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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
COMMISSION FILE NUMBER 1-12297
UNITED AUTO GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 22-3086739
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
375 PARK AVENUE, NEW YORK, NEW YORK 10152
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 223-3300
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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<CAPTION>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
<S> <C>
Voting Common Stock, par value $0.0001 per share New York Stock Exchange
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: NONE.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes..x.. No .....
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [x]
The aggregate market value of the voting common stock and the non-voting common
stock held by non-affiliates as of April 23, 1999 was $121,774,677.
As of April 23, 1999, there were 21,289,619 shares of voting common stock and
605,454 shares of non-voting common stock outstanding.
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EXPLANATORY NOTE
This Form 10-K/A amends Items 10, 11, 12 and 13 of the Annual Report on Form
10-K for the year ended December 31, 1998 filed by United Auto Group, Inc. (the
"Company") on March 31, 1999. In that report, these items were incorporated by
reference from the Company's proxy statement, which was expected to be filed by
April 30, 1999. Because the Company's proxy statement will not be finalized by
April 30, 1999, Items 10, 11, 12 and 13 of Form 10-K are being filed via this
Form 10-K/A.
RECENT DEVELOPMENTS
On April 12, 1998, the Company entered into a Securities Purchase Agreement
with International Motor Cars Group I, L.L.C. and International Motor Cars
Group II, L.L.C. (together, the "Purchaser"), two entities formed by Penske
Capital Partners, L.L.C. ("PCP"), pursuant to which the Purchaser will acquire
the Company's Series A and Series B Preferred Stock, each with par value
$0.0001 per share (the "Preferred Stock"), and warrants (the "Warrants") to
acquire the Company's voting common stock (the "Common Stock") and non-voting
common stock, par value $0.0001 per share (the "Non-Voting Common Stock") for
an aggregate purchase price of $83,000,000. The Preferred Stock is convertible
into Common Stock and Non-Voting Common Stock. Assuming conversion in full and
payment of all in kind dividends in respect of the Preferred Stock and exercise
in full of the Warrants, the Purchaser will own approximately 39.7% of the
aggregate outstanding Common Stock and Non-Voting Common Stock, calculated on a
fully diluted basis. The transactions described in this paragraph will be
consummated in two closings (the "Initial Closing" and the "Second Closing").
Pursuant to the Stockholders Agreement to be entered into on the date of the
Initial Closing, AIF II, L.P. ("AIF"), Aeneas Venture Corporation ("Aeneas")
and Trace International Holdings, Inc. ("Trace") have agreed to use their
respective reasonable best efforts to (a) from the Initial Closing through the
Second Closing, cause the Company's Board of Directors (the "Board") to consist
of three members nominated by PCP (including Roger Penske, Chairman of PCP),
one member nominated by Trace, the Company's Chief Operating Officer (or in his
absence, another person designated by the independent directors) and two
independent directors; (b) on the Initial Closing, have Roger Penske appointed
as the Company's Chairman and Chief Executive Officer; (c) prior to the Second
Closing, expand the size of the Board to nine members and nominate for election
by the Company's stockholders as directors two members nominated by PCP, (d) on
the Second Closing fill the vacancies created by such expansion with the
directors elected by the Company's stockholders and (e) from the earlier of the
first meeting of the stockholders following the Second Closing and the first
vacancy on the Board following the Second Closing, cause the Board to consist
of five members designated by PCP (including Roger Penske), one member
designated by Trace and three independent directors.
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In connection with the Securities Purchase Agreement, on April 12, 1999, the
Company and Marshall S. Cogan entered into a Non-Competition and Standstill
Agreement, pursuant to which Mr. Cogan will resign as Chief Executive Officer
of the Company on the date of Initial Closing. The Agreement provides that Mr.
Cogan may not compete with the Company or entice away any of its employees or
its subsidiaries until December 31, 2005. In addition, Mr. Cogan may not
disclose any proprietary information of the Company. The Agreement prohibits
Mr. Cogan from taking certain actions to acquire control of the Company or its
affiliates without prior approval of a majority of the Board of Directors other
than directors nominated by Trace or by a majority of the Company's
stockholders other than Trace and its affiliates. Under the Agreement, Mr.
