10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2009

o 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

Penske Automotive Group, Inc.

(Exact name of registrant as specified in its charter)

Delaware	22-3086739
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer
	Identification No.)
2555 Telegraph Road	48302-0954
Bloomfield Hills, Michigan	(Zip Code)
(Address of principal executive offices)

Registrant’s telephone number, including area code (248) 648-2500

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Each Exchange on Which Registered
Voting Common Stock, par value $0.0001 per share	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes o No þ

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 þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

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. þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. (Check one):

Large accelerated filer þ Accelerated filer o Non-accelerated filer o Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

The aggregate market value of the voting common stock held by non-affiliates as of June 30, 2009 was $634,390,781. As of February 18, 2010, there were 92,139,797 shares of voting common stock outstanding.

Documents Incorporated by Reference

Certain portions, as expressly described in this report, of the registrant’s proxy statement for the 2010 Annual Meeting of the Stockholders to be held May 5, 2010 are incorporated by reference into Part III, Items 10-14.

TABLE OF CONTENTS

Items	Page
PART I
1. Business		1
1A. Risk Factors		16
1B. Unresolved Staff Comments		26
2. Properties		26
3. Legal Proceedings		26
4. Submission of Matters to a Vote of Security Holders		26
PART II
5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		27
6. Selected Financial Data		29
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations		30
7A. Quantitative and Qualitative Disclosures About Market Risk		50
8. Financial Statements and Supplementary Data		50
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		50
9A. Controls and Procedures		51
9B. Other Information		51
PART III
10. Directors and Executive Officers and Corporate Governance		51
11. Executive Compensation		51
12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		51
13. Certain Relationships and Related Transactions, and Director Independence		51
14. Principal Accountant Fees and Services		51
PART IV
15. Exhibits and Financial Statement Schedules		51
Exhibit 4.1.2
Exhibit 4.2.2
Exhibit 10.10
Exhibit 10.12
Exhibit 12
Exhibit 21
Exhibit 23.1
Exhibit 23.2
Exhibit 31.1
Exhibit 31.2
Exhibit 32

PART I

Item 1. Business

We are the second largest automotive retailer headquartered in the U.S. as measured by total revenues. As of December 31, 2009, we owned and operated 158 franchises in the U.S. and 148 franchises outside of the U.S., primarily in the U.K. We offer a full range of vehicle brands with 95% of our total retail revenue in 2009 generated from brands of non-U.S. based manufacturers, and 65% generated from premium brands, such as Audi, BMW, Cadillac and Porsche. Each of our dealerships offers a wide selection of new and used vehicles for sale. In addition to selling new and used vehicles, we generate higher-margin revenue at each of our dealerships through maintenance and repair services and the sale and placement of higher-margin products, such as third party finance and insurance products, third-party extended service contracts and replacement and aftermarket automotive products. We are also diversified geographically, with 63% of our total revenues in 2009 generated by operations in the U.S. and Puerto Rico and 37% generated from our operations outside the U.S. (predominately in the U.K.).

We are also, through smart USA Distributor, LLC (“smart USA”), a wholly-owned subsidiary, the exclusive distributor of the smart fortwo vehicle in the U.S. and Puerto Rico. The smart fortwo is manufactured by Mercedes-Benz Cars and is a Daimler brand. This technologically advanced vehicle achieves more than 40 miles per gallon on the highway and is an ultra-low emissions vehicle as certified by the State of California Air Resources Board. As of December 31, 2009, smart USA had certified a network of more than 75 smart dealerships, nine of which are owned and operated by us. The smart fortwo offers five different versions, the pure, passion coupe, passion cabriolet, BRABUS coupe and BRABUS cabriolet, with base prices ranging from $11,990 to $20,990.

In June 2008, we acquired a 9.0% limited partnership interest in Penske Truck Leasing Co., L.P. (“PTL”), a leading global transportation services provider, from subsidiaries of General Electric Capital Corporation (collectively, “GE Capital”). PTL operates and maintains more than 200,000 vehicles and serves customers in North America, South America, Europe and Asia. Product lines include full-service leasing, contract maintenance, commercial and consumer truck rental and logistics services, including, transportation and distribution center management and supply chain management. The general partner of PTL is Penske Truck Leasing Corporation, a wholly-owned subsidiary of Penske Corporation, which, together with other wholly-owned subsidiaries of Penske Corporation, owns 41.1% of PTL. The remaining 49.9% of PTL is owned by GE Capital.

We believe our diversified income streams may mitigate the historical cyclicality found in some elements of the automotive sector. Revenues from higher margin service and parts sales are typically less cyclical than retail vehicle sales, and generate the largest part of our gross profit. The following graphic shows the percentage of our retail revenues by product area and their respective contribution to our overall gross profit in 2009:

Outlook

During 2009, there has been continued weakness in consumer confidence and spending in the markets in which we operate, which we believe has resulted in reduced customer traffic in our dealerships. While we have experienced increased vehicle sales and customer traffic in recent quarters, we expect our business to remain significantly impacted by difficult economic conditions in 2010. For a more detailed discussion of our financial and operating results, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

1

Long-Term Business Strategy

We believe offering our customers superior customer service in a premium location fosters a long-term relationship, which helps generate repeat and referral business, particularly in our higher-margin service and parts business. We believe our focus on developing a loyal customer base has helped generate incremental vehicle and service and parts sales. In addition, our large number of dealerships, geographically concentrated by region, allows us the opportunity to achieve cost savings and implement best practices. In addition, although we have reduced acquisition and facility investment in response to recent economic conditions, we remain committed to our long-term strategy to sell and service outstanding vehicle brands in premium facilities.

Offer Outstanding Brands in Premium Facilities

We have the highest percentage of revenues from foreign and luxury brands among the U.S. based publicly-traded automotive retailers. Since 1999, foreign brands representing 85% of our U.S. revenue (Toyota/Lexus, Honda/Acura, BMW/MINI, Mercedes-Benz, Audi and Nissan/Infiniti) have increased their U.S. market share by more than 80%. We believe luxury and foreign brands will continue to offer us the opportunity to generate same-store growth, including higher margin service and parts sales. Our revenue mix consists of 65% related to premium brands, 30% related to volume foreign brands, and 5% relating to brands of U.S. based manufacturers.

The following chart reflects our percentage of total revenues by brand in 2009:

We sell and service outstanding automotive brands in our world-class facilities, which are located in attractive geographic markets. We believe offering these brands in world-class facilities promotes repeat and referral business, particularly in our higher margin service and parts operations. Where advantageous, we attempt to aggregate our dealerships in a campus setting in order to build a destination location for our customers, which we believe helps to drive increased customer traffic to each of the brands at the location. This strategy also creates an opportunity to reduce personnel expenses, consolidate advertising and administrative expenses and leverage operating expenses over a larger base of dealerships. Our dealerships have generally achieved new unit vehicle sales that are significantly higher than industry averages for the brands we sell.

2

The following is a list of our larger dealership campuses or groups:

					2009
					Revenue
Location	Square Feet		Service Bays		(millions)		Franchises
North Scottsdale, Arizona		450,000		253	$	376.8	Acura, Aston Martin, Audi, BMW, Bentley, Bugatti, Jaguar, Land Rover, Lamborghini, MINI, Porsche, Rolls-Royce, Volkswagen
San Diego, California		387,000		343	$	445.4	Acura, BMW, Lexus, Mercedes-Benz, Scion, smart, Toyota
Turnersville, New Jersey		303,000		177	$	304.7	Acura, Audi, BMW, Cadillac, Chevrolet, Honda, HUMMER, Hyundai, Nissan, Scion, Toyota
Inskip, Rhode Island		319,000		176	$	291.2	Acura, Audi, Bentley, BMW, Infiniti, Lexus, Mercedes-Benz, MINI, Nissan, Porsche, smart
Tyson’s Corner, Virginia		191,000		138	$	214.7	Audi, Aston Martin, Mercedes-Benz, Porsche, smart
Fayetteville, Arkansas		129,000		109	$	165.4	Acura, Chevrolet, Honda, HUMMER, Scion, Toyota

By way of example, our Scottsdale 101 Auto Mall features ten separate showrooms with approximately 450,000 square feet of facilities. Typically, customers may choose from an inventory of over 1,250 new and used vehicles, and have access to 253 service bays with the capacity to service approximately 1,000 vehicles per day. We will continue to evaluate other opportunities to aggregate our facilities to seek the benefits of a destination location.

Maintain Variable Cost Structure and Diversified Revenue Stream

A significant percentage of our operating expenses are variable, including sales compensation, floor plan interest expense (inventory-secured financing) and advertising, which we believe we can manage over time to reflect economic trends. Gross profit generated from our service and parts business absorbs a substantial portion of our fixed expenses, excluding salespersons’ compensation and advertising. In addition, recent experience has shown that demand for our higher-margin service and parts business is less affected by economic cycles than demand for new vehicles and that we have been able to manage certain costs (such as advertising and compensation expense) in response to general industry conditions.

We benefit from a diversified revenue mix because of the multiple revenue streams in a traditional automotive dealership (new vehicles, used vehicles, finance and insurance, and service and parts operations), revenue relating to the distribution of the smart fortwo vehicle, and returns relating to our joint venture investments. We believe this diversification mitigates the cyclicality that has historically impacted some elements of the automotive sector. We are further diversified within our retail automotive operations due to our brand mix and geographical dispersion. Our geographical dispersion includes dealerships in the U.S., Puerto Rico, and abroad, predominately in the U.K.

Diversification Outside the U.S.

One of the unique attributes of our operations versus our peers is our diversification outside the U.S. Approximately 37% of our consolidated revenue during 2009 was generated from operations located outside the U.S. and Puerto Rico, predominately in the U.K. According to industry data, the U.K. represented the fourth largest retail automotive market in Western Europe in 2009 with approximately 2.0 million new vehicle registrations. Our brand mix in the U.K. is predominantly premium. We believe that as of December 31, 2009, we were among the largest Audi, Bentley, BMW, Ferrari, Land Rover, Lexus, Mercedes-Benz, Maserati and Porsche dealers in the U.K. based on number of dealerships. Additionally, we operate a number of dealerships in Germany, some through joint ventures with experienced local partners, which sell and service Audi, BMW, Lexus, MINI, Porsche, Toyota, Volkswagen and various other premium brands.

smart Distributorship

smart USA, a wholly-owned subsidiary, is the exclusive distributor of the smart fortwo vehicle in U.S. and Puerto Rico. The smart fortwo is manufactured by Mercedes-Benz Cars and is a Daimler brand. As distributor, smart USA is responsible for maintaining a vehicle dealership network in the U.S. and Puerto Rico. As of December 31, 2009, smart USA had certified a network of more than 75 smart dealerships in 36 states, nine of which are owned and operated by us. smart USA wholesaled 27,052 smart fortwo vehicles in 2008 and 13,772 smart fortwo vehicles in 2009.

3

Investment in Penske Truck Leasing

In June 2008, we acquired a 9.0% limited partnership interest in PTL. PTL operates and maintains more than 200,000 vehicles and serves customers in North America, South America, Europe and Asia. Product lines include full-service leasing, contract maintenance, commercial and consumer truck rental and logistics services, including, transportation and distribution center management and supply chain management. We currently expect to receive annual pro-rata cash distributions of a portion of the partnership’s profits and to realize U.S. cash tax savings relating to tax attributes as a result of this investment.

Expand Revenues at Existing Locations and Increase Higher-Margin Businesses

We aim to increase same-store sales, with a particular focus on developing our higher-margin businesses such as finance, insurance and other product sales and service, parts and collision repair services.

Increase Same-Store Sales. We believe our emphasis on superior customer service and world class facilities will contribute to increases in same-store sales over time. We have added a significant number of incremental service bays in recent years in order to better accommodate our customers and further enhance our service and parts revenues.

Grow Finance, Insurance and Other Aftermarket Revenues. Each sale of a vehicle provides us the opportunity to assist in financing the sale of a vehicle, to sell the customer an extended service contract or other insurance product, and to sell aftermarket products, such as entertainment systems, security systems, satellite radios and protective coatings. In order to improve our finance and insurance business, we focus on enhancing and standardizing our salesperson training programs, strengthening our product offerings and standardizing our selling processes through a menu-driven product offering.

Expand Service and Parts and Collision Repair Revenues. In recent years, we have added a significant number of service bays at our dealerships in an effort to expand this higher-margin element of our business. Many of today’s vehicles are complex and require sophisticated equipment and specially trained technicians to perform certain services. Unlike independent service shops, our dealerships are authorized to perform this work under warranties provided by manufacturers. We believe that our brand mix and the complexity of today’s vehicles, combined with our focus on customer service and superior facilities, will contribute to increases in our service and parts revenue. We also operate 25 collision repair centers which are operated as an integral part of our dealership operations. As a result, the repair centers benefit from the dealerships’ repeat and referral business.

Continue Growth through Targeted Acquisitions

We believe that attractive acquisition opportunities continue to exist for well-capitalized dealership groups with experience in identifying, acquiring and integrating dealerships. The automotive retail market provides us with significant growth opportunities in each of the markets in which we operate. We generally seek to acquire dealerships with high-growth automotive brands in highly concentrated or growing demographic areas. We target larger dealership operations that will benefit from our management expertise, manufacturer relations and scale of operations, as well as smaller, single location dealerships that can be effectively integrated into our existing operations.

Strengthen Customer Loyalty

We strive to achieve and maintain superior levels of customer satisfaction by providing high-quality products and services to meet our customers’ needs. By offering outstanding brands in premium facilities, “one-stop” shopping convenience, competitive pricing and a well-trained and knowledgeable sales staff, we aim to forge lasting relationships with our customers, enhance our reputation in the community, and create the opportunity for significant repeat and referral business. We believe that customer loyalty contributes directly to increases in same-store sales. We monitor customer satisfaction data accumulated by manufacturers to track the performance of dealership operations, and use it as a factor in determining the compensation of general managers and sales and service personnel in our dealerships. We believe that our high customer satisfaction results have directly contributed to our operating results.

Leverage Scale and Implement “Best Practices”

We seek to build scale in many of the markets where we have dealership operations. Our desire is to reduce or eliminate redundant administrative costs such as accounting, information technology systems and other general administrative costs. In addition, we seek to leverage our industry knowledge and experience to foster communication and cooperation between like brand dealerships throughout our organization. Senior management and dealership management meet regularly to review the operating performance of our dealerships, examine industry trends and, where appropriate, implement specific operating improvements. Key financial information is discussed and compared to other dealerships across all markets. This frequent interaction facilitates implementation of successful strategies throughout the organization so that each of our dealerships can benefit from the successes of our other dealerships and the knowledge and experience of our senior management.

4

Industry Overview

In 2008, the majority of automotive retail sales in the U.S. were generated by the approximately 20,500 franchised dealerships, producing revenues of approximately $598.0 billion, including 57% from new vehicle sales, 29% from used vehicle sales and 14% from service and parts sales. Dealerships also offer a wide range of higher-margin products and services, including extended service contracts, financing arrangements and credit insurance. The National Automobile Dealers Association figures noted above include finance and insurance revenues within either new or used vehicle sales, as sales of these products are usually incremental to the sale of a vehicle. Germany and the U.K. represented the first and fourth largest European automotive retail markets in 2009, with new car registrations of 3.8 million and 2.0 million vehicles, respectively. In 2008, U.K. and German automotive sales exceeded $158.0 billion and $392.0 billion, respectively. Combined, the UK and German markets make up approximately 40% of the European market, based on new vehicle unit registrations.

The automotive retail industry in the U.S and Europe is highly fragmented and largely privately held. In the U.S., publicly held automotive retail groups account for less than 10% of total industry revenue. According to industry data, the number of U.S. franchised dealerships has declined from approximately 24,000 in 1990 to approximately 20,500 as of January 1, 2009. Although significant consolidation has already taken place, the industry remains highly fragmented, with more than 90% of the U.S. industry’s market share remaining in the hands of smaller regional and independent players. We believe that further consolidation in the industry is probable due to the significant capital requirements of maintaining manufacturer facility standards, the limited number of viable alternative exit strategies for dealership owners and the impact of the current economic environment on smaller less well capitalized dealership groups.

Generally, new vehicle unit sales are cyclical and, historically, fluctuations have been influenced by factors such as manufacturer incentives, interest rates, fuel prices, unemployment, inflation, weather, the level of personal discretionary spending, credit availability, consumer confidence and other general economic factors. However, from a profitability perspective, automotive retailers have historically been less vulnerable than automobile manufacturers to declines in new vehicle sales. We believe this may be due to the retailers’ more flexible expense structure (a significant portion of the automotive retail industry’s costs are variable, relating to sales personnel, advertising and inventory finance cost) and their diversified revenue stream. In addition, automobile manufacturers may offer various dealer incentives when sales are slow, which further increases the volatility in profitability for automobile manufacturers and may help to decrease volatility for automotive retailers.

Acquisitions

We routinely acquire and dispose of franchises. Our financial statements include the results of operations of acquired dealerships from the date of acquisition. The following table sets forth information with respect to our current dealerships acquired or opened from January 2007 to December 31, 2009:

	Date Opened
Dealership	or Acquired	Location	Franchises
U.S.
Landers Ford Lincoln Mercury	01/07	Benton, Arkansas	Ford, Lincoln, Mercury
Lexus of Edison	03/07	Edison, NJ	Lexus
Round Rock Toyota-Scion	04/07	Round Rock, TX	Toyota, Scion
Round Rock Hyundai	04/07	Round Rock, TX	Hyundai
Round Rock Honda	04/07	Round Rock, TX	Honda
Inskip MINI	05/07	Warwick, RI	MINI
Royal Palm Toyota-Scion	01/08	Royal Palm, FL	Toyota, Scion
smart center Bedford	01/08	Bedford, OH	smart
smart center Bloomfield	01/08	Bloomfield Hills, MI	smart
smart center Chandler	01/08	Chandler, AZ	smart
smart center Fairfield	01/08	Fairfield, CT	smart
smart center Round Rock	01/08	Round Rock, TX	smart
smart center San Diego	01/08	San Diego, CA	smart
smart center Tyson’s Corner	01/08	Tyson's Corner, VA	smart
smart center Warwick	01/08	Warwick, RI	smart
Bingham Toyota	04/08	Clovis, CA	Toyota Scion

5

	Date Opened
Dealership	or Acquired	Location	Franchises
U.S. (continued)
Peter Pan BMW	07/08	San Mateo, CA	BMW
Pioneer Ford	03/09	Goodyear, AZ	Ford
Lamborghini Scottsdale	04/09	Phoenix, AZ	Lamborghini
Audi Turnersville	06/09	Turnersville, NJ	Audi
smart center Stevens Creek	06/09	Santa Clara, CA	smart
Outside the U.S.
Audi Leicester	06/07	Leicester, England	Audi
Audi Nottingham	06/07	Nottingham, England	Audi
Toyota World Solihull	09/07	West Midlands, England	Toyota
Maranello Ferrari Egham	10/07	Surrey, England	Ferrari, Maserati
Audi Derby	04/08	Derby, England	Audi
Bentley Leicester	05/08	Leicester, England	Bentley
Bentley Norwich	05/08	Norfolk, England	Bentley
Gatwick Honda	06/08	West Sussex, England	Honda
Penske Sportwagenzentrum	07/08	Mannheim, Germany	Porsche
Huddersfield Audi	12/08	West Yorkshire, England	Audi
Huddersfield SEAT	12/08	West Yorkshire, England	SEAT
Harrogate Volkswagen	12/08	West Yorkshire, England	Volkswagen
Huddersfield Volkswagen	12/08	West Yorkshire, England	Volkswagen
Leeds Volkswagen	12/08	West Yorkshire, England	Volkswagen
Porsche Centre Leicester	03/09	Leicester, England	Porsche
Porsche Centre Solihull	03/09	West Midlands, England	Porsche
Graypaul Birmingham	03/09	Worcestershire, England	Ferrari/Maserati
Guy Salmon Land Rover Bristol	09/09	Bristol, England	Land Rover

In 2009 and 2008, we disposed of 5 and 26 dealerships, respectively, that we believe were not integral to our strategy or operations. We expect to continue to pursue acquisitions and selected dispositions in the future.

Dealership Operations

Franchises. The following charts reflect our franchises by location and our dealership mix by franchise as of December 31, 2009:

Location	Franchises		Franchises	U.S.		Non-U.S.		Total
Arizona		21	Toyota/Lexus/Scion		39		13		52
Arkansas		14	BMW/MINI		12		30		42
California		22	Mercedes-Benz/smart		16		19		35
Connecticut		5	Honda/Acura		27		2		29
Florida		8	Chrysler/Jeep/Dodge		9		15		24
Georgia		4	Jaguar/Land Rover		2		19		21
Indiana		2	Audi		8		12		20
Michigan		7	Ferrari/Maserati		6		12		18
Minnesota		2	Ford/Mazda/Volvo		10		3		13
Nevada		2	Porsche		5		7		12
New Jersey		20	General Motors		9		—		9
New York		4	Bentley		2		5		7
Ohio		6	Nissan/Infiniti		7		—		7
Puerto Rico		15	Others		6		11		17
Rhode Island		11	Total		158		148		306
Tennessee		2
Texas		8
Virginia		5
Total U.S.		158
U.K.		139
Germany		9
Total Foreign		148
Total Worldwide		306

6

Management. Each dealership or group of dealerships has independent operational and financial management responsible for day-to-day operations. We believe experienced local managers are better qualified to make day-to-day decisions concerning the successful operation of a dealership and can be more responsive to our customers’ needs. We seek local dealership management that not only has experience in the automotive industry, but also is familiar with the local dealership’s market. We also have regional management that oversees operations at the individual dealerships and supports the dealerships operationally and administratively.

New Vehicle Retail Sales. In 2009, we sold 140,914 new vehicles which generated 53.0% of our retail revenue and 24.3% of our retail gross profit. We sell forty brands of domestic and import family, sports and premium cars, light trucks and sport utility vehicles in the U.S., Puerto Rico, the U.K. and Germany. New vehicles are typically acquired by dealerships directly from the manufacturer. We strive to maintain outstanding relations with the automotive manufacturers, based in part on our long-term presence in the automotive retail market, our commitment to providing premium facilities, the reputation of our management team and the consistent high sales volume from our dealerships. Our dealerships finance the purchase of most new vehicles from the manufacturers through floor plan financing provided by various manufacturers’ captive finance companies.

Used Vehicle Retail Sales. In 2009, we sold 102,457 used vehicles, which generated 29.5% of our retail revenue and 14.4% of our retail gross profit. We acquire used vehicles from various sources, including auctions open only to authorized new vehicle dealers, public auctions, trade-ins from consumers in connection with their purchase of a new vehicle from us and lease expirations or terminations. Vehicles returned at the end of a lease provide us with low mileage, late model vehicles for our used vehicle sales operations. We clean, repair and recondition all used vehicles we acquire for resale. We believe we may benefit from the opportunity to retain used vehicle retail customers as service and parts customers.

To improve customer confidence in our used vehicle inventory, each of our dealerships participates in all available manufacturer certification processes for used vehicles. If certification is obtained, the used vehicle owner is typically provided benefits and warranties similar to those offered to new vehicle owners by the applicable manufacturer. Several of our dealerships have implemented software tools which assist in procuring and selling used vehicles. Through our scale in many markets, we have also implemented closed-bid auctions that allow us to bring a large number of vehicles we do not intend to retail to a central market for other dealers or wholesalers to purchase. In the U.K., we also offer used vehicles for wholesale via an online auction. We believe these strategies have resulted in greater operating efficiency and helped to reduce costs associated with maintaining optimal inventories.

Vehicle Finance, Extended Service and Insurance Sales. Finance and insurance sales represented 2.5% of our retail revenue and 14.3% of our retail gross profit in 2009. At our customers’ option, our dealerships can arrange third-party financing or leasing for our customers’ vehicle purchases. We typically receive a portion of the cost of financing or leasing paid by the customer for each transaction as compensation. While these services are generally non-recourse to us, we are subject to chargebacks in certain circumstances, such as default under a financing arrangement or prepayment. These chargebacks vary by finance product but typically are limited to the fee income we receive absent a breach of our agreement with the third party finance or leasing company. We provide training to our finance and insurance personnel to help assure compliance with internal policies and procedures, as well as applicable state regulations. We also impose limits on the amount of revenue per transaction we may receive from certain finance products as part of our compliance efforts.

We also offer our customers various vehicle warranty and extended protection products, including extended service contracts, maintenance programs, guaranteed auto protection (known as “GAP,” this protection covers the shortfall between a customer’s loan balance and insurance payoff in the event of a casualty), lease “wear and tear” insurance and theft protection products. The extended service contracts and other products that our dealerships currently offer to customers are underwritten by independent third parties, including the vehicle manufacturers’ captive finance subsidiaries. Similar to finance transactions, we are subject to chargebacks relating to fees earned in connection with the sale of certain extended protection products. We also offer for sale other aftermarket products, including satellite radio service, cellular phones, security systems and protective coatings. We offer finance and insurance products using a “menu” process, which is designed to ensure that we offer our customers the complete range of finance, insurance, protection, and other aftermarket products in a transparent manner.

Service and Parts Sales. Service and parts sales represented 15.0% of our retail revenue and 47.0% of our retail gross profit in 2009. We generate service and parts sales in connection with warranty and non-warranty work performed at each of our dealerships. We believe our service and parts revenues benefit from our increased service capacity and the increasingly complex technology used in vehicles that makes it difficult for independent repair facilities to maintain and repair today’s automobiles.

7

A goal of each of our dealerships is to make each vehicle purchaser a customer of our service and parts department. Our dealerships keep detailed records of our customers’ maintenance and service histories, and many dealerships send reminders to customers when vehicles are due for periodic maintenance or service. Many of our dealerships have extended evening and weekend service hours for the convenience for our customers. We also operate 25 collision repair centers, each of which is operated as an integral part of our dealership operations.

Internet Presence. We believe the majority of our customers will consult the Internet for new and used automotive information. In order to attract customers and enhance our customer service, each of our dealerships maintains its own website. Our corporate website, www.penskeautomotive.com, provides a link to each of our dealership websites allowing consumers to source information and communicate directly with our dealerships locally. In the U.S. and U.K., all of our dealership websites are presented in common formats (except where otherwise required by manufacturers) which helps to minimize costs and provide a consistent image across dealerships. In addition, many automotive manufacturers’ websites provide links to our dealership websites and, in the U.K., manufacturers also provide a website for the dealership. Using our dealership websites, consumers can review our vehicle inventory and access detailed information relating to the purchase process, including photos, prices, promotions, specifications, reviews and tools to schedule service appointments. We believe these features make it easier for consumers to meet all of their automotive research needs.

smart USA. smart USA, a wholly-owned subsidiary, is the exclusive distributor of the smart fortwo vehicle in the U.S. and Puerto Rico and is responsible for maintaining a vehicle dealership network. smart USA generates revenue for each vehicle and part wholesaled to the smart USA certified network. In 2009, smart USA wholesaled 13,772 smart fortwo vehicles as well as various service parts and accessories, generating 1.9% of our consolidated revenue and 1.1% of our consolidated gross profit. In an effort to stimulate sales of the smart fortwo, smart USA and DCFS USA (Daimler Financial) enter into various marketing and leasing arrangements.

Non-U.S. Operations. Sytner Group, our wholly-owned U.K. subsidiary, is one of the leading retailers of premium vehicles in the U.K. As of December 31, 2009, Sytner operated 139 franchises, representing more than twenty brands. Revenues attributable to Sytner Group for the years ended December 31, 2009, 2008 and 2007 were $3.4 billion, $4.1 billion and $4.6 billion, respectively.

8

The following is a list of all of our dealerships as of December 31, 2009:

U.S. DEALERSHIPS

ARIZONA	Mazda of Escondido	Hudson Nissan
Acura North Scottsdale	Mercedes-Benz of San Diego	Hudson Toyota-Scion
Audi of Chandler	Peter Pan BMW	Hyundai of Turnersville
Audi North Scottsdale	Porsche of Stevens Creek	Lexus of Bridgewater
Bentley Scottsdale	smart center San Diego	Nissan of Turnersville
BMW North Scottsdale	smart center Stevens Creek	Toyota-Scion of Turnersville
Bugatti Scottsdale	CONNECTICUT	NEW YORK
Jaguar North Scottsdale	Audi of Fairfield	Honda of Nanuet
Lamborghini Scottsdale	Honda of Danbury	Mercedes-Benz of Nanuet
Land Rover North Scottsdale	Mercedes-Benz of Fairfield	Westbury Toyota-Scion
Lexus of Chandler	Porsche of Fairfield	OHIO
Mercedes-Benz of Chandler	smart center Fairfield	Honda of Mentor
MINI North Scottsdale	FLORIDA	Infiniti of Bedford
Pioneer Ford	Central Florida Toyota-Scion	Mercedes-Benz of Bedford
Porsche North Scottsdale	Royal Palm Mazda	smart center Bedford
Rolls-Royce Scottsdale	Palm Beach Toyota-Scion	Toyota-Scion of Bedford
Scottsdale Aston Martin	Royal Palm Toyota-Scion	RHODE ISLAND
Scottsdale Ferrari Maserati	Royal Palm Nissan	Inskip Acura
Scottsdale Lexus	GEORGIA	Inskip Audi
smart center Chandler	Atlanta Toyota-Scion	Inskip Autocenter (Mercedes-Benz)
Tempe Honda	Honda Mall of Georgia	Inskip Bentley Providence
Volkswagen North Scottsdale	United BMW of Gwinnett	Inskip BMW
ARKANSAS	United BMW of Roswell	Inskip Infiniti
Acura of Fayetteville	INDIANA	Inskip Lexus
Chevrolet/HUMMER of Fayetteville	Penske Chevrolet	Inskip MINI
Honda of Fayetteville	Penske Honda	Inskip Nissan
Landers Chevrolet HUMMER	MICHIGAN	Inskip Porsche
Landers Chrysler Jeep Dodge	Honda Bloomfield	smart center Warwick
Landers Ford Lincoln Mercury	Rinke Cadillac	TENNESSEE
Toyota-Scion of Fayetteville	Rinke Toyota-Scion	Wolfchase Toyota-Scion
CALIFORNIA	smart center Bloomfield	TEXAS
Acura of Escondido	Toyota-Scion of Waterford	BMW of Austin
Audi Escondido	MINNESOTA	Goodson Honda North
Audi Stevens Creek	Motorwerks BMW/MINI	Goodson Honda West
Bingham Toyota Scion	NEW JERSEY	Round Rock Honda
BMW of San Diego	Acura of Turnersville	Round Rock Hyundai
Capitol Honda	Audi Turnersville	Round Rock Toyota-Scion
Honda Mission Valley	BMW of Turnersville	smart center Round Rock
Honda North	Chevrolet HUMMER Cadillac of	VIRGINIA
Honda of Escondido	Turnersville	Aston Martin of Tysons Corner
Kearny Mesa Acura	BMW of Tenafly	Audi of Tysons Corner
Kearny Mesa Toyota-Scion	Lexus of Edison	Mercedes-Benz of Tysons Corner
Lexus Kearny Mesa	Ferrari Maserati of Central New Jersey	Porsche of Tysons Corner
Los Gatos Acura	Gateway Toyota-Scion	smart center Tysons Corner
Marin Honda	Honda of Turnersville

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NON-U.S. DEALERSHIPS

U.K.	Graypaul Nottingham	Porsche
Audi	Maranello Egham Ferrari/Maserati	Porsche Centre Edinburgh
Bradford Audi	Honda	Porsche Centre Glasgow
Derby Audi	Honda Gatwick	Porsche Centre Leicester
Harrogate Audi	Honda Redhill	Porsche Centre Mid-Sussex
Huddersfield Audi	Jaguar/Land Rover	Porsche Centre Silverstone
Leeds Audi	Guy Salmon Jaguar Coventry	Porsche Centre Solihull
Leicester Audi	Guy Salmon Jaguar/Land Rover Ascot	Rolls-Royce
Mayfair Audi	Guy Salmon Jaguar/Land Rover Gatwick	Rolls-Royce Motor Cars Manchester
Nottingham Audi	Guy Salmon Jaguar/Land Rover Maidstone	Rolls-Royce Motor Cars Sunningdale
Reading Audi	Guy Salmon Jaguar/Land Rover Thames	Saab
Slough Audi	Ditton	Oxford Saab
Wakefield Audi	Guy Salmon Jaguar Northampton	Toyota
West London Audi	Guy Salmon Jaguar Oxford	Toyota World Birmingham
Bentley	Guy Salmon Land Rover Bristol	Toyota World Bridgend
Bentley Birmingham	Guy Salmon Land Rover Coventry	Toyota World Bristol North
Bentley Edinburgh	Guy Salmon Land Rover Knutsford	Toyota World Bristol South
Bentley Leicester	Guy Salmon Land Rover Portsmouth	Toyota World Cardiff
Bentley Manchester	Guy Salmon Land Rover Sheffield	Toyota World Newport
BMW/MINI	Guy Salmon Land Rover Stockport	Toyota World Solihull
Sytner Birmingham	Guy Salmon Land Rover Stratford-upon-Avon	Toyota World Tamworth
Sytner Cardiff	Guy Salmon Land Rover Wakefield	Volkswagen
Sytner Chigwell	Lamborghini	SEAT Huddersfield
Sytner Coventry	Lamborghini Birmingham	VW Harrogate
Sytner Docklands	Lamborghini Edinburgh	VW Huddersfield
Sytner Harold Wood	Lexus	VW Leeds
Sytner High Wycombe	Lexus Birmingham	Volvo
Sytner Leicester	Lexus Bristol	Tollbar Warwick
Sytner Newport	Lexus Cardiff	GERMANY
Sytner Nottingham	Lexus Leicester	Penske Sportwagenzentrum
Sytner Oldbury	Lexus Milton Keynes	Tamsen, Bremen (Aston Martin, Bentley, Ferrari,
Sytner Sheffield	Mercedes-Benz/smart	Maserati)
Sytner Solihull	Mercedes-Benz of Bath	Tamsen, Hamburg (Aston Martin, Ferrari,
Sytner Sunningdale	Mercedes-Benz of Bedford	Lamborghini, Maserati)
Sytner Sutton	Mercedes-Benz of Carlisle	PUERTO RICO
Chrysler/Jeep/Dodge	Mercedes-Benz of Cheltenham and Gloucester	Lexus de San Juan
Kings Cheltenham & Gloucester	Mercedes-Benz of Newbury	Triangle Chrysler, Dodge, Jeep de Ponce
Kings Manchester	Mercedes-Benz of Northampton	Triangle Chrysler, Dodge, Jeep, Honda del Oeste
Kings Newcastle	Mercedes-Benz of Sunderland	Triangle Honda 65 de Infanteria
Kings Swindon	Mercedes-Benz of Swindon	Triangle Honda-Suzuki de Ponce
Kings Teesside	Mercedes-Benz of Weston-Super-Mare	Triangle Mazda de Ponce
Ferrari/Maserati	Mercedes-Benz/smart of Bristol	Triangle Nissan del Oeste
Ferrari Classic Parts	Mercedes-Benz/smart of Milton Keynes	Triangle Toyota-Scion de San Juan
Graypaul Birmingham	Mercedes-Benz/smart of Newcastle
Graypaul Edinburgh	Mercedes-Benz/smart of Teesside

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We also own 50% of the following dealerships:

GERMANY	U.S.
Aix Automobile (Toyota, Lexus)	Penske Wynn Ferrari Maserati (Nevada)
Audi Zentrum Aachen	MAX BMW Motorcycles (New Hampshire)
Autohaus Augsburg (Goeggingen) (BMW/MINI)	MAX BMW Motorcycles (New York)
Autohaus Augsburg (Lechhausen) (BMW)
Autohaus Augsburg (Stadtmitte) (MINI)
Autohaus Nix (Eschborn) (Toyota, Lexus)
Autohaus Krings (Volkswagen)
Autohaus Nix (Frankfurt) (Toyota)
Autohaus Nix (Offenbach) (Toyota, Lexus)
Autohaus Nix (Wachtersbach) (Toyota, Lexus)
Autohaus Piper (Volkswagen)
Autohaus Reisacher (Krumbach) (BMW, MINI)
Autohaus Reisacher (Memmingen) (BMW, MINI)
Autohaus Reisacher (Ulm) (BMW, MINI)
Autohaus Reisacher (Lundsburg) (BMW)
J-S Auto Park Stolberg (Volkswagen)
Lexus Forum Frankfort
TCD (Toyota)
Volkswagen Zentrum Aachen
Wolff & Meir (Volkswagen)
Zabka Automobile (Eschweiler) (Audi)
Zabka Automobile (Alsdorf) (Volkswagen)
Jacobs Automobile (Duren) (Volkswagen, Audi)
Jacobs Automobile (Geilenkirchen) (Volkswagen, Audi)

Management Information Systems

We consolidate financial, accounting and operational data received from our U.S. dealers through a private communications network. Dealership data is gathered and processed through individual dealer systems utilizing a common dealer management system licensed from a third party. Each dealership is allowed to tailor the operational capabilities of that system locally, but we require that they follow our standardized accounting procedures. Our U.S. network allows us to extract and aggregate information from the system in a consistent format to generate consolidating financial and operational data. The system also allows us to access detailed information for each dealership individually, as a group, or on a consolidated basis. Information we can access includes, among other things, inventory, cash, unit sales, the mix of new and used vehicle sales and sales of aftermarket products and services. Our ability to access this data allows us to continually analyze these dealerships’ results of operations and financial position so as to identify areas for improvement. Our technology and processes also enable us to quickly integrate dealerships or dealership groups we acquire in the U.S.

Our U.K. dealership financial, accounting and operational data is processed through a standard dealer management system licensed from a third party, except when otherwise required by the manufacturer. Financial and operational information is aggregated following U.S. policies and accounting requirements, and is reported in our U.S. reporting format to ensure consistency of results among our worldwide operations. Similar to the U.S., the U.K. technology and processes enable us to continually analyze these dealerships’ results of operations and financial position so as to identify areas for improvement and to quickly integrate dealerships or dealership groups we acquire in the U.K.

Marketing

Our advertising and marketing efforts are focused at the local market level, with the aim of building our retail vehicle business, as well as repeat sales and service business. We utilize many different media for our marketing activities, including newspapers, direct mail, magazines, television, radio and increasingly the Internet and other digital media. We also assist our local management in running special marketing events to generate sales. Automobile manufacturers supplement our local and regional advertising efforts through large advertising campaigns promoting their brands and promoting attractive financing packages and other incentive programs they may offer. We believe that in some instances our scale has enabled us to obtain favorable terms from suppliers and advertising media, and should enable us to realize continued cost savings in marketing. In an effort to realize increased efficiencies, we are focusing on common marketing metrics and business practices across our dealerships, as well as negotiating enterprise arrangements for targeted marketing resources.

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In an effort to stimulate interest in the smart fortwo vehicle and vehicle sales, smart USA promotes and advertises the smart fortwo through press releases, advertising, and principally through local campaigns and events such as sponsored “ride and drive” events. Increasingly, smart USA has used the Internet and other digital media to showcase and generate interest in the smart fortwo. In 2009, smart USA sponsored the “smart USA Advance Program” which gave dealers the ability to benefit from early adoption of the “cash for clunkers” governmental incentive, and has recently promoted several leasing incentives to facilitate customer acquisition of the smart fortwo.

Agreements with Vehicle Manufacturers

Each of our dealerships operates under separate franchise agreements with the manufacturers of each brand of vehicle sold at that dealership. These agreements may contain provisions and standards governing almost every aspect of the dealership, including ownership, management, personnel, training, maintenance of a minimum of working capital, net worth requirements, maintenance of minimum lines of credit, advertising and marketing activities, facilities, signs, products and services, maintenance of minimum amounts of insurance, achievement of minimum customer service standards and monthly financial reporting. Typically, the dealership principal and/or the owner of a dealership may not be changed without the manufacturer’s consent. In exchange for complying with these provisions and standards, we are granted the non-exclusive right to sell the manufacturer’s brand of vehicles and related parts and warranty services at our dealerships. The agreements also grant us a non-exclusive license to use each manufacturer’s trademarks, service marks and designs in connection with our sales and service of its brands at our dealerships.

Some of our franchise agreements expire after a specified period of time, ranging from one to six years. Manufacturers have generally not terminated our franchise agreements, and our franchise agreements with fixed terms have typically been renewed without substantial cost. We currently expect the manufacturers to renew all of our franchise agreements as they expire. In addition, certain agreements may also limit the total number of dealerships of that brand that we may own in a particular geographic area and, in some cases, limit the total number of their vehicles that we may sell as a percentage of a particular manufacturer’s overall sales. Manufacturers may also limit the ownership of stores in contiguous markets. To date, we have reached the limit of the number of Lexus dealerships we may own in the U.S., and we have reached certain geographical limitations with certain manufacturers in the U.S., such that without negotiated modifications to the agreements we cannot acquire additional franchises of those brands in certain U.S. markets. Geographical limitations have historically had little impact on our ability to execute on our acquisition strategy.

