. Assignment. No party to this Agreement may assign any of its
rights or obligations under this Agreement without the prior written
consent of the other party hereto, except that: (i) Purchaser may assign
its rights and obligations hereunder to any of its affiliates or direct or
indirect wholly owned subsidiaries, but no such transfer shall relieve
Purchaser of its obligations hereunder if such transferee does not perform
such obligations; and (ii) Stockholder may assign its rights and
obligations hereunder without the consent of Purchaser in accordance with
Section 2.
11. Defined Terms; Headings. Capitalized terms not otherwise
defined herein shall have the meaning ascribed to such terms in the
Purchase Agreement. The section headings herein are for convenience only
and shall not affect the construction of this Agreement.
12. Counterparts. This Agreement may be executed in any number of
counterparts, each of which, when executed, shall be deemed to be an
original and all of which together shall constitute one and the same
document.
13. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware (regardless
of the laws that might otherwise govern under applicable Delaware
principles of conflicts of law).
14. Termination. This Agreement shall terminate at the earlier of
(i) the date the Second Closing occurs under the Purchase Agreement, (ii)
December 31, 1999, and (iii) on the date the Purchase Agreement is
terminated pursuant to the terms thereof; provided, that the parties shall
continue to be liable for any breach of this Agreement following any such
termination. In addition, Stockholder may terminate this Agreement on or
after the 2-month anniversary of the date of the Initial Closing (as
defined in the Securities Purchase Agreement) by written notice to
Purchaser if the Proxy Statement (as defined in the Purchase Agreement) has
not been filed with the Securities and Exchange Commission prior to such
date, and the parties are not working reasonably diligently to file the
Proxy Statement with the Securities and Exchange Commission.
<PAGE>
IN WITNESS WHEREOF, Purchaser and Stockholder have caused this
Agreement to be duly executed and delivered on the day and year first above
written.
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
TRACE INTERNATIONAL HOLDINGS, INC.
By:/s/ Philip N. Smith, Jr.
-------------------------------------
Name: Philip N. Smith, Jr.
Title: Senior Vice President
Number of Shares Subject to this Agreement:
4,016,110
<PAGE>
EXHIBIT A
IRREVOCABLE PROXY
In order to secure the performance of the duties of the
undersigned pursuant to the Stockholder Voting Agreement, dated as of April
12, 1999 (the "Voting Agreement"), among the undersigned, International
Motor Cars Group I, L.L.C. and International Motor Cars Group II, L.L.C.,
each a Delaware limited liability company ("Purchaser"), a copy of such
agreement being attached hereto and incorporated by reference herein, the
undersigned hereby irrevocably appoints ______________________ and
___________________ and _____________________, and each of them, attorneys,
agents and proxies, with full power of substitution, for the undersigned
and in the name, place and stead of the undersigned, to vote or, if
applicable, to give written consent, in such manner as each such attorney,
agent and proxy or his substitute shall in his sole discretion deem proper
to record such vote or consent in the manner set forth in Section 1(a) of
the Voting Agreement with respect to all shares of Common Stock, par value
$.0001 per share (the "Shares"), of United Auto Group, Inc., a Delaware
corporation (the "Company"), (i) which the undersigned is or may be
entitled to vote at any meeting of the Company held after the date hereof,
whether annual or special and whether or not an adjourned meeting, or, if
applicable, with respect to which the undersigned is or may be entitled to
give written consent in connection with any action by written consent by
the stockholders of the Company to give written consent with respect
thereto. This Proxy is coupled with an interest, shall be irrevocable and
binding on any successor in interest of the undersigned and shall not be
terminated by operation of law or otherwise upon the occurrence of any
event (except as provided in Section 14 of the Voting Agreement),
including, without limitation, the death or incapacity of the undersigned.
This Proxy shall operate to revoke any prior proxy as to the Shares
heretofore granted by the undersigned. This Proxy shall terminate upon the
date on which the Voting Agreement shall terminate in accordance with
Section 14 of the Voting Agreement. This Proxy has been executed in
accordance with Section 212 of the Delaware General Corporation Law.
Dated:
-----------------------
TRACE INTERNATIONAL HOLDINGS, INC.