Cogan will be paid his current base salary until December 31, 1999 and $750,000
per annum thereafter until December 31, 2005. In addition, he will receive a
cash payment of $250,000 and fully vested options to purchase 400,000 shares of
Common Stock at an exercise price of $10.00. Mr. Cogan shall also receive 25% of
any compensation or bonus paid directly or indirectly to Mr. Penske by the
Company through December 31, 2005. If the Second Closing does not occur or the
Purchaser exercises certain remedies under the Securities Purchase Agreement,
then Mr. Cogan will be reinstated as Chief Executive Officer of the Company,
with the same salary, bonus, benefits and other compensation as he was entitled
to for the 1999 fiscal year.
2
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TABLE OF CONTENTS
PART III
10. Directors and Executive Officers of the Registrant................. 4
11. Executive Compensation............................................. 6
12. Security Ownership of Certain Beneficial Owners and Management..... 9
13. Certain Relationships and Related Transactions..................... 10
3
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
The Board of Directors is divided into three classes serving staggered
three-year terms, the term of one class of directors to expire each year. The
term of the present Class III directors expires at the Company's next annual
meeting of stockholders. The terms of the present Class I and Class II
directors will expire at the annual meetings in 2000 and 2001, respectively.
CLASS III DIRECTORS
MICHAEL R. EISENSON Michael R. Eisenson, 43, has served as a
Managing Director and Chief director of the Company since December
Executive Officer of Charlesbank 1993. He is a Managing Director and Chief
Capital Partners, LLC. Executive Officer of Charlesbank Capital
Partners, LLC (a successor to Harvard
Private Capital Group, Inc.)
("Charlesbank") a private investment firm,
which he joined in 1986. Charlesbank is an
investment advisor of Aeneas. Mr. Eisenson
is also a director of CCC Information
Services Group, Inc., Harken Energy
Corporation, ImmunoGen, Inc., Playtex
Products, Inc. and The WMF Group, Ltd.
JOHN J. HANNAN John J. Hannan, 44, has served as a
Principal of Apollo Advisors, director of the Company since December
L.P. and of Apollo Real Estate 1993. Mr. Hannan is one of the founding
Advisors, L.P. principals of Apollo Advisors, L.P., which
together with an affiliate has acted since
1991 as managing general partner of Apollo
Investment Fund, L.P., AIF and Apollo
Investment Fund III, L.P., private
securities investment funds, and of Apollo
Real Estate Advisors, L.P., which since
1993 has acted as managing general partner
of the Apollo Advisors, L.P. real estate
investment funds, and of Lion Advisors,
L.P., which since 1991 has acted as
financial advisor to and representative for
certain institutional investors with
respect to securities investments. Mr.
Hannan is also a director of Aris
Industries, Inc., Converse, Inc., and The
Florsheim Shoe Company, Inc.
CLASS I DIRECTORS
MARSHALL S. COGAN Marshall S. Cogan, 61, has served as
Chairman of the Board and Chief Chairman of the Board and Chief Executive
Executive Officer of the Company Officer since April 1997, prior to which he
and Chairman of the Board and served as Vice Chairman of the Board, and
Chief Executive Officer of Trace as a director of the Company since December
International Holdings, Inc. 1990. Since 1974, Mr. Cogan has been the
principal stockholder, Chairman or
Co-Chairman of the Board of Directors and
Chief Executive Officer or Co-Chief
Executive Officer of Trace. Trace has
acquired many companies in various
consolidating industries and conceived the
concept for the Company, which it founded
in December 1990. Since March 1999, Mr.
Cogan has served as Chairman of Foamex
International Inc. ("Foamex"). From May
1997 until March 1999, Mr. Cogan served as
the Vice Chairman of Foamex. Prior thereto,
he served as its Chairman from September
1993 and its Chief Executive Officer from
January 1994. He has also been a director
of Recticel s.a. since February 1993. Mr.
Cogan served as Chairman and a director of
other companies formerly owned by Trace,
including General Felt Industries, Inc.,
Knoll International, Inc. and Sheller-Globe
Corporation. Prior to forming Trace, he was
a senior partner at Cogan, Berlind, Weill &
Levitt and subsequently CBWL-Hayden Stone,
Inc., both predecessor companies to
4
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Lehman Brothers Inc. Additionally, Mr.