Many of these agreements also grant the manufacturer a security interest in the vehicles and/or parts sold by the manufacturer to the dealership, as well as other dealership assets, and permit the manufacturer to terminate or not renew the agreement for a variety of causes, including failure to adequately operate the dealership, insolvency or bankruptcy, impairment of the dealer’s reputation or financial standing, changes in the dealership’s management, owners or location without consent, sales of the dealership’s assets without consent, failure to maintain adequate working capital or floor plan financing, changes in the dealership’s financial or other condition, failure to submit required information to the manufacturer on a timely basis, failure to have any permit or license necessary to operate the dealership, and material breaches of other provisions of the agreement. In the U.S., these termination rights are subject to applicable state franchise laws that limit a manufacturer’s right to terminate a franchise. In the U.K., we operate without such local franchise law protection (see “Regulation” below).

Our agreements with manufacturers usually give the manufacturers the right, in some circumstances (including upon a merger, sale, or change of control of the company, or in some cases a material change in our business or capital structure), to acquire from us, at fair market value, the dealerships that sell the manufacturers’ brands. For example, our agreement with General Motors provides that, upon a proposed sale of 20% or more of our voting stock to any other person or entity (other than for passive investment) or another manufacturer, an extraordinary corporate transaction (such as a merger, reorganization or sale of a material amount of assets) or a change of control of our board of directors, General Motors has the right to acquire all assets, properties and business of any General Motors dealership owned by us for fair value. In addition, General Motors has a right of first refusal if we propose to sell any of our General Motors dealerships to a third party. Some of our agreements with other major manufacturers contain provisions similar to the General Motors provisions. Some of the agreements also prohibit us from pledging, or impose significant limitations on our ability to pledge, the capital stock of some of our subsidiaries to lenders.

We are also party to a distributor agreement with smart GmbH, pursuant to which we are the exclusive distributor of the smart fortwo in the U.S. and Puerto Rico. The agreement governs all aspects of our distribution rights, including sales and service activities, service and warranty terms, use of intellectual property, promotion and advertising provisions, pricing and payment terms, and indemnification requirements. The agreement expires on December 31, 2021, subject to early termination by either party subject to various conditions set forth in the agreement, including the right by smart GmbH to cancel the agreement in the event it elects to discontinue production or distribution of the fortwo or a successor model in the U.S. market, or in the event the Chairman (Mr. Penske) or President of smart USA is not participating in the smart distribution business (for any reason) and a replacement satisfactory to smart GmbH is not appointed within a reasonable period of time. The parties have agreed to the apportionment of various potential payments in connection with the termination of the smart distributorship (including obligations to smart dealers to repurchase vehicles and related expenses as outlined by our dealer agreement and state franchise laws — see “Regulation”) in the U.S. as outlined in the agreement.

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Competition

For new vehicle sales, we compete primarily with other franchised dealers in each of our marketing areas. We do not have any cost advantage in purchasing new vehicles from manufacturers, and typically we rely on our premium facilities, advertising and merchandising, management experience, sales expertise, service reputation and the location of our dealerships to compete for the sale of new vehicles. Each of our markets may include a number of well-capitalized competitors that also have extensive automobile dealership managerial experience and strong retail locations and facilities. In addition, we compete against dealerships owned by automotive manufacturers in some retail markets.

We compete with dealers that sell the same brands of new vehicles that we sell and with dealers that sell other brands of new vehicles that we do not represent in a particular market. Our new vehicle dealership competitors have franchise agreements with the various vehicle manufacturers and, as such, generally have access to new vehicles on the same terms as we do. Automotive dealers also face competition in the sale of new vehicles from on-line purchasing services and warehouse clubs. Due to lower overhead and sales costs, these companies may be willing to offer products at lower prices than franchised dealers.

For used vehicle sales, we compete with other franchised dealers, independent used vehicle dealers, automobile rental agencies, on-line purchasing services, private parties and used vehicle “superstores” for the procurement and resale of used vehicles.

We believe that the principal competitive factors in vehicle sales are the marketing campaigns conducted by manufacturers, the ability of dealerships to offer a wide selection of the most popular vehicles, the location of dealerships and the quality of customer experience. Other competitive factors include customer preference for particular brands of automobiles, pricing (including manufacturer rebates and other special offers) and warranties. We believe that our dealerships are competitive in all of these areas.

With respect to arranging or providing financing for our customers’ vehicle purchases, we compete with a broad range of financial institutions.

We compete with other franchised dealers to perform warranty repairs and with other automotive dealers, franchised and non-franchised service center chains, and independent garages for non-warranty repair and routine maintenance business. We compete with other automotive dealers, service stores and auto parts retailers in our parts operations. We believe that the principal competitive factors in parts and service sales are price, the use of factory-approved replacement parts, facility location, the familiarity with a manufacturer’s brands and models and the quality of customer service. A number of regional or national chains offer selected parts and services at prices that may be lower than our prices.

The automotive retail industry is currently served by franchised automotive dealerships, independent used vehicle dealerships and individual consumers who sell used vehicles in private transactions. Several other companies have established national or regional automotive retail chains. Additionally, vehicle manufacturers have historically engaged in the retail sale and service of vehicles, either independently or in conjunction with their franchised dealerships, and may do so on an expanded basis in the future, subject to various state laws that restrict or prohibit manufacturer ownership of dealerships.

We believe that a growing number of consumers are utilizing the Internet and other digital media, to differing degrees, in connection with the purchase of vehicles. Accordingly, we may face increased pressure from on-line automotive websites, including those developed by automobile manufacturers and other dealership groups. Consumers use the Internet and other digital media to compare prices for vehicles and related services, which may result in reduced margins for new vehicles, used vehicles and related services.

With respect to distribution of the smart fortwo, smart USA competes with all other manufacturers and distributors of vehicles sold in the U.S., and in particular those in the small compact and sub-compact segment. While this segment has historically represented a small portion of the total U.S. market, we expect increasing sales in the small vehicle segment in light of volatile gas prices and increasingly competitive offerings by other manufacturers in this segment (which may also affect smart fortwo’s current market share of this segment).

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Employees and Labor Relations

As of December 31, 2009, we employed approximately 13,950 people, approximately 500 of whom were covered by collective bargaining agreements with labor unions. We consider our relations with our employees to be satisfactory. Our policy is to motivate our key managers through, among other things, variable compensation programs tied principally to dealership profitability. Due to our reliance on vehicle manufacturers, we may be adversely affected by labor strikes or work stoppages at the manufacturers’ facilities.

Regulation

We operate in a highly regulated industry and a number of regulations affect our business of marketing, selling, financing and servicing automobiles. Under the laws of the jurisdictions in which we currently operate or into which we may expand, we typically must obtain a license in order to establish, operate or relocate a dealership or operate an automotive repair service. These laws also regulate our conduct of business, including our advertising, operating, financing, employment and sales practices. Other laws and regulations include franchise laws and regulations, environmental laws and regulations (see “Environmental Matters” below), laws and regulations applicable to new and used motor vehicle dealers, as well as privacy, identity theft prevention, wage-hour, anti-discrimination and other employment practices laws.

Our operations may also be subject to consumer protection laws. These laws typically require a manufacturer or dealer to replace a new vehicle or accept it for a full refund within a period of time after initial purchase if the vehicle does not conform to the manufacturer’s express warranties and the dealer or manufacturer, after a reasonable number of attempts, is unable to correct or repair the defect. Various laws also require various written disclosures to be provided on new vehicles, including mileage and pricing information.

Our financing activities with customers are subject to truth-in-lending, consumer leasing, equal credit opportunity and similar regulations, as well as, motor vehicle finance laws, installment finance laws, insurance laws, usury laws and other installment sales laws. Some jurisdictions regulate finance fees that may be paid as a result of vehicle sales. In recent years, private plaintiffs and state attorneys general in the U.S. have increased their scrutiny of advertising, sales, and finance and insurance activities in the sale and leasing of motor vehicles.

In the U.S., we benefit from the protection of numerous state dealer laws that generally provide that a manufacturer may not terminate or refuse to renew a franchise agreement unless it has first provided the dealer with written notice setting forth good cause and stating the grounds for termination or non-renewal. Some state dealer laws allow dealers to file protests or petitions or to attempt to comply with the manufacturer’s criteria within the notice period to avoid the termination or non-renewal. With respect to our smart distributorship, these franchise laws generally require that in the event of termination of a smart franchise, we are required to repurchase certain unsold inventories and provide other forms of termination assistance to the smart dealers.

Europe generally does not have these laws and, as a result, our European dealerships operate without these protections. In Europe, rules limit automotive manufacturers “block exemption” to certain anti-competitive rules in regards to establishing and maintaining a retail network. As a result, existing manufacturer authorized retailers are able to, subject to manufacturer facility requirements, relocate or add additional facilities throughout the European Union, offer multiple brands in the same facility, allow the operation of service facilities independent of new car sales facilities and ease restrictions on transfers of dealerships between existing franchisees within the European Union.

Environmental Matters

We are subject to a wide range of environmental laws and regulations, including those governing discharges into the air and water, the operation and removal of aboveground and underground storage tanks, the use, handling, storage and disposal of hazardous substances and other materials and the investigation and remediation of contamination. As with automotive dealerships generally, and service, parts and body shop operations in particular, our business involves the generation, use, handling and contracting for recycling or disposal of hazardous or toxic substances or wastes, including environmentally sensitive materials such as motor oil, filters, transmission fluid, antifreeze, refrigerant, waste paint and lacquer thinner, batteries, solvents, lubricants, degreasing agents, gasoline and diesel fuels. We have incurred, and will continue to incur, capital and operating expenditures and other costs in complying with such laws and regulations.

Our operations involving the management of hazardous and other environmentally sensitive materials are subject to numerous requirements. Our business also involves the operation of storage tanks containing such materials. Storage tanks are subject to periodic testing, containment, upgrading and removal under applicable law. Furthermore, investigation or remediation may be necessary in the event of leaks or other discharges from current or former underground or aboveground storage tanks. In addition, water quality protection programs govern certain discharges from some of our operations. Similarly, certain air emissions from our operations, such as auto body painting, may be subject to relevant laws. Various health and safety standards also apply to our operations.

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We may have liability in connection with materials that were sent to third-party recycling, treatment, and/or disposal facilities under the U.S. Comprehensive Environmental Response, Compensation and Liability Act and comparable statutes. These statutes impose liability for investigation and remediation of contamination without regard to fault or the legality of the conduct that contributed to the contamination. Responsible parties under these statutes may include the owner or operator of the site where the contamination occurred and companies that disposed or arranged for the disposal of the hazardous substances released at these sites.

An expanding trend in environmental regulation is to place more restrictions and limitations on activities that may affect the environment. Vehicle manufacturers are subject to federally mandated corporate average fuel economy standards, which will increase substantially as a result of legislation passed in 2007. Furthermore, in response to recent studies suggesting that emissions of carbon dioxide and certain other gases, referred to as “greenhouse gases,” may be contributing to warming of the Earth’s atmosphere, climate change-related legislation and policy changes to restrict greenhouse gas emissions are being considered at state and federal levels. Significant increases in fuel economy requirements or new federal or state restrictions on emissions of carbon dioxide that may be imposed on vehicles and automobile fuels in the U.S. could adversely affect demand for the vehicles that we sell.

We believe that we do not have any material environmental liabilities and that compliance with environmental laws and regulations will not, individually or in the aggregate, have a material adverse effect on our results of operations, financial condition or cash flows. However, soil and groundwater contamination is known to exist at certain of our current or former properties. Further, environmental laws and regulations are complex and subject to change. In addition, in connection with our acquisitions, it is possible that we will assume or become subject to new or unforeseen environmental costs or liabilities, some of which may be material. Compliance with current, amended, new or more stringent laws or regulations, stricter interpretations of existing laws or the future discovery of environmental conditions could require additional expenditures by us, and such expenditures could be material.

In an effort to improve our operating costs and be responsible in the area of environmentally sustainable practice, we are pursuing many measures with respect to the design and construction of our dealerships. As a result of our efforts, our smart USA dealerships located in Connecticut and Michigan have obtained Leadership in Energy and Environmental Design (LEED) certifications. The United States Green Building Council (USGBC), an internationally recognized nonprofit organization, awards the prestigious LEED certification to buildings that have achieved an outstanding rating in energy efficiency and resource conservation in five categories, consisting of sustainable sites, water efficiency, energy and the atmosphere, material resources, and indoor environmental quality.

Insurance

The automotive retail industry is subject to substantial risk of loss due to the significant concentration of property values at dealership locations, including vehicles and parts. In addition, we are exposed to other potential liabilities arising out of our operations, including claims by employees, customers or third parties for personal injury or property damage and potential fines and penalties in connection with alleged violations of regulatory requirements. As a result, we require significant levels of insurance covering a broad variety of risks.

We purchase insurance, including umbrella and excess insurance policies, subject to specified deductibles and significant loss retentions. The level of risk we retain may change in the future as insurance market conditions or other factors affecting the economics of purchasing insurance change. We are exposed to uninsured and underinsured losses that could have a material adverse effect on our results of operations, financial condition or cash flows. In certain instances, we post letters of credit to support our loss retentions and deductibles.

We, Penske Corporation, which is our largest stockholder, and certain affiliates have entered into a joint insurance agreement which provides that, with respect to any joint insurance (currently only our joint crime insurance policy), available coverage with respect to a loss shall be paid to each party per occurrence as stipulated in the policies. In the event of losses by us and Penske Corporation that exceed the limit of liability for any policy or policy period, the total policy proceeds will be allocated based on the ratio of premiums paid. For information regarding our relationship with Penske Corporation, see Part II — Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Related Party Transactions.”

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Seasonality

Our business is modestly seasonal overall. Our U.S. operations generally experience higher volumes of vehicle sales in the second and third quarters of each year due in part to consumer buying trends and the introduction of new vehicle models. Also, vehicle demand, and to a lesser extent demand for service and parts, is generally lower during the winter months than in other seasons, particularly in regions of the U.S. where dealerships may be subject to severe winters. Our U.K. operations generally experience higher volumes of vehicle sales in the first and third quarters of each year, due primarily to vehicle registration practices in the U.K.

Available Information

For selected financial information concerning our various operating and geographic segments, see Note 17 to our consolidated financial statements included in Item 8 of this report. Our Internet website address is www.penskeautomotive.com. Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to section 13(a) or 15(d) of the Exchange Act, are available free of charge through our website under the tab “Investor Relations” as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission. We also make available on our website copies of materials regarding our corporate governance policies and practices, including our Corporate Governance Guidelines; our Code of Business Ethics; and the charters relating to the committees of our Board of Directors. You may also obtain a printed copy of the foregoing materials by sending a written request to: Investor Relations, Penske Automotive Group, Inc., 2555 Telegraph Road, Bloomfield Hills, MI 48302 or by calling toll-free 1-866-715-528. The information on or linked to our website is not part of this document. We plan to disclose waivers, if any, for our executive officers or directors from our code of business ethics on our website. We are incorporated in the state of Delaware and began dealership operations in October 1992.

Item 1A. Risk Factors

Our business, financial condition, results of operations, cash flows, and prospects, and the prevailing market price and performance of our common stock, may be adversely affected by a number of factors, including the matters discussed below. Certain statements and information set forth in this Annual Report on Form 10-K, as well as other written or oral statements made from time to time by us or by our authorized officers on our behalf, constitute “forward-looking statements” within the meaning of the Federal Private Securities Litigation Reform Act of 1995. Words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “seeks,” “projects,” “will,” “would,” and similar expressions are intended to identify such forward-looking statements. We intend for our forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and we set forth this statement in order to comply with such safe harbor provisions. You should note that our forward-looking statements speak only as of the date of this Annual Report on Form 10-K or when made and we undertake no duty or obligation to update or revise our forward-looking statements, whether as a result of new information, future events, or otherwise. Although we believe that the expectations, plans, intentions, and projections reflected in our forward-looking statements are reasonable, such statements are subject to known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. The risks, uncertainties, and other factors that our stockholders and prospective investors should consider include, but are not limited to, the following:

RISK RELATING TO OUR BUSINESS

Our business is susceptible to adverse economic conditions, including changes in customer demand, changes in consumer confidence, changes in fuel prices and reduced credit availability.

We believe that the automotive retail industry is influenced by general economic conditions, consumer confidence, personal discretionary spending, interest rates, fuel prices, credit availability and unemployment rates. The worldwide automotive industry experienced significant operational and financial difficulties in 2008 and 2009. The turbulence in worldwide credit markets and resulting decrease in the availability of financing and leasing alternatives for consumers hampered our sales efforts. Continued or further restricted credit availability could materially adversely affect our operations as many of our retail sales customers purchase vehicles using credit. In 2008, volatility in fuel prices impacted consumer preferences and caused dramatic swings in consumer demand for various vehicle models, which led to supply and demand imbalances. Since September 2008, there has been reduced consumer confidence and spending in the markets in which we operate, which we believe has resulted in reduced customer traffic in our dealerships. We believe continued adverse economic conditions will negatively affect our business.

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Historically, unit sales of motor vehicles, particularly new vehicles, have been cyclical, fluctuating with general economic cycles. During periods of economic downturn, such as the latter half of 2008 and 2009, new vehicle retail sales tend to experience periods of decline characterized by oversupply and weak demand. The automotive retail industry may experience sustained periods of decline in vehicle sales in the future, which could materially adversely affect our results of operations, financial condition or cash flows.

RISKS RELATING TO AUTOMOTIVE MANUFACTURERS

Automotive manufacturers exercise significant control over our operations and we depend on them in order to operate our business.

Each of our dealerships operates under franchise agreements with automotive manufacturers or related distributors. We are dependent on these parties because, without a franchise agreement, we cannot operate a new vehicle franchise or perform manufacturer authorized warranty service. Manufacturers exercise a great degree of control over the operations of our dealerships. For example, manufacturers can require our dealerships to meet specified standards of appearance, require individual dealerships to meet specified financial criteria such as the maintenance of a minimum of net working capital and a minimum net worth, impose minimum customer service and satisfaction standards, restrict the use of manufacturers’ names and trademarks and consent to the replacement of the dealership principal.

Our franchise agreements may be terminated or not renewed by automotive manufacturers for a variety of reasons, including unapproved changes of ownership or management and other material breaches of the franchise agreements. We have, from time to time, not been compliant with various provisions of some of our franchise agreements. Our operations in the U.K. operate without local franchise law protection, and we are aware of efforts by certain manufacturers not to renew their franchise agreements with certain other retailers in the U.K. Although we believe that we will be able to renew all of our existing franchise agreements at expiration, if any of our significant existing franchise agreements or a large number of franchise agreements are not renewed or the terms of any such renewal are materially unfavorable to us, our results of operations, financial condition or cash flows could be materially adversely affected. In addition, actions taken by manufacturers to exploit their bargaining position in negotiating the terms of renewals of franchise agreements could also materially adversely affect our results of operations, financial condition or cash flows.

While U.S. franchise laws give us limited protection in selling a manufacturer’s product within a given geographic area, our franchise agreements do not give us the exclusive right to sell vehicles within a given area. In Europe, rules limit automotive manufacturers “block exemption” to certain anti-competitive rules in regards to establishing and maintaining a retail network. As a result, authorized retailers are able, subject to manufacturer facility requirements, to relocate or add additional facilities throughout the European Union, offer multiple brands in the same facility, allow the operation of service facilities independent of new car sales facilities and ease restrictions on transfers of dealerships between existing franchisees within the European Union. Changes to these rules adverse to us could materially adversely affect our results of operations, financial condition or cash flows.

We depend on manufacturers to provide us with a desirable mix of popular new vehicles, which tend to produce the highest profit margins. Manufacturers generally allocate their vehicles among dealerships based on the sales history of each dealership. Our inability to obtain sufficient quantities of the most popular models, whether due to sales declines at our dealerships or otherwise, could materially adversely affect our results of operations, financial condition or cash flows.

Our volumes and profitability may be adversely affected if automotive manufacturers reduce or discontinue their incentive programs.

Our dealerships depend on the manufacturers for sales incentives, warranties and other programs that promote and support vehicle sales at our dealerships. Some of these programs include customer rebates, dealer incentives, special financing or leasing terms and warranties. Manufacturers frequently change their incentive programs. If manufacturers reduce or discontinue incentive programs, our results of operations, financial condition or cash flows could be materially adversely affected.

Adverse conditions affecting one or more automotive manufacturers may negatively impact our revenues and profitability.

Our success depends on the overall success of the line of vehicles that each of our dealerships sells. As a result, our success depends to a great extent on the automotive manufacturers’ financial condition, marketing, vehicle design, production and distribution capabilities, reputation, management and labor relations. In 2009, BMW/MINI, Toyota/Lexus brands, Honda/Acura, Daimler and Audi brands accounted for 21%, 19%, 14%, 10% and 10%, respectively, of our total revenues. A significant decline in the sale of new vehicles manufactured by these manufacturers, or the loss or deterioration of our relationships with one or more of these manufacturers, could materially adversely affect our results of operations, financial condition or cash flows. No other manufacturer accounted for more than 10% of our total revenues for 2009.

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Events such as labor strikes that may adversely affect a manufacturer may also materially adversely affect us, especially if these events were to interrupt the supply of vehicles or parts to us. Similarly, the delivery of vehicles from manufacturers at a time later than scheduled, which may occur during periods of new product introductions, could lead to reduced sales during those periods. In addition, any event that causes adverse publicity involving one or more automotive manufacturers or their vehicles may materially adversely affect our results of operations, financial condition or cash flows. For example, in January 2010, Toyota temporarily suspended the production of eight of its vehicle models, and expanded its previous recall for certain existing vehicles, due to reports of unintended vehicle acceleration, and subsequently issued a recall of its Prius model due to brake issues. While we expect that these actions will adversely impact our Toyota new and used unit sales for some period, the long-term impact of lower revenue due to any diminution to Toyota’s reputation, or consumers confidence in or preference for Toyota’s vehicles, taken together with any potential increase in revenue from repair activities related to the Toyota recall, is difficult to predict.

Further restructuring of one of the U.S. based automotive manufacturers or a significant supplier may adversely affect our operations, as well as the U.S. automotive sector as a whole.

U.S. based automotive manufacturers have been experiencing decreasing U.S. market share in recent years. Beginning in 2008, these manufacturers also experienced significant operational and financial distress, due in part to shrinking market share in the U.S. and the recent limitation in worldwide credit capacity. In 2008 and early 2009, certain of these manufacturers filed for bankruptcy protection. While we have limited exposure to these manufacturers in terms of the percentage of our overall revenue, further restructuring efforts by any one of them or restructuring efforts at any of the other manufacturers we represent would likely lead to significant disruption to our dealerships that represent them, including, but not limited to, a loss of availability of new vehicle inventory, reduced consumer demand for vehicle inventory, the loss of funding for existing or future inventory, non-payment of receivables due from that manufacturer, and/or the cancellation of our franchise agreement without cancellation of our underlying lease and other obligations. Such restructuring of one of these manufacturers could also impact other automotive manufacturers and suppliers. We cannot reasonably predict the impact to the automotive retail environment of any such disruption, but believe it would be significant and adverse to the industry as a whole. Any restructuring of a significant automotive supplier, due to limited liquidity or credit availability or otherwise may have similar consequences.

Our failure to meet manufacturers’ consumer satisfaction requirements may adversely affect us.

Many manufacturers track customers’ satisfaction with their sales and warranty service experiences through measures that are generally known as customer satisfaction indices, or CSI. Manufacturers sometimes use a dealership’s CSI scores as a factor in evaluating applications for additional dealership acquisitions. Certain of our dealerships have not met their manufacturers’ CSI standards, and we may be unable to meet these standards in the future. A manufacturer may refuse to consent to a franchise acquisition by us if our dealerships do not meet their CSI standards. This could materially adversely affect our acquisition strategy. In addition, because we receive incentive payments from the manufacturers based in part on CSI scores, future payments could be materially reduced or eliminated if our CSI scores decline.

Automotive manufacturers impose limits on our ability to issue additional equity and on the ownership of our common stock by third parties, which may hamper our ability to meet our financing needs.

A number of manufacturers impose restrictions on the sale and transfer of our common stock. The most prohibitive restrictions provide that, under specified circumstances, we may be forced to sell or surrender franchises if a competing automotive manufacturer acquires a 5% or greater ownership interest in us or if an individual or entity that has a criminal record in connection with business dealings with any automotive manufacturer, distributor or dealer or who has been convicted of a felony acquires a 5% or greater ownership interest in us. Further, certain manufacturers have the right to approve the acquisition by a third party of 20% or more of our common stock, and a number of manufacturers continue to prohibit changes in ownership that may affect control of our company.

Actions by our stockholders or prospective stockholders that would violate any of the above restrictions are generally outside our control. If we are unable to obtain a waiver or relief from these restrictions, we may be forced to terminate or sell one or more franchises, which could materially adversely affect our results of operations, financial condition or cash flows. These restrictions also may prevent or deter prospective acquirers from acquiring control of us and, therefore, may adversely impact the value of our common stock. These restrictions also may impede our ability to raise required capital or our ability to acquire dealership groups using our common stock.

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RISKS RELATING TO OUR ACQUISITION STRATEGY

Growth in our revenues and earnings depends on our ability to acquire and successfully operate new dealerships.

We expect to acquire new dealerships, however, we cannot guarantee that we will be able to identify and acquire additional dealerships in the future. Moreover, acquisitions involve a number of risks, including:

• integrating the operations and personnel of the acquired dealerships;

• operating in new markets with which we may not be familiar;

• incurring unforeseen liabilities at acquired dealerships;

• disruption to our existing business;

• failure to retain key personnel of the acquired dealerships; and

• impairment of relationships with employees, manufacturers and customers.

In addition, integrating acquired dealerships into our existing mix of dealerships may result in substantial costs, diversion of our management resources or other operational or financial problems. Unforeseen expenses, difficulties and delays that may be encountered in connection with the integration of acquired entities and the rapid expansion of operations could inhibit our growth, result in our failure to achieve acquisition synergies or require us to focus resources on integration rather than other more profitable areas. Acquired entities may subject us to unforeseen liabilities that we did not detect prior to completing the acquisition, or liabilities that turn out to be greater than those we had expected. These liabilities may include liabilities that arise from non-compliance with environmental laws by prior owners for which we, as a successor owner, may be responsible.

We may also be unable to identify attractive acquisition candidates, or unable to complete acquisitions on acceptable terms on a timely basis. The magnitude, timing, pricing and nature of future acquisitions will depend upon various factors, including the availability of suitable acquisition candidates, the negotiation of acceptable terms, our financial capabilities, the availability of skilled employees to manage the acquired companies and general economic and business conditions. Further, we may need to borrow funds to complete future acquisitions, which funds may not be available. Furthermore, we have sold and may in the future sell dealerships based on numerous factors, which may impact our future revenues and earnings, particularly if we do not make acquisitions to replace such revenues and earnings.

Manufacturers’ restrictions on acquisitions may limit our future growth.

Our future growth via acquisition of automotive dealerships will depend on our ability to obtain the requisite manufacturer approvals. The relevant manufacturer must consent to any franchise acquisition and it may not consent in a timely fashion or at all. In addition, under many franchise agreements or under local law, a manufacturer may have a right of first refusal to acquire a dealership that we seek to acquire.

Some manufacturers limit the total number of their dealerships that we may own in a particular geographic area and, in some cases, limit the total number of their vehicles that we may sell as a percentage of that manufacturer’s overall sales. Manufacturers may also limit the ownership of stores in contiguous markets. To date, we have reached the limit of the number of Lexus dealerships we may own in the U.S., and we have reached certain geographical limitations with certain manufacturers in the U.S., such that without negotiated modifications to our agreements with those manufacturers we would not be able to acquire additional franchises of those brands in certain markets. If additional manufacturers impose or expand these types of restrictions, our acquisition strategy, results of operations, financial condition or cash flows could be materially adversely affected.

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OTHER BUSINESS RISKS

Substantial competition in automotive sales and services may adversely affect our profitability.

The automotive retail industry is highly competitive. Depending on the geographic market, we compete with:

• franchised automotive dealerships in our markets that sell the same or similar new and used vehicles that we offer;

• private market buyers and sellers of used vehicles;

• Internet-based vehicle brokers that sell vehicles obtained from franchised dealers directly to consumers;

• vehicle rental companies that sell their used rental vehicles;

• service center chain stores; and

• independent service and repair shops.

We also compete against automotive manufacturers in some retail markets, which may negatively affect our operating results, financial condition or cash flows. Some of our competitors may have greater financial, marketing and personnel resources and lower overhead and sales costs than us. We do not have any cost advantage over other franchised automotive dealerships when purchasing new vehicles from the automotive manufacturers.

In addition to competition for vehicle sales, our dealerships compete with franchised dealerships to perform warranty repairs and with other automotive dealers, independent service center chains, independent garages and others in connection with our non-warranty repair, routine maintenance and parts business. A number of regional or national chains offer selected parts and services at prices that may be lower than our dealerships’ prices. We also compete with a broad range of financial institutions in arranging financing for our customers’ vehicle purchases.

In addition, customers are using the Internet and other digital media to compare pricing for cars and related finance and insurance services, which may reduce our profit margins on those lines of business. Some websites offer vehicles for sale over the Internet without being a franchised dealer, although they must currently source their vehicles from a franchised dealer. If new vehicle sales made over the Internet are allowed to be conducted without the involvement of franchised dealers, or if dealerships are able to effectively use the Internet to sell outside of their markets, our business could be materially adversely affected. We could also be materially adversely affected to the extent that Internet companies acquire dealerships or ally themselves with our competitors’ dealerships.

The success of our distribution of the smart fortwo is directly impacted by availability and consumer demand for this vehicle.

We are the exclusive distributor of the smart fortwo vehicle in the U.S. and Puerto Rico. The profitability of this business depends upon the number of vehicles we distribute, which in turn is impacted by consumer demand for this vehicle. We distributed 27,052 smart fortwo vehicles in 2008 and 13,772 vehicles in 2009. We believe demand for the smart fortwo is subject to the same general economic conditions, consumer confidence, personal discretionary spending, interest rates and credit availability that impact the retail automotive industry generally. Because the smart fortwo is a vehicle with high fuel economy, future demand may be more responsive to changes in fuel prices than other vehicles. In the event sales of the smart fortwo are less than we expect, our related results of operations and cash flows may be materially adversely affected.

We are subject to purchase commitments pursuant to the smart distribution agreement, which requires us to purchase a number of vehicles to be negotiated on an ongoing basis. In addition, we are potentially subject to a purchase commitment with respect to unsold inventories and other items pursuant to the smart franchise agreement and state franchise laws in the event of franchise terminations. To the extent we are required to purchase vehicles that we are unable to distribute to franchised dealers, or repurchase vehicles from dealerships that we are unable to distribute to other franchised dealers, our results of operations, financial condition or cash flows may be adversely affected.

The smart fortwo is manufactured by Mercedes-Benz Cars at its Hambach, France factory. In the event of a supply disruption or if sufficient quantities of the smart fortwo are not made available to us, or if we accept vehicles and are unable to economically distribute those vehicles to the smart dealership network, our cash flows or results of operations may be materially adversely affected.

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Our capital costs and our results of operations may be adversely affected by a rising interest rate environment.

We finance our purchases of new and, to a lesser extent, used vehicle inventory using floor plan financing arrangements under which we are charged interest at floating rates. In addition, we obtain capital for general corporate purposes, dealership acquisitions and real estate purchases and improvements under predominantly floating interest rate credit facilities. Therefore, excluding the potential mitigating effects from interest rate hedging techniques, our interest expenses will rise with increases in interest rates. Rising interest rates may also have the effect of depressing demand in the interest rate sensitive aspects of our business, including new and used vehicles sales, because many of our customers finance their vehicle purchases. As a result, rising interest rates may have the effect of simultaneously increasing our costs and reducing our revenues, which could materially adversely affect our results of operations, financial condition or cash flows.

Our interest costs may also rise independent of general interest rates. For example, the dislocation of worldwide credit markets has resulted in an increase in the cost of capital for the captive finance subsidiaries that provide us financing for our inventory procurement. Certain of those companies have responded by increasing the cost of such financing to us. Materially increased interest costs could materially adversely affect our results of operations, financial condition or cash flows.

Our substantial indebtedness and lease commitments may limit our ability to obtain financing for acquisitions and may require that a significant portion of our cash flow be used for debt service, debt repayment and lease payments.

We have a substantial amount of indebtedness. As of December 31, 2009, we had approximately $1.2 billion of floor plan notes payable outstanding and $946.4 million of total non-floor plan debt outstanding, including $289.3 million of senior subordinated convertible notes, net of debt discount, currently expected to be redeemed in April 2011 or otherwise refinanced on or prior thereto. As of December 31, 2009, $149.0 million of term loans, $1.3 million of letters of credit and no revolving borrowings were outstanding under our U.S. credit agreement and outstanding loans under our U.K. credit agreement amounted to £55.0 million ($89.0 million), including £10.6 million ($17.1 million) under the term loan. As of December 31, 2009, we had the ability to draw on up to $355.9 million of unutilized debt capacity under our credit facilities.

We have historically structured our operations so as to minimize our ownership of real property. As a result, we lease or sublease substantially all of our dealerships properties and other facilities. These leases are generally for a period of between five and 20 years, and are typically structured to include renewal options at our election. Our total rent obligations under those leases, including extension periods we may exercise at our discretion and assuming constant consumer price indices, is currently estimated to be approximately $4.8 billion.

Our substantial debt and operating lease commitments could have important consequences. For example, they could:

• make it more difficult for us to obtain additional financing in the future for our acquisitions and operations, working capital requirements, capital expenditures, debt service or other general corporate requirements;

• require us to dedicate a substantial portion of our cash flows from operations to repay debt and related interest rather than other areas of our business;

• limit our operating flexibility due to financial and other restrictive covenants, including restrictions on incurring additional debt, creating liens on our properties, making acquisitions or paying dividends;

• place us at a competitive disadvantage compared to our competitors that have less debt; and

• make us more vulnerable in the event of adverse economic or industry conditions or a downturn in our business.

Our ability to meet our lease and debt service and repayment obligations depends on our future performance, which will be impacted by general economic conditions and by financial, business and other competitive factors, many of which are beyond our control. These factors could include operating difficulties, increased operating costs, the actions of competitors, regulatory developments and delays in implementing our growth strategies. Our ability to meet our debt and lease obligations may depend on our success in implementing our business strategies, and we may not be able to implement our business strategies or the anticipated results of our strategies may not be realized.

If our business does not generate sufficient cash flow from operations or future sufficient borrowings are not available to us, we may not be able to service or repay our debt or leases or to fund our other liquidity needs. In that event, we may have to delay or cancel acquisitions, sell equity securities, sell assets or restructure or refinance our debt. If we are unable to service or repay our debt or leases, we may not be able to pursue these options on a timely basis or on satisfactory terms or at all. In addition, the terms of our existing or future franchise agreements, agreements with manufacturers or debt agreements may prohibit us from adopting any of these alternatives.

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If we are unable to refinance or repay our 3.5% senior subordinated convertible notes in April 2011, our overall liquidity position may be materially adversely affected.

In January 2006, we issued $375.0 million aggregate principal amount of 3.50% senior subordinated convertible notes due 2026 (the “Convertible Notes”), of which $262.2 million is currently outstanding ($306.3 million on December 31, 2009). Holders of the Convertible Notes may require us to purchase all or a portion of their Convertible Notes for cash on April 1, 2011, at a purchase price equal to 100% of the principal amount of the Convertible Notes to be purchased, plus accrued and unpaid interest, if any, to the applicable purchase date. We currently expect to redeem the Convertible Notes in April 2011 or otherwise refinance the notes on or prior thereto. If our business does not generate sufficient cash flow from operations or future sufficient borrowings are not available to us, we may not be able to refinance or repay the Convertible Notes. In that event, we may have to delay or cancel acquisitions, sell equity securities, sell assets or restructure or refinance the Convertible Notes and our other indebtedness. If these efforts are not successful, our results of operations, financial condition and cash flows may be materially adversely impacted, including by resulting in cross-defaults of substantially all of our other indebtedness.

Our inability to raise capital for the purchase of vehicle inventory or otherwise could adversely affect us.

We depend to a significant extent on our ability to finance the purchase of inventory in the form of floor plan financing. Floor plan financing is financing from a vehicle manufacturer or third party secured by the vehicles we sell. Our dealerships borrow money to buy a particular vehicle from the manufacturer and generally pay off the floor plan financing when they sell the particular vehicle, paying interest during the interim period. Our floor plan financing is secured by substantially all of the assets of our automotive dealership subsidiaries. Our remaining assets are pledged to secure our credit facilities. This may impede our ability to borrow from other sources.

Most of our floor plan lenders are associated with manufacturers with whom we have franchise agreements. Consequently, the deterioration of our relationship with a manufacturer could adversely affect our relationship with the affiliated floor plan lender and vice versa. Any inability to obtain floor plan financing on customary terms, or the termination of our floor plan financing arrangements by our floor plan lenders, could materially adversely affect our results of operations, financial condition or cash flows.

We require substantial capital in order to acquire and renovate automotive dealerships. This capital has historically been raised through public or private financing, including through the issuance of debt or equity securities, sale-leaseback transactions and other sources. Availability under our credit agreements may be limited by the covenants and conditions of those facilities and we may not be able to raise additional funds. If we raise additional funds by issuing equity securities, dilution to then existing stockholders may result. If adequate funds are not available, we may be required to significantly curtail our acquisition and renovation programs, which could materially and adversely affect our growth strategy.

Our failure to comply with our debt and operating lease covenants could have a material adverse effect on our business, financial condition or results of operations.

Our U.S. credit agreement, U.K. credit agreement, and certain operating leases contain financial and operating covenants. A breach of any of these covenants could result in a default under the applicable agreement. If a default were to occur, we would likely seek a waiver of that default, attempt to reset the covenant, or refinance the instrument and accompanying obligations. If we were unable to obtain this relief, the default could result in the acceleration of that debt or lease obligation. In addition, these agreements, as well as the indentures that govern our 7.75% notes and our 3.5% convertible notes, contain cross-default provisions such that a default under one agreement could result in a default under all of our significant financing and operating agreements. If a default and/or cross default were to occur, we may not be able to pay our debts or borrow sufficient funds to refinance them. Any of these events, if they occur, could materially adversely affect our results of operations, financial condition, and cash flows.

We depend on the performance of sublessees to offset costs related to certain of our lease agreements and if the sublessees do not perform as expected, we could experience a material adverse effect on our business, financial condition or results of operations.

Since 1999, we have sold a number of dealerships to third parties. As a condition to the sale, we have at times remained liable for the lease payments relating to the properties on which those franchises operate. We are also party to lease agreements on properties that we no longer use in our retail operations that we have sublet to third parties. The aggregate rent paid by the tenants on those properties in 2009 was approximately $11.7 million and, in aggregate, we guarantee or are otherwise liable for approximately $202.5 million of lease payments, including lease payments during available renewal periods. We rely on the subtenants to pay the rent and maintain the properties covered by these leases. In the event a subtenant does not perform as expected (due to their financial condition or other factors such as the market performance of the underlying vehicle manufacturer), we may not be able to recover amounts owed to us. In either event, we could be required to fulfill these obligations, which could materially adversely affect our results of operations, financial condition and cash flows.

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Shares eligible for future sale may cause the market price of our common stock to drop significantly, even if our business is doing well.

The potential for sales of substantial amounts of our common stock in the public market may have a material adverse effect on our stock price. The majority of our outstanding shares are held by two shareholders, each of whom has registration rights that could result in a substantial number of shares being sold in the market. In addition to outstanding shares eligible for sale, 290,668 shares of our common stock are issuable under currently outstanding stock options granted to employees of the Company. An additional 2,088,646 shares of common stock are reserved for issuance to employees under equity incentive plans. In addition, we have reserved 15,826,124 shares for issuance under our 3.5% senior subordinated convertible notes due 2026, which, if issued, would result in substantial dilution to common shareholders and could adversely effect our stock price. Finally, we have a significant amount of authorized but unissued shares that, if issued, could materially adversely effect our stock price. We cannot determine the impact on the market price of our common stock of these shares which are eligible for sale in the market.

Property loss, business interruptions or other liabilities at some of our dealerships could impact our results of operations.

The automotive retail business is subject to substantial risk of loss due to the significant concentration of property values at dealership locations, including vehicles and parts. We have historically experienced business interruptions at several of our dealerships due to adverse weather conditions or other extraordinary events, such as wild fires in California or hurricanes in Florida. Other potential liabilities arising out of our operations involve claims by employees, customers or third parties for personal injury or property damage and potential fines and penalties in connection with alleged violations of regulatory requirements. To the extent we experience future similar events, our results of operations, financial condition or cash flows may be materially adversely impacted.