By:
-------------------------------------
Name:
Title:
EXHIBIT 8
==============================================================================
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 _______ __, 1999
==============================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
Page #
------
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...6
Section 2.6. Suspension of Right to Designate Directors..................6
Section 2.7. Replacement Directors.......................................7
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
ARTICLE VI. MUTUAL REPRESENTATIONS AND WARRANTIES..........................13
Section 6.1. Organization...............................................13
Section 6.2. Authorization, Validity and Enforceability.................13
Section 6.3. No Violation or Breach.....................................13
Section 6.4. Beneficial Ownership of Common Stock.......................14
ARTICLE VII. TERM..........................................................14
Section 7.1. Term.......................................................14
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.................................................16
Section 8.4. Assignment and Parties in Interest.........................16
Section 8.5. Expenses...................................................16
Section 8.6. Entire Agreement...........................................16
Section 8.7. Descriptive Headings.......................................17
Section 8.8. Counterparts...............................................17
Section 8.9. Governing Law; Jurisdiction................................17
Section 8.10. Severability...............................................17
Section 8.11. Specific Performance.......................................18
Schedule 6.3 - Conflicts
Schedule 6.4 - Equity Ownership
<PAGE>
STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT (the "Agreement") dated as of ________
___, 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.
"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 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 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.
(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 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 is No. of PCP Directors to
equal to or greater than: but less than: be designated 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, 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 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
(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 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.
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 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 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
Section7.1. Term. This Agreement shall commence on the date
hereof, and shall terminate on the earliest of (a) the 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
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 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 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 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.]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
AIF II, L.P.
By:__________________________
Name:
Title:
AENEAS VENTURE CORPORATION
By:__________________________
Name:
Title:
INTERNATIONAL MOTOR CARS GROUP, I, L.L.C.
By:__________________________
Name:
Title:
INTERNATIONAL MOTOR CARS GROUP, II, L.L.C.
By:__________________________
Name:
Title:
<PAGE>
TRACE INTERNATIONAL HOLDINGS, INC.
By:__________________________
Name:
Title:
UNITED AUTO GROUP, INC.
By:__________________________
Name:
Title:
Solely for the purposes
of Section 4.4 hereof:
PENSKE CORPORATION
By:__________________________
Name:
Title:
PENSKE CAPITAL PARTNERS, L.L.C.
By:__________________________
Name:
Title:
EXHIBIT 9
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 ______ __, 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, (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 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
(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.
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.
(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.
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.
(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 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 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 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 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, L.L.C., Chase Equity Associates,
L.P. or any other stockholder (x) that is subject to the provisions of
Regulation Y and (y) that holds shares of Common Stock or Preferred Stock
of the Corporation.
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.
"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.
"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.
<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 ___ day of ________, 1999.
UNITED AUTO GROUP, INC.
By:
------------------------------------
Name:
Title:
Attest:
By:
------------------------------
Name:
Title:
EXHIBIT 10
UNITED AUTO GROUP, INC.
CERTIFICATE OF DESIGNATION
OF
SERIES B 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 ______ __, 1999, adopted the following
resolution creating a series of Preferred Stock designated as Series B
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 B Convertible Preferred Stock" (the "Series B Preferred
Stock"). The number of shares constituting the Series B Preferred Stock
shall be 10,000. The Corporation may issue (i) up to 8,300 shares of the
Series B Preferred Stock as an original issuance and (ii) such number of
additional shares as may be required to pay dividends on the Series B
Preferred Stock, and in the case of International Motor Cars Group II,
L.L.C. the Series A Preferred Stock, in additional shares of Series B
Preferred Stock pursuant to Section 2(b) or pursuant to Section 8, or in
the case of International Motor Cars Group II, L.L.C., pursuant to Section
2(b) of the Certificate of Designation of the Series A Preferred Stock. The
Corporation shall take all actions necessary or advisable to increase the
number of shares of Series B Preferred Stock authorized to provide for
additional issuance of Series B Preferred Stock pursuant to clause (ii) of
the preceding sentence.
(b) Rank. The Series B Preferred Stock shall, with respect to
dividend rights and rights on liquidation, dissolution or winding up, rank
(i) pari passu to the Series A Preferred Stock, par value $0.0001 per share
of the Corporation (the "Series A 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, 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 B
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 B Preferred Stock have been
declared and paid.
(b) Payment of Dividends. The holders of shares of Series B
Preferred Stock, on a pari passu basis with the Series A 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 B Preferred Stock (the "Issue Date"), as long as the
shares of Series B 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 B 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 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 Non-Voting Common Stock into which a share of
Series B 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 Non-Voting Common Stock, exceeds
the aggregate amount of dividends paid to such date during such year with
respect to a share of Series B Preferred Stock (including amounts paid in
such calendar year pursuant to this sentence), then (x) the shares of the
Series B Preferred Stock shall be entitled to receive the amount of such
excess at the time of the Non-Voting Common Stock dividend and (y) any
dividends otherwise payable on the Series B 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 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 B 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 B 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.