Cogan serves on the Board of Trustees of
The Museum of Modern Art, the Boston Latin
School and New York University Medical
Center and the Board of Directors of the
American Friends of the Israel Museum. He
also serves on several committees of
Harvard University.
SAMUEL X. DIFEO Samuel X. DiFeo, 49, has served as
President and Chief Operating President and Chief Operating Officer and
Officer of the Company as a director of the Company since January
1998 and served as Executive Vice President
of certain subsidiaries of the Company, the
assets of which were formerly owned by Mr.
DiFeo and certain members of his family
(the "DiFeo Group"), from October 1992 to
January 1998. Prior to the Company's
acquisition of the DiFeo Group, Mr. DiFeo
co-managed the operations of the DiFeo
Group from 1972.
CLASS II DIRECTORS
JULES B. KROLL Jules B. Kroll, 57, has served as a
Chairman and Chief Executive director of the Company since December
Officer of The Kroll-O'Gara 1993. He has served as Chairman and Chief
Company. Executive Officer of The Kroll-O'Gara
Company ("Kroll-O'Gara"), an international
corporate investigation and consulting
firm, since December 1997. Prior thereto,
Mr. Kroll served as Chairman of Kroll
Associates, a predecessor company to
Kroll-O'Gara. Mr. Kroll is also a director
of Presidential Life Corporation.
ROBERT H. NELSON Robert H. Nelson, 53, has served as a
Executive Vice President - director of the Company since January 1996
Operations of the Company and and as Executive Vice President -
Senior Vice President, Chief Operations of the Company since January
Financial Officer and Chief 1997. He has also served as Vice Chairman
Operating Officer of Trace of United Auto Finance, Inc. since March
International Holdings, Inc. 1996, Chief Financial Officer of Trace
since 1987 and Senior Vice President, Chief
Operating Officer and a director of Trace
since 1994.
RICHARD SINKFIELD Richard Sinkfield, 56, has served as a
Senior Partner with the law director of the Company since December 1993
firm of Rogers & Hardin. and served as Executive Vice President and
Chief Administrative Officer of the Company
from July 1997 to February 1999. He is a
Senior Partner with the law firm of Rogers
& Hardin in Atlanta, Georgia, which he
joined in 1976. Mr. Sinkfield is also a
director of Weyerhaeuser Company.
Mr. Sinkfield resigned as a director
effective April 30, 1999.
EXECUTIVE OFFICERS
Executive officers are elected by the Board of Directors and hold office until
their successors have been duly elected and qualified or until their earlier
resignation or removal from office. A brief biography of each executive officer
of the Company as of March 31, 1999 is provided below (other than Messrs.
Cogan, DiFeo and Nelson, whose biographies are set forth above).
Philip N. Smith, Jr., 56, served as Vice President, Secretary and General
Counsel of the Company from June 1996 until August 1997 and as Senior Vice
President and General Counsel since August 1997. Mr. Smith has also served as
Vice President or Senior Vice President and General Counsel of Trace since
January 1988 and as Vice President or Senior Vice President, Secretary and
General Counsel of Foamex since October 1993. Prior to joining such companies,
he was the sole stockholder of a professional corporation that was a partner of
the law firm of Akin, Gump, Strauss, Hauer & Feld, LLP.
5
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Karl H. Winters, 40, served as Vice President and Treasurer of the Company from
March 1997 and has served as Executive Vice President and Chief Financial
Officer of the Company since August 1997. He currently serves as Vice President
- -- Finance of Trace, which he joined in September 1993. Prior thereto, Mr.
Winters served as a senior audit manager for Coopers & Lybrand LLP (a
predecessor to PricewaterhouseCoopers LLP), an accounting, financial advisory
services and management consulting firm, which he joined in 1983.
James R. Davidson, 53, served as Senior Vice President -- Finance of the
Company from February 1997 and has served as Executive Vice President --
Accounting and Treasurer of the Company since August 1997. Prior to joining the
Company, Mr. Davidson served as an audit partner for Ernst & Young LLP, an
accounting, financial advisory services and management consulting firm, which
he joined in 1973.