We rely on the management information systems at our dealerships, which are licensed from third parties and are used in all aspects of our sales and service efforts, as well as in the preparation of our consolidating financial and operating data. These systems are principally provided by one supplier in the U.S. and one supplier in the U.K. To the extent these systems become unavailable to us for any reason, or if our relationship deteriorates with either of our two principal suppliers, our business could be significantly disrupted which could materially adversely affect our results of operations, financial condition and cash flow.

If we lose key personnel or are unable to attract additional qualified personnel, our business could be adversely affected.

We believe that our success depends to a significant extent upon the efforts and abilities of our executive management and key employees, including, in particular, Roger S. Penske, our Chairman and Chief Executive Officer. In addition, certain of our agreements provide the counterparty with certain rights in the event Mr. Penske no longer participates in our business. For example, the general distribution agreement pursuant to which we distribute the smart fortwo provides smart GmbH the right to terminate in the event Mr. Penske is not participating in the smart distribution business (for any reason) and a replacement satisfactory to smart GmbH is not appointed within a reasonable period of time. Additionally, our business is dependent upon our ability to continue to attract and retain qualified personnel, including retaining dealership management in connection with acquisitions.

We generally have not entered into employment agreements with our key personnel. The loss of the services of one or more members of our senior management team, including, in particular, Roger S. Penske, could have a material adverse effect on us. We do not have key man insurance for any of our executive officers or key personnel. The loss of any of our key employees or the failure to attract qualified managers could have a material adverse effect on our business.

We are subject to substantial regulation, claims and legal proceedings, any of which could adversely affect our profitability.

A number of regulations affect marketing, selling, financing, distributing and servicing automobiles. These laws also regulate our conduct of business, including our advertising, operating, financing, employment and sales practices. Our foreign operations are subject to similar regulations in their respective jurisdictions.

Our financing activities with customers are subject to truth-in-lending, consumer leasing, equal credit opportunity and similar regulations as well as motor vehicle finance laws, installment finance laws, insurance laws, usury laws and other installment sales laws. Some jurisdictions regulate finance fees that may be paid as a result of vehicle sales and have increased scrutiny of advertising, sales, and finance and insurance activities in the sale and leasing of motor vehicles. In the event of regulation restricting our ability to generate revenue from arranging financing for our customers, we could be adversely affected. We could also be susceptible to claims or related actions if we fail to operate our business in accordance with applicable laws. Claims arising out of actual or alleged violations of law may be asserted against us or any of our dealers by individuals, either individually or through class actions, or by governmental entities in civil or criminal investigations and proceedings. Such actions may expose us to substantial monetary damages and legal defense costs, injunctive relief and criminal and civil fines and penalties, including suspension or revocation of our licenses and franchises to conduct dealership operations.

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We are involved in legal proceedings in the ordinary course of business including litigation with customers regarding our products and services, and expect to continue to be subject to claims related to our existing business and any new business. A significant judgment against us or the imposition of a significant fine could have a material adverse effect on our business, financial condition and future prospects.

If state franchise laws in the U.S. are repealed or weakened, our dealership franchise agreements will be more susceptible to termination, non-renewal or renegotiation.

State dealer laws in the U.S. generally provide that an automotive manufacturer may not terminate or refuse to renew a franchise agreement unless it has first provided the dealer with written notice setting forth good cause and stating the grounds for termination or non-renewal. Some state franchise laws allow dealers to file protests or petitions or to attempt to comply with the manufacturer’s criteria within the notice period to avoid the termination or non-renewal. If franchise laws are repealed in the states in which we operate, manufacturers may be able to terminate our franchises without advance notice, an opportunity to cure, or a showing of good cause. Without the protection of state franchise laws, it may also be more difficult for our U.S. dealerships to renew their franchise agreements upon expiration, which could materially adversely affect our results of operations, financial condition or cash flows. Jurisdictions outside the U.S. generally do not have these laws and, as a result, operate without these protections.

Our dealerships are subject to environmental regulations that may result in claims and liabilities which could be material.

We are subject to a wide range of environmental laws and regulations, including those governing discharges into the air and water, the operation and removal of storage tanks and the use, storage and disposal of hazardous substances. Our dealerships and service, parts and body shop operations in particular use, store and contract for recycling or disposal of hazardous materials. Any non-compliance with these regulations could result in significant fines, penalties and remediation costs which could adversely affect our results of operations, financial condition or cash flows.

In the U.S., we may also have liability in connection with materials that were sent to third-party recycling, treatment, and/or disposal facilities under federal and state statutes. In that case, regulations may make us responsible for liability relating to the investigation and remediation of contamination without regard to fault or the legality of the conduct that contributed to the contamination. In connection with our acquisitions, it is possible that we will assume or become subject to new or unforeseen environmental costs or liabilities, some of which may be material. In connection with dispositions of businesses, or dispositions previously made by companies we acquire, we may retain exposure for environmental costs and liabilities, some of which may be material.

An expanding trend in environmental regulation is to place more restrictions and limitations on activities that may affect the environment, and thus any changes in environmental laws and regulations that result in more stringent and costly waste handling, storage, transport, disposal or remediation requirements could have a material adverse effect on our results of operations and financial condition. Vehicle manufacturers are subject to federally mandated corporate average fuel economy standards, which will increase substantially over the next several years. Furthermore, in response to recent studies suggesting that emissions of carbon dioxide and certain other gases, referred to as “greenhouse gases,” may be contributing to warming of the Earth’s atmosphere, climate change-related legislation to restrict greenhouse gas emissions is being considered at the state and federal level to reduce emissions of greenhouse gases. Significant increases in fuel economy requirements or new federal or state restrictions on emissions of carbon dioxide that may be imposed on vehicles and automobile fuels could adversely affect demand for some of the vehicles that we sell. Environmental laws and regulations are complex and subject to change. Compliance with any new or more stringent laws or regulations, stricter interpretations of existing laws, or the future discovery of environmental conditions could require additional expenditures by us which could materially adversely affect our results of operations, financial condition or cash flows.

Our principal stockholders have substantial influence over us and may make decisions with which you disagree.

Penske Corporation through various affiliates beneficially owns 34% of our outstanding common stock. In addition, Penske Corporation and its affiliates have entered into a stockholders agreement with our second largest stockholder, Mitsui & Co., Ltd. and one of its affiliates, pursuant to which they have agreed to vote together as to the election of our directors. Collectively, these two groups beneficially own 51% of our outstanding stock. As a result, these persons have the ability to control the composition of our Board of Directors and therefore they may be able to control the direction of our affairs and business. This concentration of ownership, as well as various provisions contained in our agreements with manufacturers, our certificate of incorporation and bylaws and the Delaware General Corporation Law, could have the affect of discouraging, delaying or preventing a change in control of us or unsolicited acquisition proposals. These provisions include the stock ownership limits imposed by various manufacturers and our ability to issue “blank check” preferred stock and the “interested stockholder” provisions of Section 203 of the Delaware General Corporation Law.

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Some of our directors and officers may have conflicts of interest with respect to certain related party transactions and other business interests.

Some of our executive officers also hold executive positions at other companies affiliated with our largest stockholder. Roger S. Penske, our Chairman and Chief Executive Officer, is also Chairman and Chief Executive Officer of Penske Corporation, a diversified transportation services company. Robert H. Kurnick, Jr., our President and a director, is also President of Penske Corporation and Hiroshi Ishikawa, our Executive Vice President — International Business Development and a director, serves in a similar capacity for Penske Corporation. Much of the compensation of these officers is paid by Penske Corporation and not by us, and while these officers have historically devoted a substantial amount of their time to our matters, these officers are not required to spend any specific amount of time on our matters. Furthermore, one of our directors, Richard J. Peters serves as a director of Penske Corporation. In addition, Penske Corporation owns Penske Motor Group, a privately held automotive dealership company with operations in southern California. Periodically, we have purchased or sold real property and improvements to Automotive Group Reality, a wholly-owned subsidiary of Penske Corporation, which in some cases we have then leased. Due to their relationships with these related entities, Messrs. Ishikawa, Kurnick, Penske, and Peters may have a conflict of interest in making any decision related to transactions between their related entities and us, or with respect to allocations of corporate opportunities.

Penske Corporation has pledged its shares of common stock to secure a loan facility.

Penske Corporation and certain of its affiliates have pledged all of their shares of our common stock as collateral to secure a loan facility. If a default under the loan facility were to occur, Penske Corporation would likely seek a waiver of that default, attempt to reset any covenant breached, or refinance the instrument and accompanying obligations. If it were unable to obtain this relief, under certain circumstances, the lenders under these loans could elect to foreclose on these shares. The market price of our common stock could materially decline if the lenders were to sell the pledged shares in the open market. In addition, a foreclosure on the shares by the lenders could materially affect Penske Corporation’s voting rights relating to our Company and our relationships with the automotive manufacturers we represent. See “—Automotive manufacturers impose limits on our ability to issue additional equity and on the ownership of our common stock by third parties, which may hamper our ability to meet our financing needs.” A substantial decrease in Penske Corporation’s ownership of our Company could also lead to a default under or termination of existing or future agreements of ours. For example, the trademark agreement pursuant to which we license the “Penske” name could be terminated 24 months after the date that Penske Corporation and certain of its affiliates no longer own at least 20% of our voting stock.

Our operations outside the U.S. are subject to foreign currency risk and other risks associated with operating in foreign jurisdictions.

In recent years, between 30% and 40% of our revenues have been generated outside the U.S., predominately in the U.K. As a result, we are exposed to the risks involved in foreign operations, including:

• changes in foreign currency rates;

• changes in international tax laws and treaties, including increases of withholding and other taxes on remittances and other payments by subsidiaries;

• tariffs, trade barriers, and restrictions on the transfer of funds between nations;

• changes in international governmental regulations;

• the impact of local economic and political conditions; and

• the impact of European Commission regulation and the relationship between the U.K. and continental Europe.

If our operations outside the U.S. fail to perform as expected, we will be adversely impacted. In addition, our results of operations and financial position are reported in the local currency and are then translated into U.S. dollars at applicable foreign currency exchange rates for inclusion in our consolidated financial statements. As exchange rates fluctuate, particularly between the U.S. and U.K., our results of operations as reported in U.S. dollars will fluctuate. For example, if the U.S. dollar were to strengthen against the U.K. pound, our U.K. results of operations would translate into less U.S. dollar reported results.

Because a significant portion of our new vehicle business involves the sale of vehicles, vehicle parts or vehicles composed of parts that are manufactured outside the region in which they are sold, our operations are subject to customary risks associated with imported merchandise, including fluctuations in the relative value of currencies, import duties, exchange controls, differing tax structures, trade restrictions, transportation costs, work stoppages, and general political and economic conditions in foreign countries. Any of those fluctuations could materially affect our operations and our ability to purchase imported vehicles and parts at competitive prices as compared to products manufactured in the U.S., which could materially adversely affect our business.

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Our investments in joint ventures subject us to additional business risks, including the potential for future impairment charges if the joint ventures do not perform as expected.

We have invested in a variety of joint ventures, including retail automotive operations in Germany and a 9.0% limited partnership interest in Penske Truck Leasing (“PTL”). The net book value of our retail automotive joint venture investments, including PTL, was $281.4 million, as of December 31, 2009. We expect to receive future operating distributions from our joint venture investments and to realize U.S tax savings as a result of the investment in PTL. These benefits may not be realized if the joint ventures do not perform as expected, or if changes in tax, financial or regulatory requirements, changes in the financial health of the joint venture customers, labor strikes or work stoppages, lower asset utilization rates or industry competition negatively impact the results of the joint venture operations. In addition, if any of the businesses do not perform as expected, we may recognize an impairment charge which could be material and which could adversely affect our financial results for the periods in which any charge occurs.

We may write down the value of our goodwill or franchises which could have a material adverse impact on our results of operations and stockholders’ equity.

We have an aggregate of $1.0 billion of goodwill and franchise value on our consolidated balance sheet as of December 31, 2009. These intangible assets are subject to impairment assessments at least annually (or more frequently when events or circumstances indicate that an impairment may have occurred) by applying a fair-value based test. In the fourth quarter of 2008, we recorded a $606.3 million pre-tax goodwill impairment charge and a $37.1 million pre-tax franchise value impairment charge. If the growth assumptions embodied in our impairment tests prove inaccurate, we may incur incremental impairment charges. In particular, a decline of 20% or more in the estimated fair market value of our U.K. reporting unit would likely yield a significant write down of the goodwill attributable to our U.K. reporting unit. The net book value of the goodwill attributable to the U.K. reporting unit as of December 31, 2009 is approximately $339.5 million, a substantial portion of which would likely be written off if step one of the impairment test indicates impairment. If we experienced such a decline in our other reporting units, we would not expect to incur significant goodwill impairment charges. However, a 10% reduction in the estimated fair value of our franchises would result in franchise value impairment charges of approximately $5.7 million. Any such impairment charges could materially adversely affect our shareholders’ equity and other results of operations.

Item 1B. Unresolved Staff Comments

Not Applicable.

Item 2. Properties

We have historically structured our operations so as to minimize our ownership of real property. As a result, we lease or sublease substantially all of our facilities. These leases are generally for a period of between five and 20 years, and are typically structured to include renewal options at our election. We lease office space in Bloomfield Hills, Michigan, Leicester, England and Stuttgart, Germany for our administrative headquarters and other corporate related activities. We believe that our facilities are sufficient for our needs and are in good repair.

Item 3. Legal Proceedings

We are involved in litigation which may relate to claims brought by governmental authorities, issues with customers, and employment related matters, including class action claims and purported class action claims. We are not a party to any legal proceedings, including class action lawsuits that, individually or in the aggregate, are reasonably expected to have a material adverse effect on our results of operations, financial condition or cash flows. However, the results of these matters cannot be predicted with certainty, and an unfavorable resolution of one or more of these matters could have a material adverse effect on our results of operations, financial condition or cash flows.

Item 4. Submission of Matters to a Vote of Security-Holders

No matter was submitted to a vote of our security holders during the fourth quarter of the year ended December 31, 2009.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchase of Equity Securities

Our common stock is traded on the New York Stock Exchange under the symbol “PAG.” As of February 1, 2010, there were approximately 236 holders of record of our common stock. The following table sets forth the high and low sales prices for our common stock as reported on the New York Stock Exchange Composite Tape for each quarter of 2009 and 2008, as well as the per share dividends paid in each quarter.

	High		Low		Dividend
2008:
First Quarter	$	20.56	$	13.57	$	0.09
Second Quarter		22.51		14.67		0.09
Third Quarter		23.58		10.51		0.09
Fourth Quarter		11.54		5.04		0.09
2009:
First Quarter	$	10.34	$	4.82	$	—
Second Quarter		18.86		8.88		—
Third Quarter		21.40		14.33		—
Fourth Quarter		19.15		14.21		—

Dividends. We paid dividends of nine cents per share on March 3, 2008, June 2, 2008, September 1, 2008 and December 1, 2008. In February 2009, we announced the suspension of our quarterly cash dividend. Future quarterly or other cash dividends will depend upon our earnings, capital requirements, financial condition, restrictions imposed by any then existing indebtedness and other factors considered relevant by the Board of Directors. The indenture governing our 7.75% senior subordinated notes contains, and any future indenture that governs any notes which may be issued by us may contain, certain limitations on our ability to pay dividends. See Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.” We are a holding company whose assets consist primarily of the direct or indirect ownership of the capital stock of our operating subsidiaries. Consequently, our ability to pay dividends is dependent upon the earnings of our subsidiaries and their ability to distribute earnings and other advances and payments to us. Also, pursuant to the automobile franchise agreements to which our dealerships are subject, our dealerships are generally required to maintain a certain amount of working capital, which could limit our subsidiaries’ ability to pay us dividends.

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SHARE INVESTMENT PERFORMANCE

The following graph compares the cumulative total stockholder returns on our common stock based on an investment of $100 on December 31, 2004 and the close of the market on December 31 of each year thereafter against (i) the Standard & Poor’s 500 Index and (ii) an industry/peer group consisting of Asbury Automotive Group, Inc., AutoNation, Inc., Group 1 Automotive, Inc., Lithia Motors Inc. and Sonic Automotive Inc. The graph assumes the reinvestment of all dividends.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Penske Automotive Group, Inc., The S&P 500 Index
And A Peer Group

* $100 invested on 12/31/04 in stock or index, including reinvestment of dividends. Fiscal year ending December 31.

	Cumulative Total Return
	12/04		12/05		12/06		12/07		12/08		12/09
Penske Automotive Group, Inc.		100.00		130.91		163.36		122.71		55.53		109.76
S&P 500 Index		100.00		104.91		121.48		128.16		80.74		102.11
Peer Group		100.00		110.41		121.64		80.77		40.17		84.23

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Item 6. Selected Financial Data

The following table sets forth our selected historical consolidated financial and other data as of and for each of the five years in the period ended December 31, 2009, which has been derived from our audited consolidated financial statements. During the periods presented, we made a number of acquisitions, each of which has been accounted for using the purchase method of accounting, pursuant to which our financial statements include the results of operations of the acquired dealerships from the date of acquisition. As a result, our period to period results of operations vary depending on the dates of the acquisitions. Accordingly, this selected financial data is not necessarily comparable or indicative of our future results. During the periods presented, we also sold certain dealerships which have been treated as discontinued operations in accordance with general accounting principles. Certain income statement and balance sheet amounts presented in the table below reflect the January 1, 2009 retrospective adoption of general accounting principles relating to debt with cash conversion options and earnings per share to all periods presented. The presentation and disclosure provisions of general accounting principles relating to non-controlling interests adopted on January 1, 2009 have also been applied retrospectively to all periods presented herein. You should read this selected consolidated financial data in conjunction with our audited consolidated financial statements and related footnotes included elsewhere in this report.

	As of and for the Years Ended December 31,
	2009(1)		2008(2)			2007(3)		2006		2005(4)
	(In millions, except per share data)
Consolidated Statement of Operations Data:
Total revenues	$	9,523.1	$	11,637.1		$	12,781.7	$	10,938.0	$	9,370.6
Gross profit	$	1,582.3	$	1,790.2		$	1,896.5	$	1,656.5	$	1,426.2
Income (loss) from continuing operations attributable to Penske Automotive Group common stockholders (5)	$	83.6	$	(412.6	)	$	119.2	$	124.3	$	116.7
Net income (loss) attributable to Penske Automotive Group common stockholders	$	76.5	$	(420.0	)	$	120.3	$	118.3	$	119.0
Diluted earnings (loss) per share from continuing operations attributable to Penske Automotive Group common stockholders	$	0.91	$	(4.39	)	$	1.25	$	1.31	$	1.24
Diluted earnings (loss) per share attributable to Penske Automotive Group common stockholders	$	0.83	$	(4.47	)	$	1.27	$	1.25	$	1.26
Shares used in computing diluted share data		91.7		94.0			95.0		94.6		94.2
Balance Sheet Data:
Total assets	$	3,796.0	$	3,962.1		$	4,667.1	$	4,467.9	$	3,594.2
Total floor plan notes payable	$	1,196.2	$	1,469.4		$	1,524.7	$	1,147.5	$	1,065.0
Total debt (excluding floor plan notes payable)	$	946.4	$	1,063.4		$	794.8	$	1,119.3	$	580.2
Total equity attributable to Penske Automotive Group common stockholders	$	942.5	$	804.8		$	1,450.7	$	1,332.3	$	1,145.7
Cash dividends per share	$	—	$	0.36		$	0.30	$	0.27	$	0.23

(1)	Includes a gain of $10.4 million ($6.5 million after-tax), or $0.07 per share, relating to the repurchase of $68.7 million aggregate principal amount of our 3.5% senior subordinated convertible notes and charges of $5.2 million ($3.4 million after-tax), or $0.04 per share, relating to costs associated with the termination of the acquisition of the Saturn brand, our election to close three franchises in the U.S. and charges relating to our interest rate hedges of variable rate floor plan notes payable as a result of decreases in our vehicle inventories, and resulting decreases in outstanding floor plan notes payable, below hedged levels.
(2)	Includes charges of $661.9 million ($505.2 million after-tax), or $5.37 per share, including $643.5 million ($493.2 million after-tax), or $5.25 per share, relating to goodwill and franchise asset impairments, as well as, an additional $18.4 million ($12.0 million after-tax), or $0.13 per share, of dealership consolidation and relocation costs, severance costs, other asset impairment charges, costs associated with the termination of an acquisition agreement, and insurance deductibles relating to damage sustained at our dealerships in the Houston market during Hurricane Ike.
(3)	Includes charges of $18.6 million ($12.3 million after-tax), or $0.13 per share, relating to the redemption of the $300.0 million aggregate amount of 9.625% Senior Subordinated Notes and $6.3 million ($4.5 million after-tax), or $0.05 per share, relating to impairment charges.
(4)	Includes $8.2 million ($5.2 million after-tax), or $0.06 per share, of earnings attributable to the sale of all the remaining variable profits relating to the pool of extended service contracts sold at our dealerships from 2001 through 2005.
(5)	Excludes income from continuing operations attributable to non-controlling interests of $0.5 million, $1.1 million, $2.0 million, $2.2 million and $1.8 million in 2009, 2008, 2007, 2006 and 2005, respectively.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including those discussed in Item 1A. “Risk Factors” and “Forward Looking Statements.” We have acquired and initiated a number of businesses since inception. Our financial statements include the results of operations of those businesses from the date acquired or when they commenced operations. This Management’s Discussion and Analysis of Financial Condition and Results of Operations has been updated to reflect the revision of our financial statements for entities which have been treated as discontinued operations through December 31, 2009.

Overview

We are the second largest automotive retailer headquartered in the U.S. as measured by total revenues. As of December 31, 2009, we owned and operated 158 franchises in the U.S. and 148 franchises outside of the U.S., primarily in the U.K. We offer a full range of vehicle brands with 95% of our total retail revenue in 2009 generated from brands of non-U.S. based manufacturers, and 65% generated from premium brands, such as Audi, BMW, Cadillac and Porsche. Each of our dealerships offers a wide selection of new and used vehicles for sale. In addition to selling new and used vehicles, we generate higher-margin revenue at each of our dealerships through maintenance and repair services and the sale and placement of higher-margin products, such as third-party finance and insurance products, third-party extended service contracts and replacement and aftermarket automotive products. We are also diversified geographically, with 63% of our total revenues in 2009 generated by operations in the U.S. and Puerto Rico and 37% generated from our operations outside the U.S. (predominately in the U.K.).

We are also, through smart USA Distributor, LLC, a wholly-owned subsidiary, the exclusive distributor of the smart fortwo vehicle in the U.S. and Puerto Rico. The smart fortwo is manufactured by Mercedes-Benz Cars and is a Daimler brand. This technologically advanced vehicle achieves more than 40 miles per gallon on the highway and is an ultra-low emissions vehicle as certified by the State of California Air Resources Board. As of December 31, 2009, smart USA has certified a network of more than 75 smart dealerships, nine of which are owned and operated by us. The smart fortwo offers five different versions, the pure, passion coupe, passion cabriolet, BRABUS coupe and BRABUS cabriolet, with base prices ranging from $11,990 to $20,990. smart USA wholesaled 27,052 smart fortwo vehicles in 2008 and 13,772 smart fortwo vehicles in 2009.

In June 2008, we acquired a 9% limited partnership interest in Penske Truck Leasing Co., L.P. (“PTL”), a leading global transportation services provider, from subsidiaries of General Electric Capital Corporation. PTL operates and maintains more than 200,000 vehicles and serves customers in North America, South America, Europe and Asia. Product lines include full-service leasing, contract maintenance, commercial and consumer truck rental and logistics services, including, transportation and distribution center management and supply chain management. The general partner of PTL is Penske Truck Leasing Corporation, a wholly-owned subsidiary of Penske Corporation, which, together with other wholly-owned subsidiaries of Penske Corporation, owns 41.1% of PTL. The remaining 49.9% of PTL is owned by GE Capital.

Outlook

During 2009, there has been continued weakness in consumer confidence and spending in the markets in which we operate, which we believe has resulted in reduced customer traffic in our dealerships. While we have experienced increased vehicle sales and customer traffic in recent quarters, we expect our business to remain significantly impacted by difficult economic conditions in 2010.

Operating Overview

New and used vehicle revenues include sales to retail customers and to leasing companies providing consumer automobile leasing. We generate finance and insurance revenues from sales of third-party extended service contracts, sales of third-party insurance policies, fees for facilitating the sale of third-party finance and lease contracts and the sale of certain other products. Service and parts revenues include fees paid for repair, maintenance and collision services, the sale of replacement parts and the sale of aftermarket accessories. During 2009, the challenging operating environment contributed to a year over year decline in same store new and used vehicle unit sales and finance and insurance revenues. Our same store service and parts business also experienced a decline during the year, although less so than vehicle sales. We expect a continuation of this difficult operating environment in 2010.

Our gross profit tends to vary with the mix of revenues we derive from the sale of new vehicles, used vehicles, finance and insurance products, service and parts transactions, and the distribution of the smart fortwo. Our gross profit varies across product lines, with vehicle sales usually resulting in lower gross profit margins and our other revenues resulting in higher gross profit margins. Factors such as inventory and vehicle availability, customer demand, consumer confidence, unemployment, general economic conditions, seasonality, weather, credit availability, fuel prices and manufacturers’ advertising and incentives may impact the mix of our revenues, and therefore influence our gross profit margin.

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Our selling expenses consist of advertising and compensation for sales personnel, including commissions and related bonuses. General and administrative expenses include compensation for administration, finance, legal and general management personnel, rent, insurance, utilities, and other outside services. A significant portion of our selling expenses are variable, and we believe a significant portion of our general and administrative expenses are subject to our control, allowing us to adjust them over time to reflect economic trends. Our selling, general and administrative expenses for compensation and advertising have decreased in 2009, due in part to lower vehicle sales volumes, coupled with cost savings in compensation and advertising. Our rent expense is expected to grow as a result of cost of living indexes outlined in our lease agreements; however, a portion of the rent increase has been offset by concessions granted by certain landlords in recognition of current market conditions.

Floor plan interest expense relates to financing incurred in connection with the acquisition of new and used vehicle inventories that is secured by those vehicles. Other interest expense consists of interest charges on all of our interest-bearing debt, other than interest relating to floor plan financing. The cost of our variable rate indebtedness is typically based on benchmark lending rates, which are based in large part upon national inter-bank lending rates set by local governments. During the latter part of 2008, such benchmark rates were significantly reduced due to government actions designed to spur liquidity and bank lending activities. As a result, our cost of capital on variable rate indebtedness has declined during the year ended December 31, 2009; however, the significance of this decrease is limited somewhat by increases in rate spreads being charged by our vehicle finance partners.

Equity in earnings of affiliates represents our share of the earnings relating to investments in joint ventures and other non-consolidated investments, including PTL. It is our expectation that the difficult operating conditions outlined above will similarly impact these businesses in 2010.

The future success of our business will likely be dependent on, among other things, general economic and industry conditions, our ability to consummate and integrate acquisitions, our ability to increase sales of higher margin products, especially service and parts services, our ability to realize returns on our significant capital investment in new and upgraded dealerships, the success of our distribution of the smart fortwo, and the return realized from our investments in various joint ventures and other non-consolidated investments. See Item 1A — “Risk Factors” and “Forward Looking Statements.”

Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires the application of accounting policies that often involve making estimates and employing judgments. Such judgments influence the assets, liabilities, revenues and expenses recognized in our financial statements. Management, on an ongoing basis, reviews these estimates and assumptions. Management may determine that modifications in assumptions and estimates are required, which may result in a material change in our results of operations or financial position.

The following are the accounting policies applied in the preparation of our financial statements that management believes are most dependent upon the use of estimates and assumptions.

Revenue Recognition

Vehicle, Parts and Service Sales

We record revenue when vehicles are delivered and title has passed to the customer, when vehicle service or repair work is completed and when parts are delivered to our customers. Sales promotions that we offer to customers are accounted for as a reduction of revenues at the time of sale. Rebates and other incentives offered directly to us by manufacturers are recognized as a reduction of cost of sales. Reimbursement of qualified advertising expenses are treated as a reduction of selling, general and administrative expenses. The amounts received under certain manufacturer rebate and incentive programs are based on the attainment of program objectives, and such earnings are recognized either upon the sale of the vehicle for which the award was received, or upon attainment of the particular program goals if not associated with individual vehicles. During the years ended December 31, 2009, 2008 and 2007, we earned $319.8 million, $323.9 million and $343.9 million, respectively, of rebates, incentives and reimbursements from manufacturers, of which $314.1 million, $316.4 million and $337.3 million was recorded as a reduction of cost of sales.

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Finance and Insurance Sales

Subsequent to the sale of a vehicle to a customer, we sell our installment sale contracts to various financial institutions on a non-recourse basis (with specified exceptions) to mitigate the risk of default. We receive a commission from the lender equal to either the difference between the interest rate charged to the customer and the interest rate set by the financing institution or a flat fee. We also receive commissions for facilitating the sale of various third-party insurance products to customers, including credit and life insurance policies and extended service contracts. These commissions are recorded as revenue at the time the customer enters into the contract.

Impairment Testing

Franchise value impairment is assessed as of October 1 every year and upon the occurrence of an indicator of impairment through a comparison of its carrying amount and estimated fair value. An indicator of impairment exists if the carrying value of a franchise exceeds its estimated fair value and an impairment loss may be recognized up to that excess. The fair value of franchise value is determined using a discounted cash flow approach, which includes assumptions that include revenue and profitability growth, franchise profit margins, and our cost of capital. We also evaluate our franchise agreements in connection with the annual impairment testing to determine whether events and circumstances continue to support our assessment that the franchise agreements have an indefinite life.

Goodwill impairment is assessed at the reporting unit level as of October 1 every year and upon the occurrence of an indicator of impairment. We have determined that the dealerships in each of our operating segments within the Retail reportable segment, which are organized by geography, are components that are aggregated into five reporting units as they (A) have similar economic characteristics (all are automotive dealerships having similar margins), (B) offer similar products and services (all sell new and used vehicles, service, parts and third-party finance and insurance products), (C) have similar target markets and customers (generally individuals) and (D) have similar distribution and marketing practices (all distribute products and services through dealership facilities that market to customers in similar fashions). Accordingly, our operating segments are also considered our reporting units for the purpose of goodwill impairment testing relating to our Retail reportable segment. There is no goodwill recorded in our Distribution or PAG Investments reportable segments. An indicator of goodwill impairment exists if the carrying amount of the reporting unit, including goodwill, is determined to exceed the estimated fair value. The fair value of goodwill is determined using a discounted cash flow approach, which includes assumptions that include revenue and profitability growth, franchise profit margins, residual values and our cost of capital. If an indication of goodwill impairment exists, an analysis reflecting the allocation of the fair value of the reporting unit to all assets and liabilities, including previously unrecognized intangible assets, is performed. The impairment is measured by comparing the implied fair value of the reporting unit goodwill with its carrying amount and an impairment loss may be recognized up to that excess.

Investments

In 2009, investments included investments in businesses accounted for under the equity method. In 2008 and 2007, investments also included marketable securities. A majority of our investments are in joint venture relationships that are more fully described in “Joint Venture Relationships” below. Such joint venture relationships are accounted for under the equity method, pursuant to which we record our proportionate share of the joint ventures’ income each period. In December 2009, we exited from our joint venture investment in Mexico and in June 2008, we acquired a 9.0% limited partnership interest in PTL for $219.0 million from GE Capital.

The net book value of our investments was $295.5 million and $297.8 million as of December 31, 2009 and 2008, respectively. Investments for which there is not a liquid, actively traded market are reviewed periodically by management for indicators of impairment. If an indicator of impairment is identified, management estimates the fair value of the investment using a discounted cash flow approach, which includes assumptions relating to revenue and profitability growth, profit margins, residual values and our cost of capital. Declines in investment values that are deemed to be other than temporary may result in an impairment charge reducing the investments’ carrying value to fair value.

Self-Insurance

We retain risk relating to certain of our general liability insurance, workers’ compensation insurance, auto physical damage insurance, property insurance, employment practices liability insurance, directors and officers insurance, and employee medical benefits in the U.S. As a result, we are likely to be responsible for a significant portion of the claims and losses incurred under these programs. The amount of risk we retain varies by program, and, for certain exposures, we have pre-determined maximum loss limits for certain individual claims and/or insurance periods. Losses, if any, above the pre-determined loss limits are paid by third-party insurance carriers. Our estimate of future losses is prepared by management using our historical loss experience and industry-based development factors. Aggregate reserves relating to retained risk were $21.5 million and $19.2 million as of December 31, 2009 and 2008, respectively. Changes in the reserve estimate during 2009 relate primarily to the inclusion of additional participants in our self-insured employee medical benefit plans and reserves for current year activity in our general liability and workers compensation programs.

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Income Taxes

Tax regulations may require items to be included in our tax return at different times than those items are reflected in our financial statements. Some of the differences are permanent, such as expenses that are not deductible on our tax return, and some are temporary differences, such as the timing of depreciation expense. Temporary differences create deferred tax assets and liabilities. Deferred tax assets generally represent items that will be used as a tax deduction or credit in our tax return in future years which we have already recorded in our financial statements. Deferred tax liabilities generally represent deductions taken on our tax return that have not yet been recognized as expense in our financial statements. We establish valuation allowances for our deferred tax assets if the amount of expected future taxable income is not likely to allow for the use of the deduction or credit. A valuation allowance of $6.1 million has been recorded relating to net operating losses and credit carryforwards in the U.S. based on our determination that it is more likely than not that they will not be utilized.

Classification of Franchises in Continuing and Discontinued Operations

We classify the results of our operations in our consolidated financial statements based on general accounting principles for discontinued operations, which requires judgment in determining whether a franchise will be reported within continuing or discontinued operations. Such judgments include whether a franchise will be divested, the period required to complete the divestiture, and the likelihood of changes to the divestiture plans. If we determine that a franchise should be reclassified from continuing operations to discontinued operations, or from discontinued operations to continuing operations, our consolidated financial statements for prior periods are revised to reflect such reclassification.

New Accounting Pronouncement

A new accounting pronouncement amending the consolidation guidance relating to variable interest entities (“VIE”) became effective for us on January 1, 2010. The new guidance replaces the current quantitative model for determining the primary beneficiary of a variable interest entity with a qualitative approach that considers which entity has the power to direct activities that most significantly impact the variable interest entity’s performance and whether the entity has an obligation to absorb losses or the right to receive benefits that could potentially be significant to the variable interest entity. The new guidance also requires: an additional reconsideration event for determining whether an entity is a VIE when holders of an at risk equity investment lose voting or similar rights to direct the activities that most significantly impact the entities economic performance; ongoing assessments of whether an enterprise is the primary beneficiary of a VIE; separate presentation of the assets and liabilities of the VIE on the balance sheet; and additional disclosures about an entity’s involvement with a VIE. The adoption of the accounting pronouncement will not impact our consolidated financial statements.

Results of Operations

The following tables present comparative financial data relating to our operating performance in the aggregate and on a “same-store” basis. Dealership results are included in same-store comparisons when we have consolidated the acquired entity during the entirety of both periods being compared. As an example, if a dealership was acquired on January 15, 2008, the results of the acquired entity would be included in annual same-store comparisons beginning with the year ended December 31, 2010.

2009 compared to 2008 and 2008 compared to 2007 (in millions, except unit and per unit amounts)

Our results for the year ended December 31, 2009 include a gain of $10.4 million ($6.5 million after-tax), or $0.07 per share, relating to the repurchase of $68.7 million aggregate principal amount of our 3.5% senior subordinated convertible notes and charges of $5.2 million ($3.4 million after-tax), or $0.04 per share, relating to costs associated with the termination of the acquisition of the Saturn brand, our election to close three franchises in the U.S. and charges relating to our interest rate hedges of variable rate floor plan notes payable as a result of decreases in our vehicle inventories, and resulting decreases in outstanding floor plan notes payable, below hedged levels.

Retail unit sales of new vehicles during the year ended December 31, 2009 include approximately 9,500 units sold under the “cash for clunkers” program in the U.S. and similar scrappage programs in the other markets where we operate.

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Our results for the year ended December 31, 2008 include charges of $661.9 million ($505.2 million after-tax), or $5.37 per share, including $643.4 million ($493.2 million after-tax) of non-cash goodwill and franchise asset impairments, as well as, an additional $18.4 million ($12.0 million after-tax) of dealership consolidation and relocation costs, severance costs, other asset impairment charges, costs associated with the termination of an acquisition agreement, and insurance deductibles relating to damage sustained at our dealerships in the Houston market during Hurricane Ike.

Our results for the year ended December 31, 2007 include charges of $18.6 million ($12.3 million after-tax) relating to the redemption of the $300.0 million aggregate principal amount of 9.625% Senior Subordinated Notes and $6.3 million ($4.5 million after-tax) relating to impairment charges.

New Vehicle Data

							2009 vs. 2008												2008 vs. 2007
New Vehicle Data	2009			2008			Change			% Change			2008			2007			Change			% Change
New retail unit sales		140,914			171,554			(30,640	)		(17.9	)%		171,554			192,936			(21,382	)		(11.1	)%
Same-store new retail unit sales		133,317			167,232			(33,915	)		(20.3	)%		151,646			181,644			(29,998	)		(16.5	)%
New retail sales revenue	$	4,662.4		$	5,935.9		$	(1,273.5	)		(21.5	)%	$	5,935.9		$	6,929.5		$	(993.6	)		(14.3	)%
Same-store new retail sales revenue	$	4,388.6		$	5,776.3		$	(1,387.7	)		(24.0	)%	$	5,354.4		$	6,555.7		$	(1,201.3	)		(18.3	)%
New retail sales revenue per unit	$	33,087		$	34,601		$	(1,514	)		(4.4	)%	$	34,601		$	35,916		$	(1,315	)		(3.7	)%
Same-store new retail sales revenue per unit	$	32,919		$	34,540		$	(1,621	)		(4.7	)%	$	35,308		$	36,091		$	(783	)		(2.2	)%
Gross profit — new	$	376.2		$	486.4		$	(110.2	)		(22.7	)%	$	486.4		$	583.0		$	(96.6	)		(16.6	)%
Same-store gross profit — new	$	352.4		$	471.7		$	(119.3	)		(25.3	)%	$	436.1		$	549.6		$	(113.5	)		(20.7	)%
Average gross profit per new vehicle retailed	$	2,670		$	2,835		$	(165	)		(5.8	)%	$	2,835		$	3,022		$	(187	)		(6.2	)%
Same-store average gross profit per new vehicle retailed	$	2,643		$	2,821		$	(178	)		(6.3	)%	$	2,876		$	3,026		$	(150	)		(5.0	)%
Gross margin% — new		8.1	%		8.2	%		(0.1	)%		(1.2	)%		8.2	%		8.4	%		(0.2	)%		(2.4	)%
Same-store gross margin% — new		8.0	%		8.2	%		(0.2	)%		(2.4	)%		8.1	%		8.4	%		(0.3	)%		(3.6	)%

Units

Retail unit sales of new vehicles decreased 30,640 units, or 17.9%, from 2008 to 2009, and decreased 21,382 units, or 11.1%, from 2007 to 2008. The decrease from 2008 to 2009 is due to a 33,915 unit, or 20.3%, decrease in same-store new retail unit sales, offset by a 3,275 unit increase from net dealership acquisitions during the year. The same-store decrease from 2008 to 2009 was due primarily to unit sales decreases in our volume foreign and domestic brand stores in the U.S. and premium brand stores in the U.S. and U.K. The decrease from 2007 to 2008 is due to a 29,998 unit, or 16.5%, decrease in same-store new retail unit sales, offset by a 8,616 unit increase from net dealership acquisitions during the year. The same-store decrease from 2007 to 2008 was driven by decreases in premium brands in the U.S. and U.K. and volume foreign and domestic brands in the U.S. We believe our sales of new vehicle units was influenced by the reduction in traffic in our stores resulting from the decline in consumer confidence, coupled with customers electing to purchase used vehicles as a less expensive alternative to new vehicles due to the challenging economic climate.

Revenues

New vehicle retail sales revenue decreased $1.3 billion, or 21.5%, from 2008 to 2009 and decreased $993.6 million, or 14.3%, from 2007 to 2008. The decrease from 2008 to 2009 is due to a $1.4 billion, or 24.0%, decrease in same-store revenues, offset by a $114.2 million increase from net dealership acquisitions during the year. The same-store revenue decrease is due primarily to the 20.3% decrease in new retail unit sales, which decreased revenue by $1.2 billion, coupled with a $1,621, or 4.7%, decrease in comparative average selling price per unit which decreased revenue by $216.1 million. The decrease from 2007 to 2008 is due to a $1.2 billion, or 18.3%, decrease in same-store revenues, offset by a $207.7 million increase from net dealership acquisitions during the year. The same-store revenue decrease is due primarily to the 16.5% decrease in new retail unit sales, which decreased revenue by $1.1 billion, coupled with a $783, or 2.2%, decrease in comparative average selling price per unit which decreased revenue by $118.7 million.