(a) Except as provided in this Section 3, no holder of Series B
Preferred Stock shall be entitled to vote such stock on any matter on which
the stockholders of the Corporation shall be entitled to vote, and shares
of Series B Preferred Stock shall not be included in determining the number
of shares voting or entitled to vote on any such matters; provided that the
holders of Series B Preferred Stock shall have the right to vote as a
separate class on any merger or consolidation of the Corporation with or
into another entity or entities, or any recapitalization or reorganization,
in which shares of Series B Preferred Stock would receive or be exchanged
for the Shares of Series A Preferred Stock or would otherwise be treated
differently from shares of Series A Preferred Stock in connection with such
transaction, except that shares of Series B Preferred Stock may, without
such a separate class vote, receive or be exchanged for non-voting
securities which are otherwise identical on a per share basis in amount and
form to the voting securities received with respect to or exchanged for the
Series A Preferred Stock so long as (i) such non-voting securities are
convertible into such voting securities on the same terms as the Series B
Preferred Stock is convertible as the Series A Preferred Stock and (ii) all
other consideration is equal on a per share basis. Notwithstanding the
foregoing, holders of shares of the Series B Preferred Stock shall be
entitled to vote as a separate class on any amendment to this paragraph (b)
of this Section 3.
(b) Actions Not to be Taken Without Vote of Holders of Series B
Preferred Stock. So long as any shares of Series B 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 B
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 B
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 B Preferred Stock
other than as required by this Certificate of Designation; or
(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 B Preferred
Stock, or alter or change the powers, preferences or special rights of the
Series B Preferred Stock.
(c) Exercise of Voting Rights. (i) The foregoing rights of
holders of shares of Series B 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 B 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 B 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 B 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 B
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 B 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 B 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 B 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 B 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 B 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.
SECTION 4. CERTAIN RESTRICTIONS.
(a) Dividends or Distributions. Whenever any dividend payable on
the Series B 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 B 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 B Preferred Stock
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 B Preferred Stock pursuant to clause (a) of this Section 5 shall be
mailed, first class postage prepaid, to each holder of shares of Series B
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 B Preferred Stock.
(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 B
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 B
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 B
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.
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 B Preferred Stock, subject to Section 8,
shall have received the Liquidation Preference with respect to each share
held by holders of the Series B 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 Non-Voting Common Stock into
which the Series B Preferred Stock is then convertible, divided by the
number of shares of Series B 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 B Preferred Stock), then the holders of Series B Preferred Stock
shall be entitled to receive in such Liquidation such greater amount for
each share of Series B 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 B
Preferred Stock and the Series A Preferred Stock shall be insufficient to
permit payment of the full amount of the Liquidation Preference with
respect to each share of Series B Preferred Stock and each share of Series
A Preferred Stock, then the entire assets of the Corporation to be
distributed among the holders of the Series B Preferred Stock shall be
distributed ratably among such holders in accordance with the number of
shares of Series B Preferred Stock and Series A 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 B
Preferred Stock of the full amount of any liquidating distribution to which
they are entitled under this Article 7, the holders of the Series B
Preferred Stock as such shall have no right or claim to any of the
remaining assets of the Corporation.
(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 B Preferred Stock shall be
convertible into such number of fully paid and nonassessable shares of
Non-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 B 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 B 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 Non-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
Non-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 Non-Voting Common Stock on conversion of
Series B 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 Non-Voting Common Stock, to which the holder of shares of
Series B Preferred Stock being converted shall be entitled and (ii) if less
than the full number of shares of Series B 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 Non-Voting Common
Stock, in accordance herewith, and the person entitled to receive the
shares of Non-Voting Common Stock shall be treated for all purposes as
having become the record holder of such shares of Non-Voting Common Stock
at such time.