ITEM 11. EXECUTIVE COMPENSATION
The following table contains information concerning annual and long-term
compensation of each individual who served as chief executive officer during
Fiscal 1998 and each of the other four most highly compensated executive
officers of the Company who were serving as executive officers at the end of
Fiscal 1998 (the "Named Executive Officers") for services rendered in all
capacities during the fiscal years 1998, 1997 and 1996.
SUMMARY COMPENSATION TABLE
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LONG TERM
ANNUAL COMPENSATION COMPENSATION
--------------------- ------------
SECURITIES
NAME AND UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION ($)
- ------------------ ---- --------- -------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Marshall S. Cogan 1998 763,141 ---- 200,000 ----
Chairman of the Board 1997 663,440 ---- ---- ----
and Chief Executive Officer 1996 ---- ---- 100,000 ----
Samuel X. DiFeo 1998 720,000 ---- 100,000 ----
President and Chief 1997 720,000 ---- 20,000 ----
Operating Officer 1996 203,600 303,682 41,267 ----
James R. Davidson 1998 300,000 50,000 10,000 225,000 (1)
Executive Vice President-- 1997 230,191 200,000 20,000 ----
Accounting and Treasurer 1996 ---- ---- ---- ----
Robert H. Nelson 1998 475,000 ---- 30,000 ----
Executive Vice President-- 1997 388,865 100,000 ---- ----
Operations 1996 ---- ---- 34,000 ----
Richard Sinkfield 1998 691,923 ---- ---- ----
Executive Vice President-- 1997 200,000 ---- 100,000 ----
Administration 1996 ---- ---- ---- ----
</TABLE>
- -----------------
(1) Represents the settlement of an obligation relating to Mr. Davidson's
original employment with the Company.
6
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STOCK OPTION GRANTS
The following table sets forth information concerning individual grants of
options to purchase Common Stock made to the Named Executive Officers during
Fiscal 1998.
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<CAPTION>
PERCENT OF
TOTAL POTENTIAL REALIZABLE VALUE AT
NUMBER OF OPTIONS ASSUMED ANNUAL RATES OF
SECURITIES GRANTED TO EXERCISE STOCK PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES OR BASE OPTION TERM (1) (2)
OPTIONS IN FISCAL PRICE EXPIRATION -------------------------------
NAME GRANTED YEAR 1998 ($/SHARE) DATE 5% ($) 10%($)
- ---- ----------- ---------- ----------- ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Marshall S. Cogan 200,000 (3) 40.62 17.50 4/13/08 -- 1,266,000
Samuel X. DiFeo 100,000 (3) 20.31 17.50 4/13/08 -- 633,000
James R. Davidson 10,000 (3) 2.03 17.50 4/13/08 -- 63,300
Robert H. Nelson 30,000 (3) 6.09 17.50 4/13/08 -- 189,900
Richard Sinkfield -- (4) -- -- -- -- --
</TABLE>
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(1) Amounts reflect certain assumed rates of appreciation set forth in the
Commission's executive compensation disclosure rules. Actual gains, if
any, on stock option exercises will depend on future performance of the
Common Stock. No assurance can be made that the amounts reflected in these
columns will be achieved. The values in these columns assume that the fair
market value on the date of grant of each option was equal to the exercise
price thereof.
(2) Based on the closing market price of the Common Stock on December 31, 1998
of $9 3/16.
(3) Options were granted on April 13, 1998 and vest and become exercisable in
five equal annual installments beginning on April 13, 1999.
(4) Mr. Sinkfield was not granted any options during Fiscal 1998.
STOCK OPTION EXERCISES AND HOLDINGS
The following table sets forth information concerning options to purchase
Common Stock held by the Named Executive Officers on December 31, 1998. No
options were exercised by Named Executive Officers during Fiscal 1998.
AGGREGATED OPTION EXERCISES IN FISCAL 1998 AND FY-END OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR-END AT FISCAL YEAR-END
(#) (1) ($) (2)
EXERCISABLE/ EXERCISABLE/
NAME UNEXERCISABLE UNEXERCISABLE
---- ------------- -------------
Marshall S. Cogan --/200,000 --/--
Samuel X. DiFeo (3) 45,267/236,000 --/--
James R. Davidson 4,000/26,000 --/--
Robert H. Nelson 34,000/30,000 --/--
Richard Sinkfield 20,000/80,000 --/--
- -----------------
(1) Except as otherwise noted, these options are for Common Stock of the
Company and were granted pursuant to the Stock Option Plan.