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Gross Profit

Retail gross profit from new vehicle sales decreased $110.2 million, or 22.7%, from 2008 to 2009, and decreased $96.6 million, or 16.6%, from 2007 to 2008. The decrease from 2008 to 2009 is due to a $119.3 million, or 25.3%, decrease in same-store gross profit, offset by a $9.1 million increase from net dealership acquisitions during the year. The same-store retail gross profit decrease is due primarily to the 20.3% decrease in retail unit sales, which decreased gross profit by $95.6 million, coupled with a $178, or 6.3%, decrease in average gross profit per new vehicle retailed, which decreased gross profit by $23.7 million. The decrease from 2007 to 2008 is due to a $113.5 million, or 20.7%, decrease in same-store gross profit, offset by a $16.9 million increase from net dealership acquisitions during the year. The same-store retail gross profit decrease is due to the 16.5% decrease in new retail unit sales, which decreased gross profit by $90.8 million, coupled with a $150, or 5.0%, decrease in average gross profit per new vehicle retailed, which decreased gross profit by $22.7 million.

Used Vehicle Data

							2009 vs. 2008												2008 vs. 2007
Used Vehicle Data	2009			2008			Change			% Change			2008			2007			Change			% Change
Used retail unit sales		102,457			102,032			425			0.4	%		102,032			100,193			1,839			1.8	%
Same-store used retail unit sales		95,731			99,343			(3,612	)		(3.6	)%		95,450			95,313			137			0.1	%
Used retail sales revenue	$	2,600.7		$	2,848.1		$	(247.4	)		(8.7	)%	$	2,848.1		$	3,097.8		$	(249.7	)		(8.1	)%
Same-store used retail sales revenue	$	2,406.8		$	2,763.3		$	(356.5	)		(12.9	)%	$	2,646.7		$	2,960.1		$	(313.4	)		(10.6	)%
Used retail sales revenue per unit	$	25,383		$	27,913		$	(2,530	)		(9.1	)%	$	27,913		$	30,918		$	(3,005	)		(9.7	)%
Same-store used retail sales revenue per unit	$	25,141		$	27,816		$	(2,675	)		(9.6	)%	$	27,728		$	31,057		$	(3,329	)		(10.7	)%
Gross profit — used	$	224.3		$	213.4		$	10.9			5.1	%	$	213.4		$	242.0		$	(28.6	)		(11.8	)%
Same-store gross profit — used	$	209.1		$	207.7		$	1.4			0.7	%	$	200.2		$	233.4		$	(33.2	)		(14.2	)%
Average gross profit per used vehicle retailed	$	2,190		$	2,092		$	98			4.7	%	$	2,092		$	2,415		$	(323	)		(13.4	)%
Same-store average gross profit per used vehicle retailed	$	2,185		$	2,091		$	94			4.5	%	$	2,098		$	2,449		$	(351	)		(14.3	)%
Gross margin % — used		8.6	%		7.5	%		1.1	%		14.7	%		7.5	%		7.8	%		(0.3	)%		(3.8	)%
Same-store gross margin % — used		8.7	%		7.5	%		1.2	%		16.0	%		7.6	%		7.9	%		(0.3	)%		(3.8	)%

Units

Retail unit sales of used vehicles increased 425 units, or 0.4%, from 2008 to 2009 and increased 1,839 units, or 1.8%, from 2007 to 2008. The increase from 2008 to 2009 is due to a 4,037 unit increase from net dealership acquisitions during the year, offset by a 3,612, or 3.6%, decrease in same-store used retail unit sales. The same-store decrease in 2009 versus 2008 was due primarily to unit sales decreases in volume foreign and domestic brand stores in the U.S., offset by increases in unit sales at premium brand stores in the U.S. The increase from 2007 to 2008 is due to a 1,702 unit increase from net dealership acquisitions during the year, coupled with a 137 unit, or 0.1%, increase in same-store used retail unit sales. The same-store decrease in 2008 versus 2007 was driven primarily by decreases in our premium brands in the U.K. and volume foreign brands in the U.S., offset by increases in our premium brands in the U.S. We believe our sales of used vehicle units was influenced by the reduction in traffic in our stores resulting from the decline in consumer confidence, offset by customers electing to purchase used vehicles as a less expensive alternative to new vehicles due to the challenging economic climate.

Revenues

Used vehicle retail sales revenue decreased $247.4 million, or 8.7%, from 2008 to 2009 and decreased $249.7 million, or 8.1%, from 2007 to 2008. The decrease from 2008 to 2009 is due to a $356.5 million, or 12.9%, decrease in same-store revenues, offset by a $109.1 million increase from net dealership acquisitions during the year. The same-store revenue decrease is due to a $2,675, or 9.6%, decrease in comparative average selling price per vehicle, which decreased revenue by $256.1 million, coupled with the 3.6% decrease in retail unit sales, which decreased revenue by $100.4 million. The decrease from 2007 to 2008 is due to a $313.4 million, or 10.6%, decrease in same-store revenues, offset by a $63.7 million increase from net dealership acquisitions during the year. The same-store revenue decrease is due primarily to the $3,329, or 10.7%, decrease in comparative average selling price per vehicle, which decreased revenue by $317.2 million, offset by the 0.1% increase in retail unit sales, which increased revenue by $3.8 million.

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Gross Profit

Retail gross profit from used vehicle sales increased $10.9 million, or 5.1%, from 2008 to 2009 and decreased $28.6 million, or 11.8%, from 2007 to 2008. The increase from 2008 to 2009 is due to a $9.5 million increase from net dealership acquisitions during the year, coupled with a $1.4 million or 0.7%, increase in same-store gross profit. The same-store gross profit increase is primarily due to the $94, or 4.5%, increase in average gross profit per used vehicle retailed, which increased gross profit by $9.0 million, offset by the 3.6% decrease in used retail unit sales, which decreased gross profit by $7.6 million. The decrease from 2007 to 2008 is due to a $33.2 million, or 14.2%, decrease in same-store gross profit, offset by a $4.6 million increase from net dealership acquisitions during the year. The same-store gross profit decrease from 2007 to 2008 is due to a $351, or 14.3%, decrease in average gross profit per used vehicle retailed, which decreased gross profit by $33.5 million, offset by the 0.1% increase in used retail unit sales, which increased gross profit by $0.3 million.

Finance and Insurance Data

					2009 vs. 2008										2008 vs. 2007
Finance and Insurance Data	2009		2008		Change			% Change			2008		2007		Change			% Change
Total retail unit sales		243,371		273,586		(30,215	)		(11.0	)%		273,586		293,129		(19,543	)		(6.7	)%
Total same-store retail unit sales		229,048		266,575		(37,527	)		(14.1	)%		247,096		276,957		(29,861	)		(10.8	)%
Finance and insurance revenue	$	222.7	$	259.3	$	(36.6	)		(14.1	)%	$	259.3	$	286.3	$	(27.0	)		(9.4	)%
Same-store finance and insurance revenue	$	211.0	$	253.8	$	(42.8	)		(16.9	)%	$	240.1	$	275.6	$	(35.5	)		(12.9	)%
Finance and insurance revenue per unit	$	915	$	948	$	(33	)		(3.5	)%	$	948	$	977	$	(29	)		(3.0	)%
Same-store finance and insurance revenue per unit	$	921	$	952	$	(31	)		(3.3	)%	$	972	$	995	$	(23	)		(2.3	)%

Finance and insurance revenue decreased $36.6 million, or 14.1%, from 2008 to 2009 and decreased $27.0 million, or 9.4%, from 2007 to 2008. The decrease from 2008 to 2009 is due to a $42.8 million, or 16.9%, decrease in same-store revenues, offset by an $6.2 million increase from net dealership acquisitions during the year. The same-store revenue decrease is due to the 14.1% decrease in retail unit sales, which decreased revenue by $35.7 million, coupled with a $31, or 3.3%, decrease in comparative average finance and insurance revenue per unit retailed, which decreased revenue by $7.1 million. The $31 decrease in comparative average finance and insurance revenue per unit retailed is due primarily to decreased sales penetration of certain products which we believe was brought about by the challenging economic conditions. The decrease from 2007 to 2008 is due to a $35.5 million, or 12.9%, decrease in same-store revenues, offset by an $8.5 million increase from net dealership acquisitions during the year. The same-store revenue decrease is due to the 10.8% decrease in retail unit sales, which decreased revenue by $29.8 million, coupled with a $23, or 2.3%, decrease in comparative average finance and insurance revenue per unit retailed, which decreased revenue by $5.7 million. The $23 decrease in comparative average finance and insurance revenue per unit retailed is due primarily to decreased sales penetration of certain products which we believe resulted in part from the challenging economic conditions.

Service and Parts Data

							2009 vs. 2008												2008 vs. 2007
Service and Parts Data	2009			2008			Change			% Change			2008			2007			Change			% Change
Service and parts revenue	$	1,321.6		$	1,403.5		$	(81.9	)		(5.8	)%	$	1,403.5		$	1,392.3		$	11.2			0.8	%
Same-store service and parts revenue	$	1,236.2		$	1,352.3		$	(116.1	)		(8.6	)%	$	1,296.3		$	1,329.2		$	(32.9	)		(2.5	)%
Gross profit	$	728.1		$	780.5		$	(52.4	)		(6.7	)%	$	780.5		$	778.2		$	2.3			0.3	%
Same-store gross profit	$	683.0		$	754.2		$	(71.2	)		(9.4	)%	$	723.1		$	744.7		$	(21.6	)		(2.9	)%
Gross margin		55.1	%		55.6	%		(0.5	)%		(0.9	)%		55.6	%		55.9	%		(0.3	)%		(0.5	)%
Same-store gross margin		55.3	%		55.8	%		(0.5	)%		(0.9	)%		55.8	%		56.0	%		(0.2	)%		(0.4	)%

Revenues

Service and parts revenue decreased $81.9 million, or 5.8%, from 2008 to 2009 and increased $11.2 million, or 0.8%, from 2007 to 2008. The decrease from 2008 to 2009 is due to a $116.1 million, or 8.6%, decrease in same-store revenues, offset by a $34.2 million increase from net dealership acquisitions during the year. The same-store decrease is due in part to a decline in pre-inspection and delivery work on new vehicle inventories due to the 20.3% decrease in same store new vehicle retail unit sales, coupled with a 9.2% same store decrease in body shop revenue. The increase from 2007 to 2008 is due to a $44.1 million increase from net dealership acquisitions during the year, offset by a $32.9 million, or 2.5%, decrease in same-store revenues. The same-store decrease largely resulted from a decline in revenues in the second half of the year, due in part to challenging economic conditions.

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Gross Profit

Service and parts gross profit decreased $52.4 million, or 6.7%, from 2008 to 2009 and increased $2.3 million, or 0.3%, from 2007 to 2008. The decrease from 2008 to 2009 is due to a $71.2 million, or 9.4%, decrease in same-store gross profit, offset by a $18.8 million increase from net dealership acquisitions during the year. The same-store gross profit decrease is due to the $116.1 million, or 8.6%, decrease in revenues, which decreased gross profit by $64.2 million, coupled with a 0.5% decrease in gross margin percentage, which decreased gross profit by $7.0 million. The increase from 2007 to 2008 is due to a $23.9 million increase from net dealership acquisitions during the year, offset by a $21.6 million, or 2.9%, decrease in same-store gross profit. The same-store gross profit decrease is due to the $32.9 million, or 2.5%, decrease in revenues, which decreased gross profit by $18.4 million, coupled with a 0.4% decrease in gross margin percentage, which decreased gross profit by $3.2 million. In 2009 and 2008, the gross margin realized on parts, service and collision repairs declined compared to the prior year period, due in part to a higher proportion of sales of lower margin activities such as standard oil changes and tire sales. We believe customers in 2009 chose to forgo or delay significant repair and maintenance work due to the current economic environment.

Distribution

Our wholly-owned subsidiary, smart USA, began distribution the smart fortwo vehicle in the U.S. in 2008. Distribution units wholesaled during 2009 decreased 13,280 units, or 49.1%, from 27,052 during 2008 to 13,772 during 2009. Total distribution segment revenue decreased $203.6 million, or 49.7%, from $409.6 million during 2008 to $206.0 million during 2009. Segment gross profit, which includes gross profit on vehicle and parts sales, totaled $18.0 million and $55.3 million during the years ended December 31, 2009 and 2008, respectively. Total gross profit for the year ended December 31, 2009 includes $8.3 million related to finance and marketing campaigns designed to spur sales of the balance of the 2009 model year inventory.

Selling, General and Administrative

Selling, general and administrative (“SG&A”) expenses decreased $174.9 million, or 11.7%, from 2008 to 2009 and decreased $13.8 million, or 0.9%, from 2007 to 2008. The aggregate decrease from 2008 to 2009 is due primarily to a $201.4 million, or 14.0%, decrease in same-store SG&A expenses, offset by a $26.5 million increase from net dealership acquisitions during the year. The decrease in same-store SG&A expenses from 2008 to 2009 is due to (1) a net decrease in variable selling expenses, including decreases in variable compensation, as a result of the 13.7% decrease in same-store retail gross profit versus the prior year and (2) other cost savings initiatives in 2008 and 2009, such as headcount reductions, the amendment of pay plans, reduction in advertising activities, and the suspension of matching contributions to certain of our defined contribution plans, offset by (1) charges incurred during 2009 relating to costs associated with the termination of the acquisition of the Saturn brand and our election to close three franchises in the U.S., and (2) increased rent and other costs relating to our ongoing facility improvement and expansion programs. The aggregate decrease from 2007 to 2008 is due to a $103.8 million, or 7.2%, decrease in same-store SG&A expenses, offset by a $90.0 million increase from net dealership acquisitions during the year. The decrease in same-store SG&A expenses from 2007 to 2008 is due in large part to (1) a decrease in variable selling expenses, including decreases in variable compensation, as a result of the 11.3% decrease in same-store retail gross profit versus the prior year and (2) other cost savings initiatives in 2008, such as headcount reductions, the amendment of pay plans, reduction in advertising activities, and the agreement from our Chief Executive Officer and President to forgo all bonus amounts payable under their 2008 management incentive plans and from our Board of Directors electing to forgo approximately 25% of its annual cash fee relating to 2008, offset by (1) $18.4 million in charges incurred during 2008 related to dealership consolidation and relocation costs, severance costs, other asset impairment charges, costs associated with the termination of an acquisition agreement, and insurance deductibles relating to damage sustained at our dealerships in the Houston market during Hurricane Ike, (2) $23.0 million of additional costs associated with the smart distribution business, and (3) increased rent and related costs due in part to our facility improvement and expansion programs during the year.

SG&A expenses as a percentage of total revenue were 13.9%, 12.8% and 11.8% in 2009, 2008 and 2007, respectively, and as a percentage of gross profit were 83.4%, 83.5% and 79.5% in 2009, 2008 and 2007, respectively.

Intangible Impairments

Due in large part to deterioration in our operating results and turbulence in worldwide credit markets in the fourth quarter of 2008, we recorded a non-cash goodwill impairment charge of $606.3 million ($470.4 million after-tax) and $37.1 million ($22.8 million after-tax) of non-cash franchise value impairment charges.

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Depreciation and Amortization

Depreciation and amortization increased $0.4 million, or 0.7%, from 2008 to 2009 and increased $3.9 million, or 7.7%, from 2007 to 2008. The increase from 2008 to 2009 is due to a $0.7 million increase from net dealership acquisitions during the year, offset by a $0.3 million, or 0.6%, decrease in same-store depreciation and amortization. The increase from 2007 to 2008 is due to a $2.2 million increase from net dealership acquisitions during the year, coupled with a $1.7 million, or 3.5%, increase in same-store depreciation and amortization.

Floor Plan Interest Expense

Floor plan interest expense, including the impact of swap transactions, decreased $28.5 million, or 44.4%, from 2008 to 2009 and decreased $8.9 million, or 12.2%, from 2007 to 2008. The decrease from 2008 to 2009 is primarily due to a $27.8 million, or 45.0%, decrease in same-store floor plan interest expense. The same store decrease is due in large part to decreases in average outstanding floor plan balances, coupled with decreases in interest rates charged to us. While the base rate under our floor plan arrangements were generally lower in 2009 versus 2008, certain of our lenders reacted to increases in their cost of capital by raising the spread charged to us or by establishing minimum lending rates. The decrease from 2007 to 2008 is due to a $10.8 million, or 15.6%, decrease in same-store floor plan interest expense, offset by a $1.9 million increase from net dealership acquisitions during the year. The same store decrease in 2008 is due to decreases in the underlying variable rates of our revolving floor plan arrangements during the first three quarters of 2008, offset by increases in our average amounts outstanding and, beginning in the fourth quarter, increased interest rates charged to us by our finance partners. While the base rate under these arrangements were generally lower in 2008 versus 2007 due to government actions designed to spur liquidity and bank lending activities, certain of our lenders reacted to increases in their cost of capital by raising the spread charged to us, or establishing minimum lending rates. The majority of these increases occurred during the fourth quarter and some were not effective until 2009. Due to these relative increases, we did not realize the full benefit of the lower base rates in 2009 compared to 2008.

Other Interest Expense

Other interest expense increased $0.7 million, or 1.3%, from 2008 to 2009 and decreased $0.8 million, or 1.4%, from 2007 to 2008. The increase from 2008 to 2009 is due primarily to an increase in average outstanding indebtedness in 2009 as a result of our investment in PTL in June 2008, offset by (1) our 2009 repurchase of $68.7 million aggregate principal amount of our 3.5% senior subordinated convertible notes, (2) $60.0 million of our U.S. credit agreement term loan repayments, and (3) decreases in benchmark lending rates. The decrease from 2007 to 2008 is due to a decrease in our weighted average borrowing rate, offset in part by an increase in our average total outstanding indebtedness in 2008, primarily resulting from the debt incurred relating to our investment in PTL.

Debt Discount Amortization

Debt discount amortization decreased $0.9 million, or 6.7%, from 2008 to 2009 and increased $1.1 million, or 8.4%, from 2007 to 2008. The decrease from 2008 to 2009 is due primarily to the write off of a portion of our aggregate debt discount in connection with the repurchase of a portion of our outstanding 3.5% senior subordinated convertible notes in March 2009. The increase from 2007 to 2008 is a result of the requirement to amortize the debt discount over the expected life of the obligation so as to maintain a consistent effective interest rate.

Equity in Earnings of Affiliates

Equity in earnings of affiliates decreased $2.7 million, from 2008 to 2009 and increased $12.4 million, from 2007 to 2008. The decrease from 2008 to 2009 is primarily related to the impact of the difficult operating conditions outlined above, offset by earnings associated with our investment in PTL in June 2008. The increase from 2007 to 2008 is largely due to our investment in PTL in June 2008.

Gain on Debt Repurchase

In March 2009, we repurchased $68.7 million principal amount of our outstanding 3.5% senior subordinated convertible notes, which had a book value, net of debt discount, of $62.8 million for $51.4 million. In connection with the transaction, we wrote off $5.9 million of unamortized debt discount and $0.7 million of unamortized deferred financing costs, and incurred $0.3 million of transaction costs. No element of the consideration was allocated to the reacquisition of the equity component because the consideration paid was less than the fair value of the liability component prior to extinguishment. As a result, we recorded a $10.4 million pre-tax gain in connection with the repurchase.

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Income Taxes

Income taxes increased $151.1 million, or 142.9%, from 2008 to 2009 and decreased $167.5 million, or 271.1%, from 2007 to 2008. The increase from 2008 to 2009 is due to the increase in our pre-tax income versus the prior year. The income tax benefit recorded in 2008 was approximately 20%, which was significantly impacted by the write-off of goodwill that is not deductible for tax purposes. Excluding the impact of the impairment charge, our annual effective tax rate was 35.3% in 2008 compared to 35.1% in 2009 and 33.8% in 2007.

Liquidity and Capital Resources

Our cash requirements are primarily for working capital, inventory financing, the acquisition of new businesses, the improvement and expansion of existing facilities, the construction of new facilities and debt service, and potentially for dividends and repurchases of our outstanding securities under the program discussed below. Historically, these cash requirements have been met through cash flow from operations, borrowings under our credit agreements and floor plan arrangements, the issuance of debt securities, sale-leaseback transactions, mortgages, or the issuance of equity securities. As discussed in more detail below, we have currently outstanding $262.2 million ($306.3 million on December 31, 2009) in 3.5% senior subordinated convertible notes. We currently expect to be required to redeem these notes in April 2011 if we do not otherwise refinance them prior to April 2011. As of December 31, 2009, we had working capital of $113.6 million, including $13.8 million of cash, available to fund our operations and capital commitments. In addition, we had $250.0 million and £65.5 million ($105.9 million) available for borrowing under our U.S. credit agreement and our U.K. credit agreement, respectively, each of which is discussed below.

We have historically expanded our retail automotive operations through organic growth and the acquisition of retail automotive dealerships. In addition, one of our subsidiaries is the exclusive distributor of smart fortwo vehicles in the U.S. and Puerto Rico. We believe that cash flow from operations and our existing capital resources, including the liquidity provided by our credit agreements and floor plan financing arrangements, will be sufficient to fund our operations and commitments for at least the next twelve months. To the extent we pursue additional significant acquisitions, other expansion opportunities, significant repurchases of our outstanding securities, or refinance or repay existing debt (including our 3.5% senior subordinated convertible notes), we may need to raise additional capital either through the public or private issuance of equity or debt securities or through additional borrowings, which sources of funds may not necessarily be available on terms acceptable to us, if at all. In addition, our liquidity could be negatively impacted in the event we fail to comply with the covenants under our various financing and operating agreements or in the event our floor plan financing is withdrawn. For a discussion of these possible events, see the discussion below with respect to our financing agreements, as well as Item 1A — “Risk Factors.”

Share Repurchases and Dividends

During 2009, we repurchased $68.7 million aggregate principal amount of 3.5% senior subordinated convertible notes for $51.4 million under a securities repurchase program approved by our board of directors for up to $150.0 million. During 2008, we repurchased 4.015 million shares for $53.7 million, or an average of $13.36 per share, under this program. In the first quarter of 2010, we exhausted the authority under this program by repurchasing an additional $44.1 million aggregate principal amount of 3.5% senior subordinated convertible notes for $44.4 million. In February 2010, our board of directors approved an additional $150.0 million in authority to repurchase our outstanding securities. Under this new program, we may, from time to time as market conditions warrant, purchase our outstanding common stock, debt or convertible debt on the open market and in privately negotiated transactions and, potentially, via a tender offer or a pre-arranged trading plan. We have historically funded repurchases through cash flow from operations and borrowings under our U.S. credit facility. The decision to make repurchases will be based on factors such as the market price of the relevant security versus our view of its intrinsic value, the potential impact of such repurchases on our capital structure, and alternative uses of capital, such as for strategic investments in our current business, as well as any then-existing limits imposed by our finance agreements and securities trading policy.

We paid the following dividends in 2007 and 2008:

Per Share Dividends

2007 :	First Quarter	$	0.07	2008:	First Quarter	$	0.09
	Second Quarter		0.07		Second Quarter		0.09
	Third Quarter		0.07		Third Quarter		0.09
	Fourth Quarter		0.09		Fourth Quarter		0.09

In February 2009, we announced the suspension of our quarterly cash dividend. Future quarterly or other cash dividends will depend upon our earnings, capital requirements, financial condition, restrictions on any then existing indebtedness and other factors considered relevant by our Board of Directors.

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Inventory Financing

We finance substantially all of our new and a portion of our used vehicle inventories under revolving floor plan notes payable with various lenders, including the captive finance companies associated with automotive manufacturers. In the U.S., the floor plan arrangements are due on demand; however, we have not historically been required to make loan principal repayments prior to the sale of the vehicles financed. We typically make monthly interest payments on the amount financed. In the U.K., substantially all of our floor plan arrangements are payable on demand or have an original maturity of 90 days or less and we are generally required to repay floor plan advances at the earlier of the sale of the vehicles financed or the stated maturity. The floor plan agreements grant a security interest in substantially all of the assets of our dealership subsidiaries and in the U.S. are guaranteed by us. Interest rates under the floor plan arrangements are variable and increase or decrease based on changes in the prime rate, defined London Interbank Offered Rate (“LIBOR”), the Finance House Base Rate, or the Euro Interbank Offer Rate. We receive non-refundable credits from certain of our vehicle manufacturers, which are treated as a reduction of cost of sales as vehicles are sold. To date, we have not experienced any material limitation with respect to the amount or availability of financing from any institution providing us vehicle financing. See “Results of Operations — Floor Plan Interest Expense” for a discussion of the impact of challenging credit conditions on the rates charged to us under these agreements.

U.S. Credit Agreement

We are party to a $409.0 million credit agreement with DCFS USA LLC and Toyota Motor Credit Corporation, as amended (“the U.S. credit agreement”), which provides for up to $250.0 million in revolving loans for working capital, acquisitions, capital expenditures, investments and other general corporate purposes, a non-amortizing term loan with a remaining balance of $149.0 million (originally funded for $219.0 million), and for an additional $10.0 million of availability for letters of credit, through September 30, 2012. The revolving loans bear interest at a defined LIBOR plus 2.50%, subject to an incremental 0.50% for uncollateralized borrowings in excess of a defined borrowing base. The term loan, which bears interest at defined LIBOR plus 2.50%, may be prepaid at any time, but then may not be reborrowed. We repaid $60.0 million of this term loan during 2009.

The U.S. credit agreement is fully and unconditionally guaranteed on a joint and several basis by our domestic subsidiaries and contains a number of significant covenants that, among other things, restrict our ability to dispose of assets, incur additional indebtedness, repay other indebtedness, pay dividends, create liens on assets, make investments or acquisitions and engage in mergers or consolidations. We are also required to comply with specified financial and other tests and ratios, each as defined in the U.S. credit agreement, including: a ratio of current assets to current liabilities, a fixed charge coverage ratio, a ratio of debt to stockholders’ equity and a ratio of debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”). A breach of these requirements would give rise to certain remedies under the agreement, the most severe of which is the termination of the agreement and acceleration of the amounts owed. As of December 31, 2009, we were in compliance with all covenants under the U.S. credit agreement, and we believe we will remain in compliance with such covenants for the next twelve months. In making such determination, we have considered the current margin of compliance with the covenants and our expected future results of operations, working capital requirements, acquisitions, capital expenditures and investments. However, in the event of continued weakness in the economy and the automotive sector in particular, we may need to seek covenant relief. See Item 1A — “Risk Factors,” including “Our failure to comply with our debt and operating lease covenants could have a material adverse effect on our business, financial condition and results of operations” and “-Forward Looking Statements.”

The U.S. credit agreement also contains typical events of default, including change of control, non-payment of obligations and cross-defaults to our other material indebtedness. Substantially all of our domestic assets are subject to security interests granted to lenders under the U.S. credit agreement. As of December 31, 2009, $149.0 million of term loans and $1.3 million of letters of credit and no revolving borrowings were outstanding under the U.S. credit agreement.

U.K. Credit Agreement

Our subsidiaries in the U.K. (the “U.K. subsidiaries”) are party to an agreement, as amended, with the Royal Bank of Scotland plc, as agent for National Westminster Bank plc, which provides for a funded term loan, a revolving credit agreement and a seasonally adjusted overdraft line of credit (collectively, the “U.K. credit agreement”) to be used to finance acquisitions and for working capital and general corporate purposes. The U.K. credit agreement provides for (1) up to £100.0 million in revolving loans through August 31, 2013, which bears interest between a defined LIBOR plus 1.1% and defined LIBOR plus 3.0%, (2) a term loan originally funded for £30.0 million which bears interest between 6.39% and 8.29% and is payable ratably in quarterly intervals until fully repaid on June 30, 2011, and (3) a demand seasonally adjusted overdraft line of credit for up to £20.0 million that bears interest at the Bank of England Base Rate plus 1.75%.

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The U.K. credit agreement is fully and unconditionally guaranteed on a joint and several basis by our U.K. subsidiaries, and contains a number of significant covenants that, among other things, restrict the ability of our U.K. subsidiaries to pay dividends, dispose of assets, incur additional indebtedness, repay other indebtedness, create liens on assets, make investments or acquisitions and engage in mergers or consolidations. In addition, our U.K. subsidiaries are required to comply with specified ratios and tests, each as defined in the U.K. credit agreement, including: a ratio of EBITDAR to interest plus rental payments (as defined), a measurement of maximum capital expenditures, and a debt to EBITDA ratio (as defined). A breach of these requirements would give rise to certain remedies under the agreement, the most severe of which is the termination of the agreement and acceleration of the amounts owed. As of December 31, 2009, our U.K. subsidiaries were in compliance with all covenants under the U.K. credit agreement and we believe they will remain in compliance with such covenants for the next twelve months. In making such determination, we have considered the current margin of compliance with the covenants and our expected future results of operations, working capital requirements, acquisitions, capital expenditures and investments in the U.K. However, in the event of continued weakness in the U.K. economy and its automotive sector in particular, we may need to seek covenant relief. See Item 1A — “Risk Factors,” including “Our failure to comply with our debt and operating lease covenants could have a material adverse effect on our business, financial condition and results of operations” and “-Forward Looking Statements.”

The U.K. credit agreement also contains typical events of default, including change of control and non-payment of obligations and cross-defaults to other material indebtedness of our U.K. subsidiaries. Substantially all of our U.K. subsidiaries’ assets are subject to security interests granted to lenders under the U.K. credit agreement. As of December 31, 2009, outstanding loans under the U.K. credit agreement amounted £55.0 million ($89.0 million), including £10.6 million ($17.1 million) under the term loan.

7.75% Senior Subordinated Notes

On December 7, 2006 we issued $375.0 million aggregate principal amount of 7.75% senior subordinated notes due 2016 (the “7.75% Notes”). The 7.75% Notes are unsecured senior subordinated notes and are subordinate to all existing and future senior debt, including debt under our credit agreements, mortgages, and floor plan indebtedness. The 7.75% Notes are guaranteed by substantially all of our wholly-owned domestic subsidiaries on an unsecured senior subordinated basis. Those guarantees are full and unconditional and joint and several. We can redeem all or some of the 7.75% Notes at our option beginning in December 2011 at specified redemption prices, or prior to December 2011 at 100% of the principal amount of the notes plus an applicable “make-whole” premium, as defined. Upon certain sales of assets or specific kinds of changes of control, we are required to make an offer to purchase the 7.75% Notes. The 7.75% Notes also contain customary negative covenants and events of default. As of December 31, 2009, we were in compliance with all negative covenants and there were no events of default.

Senior Subordinated Convertible Notes

In January 2006, we issued $375.0 million aggregate principal amount of 3.50% senior subordinated convertible notes due 2026 (the “Convertible Notes”), of which $306.3 million was outstanding on December 31, 2009 and of which $262.2 million are currently outstanding. The Convertible Notes mature on April 1, 2026, unless earlier converted, redeemed or purchased by us, as discussed below. The Convertible Notes are unsecured senior subordinated obligations and are subordinate to all future and existing debt under our credit agreements, mortgages, and floor plan indebtedness. The Convertible Notes are guaranteed on an unsecured senior subordinated basis by substantially all of our wholly-owned domestic subsidiaries. The guarantees are full and unconditional and joint and several. The Convertible Notes also contain customary negative covenants and events of default. As of December 31, 2009, we were in compliance with all negative covenants and there were no events of default.

Holders of the Convertible Notes may convert them based on a conversion rate of 42.7796 shares of our common stock per $1,000 principal amount of the Convertible Notes (which is equal to a conversion price of approximately $23.38 per share), subject to adjustment, only under the following circumstances: (1) in any quarterly period, if the closing price of our common stock for twenty of the last thirty trading days in the prior quarter exceeds $28.43 (subject to adjustment), (2) for specified periods, if the trading price of the Convertible Notes falls below specific thresholds, (3) if the Convertible Notes are called for redemption, (4) if specified distributions to holders of our common stock are made or specified corporate transactions occur, (5) if a fundamental change (as defined) occurs, or (6) during the ten trading days prior to, but excluding, the maturity date.

Upon conversion of the Convertible Notes, for each $1,000 principal amount of the Convertible Notes, a holder will receive an amount in cash, equal to the lesser of (i) $1,000 or (ii) the conversion value, determined in the manner set forth in the indenture covering the Convertible Notes, of the number of shares of common stock equal to the conversion rate. If the conversion value exceeds $1,000, we will also deliver, at our election, cash, common stock or a combination of cash and common stock with respect to the remaining value deliverable upon conversion.

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In the event of a conversion due to a change of control on or before April 6, 2011, we will, in certain circumstances, pay a make-whole premium by increasing the conversion rate used in that conversion. In addition, we will pay additional cash interest commencing with six-month periods beginning on April 1, 2011, if the average trading price of a Convertible Note for certain periods in the prior six-month period equals 120% or more of the principal amount of the Convertible Notes. On or after April 6, 2011, we may redeem the Convertible Notes, in whole at any time or in part from time to time, for cash at a redemption price of 100% of the principal amount of the Convertible Notes to be redeemed, plus any accrued and unpaid interest to the applicable redemption date.

Holders of the Convertible Notes may require us to purchase all or a portion of their Convertible Notes for cash on each of April 1, 2011, April 1, 2016 or April 1, 2021 at a purchase price equal to 100% of the principal amount of the Convertible Notes to be purchased, plus accrued and unpaid interest, if any, to the applicable purchase date. Because of this feature, we currently expect to be required to redeem the Convertible Notes in April 2011 or otherwise refinance the notes on or prior thereto. See Item 1A-“Risk Factors,” including “If we are unable to refinance or repay our 3.5% senior subordinated convertible notes in April 2011, our overall liquidity position may be materially adversely affected.”

In March 2009, we repurchased $68.7 million principal amount of our outstanding Convertible Notes, which had a book value, net of debt discount, of $62.8 million for $51.4 million. In connection with the transaction, we wrote off $5.9 million of unamortized debt discount and $0.7 million of unamortized deferred financing costs, and incurred $0.3 million of transaction costs. No element of the consideration was allocated to the reacquisition of the equity component because the consideration paid was less than the fair value of the liability component prior to extinguishment. As a result, we recorded a $10.4 million pre-tax gain in connection with the repurchase.

In February 2010, we repurchased $44.1 million principal amount of our outstanding Convertible Notes for $44.4 million.

Mortgage Facilities

We are party to a $42.4 million mortgage facility with respect to certain of our dealership properties that matures on October 1, 2015. The facility bears interest at a defined rate, requires monthly principal and interest payments, and includes the option to extend the term for successive periods of five years up to a maximum term of twenty-five years. In the event we exercise our options to extend the term, the interest rate will be renegotiated at each renewal period. The mortgage facility also contains typical events of default, including non-payment of obligations, cross-defaults to our other material indebtedness, certain change of control events, and the loss or sale of certain franchises operated at the property. Substantially all of the buildings, improvements, fixtures and personal property of the properties under the mortgage facility are subject to security interests granted to the lender. As of December 31, 2009, $41.4 million was outstanding under this facility.

9.625% Senior Subordinated Notes

In March 2007, we redeemed our outstanding $300.0 million aggregate principal amount of 9.625% senior subordinated notes due 2012 (the “9.625% Notes”). We incurred an $18.6 million pre-tax charge in connection with the redemption, consisting of a $14.4 million redemption premium and the write-off of $4.2 million of unamortized deferred financing costs.

Interest Rate Swaps

We use interest rate swaps to manage interest rate risk associated with our variable rate floor plan debt. We are party to interest rate swap agreements through January 7, 2011 pursuant to which the LIBOR portion of $300.0 million of our floating rate floor plan debt was fixed at 3.67%. We may terminate these arrangements at any time, subject to the settlement of the then current fair value of the swap arrangements.

Prior to the third quarter of 2009, the swaps were designated as cash flow hedges of future interest payments of LIBOR based U.S. floor plan borrowings and the effective portion of the gain or loss on the derivative was reported as a component of other comprehensive income and reclassified into earnings when the hedged transaction affected earnings. During the quarter ended September 30, 2009, we experienced declines in outstanding floor plan debt balances related to certain floor plan lenders due to significant declines in vehicle inventory levels which caused hedged floor plan balances to fall below the notional value of the swap agreements. We elected to de-designate these cash flow hedges on September 30, 2009, and, as a result, recorded a net loss of $1.1 million in floor plan interest expense.

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We re-designated $290.0 million of the interest rate swap agreements as cash flow hedges of future interest payments of LIBOR based U.S. floor plan borrowings and the effective portion of the gain or loss on that $290.0 million of the swap agreements is reported as a component of other comprehensive income and reclassified into earnings when the hedged transaction affects earnings. Future settlements and changes in the fair value related to the undesignated $10.0 million of the swap agreements will be recorded as realized and unrealized gains/losses within interest expense.

As of December 31, 2009, we used Level 2 inputs to estimate the fair value of the interest rate swap agreements designated as hedging instruments to be a liability of $10.0 million, of which $9.3 million and $0.7 million are recorded in accrued expenses and other long-term liabilities, respectively. We used Level 2 inputs to estimate the fair value of the interest rate swap agreements not designated as hedging instruments as of December 31, 2009 to be a liability of $0.3 million, which is recorded in accrued expenses.

During the year ended December 31, 2009, we recognized a net gain of $3.0 million related to the effective portion of the interest rate swap agreements designated as hedging instruments in accumulated other comprehensive income, and reclassified $10.9 million of the existing derivative losses, including the $1.1 million loss on de-designation, from accumulated other comprehensive income into floor plan interest expense. We expect approximately $8.2 million associated with the swaps to be recognized as an increase of interest expense over the next twelve months as the hedged interest payments become due. During the year ended December 31, 2009, the swaps increased the weighted average interest rate on our floor plan borrowings by approximately 0.8%.

PTL Dividends

We own a 9.0% limited partnership interest in Penske Truck Leasing. In 2009 and 2008 we received $20.0 million and $2.7 million of pro rata cash dividends from this investment. We currently expect to continue to receive future dividends from PTL depending on their operating performance.

Operating Leases

We have historically structured our operations so as to minimize our ownership of real property. As a result, we lease or sublease substantially all of our facilities. These leases are generally for a period of between five and 20 years, and are typically structured to include renewal options at our election. We estimate our total rent obligations under these leases including any extension periods we may exercise at our discretion and assuming constant consumer price indices to be $4.8 billion. Pursuant to the leases for some of our larger facilities, we are required to comply with specified financial ratios, including a “rent coverage” ratio and a debt to EBITDA ratio, each as defined. For these leases, non-compliance with the ratios may require us to post collateral in the form of a letter of credit. A breach of our other lease covenants would give rise to certain remedies by the landlord, the most severe of which include the termination of the applicable lease and acceleration of the total rent payments due under the lease.

Sale/Leaseback Arrangements

We have in the past and expect in the future to enter into sale-leaseback transactions to finance certain property acquisitions and capital expenditures, pursuant to which we sell property and/or leasehold improvements to third-parties and agree to lease those assets back for a certain period of time. Such sales generate proceeds which vary from period to period. In light of the current market conditions, this financing option has become more expensive and thus we may utilize these arrangements less in the near term.

Off-Balance Sheet Arrangements

We have sold a number of dealerships to third parties and, as a condition to certain of those sales, remain liable for the lease payments relating to the properties on which those businesses operate in the event of non-payment by the buyer. We are also party to lease agreements on properties that we no longer use in our retail operations that we have sublet to third parties. We rely on subtenants to pay the rent and maintain the property at these locations. In the event the subtenant does not perform as expected, we may not be able to recover amounts owed to us and we could be required to fulfill these obligations. The aggregate rent paid by the tenants on those properties in 2009 was approximately $11.7 million, and, in aggregate, we guarantee or are otherwise liable for approximately $202.5 million of lease payments, including lease payments during available renewal periods.

smart USA

We are subject to purchase commitments pursuant to the smart distribution agreement, which requires us to purchase a number of vehicles to be negotiated on an ongoing basis. In addition, we are potentially subject to a purchase commitment with respect to unsold inventories and other items pursuant to the smart franchise agreement and state franchise laws in the event of franchise terminations.

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Cash Flows

Cash and cash equivalents decreased by $3.3 and $4.4 million during the years ended December 31, 2009 and 2007, respectively, and increased by $3.5 million during the year ended December 31, 2008. The major components of these changes are discussed below.

Cash Flows from Continuing Operating Activities

Cash provided by continuing operating activities was $303.4 million, $404.6 million and $300.5 million during the years ended December 31, 2009, 2008 and 2007, respectively. Cash flows from continuing operating activities includes net income, as adjusted for non-cash items and the effects of changes in working capital.

We finance substantially all of our new and a portion of our used vehicle inventories under revolving floor plan notes payable with various lenders. We retain the right to select which, if any, financing source to utilize in connection with the procurement of vehicle inventories. Many vehicle manufacturers provide vehicle financing for the dealers representing their brands, however, it is not a requirement that we utilize this financing. Historically, our floor plan finance source has been based on aggregate pricing considerations.