In case any shares of Series B Preferred Stock are to be redeemed
pursuant to Section 5, such right of conversion shall cease and terminate
as to the shares of Series B 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 B Preferred Stock into Non-Voting Common Stock, no
fractions of shares of Non-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 Non-Voting Common Stock
on the Trading Day on which such shares of Series B Preferred Stock are
deemed to have been converted. If more than one share of Series B Preferred
Stock shall be surrendered for conversion by the same holder at the same
time, the number of full shares of Non-Voting Common Stock issuable on
conversion thereof shall be computed on the basis of the total number of
shares of Series B Preferred Stock so surrendered. Promptly upon
conversion, the Corporation shall pay to the holder of shares of Series B
Preferred Stock so converted out of funds legally available, an amount
equal to any accrued and unpaid dividends on the shares of Series B
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 B Preferred Stock, free from any preemptive
rights, such number of its authorized but unissued shares of Non-Voting
Common Stock as will from time to time be sufficient to permit the
conversion of all outstanding shares of Series B Preferred Stock issued or
issuable pursuant to the Securities Purchase Agreement into Non-Voting
Common Stock, and shall take all actions required to increase the
authorized number of shares of Non-Voting Common Stock if necessary to
permit the conversion of all outstanding shares of Series B 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 B Preferred Stock thereafter
surrendered for conversion into Non-Voting Common Stock shall be entitled
to receive the number of shares of Non-Voting Common Stock or other
securities of the Corporation which such holder would have owned or have
been entitled to receive after the happening of any of the events described
above, had such shares of Series B 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 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 B Preferred Stock, the Series A
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 B 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 Non-Voting Common Stock receivable upon conversion of each share of
Series B Preferred Stock would differ by at least one one-hundredth of one
share of Non-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 Non-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 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 B Preferred Stock then outstanding shall
thereafter be convertible into, in lieu of the Non-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 Non-Voting Common Stock into which one
share of Series B Preferred Stock was convertible immediately prior to such
Transaction. In case securities or property other than Non-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 B 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 A Preferred Stock. In addition to the
other provisions of this Section 8, the holders of Series B Preferred Stock
shall be entitled to convert their shares of Series B Preferred Stock into
shares of Series A 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 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 Non-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 B Preferred Stock and
Non-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 B 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 B 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 B
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 State 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.
"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 B
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.
"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 B Preferred Stock.
"Liquidation Preference" with respect to a share of Series B
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 B 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.
<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 ___ day of ________, 1999.
UNITED AUTO GROUP, INC.
By:
------------------------------
Name:
Title:
Attest:
By:
------------------------------
Name:
Title:
EXHIBIT 11
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
United Auto Group, Inc., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation, adopted a
resolution proposing and declaring advisable the following amendment to the
Certificate of Incorporation of said corporation:
RESOLVED, that the Certificate of Incorporation of United Auto
Group, Inc. be amended so that:
1. The first paragraph of Section 1 of ARTICLE IV CAPITAL shall
be amended to read as follows:
The total number of shares of capital stock which the
Corporation shall have the authority to issue is [ ], consisting of:
(i) 40,000,000 shares of Voting Common Stock, par value $0.0001 per
share (the "VOTING COMMON STOCK"); (ii) [ ] shares of Non-voting
Common Stock, par value $0.0001 per share (the "NON-VOTING COMMON
STOCK"); (iii) 20,000,000 shares of Class C Common Stock, par value
$0.0001 per share (the "CLASS C COMMON STOCK" and, collectively with
the Voting Common Stock, and the Non-voting Common Stock, the "COMMON
STOCK"); and (iv) [ ] shares of Preferred Stock, par value $0.0001 per
share.
2. The following shall be added to the end of Sub-Section (b) of
Section 2 of ARTICLE IV CAPITAL:
; provided that the holders of Non-voting Common Stock shall
have the right to vote as a separate class on any merger or
consolidation of the Corporation with or into another entity or
entities, or any recapitalization or reorganization, in which shares
of Non-voting Common Stock would receive or be exchanged for
consideration different on a per share basis from consideration
received with respect to or in exchange for the shares of Voting
Common Stock or would otherwise be treated differently from shares of
Voting Common Stock in connection with such transaction, except that
shares of Non-voting Common Stock may, without such a separate class
vote, receive or be exchanged for non-voting securities which are
otherwise identical on a per share basis in amount and form to the
voting securities received with respect to or exchanged for the Voting
Common Stock so long as (i) such non-voting securities are convertible
into such voting securities on the same terms as the Non-voting Common
Stock is convertible into Voting Common Stock and (ii) all other
consideration is equal on a per share basis. Notwithstanding the
foregoing, holders of shares of the Non-voting Common Stock shall be
entitled to vote as a separate class on any amendment to this
paragraph (b) of this Section 2.
3. The following shall be added the end of Sub-Section (b) of
Section 3 of ARTICLE IV CAPITAL:
and, provided, further, that each holder of Non-voting
Common Stock may convert such shares into Voting Common Stock if such
holder reasonably believes that such converted shares will be
transferred within fifteen (15) days pursuant to a Conversion Event
(as hereinafter defined) and such holder agrees not to vote any such
shares of Voting Common Stock prior to such Conversion Event and
undertakes to promptly convert such shares back into Non-voting Common
Stock if such shares are not transferred pursuant to a Conversion
Event. Each Regulated Stockholder may provide for further restrictions
upon the conversion of any shares of Non-voting Common Stock by
providing the Corporation with signed, written instructions specifying
such additional restrictions and legending such shares as to the
existence of such restrictions.