(2) The closing price of the Company's Common Stock on December 31, 1998 was
$9 3/16.
(3) 21,267 of Mr. DiFeo's exercisable options were not granted pursuant to the
Company's Stock Option Plan.
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COMPENSATION OF DIRECTORS
The Company has a compensation plan (the "Non-Employee Director Compensation
Plan") to provide compensation to the directors of the Company who are not paid
employees of the Company (the "Outside Directors"). Pursuant to the
Non-Employee Director Compensation Plan, each Outside Director receives an
annual retainer of $15,000, a $1,000 fee for each meeting of the Board of
Directors attended in person, $750 for each meeting of a committee of the Board
of Directors attended in person and $500 for each such meeting participated in
by telephone. These fees are payable at the option of each Outside Director in
cash or in Common Stock based on the market price on the date of issuance. All
directors are entitled to reimbursement for their reasonable out-of-pocket
expenses in connection with their travel to and attendance at meetings of the
Board of Directors or committees thereof. As of December 31, 1998, there were
four Outside Directors of the Company and three employee directors. In
accordance with the internal policies of their employers, certain directors
assign their director compensation to the organizations that employ them.
Directors who are also employees of the Company or its subsidiaries receive no
cash compensation for serving as Directors or as members of Board committees.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee is comprised of Marshall S. Cogan, who
serves as its Chairman, Michael R. Eisenson, John J. Hannan and Robert H.
Nelson. Mr. Cogan is also Chairman of the Board and Chief Executive Officer of
the Company and Mr. Nelson is Executive Vice President - Operations of the
Company. For a discussion of certain arrangements between the Company and Mr.
Cogan and Mr. Nelson, see "Recent Developments" and "Employment Contracts and
Termination of Employment and Change-in-Control Arrangements" in this Form
10-K/A. In addition, Mr. Cogan is Chairman of the Board and Chief Executive
Officer of Trace and Mr. Nelson is Senior Vice President, Chief Financial
Officer and Chief Operating Officer of Trace. For a discussion of certain
transactions between the Company and Trace, see "Certain Relationships and
Related Transactions" in this Form 10-K/A.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Board of Directors has made arrangements with James R. Davidson and Robert
H. Nelson to continue their salary payments after termination of their
employment with the Company (other than for cause) if such termination occurs
within one year following a change in control of the Company. Mr. Davidson's
salary will continue for a period of 18 months and Mr. Nelson's salary will
continue for a period of 12 months. Neither Mr. Davidson nor Mr. Nelson may
compete with the Company during the term of their respective arrangements.
The Board of Directors has made an arrangement with Samuel X. DiFeo pursuant to
which, if Mr. DiFeo is terminated (other than for cause) from his position as
President and Chief Operating Officer of the Company within one year following
a change in control, Mr. DiFeo will be retained by the Company as a consultant
for a period of two years (extendible for an additional year at the Company's
option) for compensation equal to $400,000 per annum. Mr. DiFeo may not compete
with the Company during the term of his arrangement.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth certain information, as of April 23, 1999,
regarding the beneficial ownership of Common Stock by (i) each stockholder who
is known by the Company to own more than 5% of the outstanding shares of Common
Stock, (ii) each director, (iii) each Named Executive Officer and (iv) all
directors and executive officers as a group. In the case of persons other than
directors and executive officers of the Company, such information is based on
statements filed with the Commission pursuant to Sections 13(d) and 13(g) of
the Securities Exchange Act of 1934, as amended.
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<CAPTION>
SHARES BENEFICIALLY OWNED
-------------------------
BENEFICIAL OWNER NUMBER(1) PERCENT(1)
- ---------------- --------- -------
<S> <C> <C>
Trace International Holdings, Inc. 4,016,110 18.9
375 Park Avenue
New York, New York 10152
Aeneas Venture Corporation 2,843,656 13.4
(an affiliate of Charlesbank)
600 Atlantic Avenue
Boston, Massachusetts 02210
AIF II, L.P. 1,843,656 8.7
c/o Apollo Advisors, L.P.