In accordance with general accounting principles relating to the statement of cash flows, we report all cash flows arising in connection with floor plan notes payable with the manufacturer of a particular new vehicle as an operating activity in our statement of cash flows, and all cash flows arising in connection with floor plan notes payable to a party other than the manufacturer of a particular new vehicle and all floor plan notes payable relating to pre-owned vehicles as a financing activity in our statement of cash flows. Currently, the majority of our non-trade vehicle financing is with other manufacturer captive lenders. To date, we have not experienced any material limitation with respect to the amount or availability of financing from any institution providing us vehicle financing.

We believe that changes in aggregate floor plan liabilities are typically linked to changes in vehicle inventory and, therefore, are an integral part of understanding changes in our working capital and operating cash flow. As a result, we have presented the following reconciliation of cash flow from operating activities as reported in our condensed consolidated statement of cash flows as if all changes in vehicle floor plan were classified as an operating activity for informational purposes:

	Year Ended December 31,
	2009			2008			2007
Net cash from continuing operating activities as reported	$	303.4		$	404.6		$	300.5
Floor plan notes payable — non-trade as reported		(84.1	)		(52.8	)		188.7
Net cash from continuing operating activities including all floor plan notes payable	$	219.3		$	351.8		$	489.2

Cash Flows from Continuing Investing Activities

Cash used in continuing investing activities was $81.5 million, $542.0 million and $227.9 million during the years ended December 31, 2009, 2008 and 2007, respectively. Cash flows from continuing investing activities consist primarily of cash used for capital expenditures, proceeds from sale-leaseback transactions and net expenditures for acquisitions and other investments. Capital expenditures were $90.3 million, $211.8 million and $194.5 million during the years ended December 31, 2009, 2008 and 2007, respectively. Capital expenditures relate primarily to improvements to our existing dealership facilities and the construction of new facilities. As of December 31, 2009, we do not have material commitments related to our planned or ongoing capital projects. We currently expect to finance our capital expenditures with operating cash flows or borrowings under our U.S. or U.K. credit facilities. Proceeds from sale-leaseback transactions were $2.3 million, $37.4 million and $131.8 million during the years ended December 31, 2009, 2008 and 2007, respectively. Cash used in acquisitions and other investments, net of cash acquired, was $11.5 million, $147.1 million and $180.7 million during the years ended December 31, 2009, 2008 and 2007, respectively, and included cash used to repay sellers floor plan liabilities in such business acquisitions of $5.8 million, $30.7 million and $51.9 million, respectively. The years ended December 31, 2009 and 2007, respectively, include $18.0 and $15.5 million of proceeds relating to other investing activities. We used $220.5 million for other investing activities during the year ended December 31, 2008, including $219.0 million for the acquisition of the 9.0% interest in PTL.

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Cash Flows from Continuing Financing Activities

Cash used in continuing financing activities was $212.6 million and $185.8 million during the years ended December 31, 2009 and 2007, respectively and cash provided by continuing financing activities was $109.7 million during the year ended December 31, 2008. Cash flows from continuing financing activities include net borrowings or repayments of long-term debt, repurchases of securities, net borrowings or repayments of floor plan notes payable non-trade, payments of deferred financing costs, proceeds from the issuance of common stock and the exercise of stock options, and dividends. We had net repayments of long-term debt of $77.4 million during the year ended December 31, 2009, which included repayments of $60.0 million on our U.S. credit agreement term loan. We had net borrowings of long-term debt of $249.9 million during the year ended December 31, 2008 and net repayments of $348.6 million during the year ended December 31, 2007. The borrowings in the year ended December 31, 2008 included the $219.0 million loan to finance the PTL limited partnership interest acquisition and proceeds relating to a $42.4 million mortgage facility. The repayments in the year ended December 31, 2007 included $314.4 million to redeem our 9.625% Notes. In March 2009, we used $51.4 million to repurchase $68.7 million aggregate principal amount of our 3.5% senior subordinated convertible notes. We had net repayments of floor plan notes payable non-trade of $84.1 and $52.8 million during the years ended December 31, 2009 and 2008, respectively, and net borrowings of floor plan notes payable non-trade of $188.7 million during the year ended December 31, 2007. During the years ended December 31, 2009, 2008 and 2007, we received proceeds of $0.3 million, $0.8 million and $2.6 million, respectively, from the exercise of stock options. In 2008, we repurchased 4.015 million shares of common stock for $53.7 million. During the years ended December 31, 2008 and 2007, we also paid $33.9 million and $28.4 million, respectively, of cash dividends to our stockholders. No cash dividends were paid to our stockholders during the year ended December 31, 2009.

Cash Flows from Discontinued Operations

Cash flows relating to discontinued operations are not currently considered, nor are they expected to be, material to our liquidity or our capital resources. Management does not believe that there are any material past, present or upcoming cash transactions relating to discontinued operations.

Contractual Payment Obligations

The table below sets forth our best estimates as to the amounts and timing of future payments relating to our most significant contractual obligations as of December 31, 2009, except as otherwise noted. The information in the table reflects future unconditional payments and is based upon, among other things, the terms of any relevant agreements. Future events, including acquisitions, divestitures, new or revised operating lease agreements, borrowings or repayments under our credit agreements and our floor plan arrangements, and purchases or refinancing of our securities, could cause actual payments to differ significantly from these amounts.

			Less than						More than
	Total		1 year		1 to 3 years		3 to 5 years		5 years
Floorplan notes payable(A)	$	1,196.2	$	1,196.2	$	—	$	—	$	—
Long-term debt obligations(B)		963.3		12.4		463.2		74.3		413.4
Operating lease commitments		4,795.6		178.5		353.3		349.3		3,914.5
Scheduled interest payments(B)(C)		228.1		41.8		64.8		61.9		59.6
Other liabilities(D)		38.1		1.2		—		36.9		—
	$	7,221.3	$	1,430.1	$	881.3	$	522.4	$	4,387.5

(A)	Floor plan notes payable are revolving financing arrangements. Payments are generally made as required pursuant to the floor plan borrowing agreements discussed above under “Inventory Financing.”
(B)	Interest and principal repayments under our $306.3 million of 3.5% senior subordinated notes due 2026 are reflected in the table above. While these notes are not due until 2026, the holders may require us to purchase all or a portion of their notes for cash in 2011. This acceleration of ultimate repayment is reflected in the table above. In addition, we repurchased $44.1 million of the 3.5% senior subordinated notes in February 2010, which repurchase is not reflected in this table.
(C)	Estimates of future variable rate interest payments under floorplan notes payable and our credit agreements are excluded due to our inability to estimate changes to interest rates in the future. See “Inventory Financing,” “U.S. Credit Agreement,” and “U.K. Credit Agreement” above for a discussion of such variable rates.
(D)	Includes uncertain tax positions and our purchase commitments pursuant to our smart distribution and franchise agreements. Due to the subjective nature of our uncertain tax positions, we are unable to make reasonably reliable estimates of the timing of payments arising in connection with the unrecognized tax benefits, however, as a result of the statute of limitations, we do not expect any of these payments to occur in more than 5 years. We have thus classified this as “3 to 5 years.” Exposure related to our purchase commitments on known smart USA dealer franchise terminations have been classified as “Less than 1 year.”

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We expect that, other than for scheduled payments upon the maturity or termination dates of certain of our debt instruments, the amounts above will be funded through cash flow from operations. In the case of payments upon the maturity or termination dates of our debt instruments, we currently expect to be able to refinance such instruments in the normal course of business or otherwise fund them from cash flows from operations.

Related Party Transactions

Stockholders Agreement

Several of our directors and officers are affiliated with Penske Corporation or related entities. Roger S. Penske, our Chairman of the Board and Chief Executive Officer, is also Chairman of the Board and Chief Executive Officer of Penske Corporation, and through entities affiliated with Penske Corporation, our largest stockholder owning approximately 35% of our outstanding common stock. Mitsui & Co., Ltd. and Mitsui & Co. (USA), Inc. (collectively, “Mitsui”) own approximately 17% of our outstanding common stock. Mitsui, Penske Corporation and certain other affiliates of Penske Corporation are parties to a stockholders agreement pursuant to which the Penske affiliated companies agreed to vote their shares for one director who is a representative of Mitsui. In turn, Mitsui agreed to vote their shares for up to fourteen directors voted for by the Penske affiliated companies. This agreement terminates in March 2014, upon the mutual consent of the parties, or when either party no longer owns any of our common stock.

Other Related Party Interests and Transactions

Roger S. Penske is also a managing member of Transportation Resource Partners, an organization that invests in transportation-related industries. Richard J. Peters, one of our directors, is a managing director of Transportation Resource Partners and is a director of Penske Corporation. Lucio A. Noto (one of our directors) is an investor in Transportation Resource Partners. One of our directors, Hiroshi Ishikawa, serves as our Executive Vice President — International Business Development and serves in a similar capacity for Penske Corporation. Robert H. Kurnick, Jr., our President and a director, is also the President and a director of Penske Corporation.

We sometimes pay to and/or receive fees from Penske Corporation, its subsidiaries, and its affiliates for services rendered in the normal course of business, or to reimburse payments made to third parties on each others’ behalf. These transactions are reviewed periodically by our Audit Committee and reflect the provider’s cost or an amount mutually agreed upon by both parties.

We are a 9.0% limited partner of PTL, a leading global transportation services provider. PTL operates and maintains more than 200,000 vehicles and serves customers in North America, South America, Europe and Asia. Product lines include full-service leasing, contract maintenance, commercial and consumer truck rental and logistics services, including, transportation and distribution center management and supply chain management. The general partner of PTL is Penske Truck Leasing Corporation, a wholly-owned subsidiary of Penske Corporation, which together with other wholly-owned subsidiaries of Penske Corporation, owns 41.1% of PTL. The remaining 49.9% of PTL is owned by GE Capital. Among other things, the partnership agreement provides us with specified partner distribution and governance rights and restricts our ability to transfer our interests.

We have also entered into other joint ventures with certain related parties as more fully discussed below.

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Joint Venture Relationships

From time to time, we enter into joint venture relationships in the ordinary course of business, through which we own and operate automotive dealerships together with other investors. We may provide these dealerships with working capital and other debt financing at costs that are based on our incremental borrowing rate. As of December 31, 2009, our automotive retail joint venture relationships included:

		Ownership
Location	Dealerships	Interest
Fairfield, Connecticut	Audi, Mercedes-Benz, Porsche, smart		87.95	%(A)(B)
Edison, New Jersey	Ferrari, Maserati		70.00	%(B)
Las Vegas, Nevada	Ferrari, Maserati		50.00	%(C)
Munich, Germany	BMW, MINI		50.00	%(C)
Frankfurt, Germany	Lexus, Toyota		50.00	%(C)
Aachen, Germany	Audi, Lexus, Skoda, Toyota, Volkswagen		50.00	%(C)

(A)	An entity controlled by one of our directors, Lucio A. Noto (the “Investor”), owns a 12.05% interest in this joint venture, which entitles the Investor to 20% of the joint venture’s operating profits. In addition, the Investor has an option to purchase up to a 20% interest in the joint venture for specified amounts.
(B)	Entity is consolidated in our financial statements.
(C)	Entity is accounted for using the equity method of accounting.

In December 2009, we exited from our joint venture investment in Mexico which operates several Toyota franchises resulting in a gain of $0.6 million.

Cyclicality

Unit sales of motor vehicles, particularly new vehicles, historically have been cyclical, fluctuating with general economic cycles. During economic downturns, the automotive retailing industry tends to experience periods of decline and recession similar to those experienced by the general economy. We believe that the industry is influenced by general economic conditions and particularly by consumer confidence, the level of personal discretionary spending, fuel prices, interest rates and credit availability.

Seasonality

Our business is modestly seasonal overall. Our U.S. operations generally experience higher volumes of vehicle sales in the second and third quarters of each year due in part to consumer buying trends and the introduction of new vehicle models. Also, vehicle demand, and to a lesser extent demand for service and parts, is generally lower during the winter months than in other seasons, particularly in regions of the U.S. where dealerships may be subject to severe winters. Our U.K. operations generally experience higher volumes of vehicle sales in the first and third quarters of each year, due primarily to vehicle registration practices in the U.K.

Effects of Inflation

We believe that inflation rates over the last few years have not had a significant impact on revenues or profitability. We do not expect inflation to have any near-term material effects on the sale of our products and services, however, we cannot be sure there will be no such effect in the future. We finance substantially all of our inventory through various revolving floor plan arrangements with interest rates that vary based on various benchmarks. Such rates have historically increased during periods of increasing inflation.

Forward-Looking Statements

This annual report on Form 10-K contains “forward-looking statements”. Forward-looking statements generally can be identified by the use of terms such as “may,” “will,” “should,” “expect,” “anticipate,” “believe,” “intend,” “plan,” “estimate,” “predict,” “potential,” “forecast,” “continue” or variations of such terms, or the use of these terms in the negative. Forward-looking statements include statements regarding our current plans, forecasts, estimates, beliefs or expectations, including, without limitation, statements with respect to:

• our future financial and operating performance, including sales of the smart fortwo;

• future acquisitions;

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• future capital expenditures and share repurchases;

• our ability to obtain cost savings and synergies;

• our ability to respond to economic cycles;

• trends in the automotive retail industry and in the general economy in the various countries in which we operate dealerships;

• our ability to access the remaining availability under our credit agreements;

• our liquidity, including our ability to refinance our outstanding senior subordinated convertible notes;

• foreign exchange rates;

• interest rates;

• trends affecting our future financial condition or results of operations; and

• our business strategy.

Forward-looking statements involve known and unknown risks and uncertainties and are not assurances of future performance. Actual results may differ materially from anticipated results due to a variety of factors, including the factors identified under “Item 1A. — Risk Factors.” Important factors that could cause actual results to differ materially from our expectations include those mentioned in “Item 1A. — Risk Factors” such as the following:

• our business and the automotive retail industry in general are susceptible to further or continued adverse economic conditions, including changes in interest rates, foreign exchange rates, consumer demand, consumer confidence, fuel prices and credit availability;

• the number of new and used vehicles sold in our markets;

• automobile manufacturers exercise significant control over our operations, and we depend on them in order to operate our business;

• we depend on the success and popularity of the brands we sell, and adverse conditions affecting one or more automobile manufacturers, such as the current Toyota recalls relating to unintended vehicle acceleration and brake issues, may negatively impact our revenues and profitability;

• the restructuring of the U.S. automotive manufacturers may adversely affect our operations, as well as the automotive sector as a whole;

• we may not be able to satisfy our capital requirements for acquisitions, dealership renovation projects, refinancing of our debt when it becomes due (including our outstanding senior subordinated convertible notes), or financing the purchase of our inventory;

• our failure to meet a manufacturer’s consumer satisfaction requirements may adversely affect our ability to acquire new dealerships, our ability to obtain incentive payments from manufacturers and our profitability;

• although we typically purchase vehicles and parts in the local functional currency, changes in foreign exchange rates may impact manufacturers, as many of the component parts of vehicles are manufactured in foreign markets, which could lead to an increase in our costs which we may not be able to pass on to the consumer;

• changes in tax, financial or regulatory rules or requirements;

• with respect to PTL, changes in the financial health of its customers, labor strikes or work stoppages by its employees, a reduction in PTL’s asset utilization rates and industry competition;

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• substantial competition in automotive sales and services may adversely affect our profitability;

• if we lose key personnel, especially our Chief Executive Officer, or are unable to attract additional qualified personnel, our business could be adversely affected;

• our business may be adversely affected by import product restrictions and foreign trade risks that may impair our ability to sell foreign vehicles profitably;

• automobile dealerships are subject to substantial regulation which may adversely affect our profitability;

• if state dealer laws in the U.S. are repealed or weakened our automotive dealerships may be subject to increased competition and may be more susceptible to termination, non-renewal or renegotiation of their franchise agreements;

• non-compliance with the financial ratios and other covenants under our credit agreements and operating leases;

• our distribution of the smart fortwo vehicle is dependent upon the continued availability of and customer demand for the smart fortwo;

• our dealership operations may be affected by severe weather or other periodic business interruptions;

• our principal stockholders have substantial influence over us and may make decisions with which other stockholders may disagree;

• some of our directors and officers may have conflicts of interest with respect to certain related party transactions and other business interests;

• our level of indebtedness may limit our ability to obtain financing generally and may require that a significant portion of our cash flow be used for debt service;

• we may be involved in legal proceedings that could have a material adverse effect on our business;

• our operations outside of the U.S. subject our profitability to fluctuations relating to changes in foreign currency valuations; and

• we are a holding company and, as a result, must rely on the receipt of payments from our subsidiaries, which are subject to limitations, in order to meet our cash needs and service our indebtedness.

In addition:

• the price of our common stock is subject to substantial fluctuation, which may be unrelated to our performance; and

• shares eligible for future sale, or issuable under the terms of our convertible notes, may cause the market price of our common stock to drop significantly, even if our business is doing well.

We urge you to carefully consider these risk factors and further information under Item 1A-“Risk Factors” in evaluating all forward-looking statements regarding our business. Readers of this report are cautioned not to place undue reliance on the forward-looking statements contained in this report. All forward-looking statements attributable to us are qualified in their entirety by this cautionary statement. Except to the extent required by the federal securities laws and the Securities and Exchange Commission’s rules and regulations, we have no intention or obligation to update publicly any forward-looking statements whether as a result of new information, future events or otherwise.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Interest Rates. We are exposed to market risk from changes in interest rates on a significant portion of our outstanding debt. Outstanding revolving balances under our credit agreements bear interest at variable rates based on a margin over defined LIBOR or the Bank of England Base Rate. Based on the amount outstanding under these facilities as of December 31, 2009, a 100 basis point change in interest rates would result in an approximate $2.2 million change to our annual other interest expense. Similarly, amounts outstanding under our floor plan financing arrangements bear interest at a variable rate based on a margin over the prime rate, defined LIBOR, the Finance House Base Rate, or the Euro Interbank Offer Rate. We are currently party to swap agreements pursuant to which a notional $300.0 million of our floating rate floor plan debt was exchanged for fixed rate debt through January 2011. Based on an average of the aggregate amounts outstanding under our floor plan financing arrangements subject to variable interest payments, adjusted to exclude the notional value of the hedged swap agreements, during the year ended December 31, 2009, a 100 basis point change in interest rates would result in an approximate $8.8 million change to our annual floor plan interest expense.

We evaluate our exposure to interest rate fluctuations and follow established policies and procedures to implement strategies designed to manage the amount of variable rate indebtedness outstanding at any point in time in an effort to mitigate the effect of interest rate fluctuations on our earnings and cash flows. These policies include:

• the maintenance of our overall debt portfolio with targeted fixed and variable rate components;

• the use of authorized derivative instruments;

• the prohibition of using derivatives for trading or other speculative purposes; and

• the prohibition of highly leveraged derivatives or derivatives which we are unable to reliably value or for which we are unable to obtain a market quotation.

Interest rate fluctuations affect the fair market value of our fixed rate debt, including our swaps, the 7.75% Notes, the Convertible Notes and certain seller financed promissory notes, but, with respect to such fixed rate debt instruments, do not impact our earnings and cash flows.

Foreign Currency Exchange Rates. As of December 31, 2009, we had dealership operations in the U.K. and Germany. In each of these markets, the local currency is the functional currency. Due to our intent to remain permanently invested in these foreign markets, we do not hedge against foreign currency fluctuations. In the event we change our intent with respect to the investment in any of our international operations, we would expect to implement strategies designed to manage those risks in an effort to mitigate the effect of foreign currency fluctuations on our earnings and cash flows. A ten percent change in average exchange rates versus the U.S. Dollar would have resulted in an approximate $352.2 million change to our revenues for the year ended December 31, 2009.

In common with other automotive retailers, we purchase certain of our new vehicle and parts inventories from foreign manufacturers. Although we purchase the majority of our inventories in the local functional currency, our business is subject to certain risks, including, but not limited to, differing economic conditions, changes in political climate, differing tax structures, other regulations and restrictions and foreign exchange rate volatility which may influence such manufacturers’ ability to provide their products at competitive prices in the local jurisdictions. Our future results could be materially and adversely impacted by changes in these or other factors.

Item 8. Financial Statements and Supplementary Data

The consolidated financial statements listed in the accompanying Index to Consolidated Financial Statements are incorporated by reference into this Item 8.

Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure

None.

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Item 9A. Controls and Procedures

Under the supervision and with the participation of our management, including the principal executive and financial officers, we conducted an evaluation of the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this report. Our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports we file under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our principal executive and financial officers, to allow timely discussions regarding required disclosure.

Based upon this evaluation, and as discussed in our report, the Company’s principal executive and financial officers concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report. In addition, we maintain internal controls designed to provide us with the information required for accounting and financial reporting purposes. There were no changes in our internal control over financial reporting that occurred during our fourth quarter of 2009 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management’s and our auditors’ reports on our internal control over financial reporting are included with our financial statements filed as part of this Annual Report on Form 10-K.

Item 9B. Other Information

Not applicable.

PART III

Except as set forth below, the information required by Items 10 through 14 is included in the Company’s definitive proxy statement under the captions “Election of Directors,” “Executive Officers,” “Compensation Committee Report,” “Compensation Discussion and Analysis,” “Executive and Director Compensation,” “Security Ownership of Certain Beneficial Owners and Management,” “Independent Auditing Firms,” “Related Party Transactions,” “Other Matters” and “Our Corporate Governance.” Such information is incorporated herein by reference.

Securities Authorized for Issuance Under Equity Compensation Plans.

The following table provides details regarding the shares of common stock issuable upon the exercise of outstanding options, warrants and rights granted under our equity compensation plans (including individual equity compensation arrangements) as of December 31, 2009.

			Weighted-average		Number of securities remaining
	Number of securities to		exercise price of		available for future issuance
	be issued upon exercise		outstanding		under equity compensation
	of outstanding options,		options, warrants		plans (excluding securities
	warrants and rights		and rights		reflected in column (A))
Plan Category	(A)		(B)		(C)
Equity compensation plans approved by security holders		290,668		9.29		2,088,646
Equity compensation plans not approved by security holders		—		—		—
Total		290,668		9.29		2,088,646

PART IV

Item 15. Exhibits and Financial Statement Schedules

(1) Financial Statements

The consolidated financial statements listed in the accompanying Index to Consolidated Financial Statements are filed as part of this Annual Report on Form 10-K.

(2) Financial Statement Schedule — Schedule II — Valuation and Qualifying Accounts following the Consolidated Financial Statements is filed as part of this Annual Report on Form 10-K.

(3) Exhibits — See the Index of Exhibits following the signature page for the exhibits to this Annual Report on Form 10-K.

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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 on February 24, 2010.

	Penske Automotive Group, Inc.
By:	/s/ Roger S. Penske
	Roger S. Penske
	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 following persons on behalf of the registrant and in the capacities and on the date indicated.

Signature	Title	Date
/s/ Roger S. Penske	Chairman of the Board and	February 24, 2010
Roger S. Penske	Chief Executive Officer (Principal Executive Officer)
/s/ Robert T. O’Shaughnessy	Executive Vice President — Finance	February 24, 2010
Robert T. O’Shaughnessy	and Chief Financial Officer (Principal Financial and Accounting Officer)
/s/ John D. Barr	Director	February 24, 2010
John D. Barr
/s/ Michael R. Eisenson	Director	February 24, 2010
Michael R. Eisenson
/s/ Hiroshi Ishikawa	Director	February 24, 2010
Hiroshi Ishikawa
/s/ Robert H. Kurnick, Jr.	Director	February 24, 2010
Robert H. Kurnick, Jr.
/s/ William J. Lovejoy	Director	February 24, 2010
William J. Lovejoy
/s/ Kimberly J. McWaters	Director	February 24, 2010
Kimberly J. McWaters
/s/ Lucio A. Noto	Director	February 24, 2010
Lucio A. Noto
/s/ Richard J. Peters	Director	February 24, 2010
Richard J. Peters
/s/ Ronald G. Steinhart	Director	February 24, 2010
Ronald G. Steinhart
/s/ H. Brian Thompson	Director	February 24, 2010
H. Brian Thompson

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INDEX OF EXHIBITS

Each management contract or compensatory plan or arrangement is identified with an asterisk.

3.1	Certificate of Incorporation (incorporated by reference to exhibit 3.2 to our Form 8-K filed on July 2, 2007).
3.2	Bylaws (incorporated by reference to exhibit 3.1 to our Form 8-K filed on December 7, 2007).
4.1.1	Indenture regarding our 3.5% senior subordinated convertible notes due 2026, dated January 31, 2006, by and among us, as Issuer, the subsidiary guarantors named therein and The Bank of New York Trust Company, N.A., as trustee (incorporated by reference to exhibit 4.1 to our Form 8-K filed February 2, 2006).
4.1.2	Amended and Restated Supplemental Indenture regarding our 3.5% senior subordinated convertible notes due 2026 dated as of February 19, 2010, among us, as Issuer, and certain of our domestic subsidiaries, as Guarantors, and The Bank of New York Trust Company, N.A., as trustee.
4.2.1	Indenture regarding our 7.75% senior subordinated notes due 2016 dated December 7, 2006, by and among us as Issuer, the subsidiary guarantors named therein and The Bank of New York Trust Company, N.A., as trustee (incorporated by reference to exhibit 4.1 to our current report on Form 8-K filed on December 12, 2006).
4.2.2	Amended and Restated Supplemental Indenture regarding 7.75% Senior Subordinated Notes due 2016 dated February 19, 2010, among us, as Issuer, and certain of our domestic subsidiaries, as Guarantors, and Bank of New York Trust Company, N.A., as trustee.
4.3.1	Third Amended and Restated Credit Agreement, dated as of October 30, 2008, among us, DCFS USA LLC and Toyota Motor Credit Corporation (incorporated by reference to exhibit 4.4 our form 10-Q filed November 5, 2008).
4.3.2	First Amendment dated October 30, 2009 to Amended and Restated Credit Agreement dated as of October 30, 2008 among the Company, Toyota Motor Credit Corporation and DCFS USA LLC, as agent (incorporated by reference to exhibit 4.1 to the quarterly report on Form 10-Q filed November 4, 2009).
4.3.3	Second Amended and Restated Security Agreement dated as of September 8, 2004 among us, DaimlerChrysler Financial Services Americas LLC and Toyota Motor Credit Corporation (incorporated by reference to Exhibit 10.2 to our September 8, 2004 Form 8-K).
4.4.1	Multi-Option Credit Agreement dated as of August 31, 2006 between Sytner Group Limited and The Royal Bank of Scotland, plc, as agent for National Westminster Bank Plc. (RBS) (incorporated by reference to exhibit 4.1 to our Form 8-K filed on September 5, 2006).
4.4.2	Amendment dated September 29, 2008 to Multi-Option Credit Agreement dated as of August 31, 2006 between Sytner Group Limited and RBS (incorporated by reference to exhibit 4.2 of our October 1, 2008 Form 8-K).
4.4.3	Supplemental Agreement dated September 4, 2009 to Multi-Option Credit Agreement dated as of August 31, 2006 between Sytner Group Limited and RBS (incorporated by reference to Exhibit 4.1 filed on September 8, 2009 on Form 8-K).
4.4.4	Fixed Rate Credit Agreement dated as of August 31, 2006 between Sytner Group Limited and RBS (incorporated by reference to exhibit 4.2 to our Form 8-K filed on September 5, 2006).
4.4.5	Amendment dated September 29, 2008 to Fixed Rate Credit Agreement dated as of August 31, 2006 between Sytner Group Limited and RBS (incorporated by reference to exhibit 4.3 of our October 1, 2008 Form 8-K).
4.4.6	Supplemental Agreement dated September 4, 2009 to Fixed Rate Credit Agreement dated as of August 31, 2006 between Sytner Group Limited and RBS (incorporated by reference to Exhibit 4.2 filed on September 8, 2009 on Form 8-K).
4.4.7	Seasonally Adjusted Overdraft Agreement dated as of August 31, 2006 between Sytner Group Limited and RBS (incorporated by reference to exhibit 4.3 to our Form 8-K filed on September 5, 2006).
4.4.8	Amendment dated September 29, 2008 to Seasonally Adjusted Overdraft Agreement dated as of August 31, 2006 between Sytner Group Limited and RBS (incorporated by reference to exhibit 4.4 of our October 1, 2008 Form 8-K).
10.1	Form of Dealer Agreement with Acura Automobile Division, American Honda Motor Co., Inc. (incorporated by reference to exhibit 10.2.15 to our 2001 Form 10-K).
10.2	Form of Dealer Agreement with Audi of America, Inc., a division of Volkswagen of America, Inc. (incorporated by reference to exhibit10.2.14 to our 2001 Form 10-K).
10.3	Form of Car Center Agreement with BMW of North America, Inc. (incorporated by reference to exhibit 10.2.5 to our 2001 Form 10-K).
10.4	Form of SAV Center Agreement with BMW of North America, Inc. (incorporated by reference to exhibit 10.2.6 to our 2001 Form 10-K).
10.5	Form of Dealership Agreement with BMW (GB) Limited (incorporated by reference to exhibit 10.4 to our 2007 Form 10-K).
10.6	Form of Dealer Agreement with Honda Automobile Division, American Honda Motor Co. (incorporated by reference to exhibit 10.2.3 to our 2001 Form 10-K).
10.7	Form of Dealer Agreement with Lexus, a division of Toyota Motor Sales U.S.A., Inc. (incorporated by reference to exhibit 10.2.4 to our 2001 Form 10-K).

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10.8		Form of Mercedes-Benz USA, Inc. Passenger and Car Retailer Agreement (incorporated by reference to exhibit 10.2.11 to our Form 10-Q for the quarter ended March 31, 2000).
10.9		Form of Mercedes-Benz USA, Inc. Light Truck Retailer Agreement (incorporated by reference to exhibit 10.2.12 to our Form 10-Q for the quarter ended March 31, 2000).
10.10		Form of Dealer Agreement with MINI Division of BMW of North America, LLC.
10.11		Form of Dealer Agreement with Toyota Motor Sales, U.S.A., Inc. (incorporated by reference to exhibit 10.2.7 to our 2001 Form 10-K).
10.12		Form of smart USA Distribution LLC Dealer Agreement.
10.13	**	Distributor Agreement dated October 31, 2006 between smart GmbH and smart USA Distributor LLC (incorporated by reference to exhibit 10.8 to our 2007 Form 10-K)
*10.14		Amended and Restated Penske Automotive Group, Inc. 2002 Equity Compensation Plan (incorporated by reference to exhibit 10.9 to our 2007 Form 10-K).
*10.15		Form of Restricted Stock Agreement (incorporated by reference to exhibit 10.3 to our Form 10-Q for the quarter ended June 30, 2003).
*10.16		Amended and Restated Penske Automotive Group, Inc. Non-Employee Director Compensation Plan (incorporated by reference to exhibit 10.11 to our 2007 Form 10-K).
*10.17		Penske Automotive Group, Inc. Amended and Restated Management Incentive Plan (incorporated by reference to exhibit 10.26 to our January 21, 2010 Form S-1).
10.18.1		First Amended and Restated Limited Liability Company Agreement dated April 1, 2003 between UAG Connecticut I, LLC and Noto Holdings, LLC (incorporated by reference to exhibit 10.3 to our Form 10-Q filed May 15, 2003).
10.18.2		Letter Agreement dated April 1, 2003 between UAG Connecticut I, LLC and Noto Holdings, LLC (incorporated by reference to exhibit 10.5 to our Form 10-Q filed May 15, 2003).
10.19		Registration Rights Agreement among us and Penske Automotive Holdings Corp. dated as of December 22, 2000 (incorporated by reference to exhibit 10.26.1 to our Form 10-K filed March 29, 2001).
10.20		Second Amended and Restated Registration Rights Agreement among us, Mitsui & Co., Ltd. and Mitsui & Co. (U.S.A.), Inc. dated as of March 26, 2004 (incorporated by reference to the exhibit 10.2 to our March 26, 2004 Form 8-K).
10.21		Purchase Agreement by and between Mitsui & Co., Ltd., Mitsui & Co. (U.S.A.), Inc., International Motor Cars Group I, L.L.C., International Motor Cars Group II, L.L.C., Penske Corporation, Penske Automotive Holdings Corp, and Penske Automotive Group, Inc. (incorporated by reference to exhibit 10.1 to our Form 8-K filed on February 17, 2004).
10.22		Stockholders Agreement among International Motor Cars Group II, L.L.C., Penske Automotive Holdings Corp., Penske Corporation and Mitsui & Co., Ltd. and Mitsui & Co. (USA), Inc. dated as of March 26, 2004 (incorporated by reference to exhibit 10.1 to our March 26, 2004 Form 8-K).
10.23		VMC Holding Corporation Stockholders’ Agreement dated April 28, 2005 among VMC Holding Corporation, U.S., Transportation Resource Partners, LP., Penske Truck Leasing Co. LLP., and Opus Ventures General Partners Limited (incorporated by reference to exhibit 10.1 to our Form 10-Q filed on May 5, 2005).
10.24		Management Services Agreement dated April 28, 2005 among VMC Acquisition Corporation, Transportation Resource Advisors LLC., Penske Truck Leasing Co. L.P. and Opus Ventures General Partner Limited (incorporated by reference to exhibit 10.1 to our Form 10-Q filed on May 5, 2005).
10.25		Joint Insurance Agreement dated August 7, 2006 between us and Penske Corporation (incorporated by reference to exhibit 10.1 to our Form 10-Q filed August 9, 2006).
10.26		Trade Name and Trademark Agreement dated May 6, 2008 between us and Penske System, Inc. (incorporated by reference to exhibit 10 to our Form 10-Q filed May 8, 2008).
10.27		Purchase and Sale Agreement dated June 26, 2008 by and among General Electric Credit Corporation of Tennessee, Logistics Holding Corp., RTLC Acquisition Corp., NTFC Capital Corporation, Penske Truck Leasing Corporation, PTLC Holdings Co., LLC, PTLC2 Holdings Co., LLC, Penske Automotive Group, Inc. and Penske Truck Leasing Co., L.P. (incorporated by reference to exhibit 10.1 to our July 2, 2008 Form 8-K ).
10.28		Third Amended and Restated Limited Partnership Agreement of Penske Truck Leasing Co., L.P. dated as of March 26, 2009 (incorporated by reference to exhibit 10.1 to our Form 10-Q filed May 8, 2009).
10.29		Rights Agreement dated June 26, 2008 by and among PTLC Holdings Co., LLC, PTLC2 Holdings Co., LLC, Penske Truck Leasing Corporation and Penske Automotive Group, Inc. (incorporated by reference to exhibit 10.4 to our July 2, 2008 Form 8-K).
10.30.1		Amended and Restated Penske Automotive Group 401(k) Savings and Retirement Plan dated as of March 3, 2009 (incorporated by reference to exhibit 10.26 to our Form 10-K filed March 11, 2009).
10.30.2		Amendment No. 1 dated December 12, 2009 Amended and Restated Penske Automotive Group 401(k) Savings and Retirement Plan (incorporated by reference to exhibit 10.26 to our January 21, 2010 Form S-1).

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*10.31	Amended and Restated Stock Option Plan dated as of December 10, 2003(incorporated by reference to exhibit 10.22 to our 2003 Form 10-K filed March 15, 2004).
12	Computation of Ratio of Earnings to Fixed Charges.
21	Subsidiary List.
23.1	Consent of Deloitte & Touche LLP.
23.2	Consent of KPMG Audit Plc.
31.1	Rule 13(a)-14(a)/15(d)-14(a) Certification.
31.2	Rule 13(a)-14(a)/15(d)-14(a) Certification.
32	Section 1350 Certification.

*	Compensatory plans or contracts
**	Portions of this exhibit have been omitted and filed separately with the SEC pursuant to a request for confidential treatment.

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PENSKE AUTOMOTIVE GROUP, INC
As of December 31, 2009 and 2008 and For the Years Ended
December 31, 2009, 2008 and 2007

Management Reports on Internal Control Over Financial Reporting	F-2
Reports of Independent Registered Public Accounting Firms	F-3
Consolidated Balance Sheets	F-5
Consolidated Statements of Operations	F-6
Consolidated Statements of Equity and Comprehensive Income	F-7
Consolidated Statements of Cash Flows	F-8
Notes to Consolidated Financial Statements	F-9

F-1

MANAGEMENT REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of Penske Automotive Group, Inc. and subsidiaries (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control system was designed to provide reasonable assurance to the Company’s management and board of directors that the Company’s internal control over financial reporting provides reasonable assurance regarding the reliability of financial reporting and the preparation and presentation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2009. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control — Integrated Framework. Based on our assessment we believe that, as of December 31, 2009, the Company’s internal control over financial reporting is effective based on those criteria.

The Company’s independent registered public accounting firm that audited the consolidated financial statements included in the Company’s Annual Report on Form 10-K has issued an audit report on the effectiveness of the Company’s internal control over financial reporting. This report appears on page F-3.

Penske Automotive Group, Inc.
February 24, 2010

MANAGEMENT REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of UAG UK Holdings Limited and subsidiaries (the “UAG UK”) is responsible for establishing and maintaining adequate internal control over financial reporting. UAG UK’s internal control system was designed to provide reasonable assurance to the UAG UK’s management and board of directors that the UAG UK’s internal control over financial reporting provides reasonable assurance regarding the reliability of financial reporting and the preparation and presentation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Management assessed the effectiveness of the UAG UK’s internal control over financial reporting as of December 31, 2009. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control — Integrated Framework. Based on our assessment we believe that, as of December 31, 2009, the UAG UK’s internal control over financial reporting is effective based on those criteria.

UAG UK’s independent registered public accounting firm that audited the consolidated financial statements of UAG UK (not included herein) has issued an audit report on the effectiveness of the UAG UK’s internal control over financial reporting. This report appears on page F-4.

UAG UK Holdings Limited
February 24, 2010

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Penske Automotive Group, Inc.
Bloomfield Hills, Michigan

We have audited the accompanying consolidated balance sheets of Penske Automotive Group, Inc. and subsidiaries (the “Company”) as of December 31, 2009 and 2008, and the related consolidated statements of operations, equity and comprehensive income, and cash flows for each of the three years in the period ended December 31, 2009. Our audits also included the financial statement schedule listed in the Index at Item 15. We also have audited the Company’s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on these financial statements and financial statement schedule and an opinion on the Company’s internal control over financial reporting based on our audits. We did not audit the financial statements or the effectiveness of internal control over financial reporting of UAG UK Holdings Limited and subsidiaries (a consolidated subsidiary), which statements reflect total assets constituting 31% and 29% of consolidated total assets as of December 31, 2009 and 2008, respectively, and total revenues constituting 36%, 35%, and 36% of consolidated total revenues for the years ended December 31, 2009, 2008 and 2007, respectively. Those financial statements and the effectiveness of UAG UK Holdings Limited and subsidiaries’ internal control over financial reporting were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for UAG UK Holdings Limited and subsidiaries and to the effectiveness of UAG UK Holdings Limited and subsidiaries’ internal control over financial reporting, is based solely on the report of the other auditors.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits and the report of the other auditors provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, based on our audits and the report of the other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company at December 31, 2009 and 2008, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2009, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, based on our audits and (as to the amounts included for UAG UK Holdings Limited and subsidiaries) the report of the other auditors, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. Also, in our opinion, based on our audit and the report of the other auditors, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

/s/ Deloitte & Touche LLP

Detroit, Michigan
February 24, 2010

F-3

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
UAG UK Holdings Limited:

We have audited the accompanying consolidated balance sheets of UAG UK Holdings Limited and subsidiaries (the “Company”) as of December 31, 2009 and 2008, and the related consolidated statements of income, stockholders’ equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2009. In connection with our audits of the consolidated financial statements, we have also audited the related financial statement schedule. We also have audited UAG UK Holdings Limited’s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these consolidated financial statements and financial statement schedule, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule and an opinion on the Company’s internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2009 and 2008, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2009, in conformity with US generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

/s/ KPMG Audit Plc

Birmingham, United Kingdom
February 24, 2010

F-4

PENSKE AUTOMOTIVE GROUP, INC.