4. The following shall be added to the end of Sub-Section (c) of
Section 3 of ARTICLE IV CAPITAL:
Notwithstanding any provision of this Section 3 to the
contrary, each holder of Non-voting Common Stock shall be entitled to
convert shares of Non-voting Common Stock in connection with any
Conversion Event if such holder reasonably believes that such
Conversion Event will be consummated, and a written request for
conversion from any holder of Non-voting Common Stock to the
Corporation stating such holder's reasonable belief that a Conversion
Event shall occur shall be conclusive and shall obligate the
Corporation to effect such conversion in a timely manner so as to
enable each such holder to participate in such Conversion Event. The
Corporation will not cancel the shares of Non-voting Common Stock so
converted before the 15th day following such Conversion Event and will
reserve such shares until such 15th day for reissuance in compliance
with the next sentence. If any shares of Non-voting Common Stock are
converted into shares of Voting Common Stock in connection with a
Conversion Event and such shares of Voting Common Stock are not
actually distributed, disposed of or sold pursuant to such Conversion
Event, such shares of Voting Common Stock shall be promptly converted
back into the same number of shares of Non-voting Common Stock.
5. The following shall be added before the first paragraph of
Sub-Section (h) of Section 3 of ARTICLE IV CAPITAL:
"Conversion Event" shall mean (a) any public offering or
public sale of securities of the Corporation (including a public
offering registered under the Securities Act of 1933 and a public sale
pursuant to Rule 144 of the Securities and Exchange Commission or any
similar rule then in force), (b) any sale of securities of the
Corporation to a person or group of persons (within the meaning of the
Securities Exchange Act of 1934, as amended (the "1934 Act")) if,
after such sale, such person or group of persons in the aggregate
would own or control securities which possess in the aggregate the
ordinary voting power to elect a majority of the Corporation's
directors (provided that such sale has been approved by the
Corporation's Board of Directors or a committee thereof), (c) any sale
of securities of the Corporation to a person or group of persons
(within the meaning of the 1934 Act) if, after such sale, such person
or group of persons in the aggregate would own or control securities
of the Corporation (excluding any Non-voting Common Stock being
converted and disposed of in connection with such Conversion Event)
which possess in the aggregate the ordinary voting power to elect a
majority of the Corporation's directors, (d) any sale of securities of
the Corporation to a person or group of persons (within the meaning of
the 1934 Act) if, after such sale, such person or group of persons
would not, in the aggregate, own, control or have the right to acquire
more than two percent (2%) of the outstanding securities of any class
of voting securities of the Corporation, and (e) a merger,
consolidation or similar transaction involving the Corporation if,
after such transaction, a person or group of persons (within the
meaning of the 1934 Act) in the aggregate would own or control
securities which possess in the aggregate the ordinary voting power to
elect a majority of the surviving corporation's directors (provided
that the transaction has been approved by the Corporation's Board of
Directors or committee thereof).
6. The following shall be added to the end of the last paragraph
of Sub-Section (h) of Section 3 of ARTICLE IV CAPITAL:
and (v) International Motor Cars Group II, LLC, Chase Equity
Associates, L.P. or any other stockholder (x) that is subject to the
provisions of Regulation Y and (y) that holds shares of Common Stock
or Preferred Stock of the Corporation.
SECOND: That the aforesaid amendment was duly adopted in
accordance with the applicable provisions of Sections 242 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said United Auto Group, Inc. has caused this
certificate to be signed by a duly authorized officer this __________ ___,
1999.
United Auto Group, Inc.
By:
--------------------------
Name:
Title:
EXHIBIT 12
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.
_______ __, 1999
<PAGE>
REGISTRATION RIGHTS AGREEMENT, dated as of _______ __, 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
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 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 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
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 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:
(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 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
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 (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 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 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 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
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 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 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
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 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
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.
<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:
-------------------------
Name:
Title:
INTERNATIONAL MOTOR CARS
GROUP I, L.L.C.
By:
-------------------------
Name:
Title:
INTERNATIONAL MOTOR CARS
GROUP II, L.L.C.
By:
-------------------------
Name:
Title:
EXHIBIT 13
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 "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 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
(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, (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
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.
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 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.
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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. DeFeo
------------------------------------
Name: Samuel X. DeFeo
Title: President and Chief
Operating Officer
/s/ Marshall S. Cogan
------------------------------------
Marshall S. Cogan