Two Manhattanville Road
Purchase, New York 10577
Marshall S. Cogan (2) 4,122,110 19.4
Samuel X. DiFeo (3) 188,167 *
Richard Sinkfield (4) 51,300 *
Robert H. Nelson (5) 42,000 *
James R. Davidson (6) 12,000 *
Michael R. Eisenson (7) 2,843,656 13.4
John J. Hannan (8) 1,843,656 8.7
Jules B. Kroll 104,474 *
All directors and executive officers,
without duplication (10 persons) (2) (3) (4) (5) (6) (7) (8) 9,240,363 43.4
- -------------------------------------------------------------------------------------------
</TABLE>
* Less than 1%.
(1) Pursuant to the regulations of the Commission, shares are deemed to be
"beneficially owned" by a person if such person directly or indirectly has
or shares the power to vote or dispose of such shares, whether or not such
person has any pecuniary interest in such shares, or the right to acquire
the power to vote or dispose of such shares within 60 days, including any
right to acquire through the exercise of any option, warrant or right.
Percentages are based on 21, 289,619 shares of Common Stock, the number of
shares of Common Stock outstanding as of April 23, 1999.
(2) Includes 40,000 shares issuable upon exercise of options that are vested
and exercisable within 60 days, 4,016,110 shares held by Trace and 1,000
shares held by Mr. Cogan's wife. Mr. Cogan disclaims beneficial ownership
of all shares held by Trace, or his wife.
(3) Includes 69,267 shares issuable upon exercise of options that are vested
and exercisable within 60 days and 12,700 shares held by Mr. DiFeo's sons.
Mr. DiFeo disclaims beneficial ownership of all shares held by his sons.
(4) Includes 40,000 shares issuable upon exercise of options that are vested
and exercisable within 60 days and 200 shares held by Mr. Sinkfield's
wife. Mr. Sinkfield disclaims beneficial ownership of all shares held by
his wife.
(5) Includes 40,000 shares issuable upon exercise of options that are vested
and exercisable within 60 days.
(6) Includes 10,000 shares issuable upon exercise of options that are vested
and exercisable within 60 days and 500 shares held by Mr. Davidson's wife.
Mr. Davidson disclaims beneficial ownership of all shares held by his
wife.
(7) Represents the shares held by Aeneas. Mr. Eisenson is the Managing
Director and Chief Executive Officer of Charlesbank, the investment
advisor of Aeneas. Mr. Eisenson disclaims beneficial ownership of all
shares held by Aeneas.
(8) Represents the shares held by AIF. Mr. Hannan is a director of Apollo
Capital Management, Inc., which is the general partner of Apollo Advisors,
L.P., which is the managing general partner of AIF. Mr. Hannan disclaims
beneficial ownership of all shares held by AIF.
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For a discussion of certain arrangements known to the Company which may at a
subsequent date result in a change in control of the Company, see "Recent
Developments" in this Form 10-K/A.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Richard Sinkfield, Director until his resignation effective April 30, 1999 and
former Executive Vice President - Administration of the Company, is a member of
the law firm of Rogers & Hardin, which represents the Company in connection with
various business transactions.
Pursuant to stock purchase agreements dated October 15, 1993 (as amended, the
"Equity Facility") among the Company and the investors named therein (the
"Initial Stockholders"), the Initial Stockholders purchased an aggregate of
8,504,750 shares of Common Stock in multiple closings between 1993 and 1996 and
were granted registration rights in respect of such shares. Such registration
rights also apply to an additional 306,346 shares of Common Stock subsequently
purchased by the Initial Stockholders and to 10,000 shares of Common Stock held
by Richard Sinkfield. Among the Initial Stockholders are Carl Spielvogel,
former Chairman of the Board and Chief Executive Officer of the Company, Jules
B. Kroll, a director of the Company, Trace, Aeneas and AIF. In January 1997,
Trace was also granted the right, subject to certain conditions, to have its
shares of Common Stock registered in connection with a pledge of such shares to
a lender. In December 1997, the Company registered shares of Common Stock on a
"shelf" registration statement on behalf of its stockholders who have
registration rights, including several Initial Stockholders.