CONSOLIDATED BALANCE SHEETS

	December 31,
	2009		2008
	(In thousands, except
	per share amounts)
ASSETS
Cash and cash equivalents	$	13,769	$	17,108
Accounts receivable, net of allowance for doubtful accounts of $1,694 and $2,081, as of December 31, 2009 and 2008, respectively		322,598		294,230
Inventories		1,306,532		1,586,914
Other current assets		95,560		88,437
Assets held for sale		5,005		20,574
Total current assets		1,743,464		2,007,263
Property and equipment, net		726,835		662,898
Goodwill		810,323		776,683
Franchise value		201,756		196,358
Equity method investments		295,473		296,487
Other long-term assets		18,156		22,460
Total assets	$	3,796,007	$	3,962,149
LIABILITIES AND EQUITY
Floor plan notes payable	$	772,926	$	961,993
Floor plan notes payable — non-trade		423,316		507,404
Accounts payable		190,325		178,994
Accrued expenses		227,725		196,704
Current portion of long-term debt		12,442		11,305
Liabilities held for sale		3,083		24,289
Total current liabilities		1,629,817		1,880,689
Long-term debt		933,966		1,052,060
Deferred tax liability		157,500		106,590
Other long-term liabilities		128,685		114,389
Total liabilities		2,849,968		3,153,728
Commitments and contingent liabilities
Equity
Penske Automotive Group stockholders’ equity:
Preferred Stock, $0.0001 par value; 100 shares authorized; none issued and outstanding		—		—
Common Stock, $0.0001 par value, 240,000 shares authorized; 91,618 shares issued and outstanding at December 31, 2009; 91,431 shares issued and outstanding at December 31, 2008		9		9
Non-voting Common Stock, $0.0001 par value, 7,125 shares authorized; none issued and outstanding		—		—
Class C Common Stock, $0.0001 par value, 20,000 shares authorized; none issued and outstanding		—		—
Additional paid-in-capital		737,198		731,037
Retained earnings		196,205		119,744
Accumulated other comprehensive income (loss)		9,049		(45,989	)
Total Penske Automotive Group stockholders’ equity		942,461		804,801
Non-controlling interest		3,578		3,620
Total equity		946,039		808,421
Total liabilities and equity	$	3,796,007	$	3,962,149

See Notes to Consolidated Financial Statements.

F-5

PENSKE AUTOMOTIVE GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

	Year Ended December 31,
	2009			2008			2007
	(In thousands, except per share amounts)
Revenue:
New vehicle	$	4,662,418		$	5,935,857		$	6,929,511
Used vehicle		2,600,691			2,848,053			3,097,795
Finance and insurance, net		222,672			259,255			286,294
Service and parts		1,321,580			1,403,545			1,392,286
Distribution		179,159			348,809			—
Fleet and wholesale		536,585			841,617			1,075,831
Total revenues		9,523,105			11,637,136			12,781,717
Cost of sales:
New vehicle		4,286,224			5,449,476			6,346,555
Used vehicle		2,376,358			2,634,607			2,855,836
Service and parts		593,463			623,032			614,105
Distribution		161,000			294,535			—
Fleet and wholesale		523,749			845,282			1,068,692
Total cost of sales		7,940,794			9,846,932			10,885,188
Gross profit		1,582,311			1,790,204			1,896,529
Selling, general and administrative expenses		1,318,980			1,493,903			1,507,721
Intangible impairments		—			643,459			—
Depreciation and amortization		54,234			53,877			50,007
Operating income (loss)		209,097			(401,035	)		338,801
Floor plan interest expense		(35,662	)		(64,188	)		(73,104	)
Other interest expense		(55,201	)		(54,504	)		(55,266	)
Debt discount amortization		(13,043	)		(13,984	)		(12,896	)
Equity in earnings of affiliates		13,808			16,513			4,084
Gain on debt repurchase		10,429			—			—
Loss on debt redemption		—			—			(18,634	)
Income (loss) from continuing operations before income taxes		129,428			(517,198	)		182,985
Income taxes		(45,386	)		105,741			(61,783	)
Income (loss) from continuing operations		84,042			(411,457	)		121,202
(Loss) income from discontinued operations, net of tax		(7,122	)		(7,446	)		1,031
Net income (loss)		76,920			(418,903	)		122,233
Less: Income attributable to non-controlling interests		459			1,133			1,972
Net income (loss) attributable to Penske Automotive Group common stockholders	$	76,461		$	(420,036	)	$	120,261
Basic earnings per share attributable to Penske Automotive Group common stockholders:
Continuing operations	$	0.91		$	(4.39	)	$	1.26
Discontinued operations		(0.08	)		(0.08	)		0.01
Net income (loss)	$	0.84		$	(4.47	)	$	1.27
Shares used in determining basic earnings per share		91,557			93,958			94,854
Diluted earnings per share attributable to Penske Automotive Group common stockholders:
Continuing operations	$	0.91		$	(4.39	)	$	1.25
Discontinued operations		(0.08	)		(0.08	)		0.01
Net income (loss)	$	0.83		$	(4.47	)	$	1.27
Shares used in determining diluted earnings per share		91,653			93,958			95,046
Amounts attributable to Penske Automotive Group common stockholders:
Income (loss) from continuing operations	$	84,042		$	(411,457	)	$	121,202
Less: Income attributable to non-controlling interests		459			1,133			1,972
Income (loss) from continuing operations, net of tax		83,583			(412,590	)		119,230
(Loss) income from discontinued operations, net of tax		(7,122	)		(7,446	)		1,031
Net income (loss)	$	76,461		$	(420,036	)	$	120,261
Cash dividends per share	$	—		$	0.36		$	0.30

See Notes to Consolidated Financial Statements.

F-6

PENSKE AUTOMOTIVE GROUP, INC.

CONSOLIDATED STATEMENTS OF EQUITY AND COMPREHENSIVE INCOME

	Voting and
	Non-voting											Accumulated						Total
	Common Stock					Additional						Other						Stockholders’ Equity									Comprehensive Income
	Issued					Paid-in			Retained			Comprehensive			Treasury			Attributable to Penske			Non-controlling			Total			Attributable to Penske			Non-controlling
	Shares			Amount		Capital			Earnings			Income (Loss)			Stock			Automotive Group			Interest			Equity			Automotive Group			Interest		Total
Balance, January 1, 2007		94,468,013		$	9	$	811,887		$	486,298		$	79,379		$	(45,233	)	$	1,332,340		$	15,031		$	1,347,371
Adoption of new accounting pronouncement (note 16)		—			—		—			(4,430	)		—			—			(4,430	)		—			(4,430	)
Equity compensation		346,265			—		7,721			—			—			—			7,721			—			7,721
Exercise of options, including tax benefit of $1,113		205,485			—		2,614			—			—			—			2,614			—			2,614
Dividends		—			—		—			(28,447	)		—			—			(28,447	)		—			(28,447	)
Distributions to non-controlling interests		—			—		—			—			—			—			—			(3,230	)		(3,230	)
Sale of subsidiary shares to non-controlling interest		—			—		—			—			—			—			—			465			465
Foreign currency translation		—			—		—			—			12,745			—			12,745			—			12,745		$	12,745		$	—	$	12,745
Other		—			—		—			—			7,864			—			7,864			1,030			8,894			7,864			—		7,864
Retirement of treasury stock		—			—		(45,233	)		—			—			45,233			—			—			—
Net income		—			—		—			120,261			—			—			120,261			1,972			122,233			120,261			1,972		122,233
Balance, December 31, 2007		95,019,763			9		776,989			573,682			99,988			—			1,450,668			15,268			1,465,936		$	140,870		$	1,972	$	142,842
Equity compensation		365,825			—		6,884			—			—			—			6,884			—			6,884
Exercise of options, including tax benefit of $245		60,336			—		825			—			—			—			825			—			825
Repurchase of common stock		(4,015,143	)		—		(53,661	)		—			—			—			(53,661	)		—			(53,661	)
Dividends		—			—		—			(33,902	)		—			—			(33,902	)		—			(33,902	)
Distributions to non-controlling interests		—			—		—			—			—			—			—			(1,565	)		(1,565	)
Purchase of subsidiary shares from non-conrolling interests		—			—		—			—			—			—			—			(12,389	)		(12,389	)
Sale of subsidiary shares to non-controlling interest		—			—		—			—			—			—			—			402			402
Foreign currency translation		—			—		—			—			(134,087	)		—			(134,087	)		—			(134,087	)	$	(134,087	)	$	—	$	(134,087	)
Other		—			—		—			—			(11,890	)		—			(11,890	)		771			(11,119	)		(11,890	)		—		(11,890	)
Net (loss) income		—			—		—			(420,036	)		—			—			(420,036	)		1,133			(418,903	)		(420,036	)		1,133		(418,903	)
Balance, December 31, 2008		91,430,781			9		731,037			119,744			(45,989	)		—			804,801			3,620			808,421		$	(566,013	)	$	1,133	$	(564,880	)
Equity compensation		153,757			—		5,718			—			—			—			5,718			—			5,718
Exercise of options, including tax benefit of $128		33,208			—		349			—			—			—			349			—			349
Distributions to non-controlling interests		—			—		—			—			—			—			—			(565	)		(565	)
Sale of subsidiary shares to non-controlling interest		—			—		94			—			—			—			94			64			158
Foreign currency translation		—			—		—			—			47,920			—			47,920			—			47,920		$	47,920		$	—	$	47,920
Other		—			—		—			—			7,118			—			7,118			—			7,118			7,118			—		7,118
Net income		—			—		—			76,461			—			—			76,461			459			76,920			76,461			459		76,920
Balance, December 31, 2009		91,617,746		$	9	$	737,198		$	196,205		$	9,049		$	—		$	942,461		$	3,578		$	946,039		$	131,499		$	459	$	131,958

See Notes to Consolidated Financial Statements.

F-7

PENSKE AUTOMOTIVE GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended December 31,
	2009			2008			2007
	(In thousands)
Operating Activities:
Net income (loss)	$	76,920		$	(418,903	)	$	122,233
Adjustments to reconcile net income (loss) to net cash from continuing operating activities:
Intangible impairments		—			643,459			—
Depreciation and amortization		54,234			53,877			50,007
Debt discount amortization		13,043			13,984			12,896
Undistributed earnings of equity method investments		(13,808	)		(13,821	)		(4,084	)
Loss (income) from discontinued operations, net of tax		7,122			7,446			(1,031	)
Loss on debt redemption		—			—			18,634
Gain on debt repurchase		(10,733	)		—			—
Deferred income taxes		45,699			(106,431	)		24,782
Changes in operating assets and liabilities:
Accounts receivable		(27,101	)		145,235			21,947
Inventories		297,803			145,278			(144,803	)
Floor plan notes payable		(189,107	)		(2,558	)		208,238
Accounts payable and accrued expenses		37,171			(121,823	)		(33,583	)
Other		12,201			58,885			25,258
Net cash from continuing operating activities		303,444			404,628			300,494
Investing Activities:
Purchase of equipment and improvements		(90,315	)		(211,832	)		(194,492	)
Proceeds from sale-leaseback transactions		2,338			37,422			131,793
Dealership acquisitions, net, including repayment of sellers’ floor plan notes payable of $5,784, $30,711 and $51,904, respectively		(11,476	)		(147,089	)		(180,721	)
Purchase of Penske Truck Leasing Co., L.P. partnership interest		—			(219,000	)		—
Other		17,994			(1,500	)		15,518
Net cash from continuing investing activities		(81,459	)		(541,999	)		(227,902	)
Financing Activities:
Proceeds from borrowings under U.S. credit agreement revolving credit line		409,900			550,900			426,900
Repayments under U.S. credit agreement revolving credit line		(409,900	)		(550,900	)		(426,900	)
Proceeds from U.S. credit agreement term loan		—			219,000			—
Repayments under U.S. credit agreement term loan		(60,000	)		(10,000	)		—
Repurchase 3.5% senior subordinated convertible notes		(51,424	)		—			—
Proceeds from mortgage facility		—			42,400			—
Net repayments of other long-term debt		(17,402	)		(1,520	)		(34,190	)
Net (repayments) borrowings of floor plan notes payable — non-trade		(84,088	)		(52,783	)		188,692
Payment of deferred financing costs		—			(661	)		—
Redemption 9 5/8% senior subordinated debt		—			—			(314,439	)
Proceeds from exercises of options, including excess tax benefit		349			821			2,614
Repurchases of common stock		—			(53,661	)		—
Dividends		—			(33,902	)		(28,447	)
Net cash from continuing financing activities		(212,565	)		109,694			(185,770	)
Discontinued operations:
Net cash from discontinued operating activities		(5,596	)		(2,938	)		17,283
Net cash from discontinued investing activities		2,065			64,472			69,697
Net cash from discontinued financing activities		(9,228	)		(30,365	)		21,751
Net cash from discontinued operations		(12,759	)		31,169			108,731
Net change in cash and cash equivalents		(3,339	)		3,492			(4,447	)
Cash and cash equivalents, beginning of period		17,108			13,616			18,063
Cash and cash equivalents, end of period	$	13,769		$	17,108		$	13,616
Supplemental disclosures of cash flow information:
Cash paid for:
Interest	$	92,804		$	125,184		$	138,941
Income taxes		18,251			8,862			35,054
Seller financed/assumed debt		—			4,728			2,992

See Notes to Consolidated Financial Statements.

F-8

PENSKE AUTOMOTIVE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts)

1. Organization and Summary of Significant Accounting Policies

Business Overview and Concentrations

Penske Automotive Group, Inc. (the “Company”) is engaged in the sale of new and used motor vehicles and related products and services, including vehicle service, parts, collision repair, finance and lease contracts, third-party insurance products and other aftermarket products. The Company operates dealerships under franchise agreements with a number of automotive manufacturers. In accordance with individual franchise agreements, each dealership is subject to certain rights and restrictions typical of the industry. The ability of the manufacturers to influence the operations of the dealerships, or the loss of a significant number of franchise agreements, could have a material impact on the Company’s results of operations, financial position and cash flows. For the year ended December 31, 2009, BMW/MINI franchises accounted for 21% of the Company’s total revenues, Toyota/Lexus franchises accounted for 19%, Honda/Acura franchises accounted for 14%, and Daimler and Audi franchises each accounted for 10%. No other manufacturers’ franchises accounted for more than 10% of our total revenue. At December 31, 2009 and 2008, the Company had receivables from manufacturers of $80,661 and $72,301, respectively. In addition, a large portion of the Company’s contracts in transit, which are included in accounts receivable, are due from manufacturers’ captive finance subsidiaries. In 2007, the Company established a wholly-owned subsidiary, smart USA Distributor LLC (“smart USA”), which is the exclusive distributor of the smart fortwo vehicle in the U.S. and Puerto Rico.

Basis of Presentation

Results for the year ended December 31, 2009 include a $10,429 pre-tax gain relating to the repurchase of $68,740 aggregate principal amount of the Company’s 3.5% senior subordinated convertible notes. Results for the year ended December 31, 2008 include pre-tax charges of $661,880, including $643,459 relating to pre-tax goodwill and franchise asset impairments, as well as, an additional $18,421 of pre-tax dealership consolidation and relocation costs, severance costs, other asset impairment charges, costs associated with the termination of an acquisition agreement, and insurance deductibles relating to damage sustained at our dealerships in the Houston market during Hurricane Ike. Results for the year ended December 31, 2007 include pre-tax charges of $18,634 relating to the redemption of $300.0 million aggregate principal amount of 9.625% Senior Subordinated Notes and $6,267 of pre-tax impairment charges.

The consolidated financial statements include all majority-owned subsidiaries. Investments in affiliated companies, representing an ownership interest in the voting stock of the affiliate of between 20% and 50% or an investment in a limited partnership or a limited liability corporation for which the Company’s investment is more than minor, are stated at cost of acquisition plus the Company’s equity in undistributed net earnings since acquisition. All intercompany accounts and transactions have been eliminated in consolidation. The Company evaluated subsequent events through February 24, 2010, the date the consolidated financial statements were filed with the SEC.

The consolidated financial statements have been adjusted for entities that have been treated as discontinued operations through December 31, 2009 in accordance with general accounting principles.

In June 2008, the Company acquired a 9.0% limited partnership interest in Penske Truck Leasing Co., L.P. (“PTL”), a leading global transportation services provider, from subsidiaries of General Electric Capital Corporation in exchange for $219,000. PTL operates and maintains more than 200,000 vehicles and serves customers in North America, South America, Europe and Asia. Product lines include full-service leasing, contract maintenance, commercial and consumer truck rental and logistics services, including, transportation and distribution center management and supply chain management.

Reclassification

The 2008 balance sheet has been reclassified to conform to current year presentation.

F-9

PENSKE AUTOMOTIVE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts) — (Continued)

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The accounts requiring the use of significant estimates include accounts receivable, inventories, income taxes, intangible assets and certain reserves.

Cash and Cash Equivalents

Cash and cash equivalents include all highly-liquid investments that have an original maturity of three months or less at the date of purchase.

Contracts in Transit

Contracts in transit represent receivables from unaffiliated finance companies relating to the sale of customers’ installment sales contracts arising in connection with the sale of a vehicle by us. Contracts in transit, included in accounts receivable, net in the Company’s consolidated balance sheets, amounted to $120,619 and $105,902 as of December 31, 2009 and 2008, respectively.

Inventory Valuation

Inventories are stated at the lower of cost or market. Cost for new and used vehicle inventories is determined using the specific identification method. Cost for parts and accessories are based on factory list prices.

Property and Equipment

Property and equipment are recorded at cost and depreciated over estimated useful lives using the straight-line method. Useful lives for purposes of computing depreciation for assets, other than leasehold improvements, range between 3 and 15 years. Leasehold improvements and equipment under capital lease are depreciated over the shorter of the term of the lease or the estimated useful life of the asset, not to exceed 40 years.

Expenditures relating to recurring repair and maintenance are expensed as incurred. Expenditures that increase the useful life or substantially increase the serviceability of an existing asset are capitalized.

When equipment is sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the balance sheet, with any resulting gain or loss being reflected in income.

Income Taxes

Tax regulations may require items to be included in our tax return at different times than those items are reflected in our financial statements. Some of the differences are permanent, such as expenses that are not deductible on our tax return, and some are temporary differences, such as the timing of depreciation expense. Temporary differences create deferred tax assets and liabilities. Deferred tax assets generally represent items that will be used as a tax deduction or credit in our tax return in future years which we have already recorded in our financial statements. Deferred tax liabilities generally represent deductions taken on our tax return that have not yet been recognized as an expense in our financial statements. We establish valuation allowances for our deferred tax assets if the amount of expected future taxable income is not more likely than not to allow for the use of the deduction or credit.

F-10

PENSKE AUTOMOTIVE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts) — (Continued)

Intangible Assets

The Company’s principal intangible assets relate to its franchise agreements with vehicle manufacturers, which represent the estimated value of franchises acquired in business combinations, and goodwill, which represents the excess of cost over the fair value of tangible and identified intangible assets acquired in business combinations. The Company believes the franchise values of its dealerships have an indefinite useful life based on the following facts:

• Automotive retailing is a mature industry and is based on franchise agreements with the vehicle manufacturers;

• There are no known changes or events that would alter the automotive retailing franchise environment;

• Certain franchise agreement terms are indefinite;

• Franchise agreements that have limited terms have historically been renewed by us without substantial cost; and

• The Company’s history shows that manufacturers have not terminated our franchise agreements.

Impairment Testing

Franchise value impairment is assessed as of October 1 every year and upon the occurrence of an indicator of impairment through a comparison of its carrying amount and estimated fair value. An indicator of impairment exists if the carrying value of a franchise exceeds its estimated fair value, and an impairment loss may be recognized up to that excess. The fair value of franchise value is determined using a discounted cash flow approach, which includes assumptions that include revenue and profitability growth, franchise profit margins, and the Company’s cost of capital. The Company also evaluates its franchise agreements in connection with the annual impairment testing to determine whether events and circumstances continue to support its assessment that the franchise agreements have an indefinite life. As discussed in Note 7, the Company determined that the carrying value as of December 31, 2008 relating to certain of its franchise agreements was impaired and recorded a pre-tax non-cash impairment charge of $37,110.

Goodwill impairment is assessed at the reporting unit level as of October 1 every year and upon the occurrence of an indicator of impairment. The Company has determined that the dealerships in each of its operating segments within the Retail reportable segment, which are organized by geography, are components that are aggregated into five reporting units as they (A) have similar economic characteristics (all are automotive dealerships having similar margins), (B) offer similar products and services (all sell new and used vehicles, service, parts and third-party finance and insurance products), (C) have similar target markets and customers (generally individuals) and (D) have similar distribution and marketing practices (all distribute products and services through dealership facilities that market to customers in similar fashions). Accordingly, our operating segments are also considered our reporting units for the purpose of goodwill impairment testing relating to the Company’s Retail reportable segment. There is no goodwill recorded in the Distribution or PAG Investments reportable segments. An indicator of goodwill impairment exists if the carrying amount of the reporting unit, including goodwill, is determined to exceed the estimated fair value. The fair value of goodwill is determined using a discounted cash flow approach, which includes assumptions that include revenue and profitability growth, franchise profit margins, residual values and the Company’s cost of capital. If an indication of goodwill impairment exists, an analysis reflecting the allocation of the fair value of the reporting unit to all assets and liabilities, including previously unrecognized intangible assets, is performed. The impairment is measured by comparing the implied fair value of the reporting unit goodwill with its carrying amount and an impairment loss may be recognized up to that excess. As discussed in Note 7, the Company determined that the carrying value of goodwill as of December 31, 2008 relating to certain reporting units was impaired and recorded a pre-tax non-cash impairment charge of $606,349.

Investments

In 2009, investments included investments in businesses accounted for under the equity method. In 2008 and 2007, investments also included marketable securities. A majority of the Company’s investments are in joint venture relationships. Such joint venture relationships are accounted for under the equity method, pursuant to which the Company records its proportionate share of the joint ventures’ income each period. In December 2009, the Company exited from its joint venture investment in Mexico, which resulted in a gain of $581. In June 2008, the Company acquired the 9.0% limited partnership interest in PTL for $219,000 from GE Capital.

F-11

PENSKE AUTOMOTIVE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts) — (Continued)

Investments for which there is not a liquid, actively traded market are reviewed periodically by management for indicators of impairment. If an indicator of impairment is identified, management estimates the fair value of the investment using a discounted cash flow approach, which includes assumptions relating to revenue and profitability growth, profit margins, residual values and the Company’s cost of capital. Declines in investment values that are deemed to be other than temporary may result in an impairment charge reducing the investments’ carrying value to fair value. During 2007, the Company recorded an adjustment to the carrying value of an investment to recognize an other than temporary impairment of $3,360. As a result of continued deterioration in the value of the investment, the Company recorded an additional other than temporary impairment charge of $506 during 2008.

Foreign Currency Translation

For all of the Company’s foreign operations, the functional currency is the local currency. The revenue and expense accounts of the Company’s foreign operations are translated into U.S. dollars using the average exchange rates that prevailed during the period. Assets and liabilities of foreign operations are translated into U.S. dollars using period end exchange rates. Cumulative translation adjustments relating to foreign functional currency assets and liabilities are recorded in accumulated other comprehensive income (loss), a separate component of equity.

Fair Value of Financial Instruments

Financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, debt, floor plan notes payable, and interest rate swaps used to hedge future cash flows. Other than our subordinated notes, the carrying amount of all significant financial instruments approximates fair value due either to length of maturity, the existence of variable interest rates that approximate prevailing market rates, or as a result of mark to market accounting. A summary of the fair value of the subordinated notes, based on quoted, level one market data, follows:

	December 31, 2009				December 31, 2008
	Carrying Value		Fair Value		Carrying Value		Fair Value
7.75% Senior Subordinated Notes due 2016	$	375,000	$	352,688	$	375,000	$	150,938
3.5% Senior Subordinated Convertible Notes due 2026		289,344		306,833		339,128		206,250

Revenue Recognition

Vehicle, Parts and Service Sales

The Company records revenue when vehicles are delivered and title has passed to the customer, when vehicle service or repair work is completed and when parts are delivered to our customers. Sales promotions that we offer to customers are accounted for as a reduction of revenues at the time of sale. Rebates and other incentives offered directly to us by manufacturers are recognized as a reduction of cost of sales. Reimbursements of qualified advertising expenses are treated as a reduction of selling, general and administrative expenses. The amounts received under certain manufacturer rebate and incentive programs are based on the attainment of program objectives, and such earnings are recognized either upon the sale of the vehicle for which the award was received, or upon attainment of the particular program goals if not associated with individual vehicles.

Finance and Insurance Sales

Subsequent to the sale of a vehicle to a customer, the Company sells its installment sale contracts to various financial institutions on a non-recourse basis (with specified exceptions) to mitigate the risk of default. The Company receives a commission from the lender equal to either the difference between the interest rate charged to the customer and the interest rate set by the financing institution or a flat fee. The Company also receives commissions for facilitating the sale of various third-party insurance products to customers, including credit and life insurance policies and extended service contracts. These commissions are recorded as revenue at the time the customer enters into the contract. In the case of finance contracts, a customer may prepay or fail to pay their contract, thereby terminating the contract. Customers may also terminate extended service contracts and other insurance products, which are fully paid at purchase, and become eligible for refunds of unused premiums. In these circumstances, a portion of the commissions the Company received may be charged back based on the terms of the contracts. The revenue the Company records relating to these transactions is net of an estimate of the amount of chargebacks the Company will be required to pay. The Company’s estimate is based upon the Company’s historical experience with similar contracts, including the impact of refinance and default rates on retail finance contracts and cancellation rates on extended service contracts and other insurance products. Aggregate reserves relating to chargeback activity were $19,263 and $20,420 as of December 31, 2009 and 2008, respectively. Changes in reserve estimates relate primarily to a decrease in current period revenues.

F-12

PENSKE AUTOMOTIVE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts) — (Continued)

Defined Contribution Plans

The Company sponsors a number of defined contribution plans covering a significant majority of the Company’s employees. Company contributions to such plans are discretionary and are based on the level of compensation and contributions by plan participants. The Company suspended its 2009 contributions to its U.S. 401(K) plan and intends to reinstate the matching contributions relating to employees’ 2010 contributions. The Company incurred expense of $5,932, $10,424 and $11,053 relating to such plans during the years ended December 31, 2009, 2008 and 2007, respectively.

Advertising

Advertising costs are expensed as incurred or when such advertising takes place. The Company incurred net advertising costs of $62,970, $80,952 and $86,864 during the years ended December 31, 2009, 2008 and 2007, respectively. Qualified advertising expenditures reimbursed by manufacturers, which are treated as a reduction of advertising expense, were $9,704, $7,693 and $15,524 during the years ended December 31, 2009, 2008 and 2007, respectively.

Self Insurance

We retain risk relating to certain of our general liability insurance, workers’ compensation insurance, auto physical damage insurance, property insurance, employment practices liability insurance, directors and officers insurance, and employee medical benefits in the U.S. As a result, we are likely to be responsible for a significant portion of the claims and losses incurred under these programs. The amount of risk we retain varies by program, and, for certain exposures, we have pre-determined maximum loss limits for certain individual claims and/or insurance periods. Losses, if any, above such pre-determined loss limits are paid by third-party insurance carriers. Our estimate of future losses is prepared by management using our historical loss experience and industry-based development factors.

Earnings Per Share

Basic earnings per share is computed using net income attributable to Penske Automotive Group common stockholders and the number of weighted average shares of voting common stock outstanding, including outstanding unvested restricted stock awards which contain rights to non-forfeitable dividends. Diluted earnings per share is computed using net income attributable to Penske Automotive Group common stockholders and the number of weighted average shares of voting common stock outstanding, adjusted for the dilutive effect of stock options. For the year ended December 31, 2008, no stock options were included in the computation of diluted loss per share because the Company reported a net loss from continuing operations attributable to Penske Automotive Group common stockholders and the effect of their inclusion would be anti-dilutive. A reconciliation of the number of shares used in the calculation of basic and diluted earnings per share for the years ended December 31, 2009, 2008 and 2007 follows:

	Year Ended December 31,
	2009		2008		2007
Weighted average number of common shares outstanding		91,557		93,958		94,854
Effect of non-participatory equity compensation		96		—		192
Weighted average number of common shares outstanding, including effect of dilutive securities		91,653		93,958		95,046

There were no anti-dilutive stock options outstanding during the years ended December 31, 2009 or 2007. In addition, the Company has senior subordinated convertible notes outstanding which, under certain circumstances discussed in Note 9, may be converted to voting common stock. As of December 31, 2009, 2008, and 2007, no shares related to the senior subordinated convertible notes were included in the calculation of diluted earnings per share because the effect of such securities was anti-dilutive.

Hedging

General accounting principles relating to derivative instruments and hedging activities require all derivatives, whether designated in hedging relationships or not, to be recorded on the balance sheet at fair value. These accounting principles also define requirements for designation and documentation of hedging relationships, as well as ongoing effectiveness assessments, which must be met in order to qualify for hedge accounting. For a derivative that does not qualify as a hedge, changes in fair value are recorded in earnings immediately. If the derivative is designated in a fair-value hedge, the changes in the fair value of the derivative and the hedged item are recorded in earnings. If the derivative is designated in a cash-flow hedge, effective changes in the fair value of the derivative are recorded in accumulated other comprehensive income (loss), a separate component of equity, and recorded in the income statement only when the hedged item affects earnings. Changes in the fair value of the derivative attributable to hedge ineffectiveness are recorded in earnings immediately.

F-13

PENSKE AUTOMOTIVE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts) — (Continued)

Stock-Based Compensation

General accounting principles relating to share-based payments require the Company to record compensation expense for all awards based on their grant-date fair value. The Company’s share-based payments have generally been in the form of “non-vested shares,” the fair value of which are measured as if they were vested and issued on the grant date.

New Accounting Pronouncements

A new accounting pronouncement amending the consolidation guidance relating to variable interest entities (“VIE”) became effective for the Company on January 1, 2010. The new guidance replaces the current quantitative model for determining the primary beneficiary of a variable interest entity with a qualitative approach that considers which entity has the power to direct activities that most significantly impact the variable interest entity’s performance and whether the entity has an obligation to absorb losses or the right to receive benefits that could potentially be significant to the variable interest entity. The new guidance also requires: an additional reconsideration event for determining whether an entity is a VIE when holders of an at risk equity investment lose voting or similar rights to direct the activities that most significantly impact the entities economic performance; ongoing assessments of whether an enterprise is the primary beneficiary of a VIE; separate presentation of the assets and liabilities of the VIE on the balance sheet; and additional disclosures about an entity’s involvement with a VIE. The adoption of the accounting pronouncement will not impact the Company’s consolidated financial statements.

2. Equity Method Investees

In December 2009, the Company exited from its joint venture investment in Mexico which operates several Toyota franchises resulting in a gain of $581.

In June 2008, the Company acquired the 9.0% limited partnership interest in PTL for $219,000.

The Company’s other investments in companies that are accounted for under the equity method consist of the following: the Jacobs Group (50%), the Nix Group (50%), the Reisacher Group (50%), Penske Wynn Ferrari Maserati (50%), Max Cycles (50%), QEK Global Solutions (22.5%), Cycle Express, LP (9.4%), Innovative Media (45%), and Fleetwash, LLC (7%). All of these operations except QEK, Fleetwash, Cycle Express, Max Cycles, and Innovative Media are engaged in the sale and servicing of automobiles. QEK is an automotive fleet management company, Fleetwash provides vehicle fleet washing services, Cycle Express provides auction services to the motorcycle, ATV and other recreational vehicle market, Max Cycles is engaged in the sale and servicing of BMW motorcycles, and Innovative Media provides dealership graphics. The Company’s investment in entities accounted for under the equity method amounted to $295,473 and $296,487 at December 31, 2009 and 2008, respectively.

The combined results of operations and financial position of the Company’s equity basis investments are summarized as follows:

Condensed income statement information:

	Year Ended December 31,
	2009		2008		2007
Revenues	$	4,748,082	$	5,220,893	$	1,074,144
Gross margin		1,794,563		2,003,977		199,033
Net income		138,504		242,001		7,079
Equity in net income of affiliates		13,808		16,513		4,084

F-14

PENSKE AUTOMOTIVE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts) — (Continued)

Condensed balance sheet information:

	December 31,		December 31,
	2009		2008
Current assets	$	981,431	$	1,097,773
Noncurrent assets		6,216,491		6,725,220
Total assets	$	7,197,922	$	7,822,993
Current liabilities	$	924,225	$	1,028,494
Noncurrent liabilities		5,285,405		5,739,895
Equity		988,292		1,054,604
Total liabilities and equity	$	7,197,922	$	7,822,993

3. Business Combinations

The Company’s retail operations acquired five and thirteen franchises during 2009 and 2008, respectively. The Company’s financial statements include the results of operations of the acquired dealerships from the date of acquisition. The fair value of the assets acquired and liabilities assumed have been recorded in the Company’s consolidated financial statements, and may be subject to adjustment pending completion of final valuation. A summary of the aggregate consideration paid and the aggregate amounts of the assets acquired and liabilities assumed for the years ended December 31, 2009 and 2008 follows:

	December 31,
	2009			2008
Accounts receivable	$	—		$	4,845
Inventory		5,921			70,130
Other current assets		129			962
Property and equipment		3,250			4,734
Goodwill		1,746			57,729
Franchise value		749			23,894
Other assets		—			1,084
Current liabilities		(319	)		(11,561	)
Total consideration		11,476			151,817
Seller financed/assumed debt		—			(4,728	)
Cash used in dealership acquisitions	$	11,476		$	147,089

4. Discontinued Operations

The Company accounts for dispositions of its retail operations as discontinued operations when it is evident that the operations and cash flows of a franchise being disposed of will be eliminated from on-going operations and that the Company will not have any significant continuing involvement in its operations.

In evaluating whether the cash flows of a dealership in its Retail reportable segment will be eliminated from ongoing operations, the Company considers whether it is likely that customers will migrate to similar franchises that it owns in the same geographic market. The Company’s consideration includes an evaluation of the brands sold at other dealerships it operates in the market and their proximity to the disposed dealership. When the Company disposes of franchises, it typically does not have continuing brand representation in that market. If the franchise being disposed of is located in a complex of Company owned dealerships, the Company does not treat the disposition as a discontinued operation if it believes that the cash flows previously generated by the disposed franchise will be replaced by expanded operations of the remaining or replacement franchises. The net assets of dealerships accounted for as discontinued operations in the accompanying consolidated balance sheets were immaterial. Combined income statement information regarding dealerships accounted for as discontinued operations follows:

	Year Ended December 31,
	2009			2008			2007
Revenues	$	34,995		$	280,610		$	666,897
Pre-tax (loss) income		(7,089	)		(7,417	)		791
Gain (loss) on disposal		(3,503	)		(7,391	)		1,276

F-15

PENSKE AUTOMOTIVE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts) — (Continued)

5. Inventories

Inventories consisted of the following:

	December 31,		December 31,
	2009		2008
New vehicles	$	901,222	$	1,245,342
Used vehicles		326,376		259,634
Parts, accessories and other		78,934		81,938
Total inventories	$	1,306,532	$	1,586,914

The Company receives non-refundable credits from certain vehicle manufacturers that reduce cost of sales when the vehicles are sold. Such credits amounted to $28,757, $24,678 and $30,841 during the years ended December 31, 2009, 2008 and 2007, respectively.

6. Property and Equipment

Property and equipment consisted of the following:

	December 31,
	2009			2008
Buildings and leasehold improvements	$	670,992		$	583,106
Furniture, fixtures and equipment		312,456			292,705
Total		983,448			875,811
Less: Accumulated depreciation and amortization		(256,613	)		(212,913	)
Property and equipment, net	$	726,835		$	662,898

As of December 31, 2009 and 2008, approximately $27,900 and $27,800, respectively, of capitalized interest is included in buildings and leasehold improvements and is being amortized over the useful life of the related assets.

7. Intangible Assets

The following is a summary of the changes in the carrying amount of goodwill and franchise value during the years ended December 31, 2009 and 2008:

				Franchise
	Goodwill			Value
Balance — December 31, 2007, net of accumulated impairment losses of $0 and $0, respectively	$	1,429,399		$	235,505
Additions		57,623			23,894
Deletions		(356	)		(1,758	)
Impairment		(606,349	)		(37,110	)
Foreign currency translation		(103,634	)		(24,173	)
Balance — December 31, 2008, net of accumulated impairment losses of $606,349 and $37,110, respectively	$	776,683		$	196,358
Additions		1,101			749
Deletions		—			(1,128	)
Foreign currency translation		32,539			5,777
Balance — December 31, 2009, net of accumulated impairment losses of $606,349 and $37,110, respectively	$	810,323		$	201,756

The test for goodwill impairment, as defined by general accounting principles related to goodwill and other intangibles, is a two-step approach. The first step of the goodwill impairment test requires a determination of whether or not the fair value of a reporting unit is less than its carrying value. If so, the second step is required, which involves an analysis reflecting the allocation of the fair value determined in the first step to all of the reporting units’ assets and liabilities, including goodwill (as if the calculated fair value was the purchase price in a business combination). If the calculated fair value of the implied goodwill resulting from this allocation is lower than the carrying value of the goodwill in the reporting unit, the difference is recognized as a non-cash impairment charge. The purpose of the second step is only to determine the amount of goodwill that should be recorded on the balance sheet. The recorded amounts of other items on the balance sheet are not adjusted.

F-16

PENSKE AUTOMOTIVE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts) — (Continued)

We estimated the fair value of our reporting units using an “income” valuation approach. The “income” valuation approach estimates our enterprise value using a net present value model, which discounts projected free cash flows of our business using our weighted average cost of capital as the discount rate. We also considered whether the allocation of our enterprise value, which is comprised of our market capitalization and our debt, supported the values obtained through our “income” approach. Through this consideration we include a control premium that represents the estimated amount an investor would pay for our equity securities to obtain a controlling interest. The discounted cash flow approach used in the impairment test contains significant assumptions including revenue and profitability growth, franchise profit margins, residual values and the Company’s cost of capital. Due to the weak operating environment of the past eighteen months, the Company adjusted the assumptions underlying its historical discounted cash flow. Among the assumptions applied are projected cash flows beginning after 2009 at levels slightly above recent levels to reflect anticipated improvement to the business environment, while the residual value reflects a growth rate more consistent with our historical growth rate. Additionally, the discount rate used in the current year reflects a movement towards historical assumptions versus that applied in the prior year analysis where there was more turbulence in worldwide credit markets.

The requirements of the goodwill impairment testing process are such that, in our situation, if the first step of the impairment testing process indicates that the fair value of the reporting unit is below its carrying value (even by a relatively small amount), the requirements of the second step of the test result in a significant decrease in the amount of goodwill recorded on the balance sheet. This is due to the fact that, prior to our adoption on July 1, 2001 of general accounting principles relating to business combinations, we did not separately identify franchise rights associated with the acquisition of dealerships as separate intangible assets. In performing the second step, we are required by general accounting principles related to goodwill and other intangibles to assign value to any previously unrecognized identifiable intangible assets (including such franchise rights, which are substantial) even though such amounts are not separately recorded on our consolidated balance sheet. As the calculated fair value of goodwill exceeded the carrying value in step one in 2009, there was no requirement to perform step two. In 2008, as a result of completing the first step of this interim goodwill impairment test, we determined that the carrying value of the goodwill in four of our five reporting units exceeded their fair value, which required us to perform the second step of the goodwill impairment test. Based on the results of the second step of the goodwill impairment test, we determined that goodwill was impaired, and we recorded pre-tax non-cash impairment charge of $606,349 in 2008.

In connection with the impairment testing of our goodwill noted above, we also tested our franchise value for impairment and there was no impairment of the carrying value associated with franchise value in 2009. In 2008, this testing resulted in a $37,110 impairment.

If the growth assumptions embodied in the current year impairment test prove inaccurate, the Company may incur impairment charges. In particular, a decline of 20% or more in the estimated fair market value of our U.K. reporting unit would yield a substantial write down. The net book value of the goodwill attributable to the U.K. reporting unit is approximately $339,500, a substantial portion of which would likely be written off if step one of the impairment test indicated impairment. If we experienced such a decline in our other reporting units, we would not expect to incur significant goodwill impairment charges. However, a 10% reduction in the estimated fair value of the franchises would result in franchise value impairment charges of approximately $5,700.

8. Floor Plan Notes Payable — Trade and Non-trade

The Company finances substantially all of its new and a portion of its used vehicle inventories under revolving floor plan arrangements with various lenders, including the captive finance companies associated with automotive manufacturers. In the U.S., the floor plan arrangements are due on demand; however, the Company has not historically been required to repay floor plan advances prior to the sale of the vehicles that have been financed. The Company typically makes monthly interest payments on the amount financed. Outside of the U.S., substantially all of the floor plan arrangements are payable on demand or have an original maturity of 90 days or less and the Company is generally required to repay floor plan advances at the earlier of the sale of the vehicles that have been financed or the stated maturity. All of the floor plan agreements grant a security interest in substantially all of the assets of the Company’s dealership subsidiaries, and in the U.S. are guaranteed by the Company. Interest rates under the floor plan arrangements are variable and increase or decrease based on changes in the prime rate, defined London Interbank Offered Rate (“LIBOR”), the Finance House Bank Rate, or the Euro Interbank offer Rate. The weighted average interest rate on floor plan borrowings, including the effect of the interest rate swap discussed in Note 10, was 2.7%, 5.0% and 5.2% for the years ended December 31, 2009, 2008 and 2007, respectively. The Company classifies floor plan notes payable to a party other than the manufacturer of a particular new vehicle, and all floor plan notes payable relating to pre-owned vehicles, as floor plan notes payable — non-trade on its consolidated balance sheets and classifies related cash flows as a financing activity on its consolidated statements of cash flows.