From time to time, the Company has paid and/or received fees from Trace and its
affiliates for services rendered in the normal course of business. These
transactions reflect the providers' cost or an amount mutually agreed upon by
both parties. It is the Company's belief that the payments relating to these
transactions are on terms at least as favorable as those which could be
obtained from an unrelated third party. During 1998, the Company incurred $0.3
million in fees payable to Trace for such services.
Pursuant to an agreement effective as of January 1, 1997, the Company's
exposure with respect to the majority of the extended service contracts sold by
United Auto Care, Inc. ("UAC"), a wholly owned subsidiary of the Company,
during the period from January 1, 1997 through October 31, 1998, were assumed
by Trace and Alpha Automotive, Inc. ("Alpha"), a wholly owned subsidiary of
Trace, in exchange for certain fees. During the period covered by the
agreement, the Company remitted approximately $7.7 million to Alpha. Such
remittances reflect approximately $10.1 million in fees for the assumption of
obligations with respect to the cost of future repairs under the terms of the
approximately 51,000 warranty and extended service contracts sold by UAC
between January 1, 1997 and October 31, 1998, offset by approximately $2.4
million of claims payments made by the Company relating to such contracts. The
Company has been informed by Trace and Alpha that they are in the process of
evaluating their ability to meet their obligations with respect to such
warranty and extended service contracts. As a result of the uncertainty about
Trace and Alpha's ability to perform their contractual obligations, the Company
has entered into an insurance agreement with Virginia Surety Company, Inc.
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("Virginia Surety") and certain of its affiliates. Virginia Surety is a
subsidiary of Aon Corporation, an insurance services holding company. Under the
terms of the agreement, affiliates of Virginia Surety have agreed to assume the
repair obligations relating to the 51,000 warranty and extended service
contracts in exchange for a fixed premium payable over time. During 1998, the
Company recorded a $12.6 million pre-tax charge, which represents the estimated
present value of those premium payments. The Company has no further financial
obligations related to these contracts other than to make the specified premium
payments. Trace and Alpha will remain liable with respect to warranty or
extended service contracts sold prior to November 1, 1998. Future recoveries
from Trace and Alpha will reduce the cost of the Virginia Surety insurance
agreement.
The Company is the tenant under a number of non-cancelable lease agreements
with Mr. DiFeo and members of his family. The Company believes all such leases
are on terms no less favorable to the Company than would be obtained through
arm's-length negotiations with unaffiliated third parties.
The Company has entered into severance arrangements with James R. Davidson,
Robert H. Nelson and Samuel X. DiFeo which are activated in the event of
termination of employment (other than for cause) within one year following a
change in control of the Company. See "Employment Contracts and Termination of
Employment and Change-in-Control Arrangements" in this Form 10-K/A.
The Company, Aeneas, AIF, Trace, Marshall S. Cogan and the Purchasers have
entered into a number of agreements relating to the sale by the Company of its
Preferred Stock and Warrants to two entities formed by PCP. See "Recent
Developments" in this Form 10-K/A.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, in New York, New
York on April 30, 1999.
UNITED AUTO GROUP, INC.
By: /s/ Marshall S. Cogan
-----------------------------
Marshall S. Cogan
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on its behalf by the
registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Marshall S. Cogan Chairman of the Board and Chief Executive April 30, 1999
- --------------------------- Officer (Principal Executive Officer)
Marshall S. Cogan
/s/ Samuel X. DiFeo President and Chief Operating Officer April 30, 1999
- --------------------------- and Director
Samuel X. DiFeo
/s/ Karl H. Winters Executive Vice President and April 30, 1999
- --------------------------- Chief Financial Officer
Karl H. Winters (Principal Financial Officer)
/s/ James R. Davidson Executive Vice President - Accounting April 30, 1999
- --------------------------- and Treasurer
James R. Davidson (Principal Accounting Officer)
/s/ Robert H. Nelson Executive Vice President - Operations April 30, 1999
- --------------------------- and Director
Robert H. Nelson
/s/ Michael R. Eisenson Director April 30, 1999
- -----------------------
Michael R. Eisenson
/s/ John J. Hannan Director April 30, 1999
- ---------------------------
John J. Hannan
/s/ Jules B. Kroll Director April 30, 1999
- ---------------------------
Jules B. Kroll
</TABLE>
12