F-17

PENSKE AUTOMOTIVE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts) — (Continued)

9. Long-Term Debt

Long-term debt consisted of the following:

	December 31,			December 31,
	2009			2008
U.S. credit agreement — term loan	$	149,000		$	209,000
U.K. credit agreement — revolving credit line		59,803			59,831
U.K. credit agreement — term loan		17,115			25,752
U.K. credit agreement — seasonally adjusted overdraft line of credit		12,048			9,502
7.75% senior subordinated notes due 2016		375,000			375,000
3.5% senior subordinated convertible notes due 2026, net of debt discount		289,344			339,128
Mortgage facilities		41,358			42,243
Other		2,740			2,909
Total long-term debt		946,408			1,063,365
Less: current portion		(12,442	)		(11,305	)
Net long-term debt	$	933,966		$	1,052,060

Scheduled maturities of long-term debt for each of the next five years and thereafter are as follows:

2010	$	12,442
2011		313,050
2012		150,134
2013		73,048
2014		1,257
2015 and thereafter		413,393
Total long-term debt maturities		963,324
Less: unamortized debt discount		16,916
Total long-term debt reported	$	946,408

Principal repayments under our 3.5% senior subordinated notes due in 2026 are reflected in the table above, however, while these notes are not due until 2026, the holders may require us to purchase all or a portion of their notes for cash in 2011. This acceleration of ultimate repayment is reflected in the table above.

U.S. Credit Agreement

The Company is party to a $409,000 credit agreement with DCFS USA LLC and Toyota Motor Credit Corporation, as amended (the “U.S. Credit Agreement”), which provides for up to $250,000 in revolving loans for working capital, acquisitions, capital expenditures, investments and other general corporate purposes, a non-amortizing term loan with a remaining balance of $149,000 (originally funded for $219,000), and for an additional $10,000 of availability for letters of credit, through September 30, 2012. The revolving loans bear interest at a defined LIBOR plus 2.50%, subject to an incremental 0.50% for uncollateralized borrowings in excess of a defined borrowing base. The term loan, which bears interest at defined LIBOR plus 2.50%, may be prepaid at any time, but then may not be re-borrowed. We repaid $60,000 of this term loan during 2009.

The U.S. Credit Agreement is fully and unconditionally guaranteed on a joint and several basis by the Company’s domestic subsidiaries and contains a number of significant covenants that, among other things, restrict the Company’s ability to dispose of assets, incur additional indebtedness, repay other indebtedness, pay dividends, create liens on assets, make investments or acquisitions and engage in mergers or consolidations. The Company is also required to comply with specified financial and other tests and ratios, each as defined in the U.S. Credit Agreement, including: a ratio of current assets to current liabilities, a fixed charge coverage ratio, a ratio of debt to stockholders’ equity and a ratio of debt to EBITDA. A breach of these requirements would give rise to certain remedies under the agreement, the most severe of which is the termination of the agreement and acceleration of the amounts owed. As of December 31, 2009, the Company was in compliance with all covenants under the U.S. Credit Agreement.

The U.S. Credit Agreement also contains typical events of default, including change of control, non-payment of obligations and cross-defaults to the Company’s other material indebtedness. Substantially all of the Company’s domestic assets are subject to security interests granted to lenders under the U.S. Credit Agreement. As of December 31, 2009, $149,000 of term loans and $1,250 of letters of credit and no revolving borrowings were outstanding under the U.S. credit agreement.

F-18

PENSKE AUTOMOTIVE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts) — (Continued)

U.K. Credit Agreement

The Company’s subsidiaries in the U.K. (the “U.K. Subsidiaries”) are party to an agreement, as amended, with the Royal Bank of Scotland plc, as agent for National Westminster Bank plc, which provides for a funded term loan, a revolving credit agreement and a seasonally adjusted overdraft line of credit (collectively, the “U.K. Credit Agreement”) to be used to finance acquisitions, and for working capital and general corporate purposes. The U.K. Credit Agreement provides for (1) up to £100,000 in revolving loans through August 31, 2013, which bears interest between a defined LIBOR plus 1.1% and defined LIBOR plus 3.0%, (2) a term loan originally funded for £30,000 which bears interest between 6.39% and 8.29% and is payable ratably in quarterly intervals until fully repaid on June 30, 2011, and (3) a demand seasonally adjusted overdraft line of credit for up to £20,000 that bears interest at the Bank of England Base Rate plus 1.75%.

The U.K. Credit Agreement is fully and unconditionally guaranteed on a joint and several basis by the U.K. Subsidiaries, and contains a number of significant covenants that, among other things, restrict the ability of the U.K. Subsidiaries to pay dividends, dispose of assets, incur additional indebtedness, repay other indebtedness, create liens on assets, make investments or acquisitions and engage in mergers or consolidations. In addition, the U.K. Subsidiaries are required to comply with specified ratios and tests, each as defined in the U.K. Credit Agreement, including: a ratio of EBITDAR to interest plus rental payments (as defined), a measurement of maximum capital expenditures, and a debt to EBITDA ratio (as defined). A breach of these requirements would give rise to certain remedies under the agreement, the most severe of which is the termination of the agreement and acceleration of the amounts owed. As of December 31, 2009, the U.K. Subsidiaries were in compliance with all covenants under the U.K. Credit Agreement.

The U.K. Credit Agreement also contains typical events of default, including change of control and non-payment of obligations and cross-defaults to other material indebtedness of the U.K. Subsidiaries. Substantially all of the U.K. Subsidiaries’ assets are subject to security interests granted to lenders under the U.K. Credit Agreement. As of December 31, 2009, outstanding loans under the U.K. Credit Agreement amounted to £55,043 ($88,966), including £10,589 ($17,115) under the term loan.

7.75% Senior Subordinated Notes

On December 7, 2006, the Company issued $375,000 aggregate principal amount of 7.75% senior subordinated notes (the “7.75% Notes”) due 2016. The 7.75% Notes are unsecured senior subordinated notes and are subordinate to all existing and future senior debt, including debt under the Company’s credit agreements, mortgages and floor plan indebtedness. The 7.75% Notes are guaranteed by substantially all of the Company’s wholly-owned domestic subsidiaries on a unsecured senior subordinated basis. Those guarantees are full and unconditional and joint and several. The Company can redeem all or some of the 7.75% Notes at its option beginning in December 2011 at specified redemption prices, or prior to December 2011 at 100% of the principal amount of the notes plus an applicable “make-whole” premium, as defined. Upon certain sales of assets or specific kinds of changes of control the Company is required to make an offer to purchase the 7.75% Notes. The 7.75% Notes also contain customary negative covenants and events of default. As of December 31, 2009, the Company was in compliance with all negative covenants and there were no events of default.

Senior Subordinated Convertible Notes

In January 2006, the Company issued $375,000 aggregate principal amount of 3.50% senior subordinated convertible notes due 2026 (the “Convertible Notes”), of which $306,260 were outstanding at December 31, 2009. The Convertible Notes mature on April 1, 2026, unless earlier converted, redeemed or purchased by the Company, as discussed below. The Convertible Notes are unsecured senior subordinated obligations and subordinate to all future and existing debt under the Company’s credit agreements, mortgages and floor plan indebtedness. The Convertible Notes are guaranteed on an unsecured senior subordinated basis by substantially all of the Company’s wholly-owned domestic subsidiaries. Those guarantees are full and unconditional and joint and several. The Convertible Notes also contain customary negative covenants and events of default. As of December 31, 2009, the Company was in compliance with all negative covenants and there were no events of default.

Holders of the Convertible Notes may convert them based on a conversion rate of 42.7796 shares of common stock per $1,000 principal amount of the Convertible Notes (which is equal to a conversion price of approximately $23.38 per share), subject to adjustment, only under the following circumstances: (1) in any quarterly period, if the closing price of the common stock for twenty of the last thirty trading days in the prior quarter exceeds $28.43 (subject to adjustment), (2) for specified periods, if the trading price of the Convertible Notes falls below specific thresholds, (3) if the Convertible Notes are called for redemption, (4) if specified distributions to holders of the common stock are made or specified corporate transactions occur, (5) if a fundamental change (as defined) occurs, or (6) during the ten trading days prior to, but excluding, the maturity date.

F-19

PENSKE AUTOMOTIVE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts) — (Continued)

Upon conversion of the Convertible Notes, for each $1,000 principal amount of the Convertible Notes, a holder will receive an amount in cash, equal to the lesser of (i) $1,000 or (ii) the conversion value, determined in the manner set forth in the related indenture covering the Convertible Notes, of the number of shares of common stock equal to the conversion rate. If the conversion value exceeds $1,000, the Company will also deliver, at its election, cash, common stock or a combination of cash and common stock with respect to the remaining value deliverable upon conversion.

In the event of a conversion due to a change of control on or before April 6, 2011, the Company will, in certain circumstances, pay a make-whole premium by increasing the conversion rate used in that conversion. In addition, the Company will pay additional cash interest, commencing with six-month periods beginning on April 1, 2011, if the average trading price of a Convertible Note for certain periods in the prior six-month period equals 120% or more of the principal amount of the Convertible Notes. On or after April 6, 2011, the Company may redeem the Convertible Notes, in whole at any time or in part from time to time, for cash at a redemption price of 100% of the principal amount of the Convertible Notes to be redeemed, plus any accrued and unpaid interest to the applicable redemption date.

Holders of the Convertible Notes may require the Company to purchase all or a portion of their Convertible Notes for cash on each of April 1, 2011, April 1, 2016 and April 1, 2021 at a purchase price equal to 100% of the principal amount of the Convertible Notes to be purchased, plus accrued and unpaid interest, if any, to the applicable purchase date.

In March 2009, the Company repurchased $68,740 principal amount of its outstanding Convertible Notes, which had a book value, net of debt discount, of $62,831 for $51,425. In connection with the transaction, the Company wrote off $5,909 of unamortized debt discount and $672 of unamortized deferred financing costs, and incurred $305 of transaction costs. No element of the consideration was allocated to the reacquisition of the equity component because the consideration paid was less than the fair value of the liability component prior to extinguishment. As a result, the Company recorded a $10,429 pre-tax gain in connection with the repurchase.

The liability and equity components related to the Convertible Notes consist of the following:

	December 31,		December 31,
	2009		2008
Carrying amount of the equity component	$	43,093	$	43,093
Principal amount of the liability component	$	306,260	$	375,000
Unamortized debt discount		16,916		35,872
Net carrying amount of the liability component	$	289,344	$	339,128

Based on amounts outstanding at December 31, 2009, the remaining unamortized debt discount will be amortized as additional interest expense through the date the Company expects to be required to redeem the Convertible Notes, approximately $13,423 of which will be recognized as an increase of interest expense over the next twelve months. The annual effective interest rate on the liability component is 8.25%.

In February 2010, the Company repurchased $44,050 principal amount of its outstanding Convertible Notes for $44,380.

Mortgage Facilities

The Company is party to a $42,400 mortgage facility with respect to certain of its dealership properties that matures on October 1, 2015. The facility bears interest at a defined rate, requires monthly principal and interest payments, and includes the option to extend the term for successive periods of five years up to a maximum term of twenty-five years. In the event the Company exercises its options to extend the term, the interest rate will be renegotiated at each renewal period. The mortgage facility also contains typical events of default, including non-payment of obligations, cross-defaults to the Company’s other material indebtedness, certain change of control events, and the loss or sale of certain franchises operated at the property. Substantially all of the buildings, improvements, fixtures and personal property relating to the properties under the mortgage facility are subject to security interests granted to the lender. As of December 31, 2009, $41,358 was outstanding under this facility.

F-20

PENSKE AUTOMOTIVE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts) — (Continued)

9.625% Senior Subordinated Notes

In March 2007, the Company redeemed its $300,000 aggregate principal amount of 9.625% senior subordinated notes due 2012 (the “9.625% Notes”) at a price of 104.813%. The Company incurred an $18,634 pre-tax charge in connection with the redemption, consisting of a $14,439 redemption premium and the write-off of $4,195 of unamortized deferred financing costs.

10. Interest Rate Swaps

The Company uses interest rate swaps to manage interest rate risk associated with the Company’s variable rate floor plan debt. The Company is party to interest rate swap agreements through January 7, 2011 pursuant to which the LIBOR portion of $300,000 of the Company’s floating rate floor plan debt was fixed at 3.67%. We may terminate these arrangements at any time, subject to the settlement of the then current fair value of the swap arrangements.

Prior to the third quarter of 2009, the swaps were designated as cash flow hedges of future interest payments of LIBOR based U.S. floor plan borrowings and the effective portion of the gain or loss on the derivative was reported as a component of other comprehensive income and reclassified into earnings when the hedged transaction affected earnings. During the quarter ended September 30, 2009, the Company experienced declines in outstanding floor plan debt balances related to certain floor plan lenders due to significant declines in vehicle inventory levels which caused hedged floor plan balances to fall below the notional value of the swap agreements. The Company elected to de-designate these cash flow hedges on September 30, 2009, and, as a result, recorded a net loss of $1,057 in floor plan interest expense.

The Company re-designated $290,000 of the interest rate swap agreements as cash flow hedges of future interest payments of LIBOR based U.S. floor plan borrowings and the effective portion of the gain or loss on that $290,000 of the swap agreements is reported as a component of other comprehensive income and reclassified into earnings when the hedged transaction affects earnings. Future settlements and changes in the fair value related to the undesignated $10,000 of the swap agreements will be recorded as realized and unrealized gains/losses within interest expense.

As of December 31, 2009, the Company used Level 2 inputs to estimate the fair value of the interest rate swap agreements designated as hedging instruments to be a liability of $9,963, of which $9,250 and $713 are recorded in accrued expenses and other long-term liabilities, respectively. The Company used Level 2 inputs to estimate the fair value of the interest rate swap agreements not designated as hedging instruments as of December 31, 2009 to be a liability of $344, of which $319 and $25 are recorded in accrued expenses and other long-term liabilities, respectively.

During the year ended December 31, 2009, the Company recognized a net gain of $2,952 related to the effective portion of the interest rate swap agreements designated as hedging instruments in accumulated other comprehensive income, and reclassified $10,917 of the existing derivative losses, including the $1,057 loss on de-designation, from accumulated other comprehensive income into floor plan interest expense. The Company expects approximately $8,157 associated with the swaps to be recognized as an increase of interest expense over the next twelve months as the hedged interest payments become due. During the year ended December 31, 2009, the swaps increased the weighted average interest rate on the Company’s floor plan borrowings by approximately 0.8%.

11. Off-Balance Sheet Arrangements

See Note 12 for a discussion of the Company’s lease obligations relating to properties associated with disposed franchises.

12. Commitments and Contingent Liabilities

The Company is involved in litigation which may relate to claims brought by governmental authorities, issues with customers, and employment related matters, including class action claims and purported class action claims. As of December 31, 2009, the Company is not party to any legal proceedings, including class action lawsuits, that, individually or in the aggregate, are reasonably expected to have a material adverse effect on the Company’s results of operations, financial condition or cash flows. However, the results of these matters cannot be predicted with certainty, and an unfavorable resolution of one or more of these matters could have a material adverse effect on the Company’s results of operations, financial condition or cash flows.

F-21

PENSKE AUTOMOTIVE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts) — (Continued)

The Company has historically structured its operations so as to minimize ownership of real property. As a result, the Company leases or subleases substantially all of its facilities. These leases are generally for a period of between five and 20 years, and are typically structured to include renewal options at the Company’s election. The Company estimates the total rent obligations under these leases including any extension periods it may exercise at its discretion and assuming constant consumer price indices to be $4.8 billion. Pursuant to the leases for some of the Company’s larger facilities, the Company is required to comply with specified financial ratios, including a “rent coverage” ratio and a debt to EBITDA ratio, each as defined. For these leases, non-compliance with the ratios may require the Company to post collateral in the form of a letter of credit. A breach of the other lease covenants gives rise to certain remedies by the landlord, the most severe of which include the termination of the applicable lease and acceleration of the total rent payments due under the lease.

Minimum future rental payments required under operating leases in effect as of December 31, 2009 are as follows:

2010	$	178,539
2011		177,185
2012		176,117
2013		175,125
2014		174,190
2015 and thereafter		3,914,449
	$	4,795,605

Rent expense for the years ended December 31, 2009, 2008 and 2007 amounted to $165,256, $160,113 and $150,430, respectively. Of the total rental payments, $431, $470 and $455, respectively, were made to related parties during 2009, 2008 and 2007, respectively (See Note 13).

The Company has sold a number of dealerships to third parties and, as a condition to certain of those sales, remains liable for the lease payments relating to the properties on which those businesses operate in the event of non-payment by the buyer. The Company is also party to lease agreements on properties that it no longer uses in its retail operations that it has sublet to third parties. The Company relies on subtenants to pay the associated rent and maintain the property at these locations. In the event the subtenant does not perform as expected, the Company may not be able to recover amounts owed to it and the Company could be required to fulfill these obligations. The aggregate rent paid by the tenants on those properties in 2009 was approximately $11,722, and, in aggregate, the Company currently guarantees or is otherwise liable for approximately $202,486 of these lease payments, including lease payments during available renewal periods.

The Company is potentially subject to additional purchase commitments pursuant to its smart distribution agreement, smart franchise agreement and state franchise laws in the event of franchise terminations, none of which have historically had a material adverse effect on its results of operations, financial condition or cash flows. The Company does not anticipate that the purchase commitments will have a material adverse effect on its future results of operations, financial condition or cash flows, although such outcome is possible.

13. Related Party Transactions

The Company currently is a tenant under a number of non-cancelable lease agreements with Automotive Group Realty, LLC and its subsidiaries (together “AGR”), which are subsidiaries of Penske Corporation. During the years ended December 31, 2009, 2008 and 2007, the Company paid $431, $470 and $455, respectively, to AGR under these lease agreements. From time to time, we may sell AGR real property and improvements that are subsequently leased by AGR to us. In addition, we may purchase real property or improvements from AGR. Any such transaction is valued at a price that is independently confirmed. There were no purchase or sale transactions with AGR in 2007, 2008, or 2009.

The Company sometimes pays to and/or receives fees from Penske Corporation and its affiliates for services rendered in the normal course of business, or to reimburse payments made to third parties on each others’ behalf. These transactions and those relating to AGR mentioned above are reviewed periodically by the Company’s Audit Committee and reflect the provider’s cost or an amount mutually agreed upon by both parties. During the years ended December 31, 2009, 2008 and 2007, Penske Corporation and its affiliates billed the Company $3,368, $2,522 and $3,989, respectively, and the Company billed Penske Corporation and its affiliates $24, $27 and $105, respectively, for such services. As of December 31, 2009 and 2008, the Company had $13 and $11 of receivables from and $363 and $313 of payables to Penske Corporation and its subsidiaries, respectively.

F-22

PENSKE AUTOMOTIVE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts) — (Continued)

The Company, Penske Corporation and certain affiliates have entered into a joint insurance agreement which provides that, with respect to any joint insurance (currently only our joint crime insurance policy), available coverage with respect to a loss shall be paid to each party per occurrence as stipulated in the policies. In the event of losses by the Company and Penske Corporation that exceed the limit of liability for any policy or policy period, the total policy proceeds will be allocated based on the ratio of premiums paid.

The general partner of PTL is Penske Truck Leasing Corporation, a wholly-owned subsidiary of Penske Corporation, which together with other wholly-owned subsidiaries of Penske Corporation, owns 41.1% of PTL. The remaining 49.9% of PTL is owned by GE Capital. The Company is party to a partnership agreement among the other partners which, among other things, provides us with specified partner distribution and governance rights and restricts our ability to transfer our interests. In 2009 and 2008, the Company received $20,012 and $2,691, respectively, from PTL in pro rata cash dividends.

The Company is also party to a five year sublease pursuant to which PTL occupies a portion of one of our dealership locations in New Jersey for $87 per year plus its pro rata share of certain property expenses. During 2009 and 2008, respectively, smart USA paid PTL $1,217 and $1,164 for assistance with roadside assistance and other services to smart fortwo owners, of which $863 and $860, respectively, were pass-through expenses to be paid by PTL to third party vendors. In 2009, PTL began hosting the Company’s disaster recovery site. Annual fees paid to PTL for this service will be $70. The Company paid $17 for these services in 2009.

Pursuant to the repurchase program described in Note 15 below, the Company repurchased an aggregate of 950,000 shares of it’s outstanding common stock from Eustace W. Mita, a former director, for $10,300 in 2008. The transaction prices were based on the closing prices of the Company’s common stock on the New York Stock Exchange on the dates the shares were acquired.

From time to time the Company enters into joint venture relationships in the ordinary course of business, pursuant to which it owns and operates automotive dealerships together with other investors. The Company may also provide these dealerships with working capital and other debt financing at costs that are based on the Company’s incremental borrowing rate. As of December 31, 2009, the Company’s automotive joint venture relationships were as follows:

		Ownership
Location	Dealerships	Interest
Fairfield, Connecticut	Audi, Mercedes-Benz, Porsche, smart		87.95	%(A)(B)
Edison, New Jersey	Ferrari, Maserati		70.00	%(B)
Las Vegas, Nevada	Ferrari, Maserati		50.00	%(C)
Munich, Germany	BMW, MINI		50.00	%(C)
Frankfurt, Germany	Lexus, Toyota		50.00	%(C)
Achen, Germany	Audi, Lexus, Toyota, Volkswagen		50.00	%(C)

(A)	An entity controlled by one of the Company’s directors, Lucio A. Noto (the “Investor”), owns a 12.05% interest in this joint venture, which entitles the Investor to 20% of the operating profits of the joint venture. In addition, the Investor has an option to purchase up to a 20% interest in the joint venture for specified amounts.
(B)	Entity is consolidated in the Company’s financial statements.
(C)	Entity is accounted for using the equity method of accounting.

14. Stock-Based Compensation

Key employees, outside directors, consultants and advisors of the Company are eligible to receive stock-based compensation pursuant to the terms of the Company’s 2002 Equity Compensation Plan (the “Plan”). The Plan originally allowed for the issuance of 4,200 shares for stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares and other awards. As of December 31, 2009, 2,089 shares of common stock were available for grant under the Plan. Compensation expense related to the Plan was $5,631, $5,710, and $5,045 during the years ended December 31, 2009, 2008 and 2007, respectively.

F-23

PENSKE AUTOMOTIVE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts) — (Continued)

Restricted Stock

During 2009, 2008 and 2007, the Company granted 114, 378 and 269 shares, respectively, of restricted common stock at no cost to participants under the Plan. The restricted stock entitles the participants to vote their respective shares and receive dividends. The shares are subject to forfeiture and are non-transferable, which restrictions generally lapse over a four year period from the grant date. The grant date quoted market price of the underlying common stock is amortized as expense over the restriction period. As of December 31, 2009, there was $5,606 of total unrecognized compensation cost related to the restricted stock. That cost is expected to be recognized over the next 3.5 years.

Presented below is a summary of the status of the Company’s restricted stock as of December 31, 2008 and changes during the year ended December 31, 2009:

				Weighted Average
	Shares			Grant-Date Fair Value		Intrinsic Value
December 31, 2008		740		$	19.45	$	5,700
Granted		114			9.98
Vested		(250	)		17.36
Forfeited		(21	)		11.75
December 31, 2009		583		$	18.49	$	8,880

Stock Options

Options were granted by the Company prior to 2006. These options generally vested over a three year period and had a maximum term of ten years.

Presented below is a summary of the status of stock options held by participants during 2009, 2008 and 2007:

	2009				2008				2007
			Weighted				Weighted				Weighted
			Average				Average				Average
			Exercise				Exercise				Exercise
Stock Options	Shares		Price		Shares		Price		Shares		Price
Options outstanding at beginning of year		324	$	9.01		386	$	9.11		733	$	8.40
Granted		—		—		—		—		—		—
Exercised		33		6.65		60		9.61		205		7.30
Forfeited		—		—		2		8.95		142		8.05
Options outstanding at end of year		291	$	9.29		324	$	9.01		386	$	9.11

The total intrinsic value of stock options exercised was $325, $641, and $2,819 in 2009, 2008, and 2007, respectively.

The following table summarizes the status of stock options outstanding and exercisable as of December 31, 2009:

			Weighted		Weighted						Weighted
	Stock		Average		Average				Stock		Average
	Options		Remaining		Exercise		Intrinsic		Options		Exercise		Intrinsic
Range of Exercise Prices	Outstanding		Contractual Life		Price		Value		Exercisable		Price		Value
$3 to $6		68		1.2	$	4.74	$	714		68	$	4.74	$	714
$6 to $16		223		2.2		10.51		1,037		223		10.51		1,037
		291					$	1,751		291			$	1,751

15. Equity

Share Repurchase

During 2008, the Company repurchased 4.015 million shares of our outstanding common stock for $53,661, or an average of $13.36 per share, under a program approved by the Company’s board of directors.

F-24

PENSKE AUTOMOTIVE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts) — (Continued)

Accumulated Other Comprehensive Income (Loss)

The components of accumulated other comprehensive income (loss), net of tax, follow:

							Accumulated
							Other
	Currency						Comprehensive
	Translation			Other			Income (Loss)
Balance at December 31, 2006	$	78,296		$	1,083		$	79,379
Change		12,745			7,864			20,609
Balance at December 31, 2007		91,041			8,947			99,988
Change		(134,087	)		(11,890	)		(145,977	)
Balance at December 31, 2008		(43,046	)		(2,943	)		(45,989	)
Change		47,920			7,118			55,038
Balance at December 31, 2009	$	4,874		$	4,175		$	9,049

“Other” represents changes relating to other immaterial items, including: certain defined benefit plans in the U.K., changes in the fair value of interest rate swap agreements, and valuation adjustments relating to certain available for sale securities each of which has been excluded from net income and reflected in equity.

16. Income Taxes

Income taxes relating to income (loss) from continuing operations consisted of the following:

	Year Ended December 31,
	2009			2008			2007
Current:
Federal	$	(27,518	)	$	(18,189	)	$	9,222
State and local		1,170			1,596			2,808
Foreign		25,452			17,285			24,317
Total current		(896	)		692			36,347
Deferred:
Federal		37,646			(88,167	)		15,869
State and local		7,549			(19,292	)		3,489
Foreign		1,087			1,026			6,078
Total deferred		46,282			(106,433	)		25,436
Income taxes relating to continuing operations	$	45,386		$	(105,741	)	$	61,783

Income taxes relating to income (loss) from continuing operations varied from the U.S. federal statutory income tax rate due to the following:

	Year Ended December 31,
	2009			2008			2007
Income taxes relating to continuing operations at federal statutory rate of 35%	$	45,300		$	(180,897	)	$	64,131
State and local income taxes, net of federal taxes		6,002			(12,832	)		3,710
Foreign		(7,111	)		(1,853	)		(4,587	)
Goodwill impairment		—			90,575			—
Other		1,195			(734	)		(1,471	)
Income taxes relating to continuing operations	$	45,386		$	(105,741	)	$	61,783

F-25

PENSKE AUTOMOTIVE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts) — (Continued)

The components of deferred tax assets and liabilities at December 31, 2009 and 2008 were as follows:

	2009			2008
Deferred Tax Assets
Accrued liabilities	$	41,227		$	41,362
Net operating loss carryforwards		27,502			24,051
Interest rate swap		3,924			6,273
Other		3,268			3,503
Total deferred tax assets		75,921			75,189
Valuation allowance		(6,073	)		(3,378	)
Net deferred tax assets		69,848			71,811
Deferred Tax Liabilities
Depreciation and amortization		(73,273	)		(51,748	)
Partnership investments		(93,551	)		(58,992	)
Convertible notes		(32,745	)		(36,982	)
Other		(1,940	)		(2,575	)
Total deferred tax liabilities		(201,509	)		(150,297	)
Net deferred tax liabilities	$	(131,661	)	$	(78,486	)

As of December 31, 2009 and 2008, approximately $689,522 of the Company’s goodwill is deductible for tax purposes. The Company has established deferred tax liabilities related to the temporary differences relating to such tax deductible goodwill.

General accounting principles relating to uncertain income tax positions prescribe a minimum recognition threshold a tax position is required to meet before being recognized, and provides guidance on the derecognition, measurement, classification and disclosure relating to income taxes. The Company adopted this accounting principle as of January 1, 2007, pursuant to which the Company recorded a $4,430 increase in the liability for unrecognized tax benefits, which was accounted for as a reduction to the January 1, 2007 balance of retained earnings.

The movement in uncertain tax positions for the years ended December 31, 2009, 2008, and 2007 were as follows:

	2009			2008			2007
Uncertain tax positions — January 1, 2009	$	32,901		$	43,333		$	39,339
Gross increase — tax position in prior periods		2,411			2,751			10,087
Gross decrease — tax position in prior periods		(165	)		(787	)		(498	)
Gross increase — current period tax position		—			50			433
Settlements		—			(1,453	)		(3,872	)
Lapse in statute of limitations		(1,227	)		(1,481	)		(2,156	)
Foreign exchange		2,967			(9,512	)		—
Uncertain tax positions — December 31, 2009	$	36,887		$	32,901		$	43,333

The Company has elected to include interest and penalties in its income tax expense. The total interest and penalties included within uncertain tax positions at December 31, 2009 was $7,958. We do not expect a significant change to the amount of uncertain tax positions within the next twelve months. The Company’s U.S. federal returns remain open to examination for 2006 to 2008 and various foreign and U.S. states jurisdictions are open for periods ranging from 2002 through 2008. The portion of the total amount of uncertain tax positions as of December 31, 2009 that would, if recognized, impact the effective tax rate was $27,872.

The Company does not provide for U.S. taxes relating to undistributed earnings or losses of its foreign subsidiaries. Income from continuing operations before income taxes of foreign subsidiaries (which subsidiaries are predominately in the U.K.) was $96,153, $35,112 and $103,395 during the years ended December 31, 2009, 2008 and 2007, respectively. It is the Company’s belief that such earnings will be indefinitely reinvested in the companies that produced them. At December 31, 2009, the Company has not provided U.S. federal income taxes on a total of $503,059 of earnings of individual foreign subsidiaries. If these earnings were remitted as dividends, the Company would be subject to U.S. income taxes and certain foreign withholding taxes.

F-26

PENSKE AUTOMOTIVE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts) — (Continued)

At December 31, 2009, the Company has $23,186 of federal net operating loss carryforwards in the U.S. expiring in 2028, $226,586 of state net operating loss carryforwards in the U.S. that expire at various dates through 2029, $2,773 of federal capital loss carryforwards in the U.S. expiring in 2014, $3,981 of state capital loss carryforwards in the U.S. expiring through 2024, U.S. federal and state credit carryforwards of $4,929 that will not expire, a U.K. net operating loss carryforward of $4,014 that will not expire, a U.K. capital loss of $5,521 that will not expire, and a German net operating loss of $4,717 that will not expire. A valuation allowance of $4,859 has been recorded against the state net operating loss carryforwards in the U.S., a valuation allowance of $29 has been recorded against the state credit carryforwards in the U.S., and a valuation allowance of $1,185 has been recorded against federal and state capital loss carryforwards in the U.S.

The Company has classified its tax reserves as a long term obligation on the basis that management does not expect to make payments relating to those reserves within the next twelve months.

17. Segment Information

The Company’s operations are organized by management into operating segments by line of business and geography. The Company has determined it has three reportable segments as defined in general accounting principles for segment reporting, including: (i) Retail, consisting of our automotive retail operations, (ii) Distribution, consisting of our distribution of the smart fortwo vehicle, parts and accessories in the U.S. and Puerto Rico and (iii) PAG Investments, consisting of our investments in non-automotive retail operations. The Retail reportable segment includes all automotive dealerships and all departments relevant to the operation of the dealerships. The individual dealership operations included in the Retail reportable segment have been grouped into five geographic operating segments, which have been aggregated into one reportable segment as their operations (A) have similar economic characteristics (all are automotive dealerships having similar margins), (B) offer similar products and services (all sell new and used vehicles, service, parts and third-party finance and insurance products), (C) have similar target markets and customers (generally individuals) and (D) have similar distribution and marketing practices (all distribute products and services through dealership facilities that market to customers in similar fashions). The accounting policies of the segments are the same and are described in Note 1.

The following table summarizes revenues, floor plan interest expense, other interest expense, debt discount amortization, depreciation and amortization, equity in earnings (loss) of affiliates and income (loss) from continuing operations before certain non-recurring items and income taxes, which is the measure by which management allocates resources to its segments, and which we refer to as adjusted segment income (loss), for each of our reportable segments. Adjusted segment income excludes the items in the table below in order to enhance the comparability of segment income from period to period.

					PAG			Intersegment
	Retail		Distribution		Investments			Elimination			Total
Revenues
2009	$	9,344,022	$	205,962	$	—		$	(26,879	)	$	9,523,105
2008		11,288,327		409,640		—			(60,831	)		11,637,136
2007		12,781,717		—		—			—			12,781,717
Floor plan interest expense
2009	$	34,894	$	768	$	—		$	—		$	35,662
2008		63,521		667		—			—			64,188
2007		73,104		—		—			—			73,104
Other interest expense
2009	$	55,201	$	—	$	—		$	—		$	55,201
2008		54,504		—		—			—			54,504
2007		55,266		—		—			—			55,266
Debt discount amortization
2009	$	13,043	$	—	$	—		$	—		$	13,043
2008		13,984		—		—			—			13,984
2007		12,896		—		—			—			12,896
Depreciation and amortization
2009	$	53,532	$	702	$	—		$	—		$	54,234
2008		53,475		402		—			—			53,877
2007		50,007		—		—			—			50,007
Equity in earnings (losses) of affiliates
2009	$	2,617	$	—	$	11,191		$	—		$	13,808
2008		3,293		—		13,220			—			16,513
2007		4,415		—		(331	)		—			4,084

F-27

PENSKE AUTOMOTIVE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts) — (Continued)

						PAG			Intersegment
	Retail		Distribution			Investments			Elimination			Total
Adjusted segment income (loss)
2009	$	113,966	$	(6,353	)	$	11,191		$	195		$	118,999
2008		83,502		30,525			13,220			(986	)		126,261
2007		201,950		—			(331	)		—			201,619

The following table reconciles total adjusted segment income (loss) to consolidated income (loss) from continuing operations before income taxes. The intangible impairment is associated with the Retail reportable segment as there is no goodwill reported in the Distribution or PAG Investments reportable segments.

	Year Ended December 31,
	2009		2008			2007
Adjusted segment income	$	118,999	$	126,261		$	201,619
Gain on debt repurchase		10,429		—			—
Intangible impairments		—		(643,459	)		—
Loss on debt redemption		—		—			(18,634	)
Income (loss) from continuing operations before income taxes	$	129,428	$	(517,198	)	$	182,985

Total assets, equity method investments, and capital expenditures by reporting segment are as set forth in the table below.

					PAG		Intersegment
	Retail		Distribution		Investments		Elimination			Total
Total assets
2009	$	3,524,314	$	37,835	$	234,443	$	(585	)	$	3,796,007
2008		3,676,347		47,054		240,138	$	(1,390	)		3,962,149
Equity method investments
2009	$	61,030	$	—	$	234,443	$	—		$	295,473
2008		56,349		—		240,138		—			296,487
Capital expenditures
2009	$	90,315	$	—	$	—	$	—		$	90,315
2008		208,291		5,644		—		(2,103	)		211,832
2007		190,530		5,405		—		(1,443	)		194,492

The following table presents certain data by geographic area:

	Year Ended December 31,
	2009		2008		2007
Sales to external customers:
U.S.	$	6,008,678	$	7,396,382	$	7,993,780
Foreign		3,514,427		4,240,754		4,787,937
Total sales to external customers	$	9,523,105	$	11,637,136	$	12,781,717
Long-lived assets, net:
U.S.	$	743,699	$	770,329
Foreign		296,765		211,516
Total long-lived assets	$	1,040,464	$	981,845

The Company’s foreign operations are predominantly based in the U.K.

F-28

PENSKE AUTOMOTIVE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts) — (Continued)

18. Summary of Quarterly Financial Data (Unaudited)

	First		Second		Third		Fourth
2009(1)(2)(3)	Quarter		Quarter		Quarter		Quarter
Total revenues	$	2,159,899	$	2,324,621	$	2,594,412	$	2,444,173
Gross profit		368,608		395,265		424,020		394,418
Net income		16,202		14,167		27,662		18,889
Net income attributable to Penske Automotive Group common stockholders		16,282		14,079		27,423		18,677
Diluted earnings per share attributable to Penske Automotive Group common stockholders	$	0.18	$	0.15	$	0.30	$	0.20

	First		Second		Third		Fourth
2008(1)(2)(4)	Quarter		Quarter		Quarter		Quarter
Total revenues	$	3,176,199	$	3,333,911	$	2,972,433	$	2,154,593
Gross profit		488,433		496,635		457,620		347,516
Net income (loss)		32,331		38,258		22,372		(511,864	)
Net income (loss) attributable to Penske Automotive Group common stockholders		31,896		37,830		22,183		(511,945	)
Diluted earnings (loss) per share attributable to Penske Automotive Group common stockholders	$	0.33	$	0.40	$	0.24	$	(5.59	)

(1)	As discussed in Note 4, the Company has treated the operations of certain entities as discontinued operations. The results for all periods have been restated to reflect such treatment.
(2)	Per share amounts are calculated independently for each of the quarters presented. The sum of the quarters may not equal the full year per share amounts due to rounding.
(3)	Results for the year ended December 31, 2009 include a first quarter pre-tax gain of $10,429 relating to the repurchase of $68,740 aggregate principal amount of the Company’s 3.5% senior subordinated convertible notes.
(4)	Results for the year ended December 31, 2008 include fourth quarter charges of $657,590, including $643,459, relating to goodwill and franchise asset impairments, as well as, an additional $14,131 of dealership consolidation and relocation costs, severance costs, and other asset impairment charges, and third quarter charges of $4,290 relating to severance costs, costs associated with the termination of an acquisition agreement, and insurance deductibles relating to damage sustained at our dealerships in the Houston market during Hurricane Ike.

F-29

PENSKE AUTOMOTIVE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts) — (Continued)

19. Condensed Consolidating Financial Information

The following tables include condensed consolidating financial information as of December 31, 2009 and 2008 and for the years ended December 31, 2009, 2008, and 2007 for Penske Automotive Group, Inc. (as the issuer of the Convertible Notes and the 7.75% Notes), guarantor subsidiaries and non-guarantor subsidiaries (primarily representing foreign entities). The condensed consolidating financial information includes certain allocations of balance sheet, income statement and cash flow items which are not necessarily indicative of the financial position, results of operations and cash flows of these entities on a stand-alone basis.

CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 2009

						Penske				Non-
	Total					Automotive		Guarantor		Guarantor
	Company		Eliminations			Group, Inc.		Subsidiaries		Subsidiaries
	(In thousands)
Cash and cash equivalents	$	13,769	$	—		$	—	$	12,114	$	1,655
Accounts receivable, net		322,598		(230,299	)		230,299		197,120		125,478
Inventories		1,306,532		—			—		780,924		525,608
Other current assets		95,560		—			1,725		61,774		32,061
Assets held for sale		5,005		—			—		5,005		—
Total current assets		1,743,464		(230,299	)		232,024		1,056,937		684,802
Property and equipment, net		726,835		—			6,007		450,143		270,685
Intangible assets		1,012,079		—			—		570,558		441,521
Equity method investments		295,473		—			231,897		—		63,576
Other long-term assets		18,156		(1,287,938	)		1,293,067		10,852		2,175
Total assets	$	3,796,007	$	(1,518,237	)	$	1,762,995	$	2,088,490	$	1,462,759
Floor plan notes payable	$	772,926	$	—		$	—	$	451,338	$	321,588
Floor plan notes payable — non-trade		423,316		—			—		254,807		168,509
Accounts payable		190,325		—			3,268		74,946		112,111
Accrued expenses		227,725		(230,299	)		344		112,231		345,449
Current portion of long-term debt		12,442		—			—		1,033		11,409
Liabilities held for sale		3,083		—			—		3,083		—
Total current liabilities		1,629,817		(230,299	)		3,612		897,438		959,066
Long-term debt		933,966		(59,706	)		813,344		43,066		137,262
Deferred tax liability		157,500		—			—		145,551		11,949
Other long-term liabilities		128,685		—			—		123,710		4,975
Total liabilities		2,849,968		(290,005	)		816,956		1,209,765		1,113,252
Total equity		946,039		(1,228,232	)		946,039		878,725		349,507
Total liabilities and equity	$	3,796,007	$	(1,518,237	)	$	1,762,995	$	2,088,490	$	1,462,759

F-30

PENSKE AUTOMOTIVE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts) — (Continued)

CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 2008

						Penske				Non-
	Total					Automotive		Guarantor		Guarantor
	Company		Eliminations			Group, Inc.		Subsidiaries		Subsidiaries
	(In thousands)
Cash and cash equivalents	$	17,108	$	—		$	—	$	14,126	$	2,982
Accounts receivable, net		294,230		(196,465	)		196,465		182,230		112,000
Inventories		1,586,914		—			—		996,199		590,715
Other current assets		88,437		—			2,711		59,859		25,867
Assets held for sale		20,574		—			—		8,656		11,918
Total current assets		2,007,263		(196,465	)		199,176		1,261,070		743,482
Property and equipment, net		662,898		—			6,927		415,985		239,986
Intangible assets		973,041		—			—		541,191		431,850
Equity method investments		296,487		—			227,451		—		69,036
Other long-term assets		22,460		(1,293,431	)		1,300,546		12,169		3,176
Total assets	$	3,962,149	$	(1,489,896	)	$	1,734,100	$	2,230,415	$	1,487,530
Floor plan notes payable	$	961,993	$	—		$	—	$	654,689	$	307,304
Floor plan notes payable — non-trade		507,404		—			—		268,988		238,416
Accounts payable		178,994		—			2,183		79,849		96,962
Accrued expenses		196,704		(196,465	)		368		94,848		297,953
Current portion of long-term debt		11,305		—			—		978		10,327
Liabilities held for sale		24,289		—			—		7,163		17,126
Total current liabilities		1,880,689		(196,465	)		2,551		1,106,515		968,088
Long-term debt		1,052,060		(138,341	)		923,128		44,117		223,156
Deferred tax liability		106,590		—			—		97,491		9,099
Other long-term liabilities		114,389		—			—		103,623		10,766
Total liabilities		3,153,728		(334,806	)		925,679		1,351,746		1,211,109
Total equity		808,421		(1,155,090	)		808,421		878,669		276,421
Total liabilities and equity	$	3,962,149	$	(1,489,896	)	$	1,734,100	$	2,230,415	$	1,487,530

F-31

PENSKE AUTOMOTIVE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts) — (Continued)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Year Ended December 31, 2009

							Penske						Non-
	Total						Automotive			Guarantor			Guarantor
	Company			Eliminations			Group, Inc.			Subsidiaries			Subsidiaries
	(In thousands)
Revenues	$	9,523,105		$	—		$	—		$	5,565,756		$	3,957,349
Cost of sales		7,940,794			—			—			4,609,527			3,331,267
Gross profit		1,582,311			—			—			956,229			626,082
Selling, general, and administrative expenses		1,318,980			—			18,259			807,020			493,701
Depreciation and amortization		54,234			—			1,160			33,501			19,573
Operating income (loss)		209,097			—			(19,419	)		115,708			112,808
Floor plan interest expense		(35,662	)		—			—			(25,182	)		(10,480	)
Other interest expense		(55,201	)		—			(41,036	)		(139	)		(14,026	)
Debt discount amortization		(13,043	)		—			(13,043	)		—			—
Equity in earnings of affiliates		13,808			—			11,087			—			2,721
Gain on debt repurchase		10,429			—			10,429			—			—
Equity in earnings of subsidiaries		—			(180,951	)		180,951			—			—
Income from continuing operations before income taxes		129,428			(180,951	)		128,969			90,387			91,023
Income taxes		(45,386	)		63,679			(45,386	)		(37,754	)		(25,925	)
Income from continuing operations		84,042			(117,272	)		83,583			52,633			65,098
Loss from discontinued operations, net of tax		(7,122	)		7,122			(7,122	)		(4,747	)		(2,375	)
Net income		76,920			(110,150	)		76,461			47,886			62,723
Less: Income attributable to non-controlling interests		459			—			—			—			459
Net income attributable to Penske Automotive Group common stockholders	$	76,461		$	(110,150	)	$	76,461		$	47,886		$	62,264

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Year Ended December 31, 2008

							Penske						Non-
	Total						Automotive			Guarantor			Guarantor
	Company			Eliminations			Group, Inc.			Subsidiaries			Subsidiaries
	(In thousands)
Revenues	$	11,637,136		$	—		$	—		$	6,819,447		$	4,817,689
Cost of sales		9,846,932			—			—			5,723,490			4,123,442
Gross profit		1,790,204			—			—			1,095,957			694,247
Selling, general, and administrative expenses		1,493,903			—			26,436			934,505			532,962
Intangible impairments		643,459			—			—			611,520			31,939
Depreciation and amortization		53,877			—			1,233			31,353			21,291
Operating (loss) income		(401,035	)		—			(27,669	)		(481,421	)		108,055
Floor plan interest expense		(64,188	)		—			—			(37,305	)		(26,883	)
Other interest expense		(54,504	)		—			(37,412	)		(228	)		(16,864	)
Debt discount amortization		(13,984	)		—			(13,984	)		—			—
Equity in earnings of affiliates		16,513			—			10,827			—			5,686
Equity in earnings of subsidiaries		—			450,093			(450,093	)		—			—
(Loss) income from continuing operations before income taxes		(517,198	)		450,093			(518,331	)		(518,954	)		69,994
Income taxes		105,741			(89,520	)		105,741			110,885			(21,365	)
(Loss) income from continuing operations		(411,457	)		360,573			(412,590	)		(408,069	)		48,629
Loss from discontinued operations, net of tax		(7,446	)		7,446			(7,446	)		(6,540	)		(906	)
Net (loss) income		(418,903	)		368,019			(420,036	)		(414,609	)		47,723
Less: Income attributable to non-controlling interests		1,133			—			—			—			1,133
Net (loss) income attributable to Penske Automotive Group common stockholders	$	(420,036	)	$	368,019		$	(420,036	)	$	(414,609	)	$	46,590

F-32

PENSKE AUTOMOTIVE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts) — (Continued)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
Year Ended December 31, 2007

							Penske						Non-
	Total						Automotive			Guarantor			Guarantor
	Company			Eliminations			Group, Inc.			Subsidiaries			Subsidiaries
	(In thousands)
Revenues	$	12,781,717		$	—		$	—		$	7,066,754		$	5,714,963
Cost of sales		10,885,188			—			—			5,981,973			4,903,215
Gross profit		1,896,529			—			—			1,084,781			811,748
Selling, general, and administrative expenses		1,507,721			—			16,529			861,917			629,275
Depreciation and amortization		50,007			—			1,166			26,354			22,487
Operating income (loss)		338,801			—			(17,695	)		196,510			159,986
Floor plan interest expense		(73,104	)		—			—			(42,094	)		(31,010	)
Other interest expense		(55,266	)		—			(31,061	)		(97	)		(24,108	)
Debt discount amortization		(12,896	)		—			(12,896	)		—			—
Equity in earnings of affiliates		4,084			—			—			—			4,084
Loss on debt redemption		(18,634	)		—			(18,634	)		—			—
Equity in earnings of subsidiaries		—			(261,299	)		261,299			—			—
Income from continuing operations before income taxes		182,985			(261,299	)		181,013			154,319			108,952
Income taxes		(61,783	)		89,186			(61,783	)		(54,694	)		(34,492	)
Income from continuing operations		121,202			(172,113	)		119,230			99,625			74,460
Income from discontinued operations, net of tax		1,031			(1,031	)		1,031			1,013			18
Net income		122,233			(173,144	)		120,261			100,638			74,478
Less: Income attributable to non-controlling interests		1,972			—			—			—			1,972
Net income attributable to Penske Automotive Group common stockholders	$	120,261		$	(173,144	)	$	120,261		$	100,638		$	72,506

F-33

PENSKE AUTOMOTIVE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts) — (Continued)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
Year Ended December 31, 2009

				Penske						Non-
	Total			Automotive			Guarantor			Guarantor
	Company			Group, Inc.			Subsidiaries			Subsidiaries
	(In thousands)
Net cash from continuing operating activities	$	303,444		$	42,525		$	87,038		$	173,881
Investing Activities:
Purchase of equipment and improvements		(90,315	)		(240	)		(66,085	)		(23,990	)
Proceeds from sale — leaseback transactions		2,338			—			2,338			—
Dealership acquisitions, net		(11,476	)		—			(3,556	)		(7,920	)
Other		17,994			11,485			(206	)		6,715
Net cash from continuing investing activities		(81,459	)		11,245			(67,509	)		(25,195	)
Financing Activities:
Repayments under U.S. credit agreement term loan		(60,000	)		(60,000	)		—			—
Repurchase 3.5% senior subordinated convertible notes		(51,424	)		(51,424	)		—			—
Net (repayments) borrowings of other long-term debt		(17,402	)		57,305			(126	)		(74,581	)
Net (repayments) of floor plan notes payable — non-trade		(84,088	)		—			(14,181	)		(69,907	)
Proceeds from exercises of options, including excess tax benefit		349			349			—			—
Distributions from (to) parent		—			—			317			(317	)
Net cash from continuing financing activities		(212,565	)		(53,770	)		(13,990	)		(144,805	)
Net cash from discontinued operations		(12,759	)		—			(7,551	)		(5,208	)
Net change in cash and cash equivalents		(3,339	)		—			(2,012	)		(1,327	)
Cash and cash equivalents, beginning of period		17,108			—			14,126			2,982
Cash and cash equivalents, end of period	$	13,769		$	—		$	12,114		$	1,655

F-34

PENSKE AUTOMOTIVE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts) — (Continued)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
Year Ended December 31, 2008

				Penske						Non-
	Total			Automotive			Guarantor			Guarantor
	Company			Group, Inc.			Subsidiaries			Subsidiaries
	(In thousands)
Net cash from continuing operating activities	$	404,628		$	23,547		$	200,255		$	180,826
Investing Activities:
Purchase of equipment and improvements		(211,832	)		(3,547	)		(130,814	)		(77,471	)
Proceeds from sale — leaseback transactions		37,422			—			23,223			14,199
Dealership acquisitions, net		(147,089	)		—			(98,589	)		(48,500	)
Purchase of Penske Truck Leasing Co., L.P. partnership interest		(219,000	)		(219,000	)		—			—
Other		(1,500	)		—			—			(1,500	)
Net cash from continuing investing activities		(541,999	)		(222,547	)		(206,180	)		(113,272	)
Financing Activities:
Proceeds from U.S. credit agreement term loan		219,000			219,000			—			—
Repayments under U.S. credit agreement term loan		(10,000	)		(10,000	)		—			—
Proceeds from mortgage facility		42,400			—			42,400			—
Net (repayments) borrowings of other long-term debt		(1,520	)		77,263			7,794			(86,577	)
Net (repayments) borrowings of floor plan notes payable — non-trade		(52,783	)		—			(63,451	)		10,668
Payment of deferred financing costs		(661	)		(521	)		—			(140	)
Proceeds from exercises of options, including excess tax benefit		821			821			—			—
Repurchase of common stock		(53,661	)		(53,661	)		—			—
Distributions from (to) parent		—			—			4,824			(4,824	)
Dividends		(33,902	)		(33,902	)		—			—
Net cash from continuing financing activities		109,694			199,000			(8,433	)		(80,873	)
Net cash from discontinued operations		31,169			—			24,740			6,429
Net change in cash and cash equivalents		3,492			—			10,382			(6,890	)
Cash and cash equivalents, beginning of period		13,616			—			3,744			9,872
Cash and cash equivalents, end of period	$	17,108		$	—		$	14,126		$	2,982

F-35

PENSKE AUTOMOTIVE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts) — (Continued)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
Year Ended December 31, 2007

				Penske						Non-
	Total			Automotive			Guarantor			Guarantor
	Company			Group, Inc.			Subsidiaries			Subsidiaries
	(In thousands)
Net cash from continuing operating activities	$	300,494		$	7,634		$	117,499		$	175,361
Investing Activities:
Purchase of equipment and improvements		(194,492	)		(1,959	)		(103,661	)		(88,872	)
Proceeds from sale — leaseback transactions		131,793			—			67,351			64,442
Dealership acquisitions, net		(180,721	)		—			(121,025	)		(59,696	)
Other		15,518			8,764			—			6,754
Net cash from continuing investing activities		(227,902	)		6,805			(157,335	)		(77,372	)
Financing Activities:
Net (repayments) borrowings of long-term debt		(34,190	)		325,833			(287,212	)		(72,811	)
Net borrowings (repayments) of floor plan notes payable — non-trade		188,692			—			202,054			(13,362	)
Redemption of 9 5/8% senior subordinated debt		(314,439	)		(314,439	)		—			—
Proceeds from exercises of options, including excess tax benefit		2,614			2,614			—			—
Distributions from (to) parent		—			—			17,002			(17,002	)
Dividends		(28,447	)		(28,447	)		—			—
Net cash from continuing financing activities		(185,770	)		(14,439	)		(68,156	)		(103,175	)
Net cash from discontinued operations		108,731			—			106,327			2,404
Net change in cash and cash equivalents		(4,447	)		—			(1,665	)		(2,782	)
Cash and cash equivalents, beginning of period		18,063			—			5,409			12,654
Cash and cash equivalents, end of period	$	13,616		$	—		$	3,744		$	9,872

F-36

Schedule II

PENSKE AUTOMOTIVE GROUP, INC.
VALUATION AND QUALIFYING ACCOUNTS

	Balance at				Deductions,			Balance
	Beginning				Recoveries			at End
Description	of Year		Additions		& Other			of Year
	(In thousands)
Year Ended December 31, 2009
Allowance for doubtful accounts		2,081		1,223		(1,610	)		1,694
Tax valuation allowance		3,378		3,649		(954	)		6,073
Year Ended December 31, 2008
Allowance for doubtful accounts		2,870		1,365		(2,154	)		2,081
Tax valuation allowance		2,337		1,041		—			3,378
Year Ended December 31, 2007
Allowance for doubtful accounts		2,702		1,810		(1,642	)		2,870
Tax valuation allowance		3,943		725		(2,331	)		2,337

F-37

EX-4.1.2

EXHIBIT 4.1.2

PENSKE AUTOMOTIVE GROUP, INC.
as Issuer,

THE GUARANTORS NAMED HEREIN
as Guarantors,

and

BANK OF NEW YORK TRUST COMPANY, N.A.
as Trustee,

3.50% SENIOR SUBORDINATED CONVERTIBLE NOTES DUE 2026

AMENDED AND RESTATED SUPPLEMENTAL INDENTURE

Dated as of February 19, 2010

to

INDENTURE

Dated as of January 31, 2006

AMENDED AND RESTATED SUPPLEMENTAL INDENTURE

AMENDED AND RESTATED SUPPLEMENTAL INDENTURE (this “Supplemental Indenture”), dated as of February 19, 2010, among PAG NORTHERN CALIFORNIA MANAGEMENT, INC., PAG SANTA ANA AVW, INC., PAG WEST ACQUISITION 1, INC. and PAG WEST ACQUISITION 2, INC. (each a “Guaranteeing Subsidiary”), subsidiaries of Penske Automotive Group, Inc. (or its permitted successor), a Delaware corporation (the “Company”), the Company, the other Guarantors (as defined in the Indenture referred to herein) and Bank of New York Trust Company, N.A., successor to J.P. Morgan Trust Company, National Association, as trustee under the Indenture referred to below (the “Trustee”).

WITNESSETH

WHEREAS, the Company has heretofore executed and delivered to the Trustee an indenture (the “Indenture”), dated as of January 31, 2006 providing for the issuance of 3.50% Senior Subordinated Convertible Notes due 2026 (the “Notes”);

WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally guarantee all of the Company’s Obligations under the Notes and the Indenture on the terms and conditions set forth herein (the “Note Guarantee”); and

WHEREAS, pursuant to Section 10.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture.

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows:

1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture.

2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiary hereby agrees to provide a Guarantee on the terms and subject to the conditions set forth in the Guarantee and in the Indenture including but not limited to Article 12 thereof, including the subordination provisions thereof.

4. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, incorporator, stockholder or agent of the Guaranteeing Subsidiary(ies), as such, shall have any liability for any obligations of the Company or any Guaranteeing Subsidiary(ies) under the Notes, any Guarantees, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of the Notes or any Guarantee by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes and this Guarantee.

5. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

6. COUNTERPARTS. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement.

7. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof.

8. THE TRUSTEE. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiary and the Company.

IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed and attested, all as of the date first above written.

Dated as of February 19, 2010

SIGNATURES PENSKE AUTOMOTIVE GROUP, INC.
By:	/s/ Robert O’Shaughnessy
	Name:	Robert O’Shaughnessy
	Title:	Executive Vice President — Finance and CFO
GUARANTORS: UAG MINNEAPOLIS B1, LLC JS IMPORTS, LLC PALM AUTO PLAZA, LLC WEST PALM NISSAN, LLC UAG BOSTON FMM, LLC UAG BOSTON FMB, LLC UAG BOSTON FML, LLC UAG BOSTON FMR, LLC UAG BOSTON BENTLEY, LLC WEST PALM S1, LLC
By:	/s/ Robert O’Shaughnessy
	Name:	Robert O’Shaughnessy
	Title:	Assistant Treasurer

SCOTTSDALE 101 MANAGEMENT, LLC SCOTTSDALE PAINT & BODY, LLC UAG ACQUISITION 1, LLC UAG ACQUISITION 2, LLC UAG ACQUISITION 3, LLC UAG ACQUISITION 4, LLC UAG ACQUISITION 5, LLC TAMBURRO ENTERPRISES, INC. CLASSIC SPECIAL ADVERTISING, INC. CLASSIC SPECIAL, LLC CLASSIC SPECIAL AUTOMOTIVE GP, LLC
By:	/s/ Robert O’Shaughnessy
	Name:	Robert O’Shaughnessy
	Title:	Assistant Treasurer

CLASSIC OLDSMOBILE-PONTIAC-GMC, LTD. CLASSIC SPECIAL HYUNDAI, LTD. HILL COUNTRY IMPORTS, LTD.
	By:	CLASSIC SPECIAL, LLC
	Its:	General Partner
		By:	/s/ Robert O’Shaughnessy Name: Robert O’Shaughnessy
			Title:    Assistant Treasurer
CLASSIC SPECIAL AUTOMOTIVE, LTD.
	By:	CLASSIC SPECIAL AUTOMOTIVE GP, LLC
	Its:	General Partner
		By:	/s/ Robert O’Shaughnessy Name: Robert O’Shaughnessy
			Title:    Assistant Treasurer

ADDITIONAL GUARANTORS PAG LONG ISLAND M1, LLC PAG LONG ISLAND A1, LLC PAG LONG ISLAND B1, LLC PAG LONG ISLAND L1, LLC TURNERSVILLE AUTO OUTLET, LLC SMART USA DISTRIBUTOR LLC PAG NORTH SCOTTSDALE BE, LLC PENSKE DIRECT, LLC CYCLE HOLDINGS, LLC PAG TURNERSVILLE AU, LLC PAG ACQUISITION 15, LLC PAG MICHIGAN S1, LLC PAG AUSTIN S1, LLC PAG CLOVIS T1, INC. PAG ORLANDO LIMITED, INC. PAG ORLANDO GENERAL, INC.
By:	/s/ Robert O’Shaughnessy
	Name:	Robert O’Shaughnessy
	Title:	Assistant Treasurer

PAG ORLANDO PARTNERSHIP, LTD.
	By: PAG ORLANDO GENERAL, INC.
	Its: General Partner
		By:	/s/ Robert O’Shaughnessy Name: Robert O’Shaughnessy
			Title:    Assistant Treasurer
HBL, LLC
	By: Penske Automotive Group, Inc.
	Its: Sole Member
		By:	/s/ Robert O’Shaughnessy Name: Robert O’Shaughnessy
			Title:    Executive Vice President-Finance

PETER PAN MOTORS, INC.
By:	/s/ Robert O’Shaughnessy
	Name:	Robert O’Shaughnessy
	Title:	Assistant Treasurer

UAG MENTOR ACQUISITION, LLC
	By: Penske Automotive Group, Inc.
	Its: Sole Member
		By:	/s/ Robert O’Shaughnessy Name: Robert O’Shaughnessy
			Title:    Executive Vice President-Finance

PAG SAN JOSE S1, INC.
By:	/s/ Robert O’Shaughnessy Name: Robert O’Shaughnessy
	Title:    Assistant Treasurer
AUTOMOTIVE MEDIA HOLDINGS, LLC
PAG ACQUISITION 20, LLC
PAG ACQUISITION 21, LLC
PAG ACQUISITION 22, LLC
PAG ACQUISITION 23, LLC
PAG ACQUISITION 24, LLC
PAG ACQUISITION 25, LLC
PAG ACQUISITION 26, LLC
By: PENSKE AUTOMOTIVE GROUP, INC.
Its: Sole Member
By:	/s/ Robert O’Shaughnessy Name: Robert O’Shaughnessy
	Title:    Executive Vice President-Finance and CFO
PAG NORTHERN CALIFORNIA MANAGEMENT, INC.
PAG SANTA ANA AVW, INC.
By:	/s/ Robert O’Shaughnessy Name: Robert O’Shaughnessy
	Title:    Assistant Treasurer
PAG WEST ACQUISITION 1, LLC
PAG WEST ACQUISITION 2, LLC
By:	/s/ Robert O’Shaughnessy Name: Robert O’Shaughnessy
	Title:    Treasurer

THE BANK OF NEW YORK TRUST COMPANY, N.A., as Trustee,
as successor in interest to
J.P. Morgan Trust Company, N.A.

By:	/s/ D.G. Donovan
	Name:	D.G. Donovan
	Title:	Vice President

EX-4.2.2

EXHIBIT 4.2.2

AMENDED AND RESTATED SUPPLEMENTAL INDENTURE

AMENDED AND RESTATED SUPPLEMENTAL INDENTURE (this “Supplemental Indenture”), dated as of February 19, 2010, among PAG NORTHERN CALIFORNIA MANAGEMENT, INC., PAG SANTA ANA AVW, INC., PAG WEST ACQUISITION 1, INC. and PAG ACQUISITION 2, INC. (each a “Guaranteeing Subsidiary”), subsidiaries of Penske Automotive Group, Inc. (or its permitted successor), a Delaware corporation (the “Company”), the Company, the other Guarantors (as defined in the Indenture referred to herein) and Bank of New York Trust Company, N.A., successor to J.P. Morgan Trust Company, National Association, as trustee under the Indenture referred to below (the “Trustee”).

WITNESSETH

WHEREAS, the Company has heretofore executed and delivered to the Trustee an indenture (the “Indenture”), dated as of December 7, 2006 providing for the issuance of 7.750% Senior Subordinated Notes due 2016 (the “Notes”);

WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally guarantee all of the Company’s Obligations under the Notes and the Indenture on the terms and conditions set forth herein (the “Note Guarantee”); and

WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture.

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows:

1. CAPITALIZED TERMS. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture.

2. AGREEMENT TO GUARANTEE. The Guaranteeing Subsidiary hereby agrees to provide a Guarantee on the terms and subject to the conditions set forth in the Guarantee and in the Indenture including but not limited to Article 13 thereof, including the subordination provisions thereof.

4. NO RECOURSE AGAINST OTHERS. No past, present or future director, officer, employee, incorporator, stockholder or agent of the Guaranteeing Subsidiary(ies), as such, shall have any liability for any obligations of the Company or any Guaranteeing Subsidiary(ies) under the Notes, any Guarantees, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of the Notes or any Guarantee by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes and this Guarantee.

5. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.

6. COUNTERPARTS. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement.

7. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof.

8. THE TRUSTEE. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiary and the Company.

IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed and attested, all as of the date first above written.

Dated as of February 19, 2010

SIGNATURES

PENSKE AUTOMOTIVE GROUP, INC.
By:	/s/ Robert O’Shaughnessy
	Name:	Robert O’Shaughnessy
	Title:	Executive Vice President — Finance and CFO
GUARANTORS: UAG MINNEAPOLIS B1, LLC JS IMPORTS, LLC PALM AUTO PLAZA, LLC WEST PALM NISSAN, LLC UAG BOSTON FMM, LLC UAG BOSTON FMB, LLC UAG BOSTON FML, LLC UAG BOSTON FMR, LLC UAG BOSTON BENTLEY, LLC WEST PALM S1, LLC
By:	/s/ Robert O’Shaughnessy
	Name:	Robert O’Shaughnessy
	Title:	Assistant Treasurer

SCOTTSDALE 101 MANAGEMENT, LLC SCOTTSDALE PAINT & BODY, LLC UAG ACQUISITION 1, LLC UAG ACQUISITION 2, LLC UAG ACQUISITION 3, LLC UAG ACQUISITION 4, LLC UAG ACQUISITION 5, LLC TAMBURRO ENTERPRISES, INC. CLASSIC SPECIAL ADVERSTISING, INC. CLASSIC SPECIAL, LLC CLASSIC SPECIAL AUTOMOTIVE GP, LLC
By:	/s/ Robert O’Shaughnessy
	Name:	Robert O’Shaughnessy
	Title:	Assistant Treasurer

CLASSIC OLDSMOBILE-PONTIAC-GMC, LTD.
CLASSIC SPECIAL HYUNDAI, LTD.
HILL COUNTRY IMPORTS, LTD.
	By: CLASSIC SPECIAL, LLC
	Its: General Partner
		By:	/s/ Robert O’Shaughnessy Name: Robert O’Shaughnessy
			Title:    Assistant Treasurer
CLASSIC SPECIAL AUTOMOTIVE, LTD.
	By: CLASSIC SPECIAL AUTOMOTIVE GP, LLC
	Its: General Partner
		By:	/s/ Robert O’Shaughnessy Name: Robert O’Shaughnessy
			Title:    Assistant Treasurer

ADDITIONAL GUARANTORS PAG LONG ISLAND M1, LLC PAG LONG ISLAND A1, LLC PAG LONG ISLAND B1, LLC PAG LONG ISLAND L1, LLC TURNERSVILLE AUTO OUTLET, LLC SMART USA DISTRIBUTOR LLC PAG NORTH SCOTTSDALE BE, LLC PENSKE DIRECT, LLC CYCLE HOLDINGS, LLC PAG TURNERSVILLE AU, LLC PAG ACQUISITION 15, LLC PAG MICHIGAN S1, LLC PAG AUSTIN S1, LLC PAG CLOVIS T1, INC. PAG ORLANDO LIMITED, INC. PAG ORLANDO GENERAL, INC.
By:	/s/ Robert O’Shaughnessy
	Name:	Robert O’Shaughnessy
	Title:	Assistant Treasurer

PAG ORLANDO PARTNERSHIP, LTD.
	By: PAG ORLANDO GENERAL, INC.
	Its: General Partner
		By:	/s/ Robert O’Shaughnessy Name: Robert O’Shaughnessy
			Title:    Assistant Treasurer
HBL, LLC
	By: Penske Automotive Group, Inc.
	Its: Sole Member
		By:	/s/ Robert O’Shaughnessy Name: Robert O’Shaughnessy
			Title:    Executive Vice President-Finance

PETER PAN MOTORS, INC.

By:	/s/ Robert O’Shaughnessy Name: Robert O’Shaughnessy
	Title:    Assistant Treasurer
UAG MENTOR ACQUISITION, LLC

By: Penske Automotive Group, Inc.
Its: Sole Member
	By:	/s/ Robert O’Shaughnessy Name: Robert O’Shaughnessy
		Title:    Executive Vice President-Finance

PAG SAN JOSE S1, INC.
By:	/s/ Robert O’Shaughnessy Name: Robert O’Shaughnessy
	Title:    Assistant Treasurer
AUTOMOTIVE MEDIA HOLDINGS, LLC
PAG ACQUISITION 20, LLC
PAG ACQUISITION 21, LLC
PAG ACQUISITION 22, LLC
PAG ACQUISITION 23, LLC
PAG ACQUISITION 24, LLC
PAG ACQUISITION 25, LLC
PAG ACQUISITION 26, LLC
By: PENSKE AUTOMOTIVE GROUP, INC.
Its: Sole Member
By:	/s/ Robert O’Shaughnessy Name: Robert O’Shaughnessy
	Title:    Executive Vice President — Finance and CFO
PAG NORTHERN CALIFORNIA MANAGEMENT, INC.
PAG SANTA ANA AVW, INC.
By:	/s/ Robert O’Shaughnessy Name: Robert O’Shaughnessy
	Title:    Assistant Treasurer
PAG WEST ACQUISITION 1, LLC
PAG WEST ACQUISITION 2, LLC
By:	/s/ Robert O’Shaughnessy Name: Robert O’Shaughnessy
	Title:    Treasurer
THE BANK OF NEW YORK TRUST COMPANY, AS TRUSTEE
By:	/s/ D.G. Donovan Name: D.G. Donovan
	Title:    Vice President

EX-10.10

EXHIBIT 10.10

DEALER AGREEMENT

FOR

MINI PASSENGER CARS

BMW OF NORTH AMERICA, LLC

DEALER AGREEMENT FOR MINI PASSENGER CARS

STANDARD PROVISIONS

Table of Contents

PARAGRAPH 1 — DEFINITIONS	3
BMW Group	3
BMW NA	3
Dealer	3
Dealer Facility	3
Dealer Operating Requirements Addendum	3
Dealer Operator	4
Dealer’s Officers	4
Dealer’s Owners	4
General Manager	4
Improvement Addendum	4
MINI Car Dealers	4
MINI Car Dealer Agreement	4
MINI Dealer Car Operations	5
MINI Division	5
MINI Products	5
MINI Vehicle(s)	5
Net Purchase Price	5
Original MINI Parts	6
Primary Market Area	6
United States	6
PARAGRAPH 2 — APPOINTMENT OF CAR DEALER	7
Dealer Appointment	7
PARAGRAPH 3 — DEALER AGREEMENT AND OPERATING STANDARDS	8
Dealer Agreement	8
Operating Standards	8
PARAGRAPH 4 — TERM	9
Term	9
PARAGRAPH 5 — CAR DEALER OWNERSHIP AND MANAGEMENT	10
Ownership and Management	10
PARAGRAPH 6 — OWNERSHIP CHANGES AND TRANSFERS OF AGREEMENT	14
Transfer, Sale, or Assignment by Dealer	14
Ownership, Policies and Procedures	14
Ownership Limitations	14
PARAGRAPH 7 — RIGHT OF FIRST REFUSAL	15
Right of First Refusal	15
PARAGRAPH 8 — DEALER FACILITIES	17
Dealer Facilities	17
Facility and Satellite Authorization	18
Dedication to the MINI Brand	18
Facilities Compliance	19
Pre-Owned Vehicle Facilities	19
PARAGRAPH 9 — BASIC OBLIGATIONS OF MINI DIVISION	20
Assistance to Dealer	20
Allocation of Vehicles	20
Supply of MINI Products to Dealer	21

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PARAGRAPH 10 — BASIC OBLIGATIONS OF DEALER	22
MINI Sales, Service, and Parts Supply	22
Conduct of Business	22
Compliance with Dealer Operating Requirements and Standards for MINI Dealers	22
Issuance of Improvement Addendum	23
PARAGRAPH 11 — CUSTOMER SATISFACTION	24
Customer Satisfaction	24
PARAGRAPH 12 — GENERAL REQUIREMENTS FOR DEALER’S CAR OPERATIONS	25
Business Hours	25
Signs, Pylons, and Displays	25
Dealer’s Corporate and Trade Name	25
Exclusive Ownership of MINI Trademarks and Non-Exclusive Trademark License	25
Use of MINI Trademarks by Dealer	26
Dealer Web Sites and Internet Use	27
Sales of Certified Pre-Owned and Other Pre-Owned MINI Vehicles	28
Insurance	28
Training	28
Advertising and Marketing	28
Dealer Submissions to MINI Division	29
Compliance with Laws	29
Compliance with this Agreement and MINI Division Policies, Procedures, Programs, and Guidelines	29
PARAGRAPH 13 — DEALER’S SALES OF MINI VEHICLES	30
Sales Promotion	30
Sales Performance	30
Sales Leads	30
Demonstrators	30
Strategic Business Plan	30
Primary Market Area	31
Performance Evaluation	31
Down Payments and Trade-Ins	32
Consumer Disclosures	32
PARAGRAPH 14 — CUSTOMER SERVICE	33
Scope and Quality	33
Disclosure and Use of Original MINI Parts	33
Pre-Delivery Inspection	33
MINI Service and Warranty Information Booklet and MINI Owner’s Manual	34
Compliance with Consumer Protection Statutes, Policies, Procedures, and Guidelines	34
PARAGRAPH 15 — DEALER’S RECORDS AND REPORTS AND ACCESS TO DEALER’S PREMISES	35
Financial Records	35
Management Information Systems Requirements	35
Financial Statements	35
Additional Reports	35
Access to Dealer’s Premises and Records	36
Confidentiality	36
PARAGRAPH 16 — DEALER’S PURCHASES OF MINI VEHICLES	37
Dealer’s Purchase Price	37
Payment	37
Line of Wholesale Credit	37
Shipment to Dealer	37
Claims Processing	37
Passing of Risk	38
Repair and Sale of Damaged MINI Vehicles	38
Option to Repurchase Damaged Vehicles	38

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PARAGRAPH 17 — DEALER’S INVENTORY AND PURCHASE OF ORIGINAL MINI PARTS	39
Minimum Inventory of Original MINI Parts	39
Dealer’s Purchase Price	39
Payment	39
Delivery	39
Claims for Incomplete Delivery	39
Return of Defective Original MINI Parts	40
Right to Return Original MINI Parts	40
Non-Returnable Materials, Parts, and Assemblies	40
PARAGRAPH 18 — ADDITIONAL PROVISIONS GOVERNING DEALER’S PURCHASE OF MINI PRODUCTS AND DEALER’S INVENTORIES	41
Taxes	41
Purchase Money Security Interest	42
Return or Diversion of MINI Vehicles on Dealer’s Failure to Accept	43
Failure of or Delay in Delivery	43
Changes in Specifications	43
Changes by Dealer on MINI Products and Compliance with Safety, Air Pollution, Noise Control, and Consumer Warranty Requirements	44
Inventories	44
PARAGRAPH 19 — WARRANTY TO CUSTOMERS	45
MINI Warranties	45
Incorporation of MINI Warranties in Dealer’s Sales	45
Exclusion of Warranties	45
Warranty Policies and Procedures	45
PARAGRAPH 20 — TERMINATION PRIOR TO EXPIRATION DATE AND SUCCESSION	47
Termination by Dealer	47
Immediate Termination by the MINI Division for Cause	47
Termination by the MINI Division on Sixty (60) Days Notice	49
Termination upon Offering to Enter into a New or Amended MINI Car Dealer Agreement	50
Termination for Failure of BMW NA to be Licensed	50
No Waiver by Failure to Terminate	50
Termination upon Death or Permanent Disability	51
Successor in Event of Death or Permanent Disability	51
Successor Nominee	52
PARAGRAPH 21 — CONTINUATION OF BUSINESS RELATIONS	53
Continuation of Business Relations After Expiration or Prior Termination	53
PARAGRAPH 22 — RIGHTS AND LIABILITIES UPON EXPIRATION OR PRIOR TERMINATION	54
Cancellation of Pending Orders and Post Expiration and Termination Obligations	54
Purchase of Dealer’s Inventory of MINI Products by the MINI Division	55
PARAGRAPH 23 — INDEMNIFICATION	57
Indemnification by the MINI Division	57
Indemnification by Dealer	58
Notification	59
Allegations Involving Both the MINI Division and Dealer	60
PARAGRAPH 24 — ALTERNATE DISPUTE RESOLUTION	61
PARAGRAPH 25 — MISCELLANEOUS PROVISIONS	62
Approval or Consent by the MINI Division	62
Divisibility	62
Termination of Prior Agreements	62
Notices	62
No Implied Waivers	62
Dealer Not an Agent and Disclaimer of Further Liability by the MINI Division and the BMW Group	63
Accounts Payable	63
Continuing Security Interests	63
Assignment of Security Interests	63
Assignment of Dealer Agreement by the MINI Division of BMW NA	63
Limitations Re Dealer Stock and Assets	64
MINI Division’s Right to Specific Performance	64
Reservation of Rights	64
Headings	64
Entire Agreement and Representations	64
Execution of Agreement	65
Modification of Agreement	65
New Jersey Law	65

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This DEALER AGREEMENT is effective as of the _____ day of _____, _____, by and between the MINI Division of BMW of North America, LLC, a Delaware limited liability company, having its principal place of business at 300 Chestnut Ridge Road, Woodcliff Lake, New Jersey 07677, and

Dealer Name:
Dealer Location:	, a
Business Type:

(if a corporation, limited liability company, or partnership) organized or incorporated under the laws of the

State of:	and
Doing Business As:

having its principal place of business at

Address:	, in
City/Town:	, in the
County of:	, in the
State of:	, (as “Dealer”)

1

PURPOSE OF AGREEMENT

The purpose of this Agreement is to authorize Dealer to operate an approved MINI Car dealership and to set forth the rights and responsibilities of both the MINI Division and Dealer in providing MINI Products and services to the consuming public. The relationship between the MINI Division and Dealer is based on the respect of the individual roles each party must play and recognition that each party must perform in a competent, cooperative, and ethical manner to help achieve mutual success and the overall success of the MINI brand.

The reintroduction of the MINI brand and MINI passenger cars to the American market offers a unique business opportunity for both the MINI passenger car dealer organization and MINI Division. Dedication to a pure and consistent presentation of MINI brand values will entice consumers to the brand, leverage our collective investments, increase our voice, and help provide a higher return on investment. The MINI personality must be consistent in visual branding, marketing communications, and promotions on the Internet and through the retail, product, and ownership experiences.

2

PARAGRAPH 1 — DEFINITIONS

IN CONSIDERATION OF the foregoing and the mutual covenants herein contained, the parties hereto agree as follows:

The following definitions shall be used in this Dealer Agreement and have the following meanings:

BMW Group

(a) “BMW Group” is the umbrella term for collectively identifying the operations, businesses, and/or activities of Bayerische Motoren Werke AG, its subsidiaries, their affiliates, and related entities throughout the world, both within and outside the automotive industry. The BMW Group produces products under various brand names; the most significant at the time of introducing this Agreement are MINI (the only brand addressed by this Agreement) and BMW (which is not covered). The BMW Group is represented by many different legal entities, including, but not limited to, BMW of North America, LLC and its affiliates.

BMW NA

(b) “BMW NA” shall mean BMW of North America, LLC, an, entity organized under the laws of the State of Delaware. The MINI Division of BMW NA or an affiliated entity (“Affiliated Entity”) shall be the exclusive importer and distributor of MINI Products in the United States.

Dealer

(c) “Dealer”, “MINI Dealer”, “Center”, “MINI Center”, “Dealership”, or “MINI Dealership” shall mean a dealer authorized to sell and service MINI Products as appointed by the MINI Division of BMW of North America, LLC or an Affiliated Entity pursuant to this Agreement.

Dealer Facility

(d) “Dealer Facility”, including its plural and possessive forms, shall mean the land and building(s) that constitute the authorized location(s) established in accordance with the provisions of Paragraph 8 of this Dealer Agreement for the conduct of MINI Dealer Car Operations.

Dealer Operating Requirements Addendum

(e) “Dealer Operating Requirements Addendum”, “Center Operating Requirements Addendum”, and “Operating Requirements Addendum” shall mean the Addendum to this Agreement containing the “Dealer Operating Requirements”, which are the MINI Product, Dealer Facility, Corporate Identity, Personnel, Training, Financial, Equipment, Special Tool, Certified Pre-Owned Vehicle, Parts, and Demonstrator Requirements for a MINI Dealer’s Car Operations and other such requirements applicable to Dealer, as issued, amended, canceled, or superseded from time to time by the MINI Division of BMW of North America, LLC or an Affiliated Entity following review with Dealer.

3

Dealer Operator

(f) “Dealer Operator” shall mean the person named in Paragraph 5 of the Dealer Agreement as the person in charge of MINI Dealer Operations with authority to make all operating decisions on behalf of the Dealer with respect to the MINI Dealer Operations and is the person upon whom the MINI Division of BMW of North America, LLC or an Affiliated Entity is relying to represent MINI Products and to act on the Dealer’s behalf, as well as any person who succeeds to such position in accordance with this Agreement.

Dealer’s Officers

(g) “Dealer’s Officers” or “Dealer Officers” shall mean all the persons named in Paragraph 5 of the Dealer Agreement as officers of Dealer, as well as any other person who succeeds to any such executive and/or managerial position in the Dealer in accordance with the Agreement.

Dealer’s Owners

(h) “Dealer’s Owners” or “Dealer Owners” shall mean all the persons named in Paragraph 5 of the Dealer Agreement as the beneficial and record owners of the Dealer, as well as any other person who acquires or succeeds to any beneficial interest or record ownership of the Dealer in accordance with the Agreement.

General Manager

(i) “General Manager” shall mean the person named in Paragraph 5 of the Dealer Agreement as the person in charge of its MINI Car Operations in the absence of the Dealer Operator, as well as any person who succeeds to such position in accordance with this Agreement.

Improvement Addendum

(j) “Improvement Addendum” shall mean the Addendum to this Dealer Agreement that lists the outstanding obligations of the Dealer that must be met to ensure the continuation of this Agreement under Paragraph 4 of this Agreement.

MINI Car Dealers

(k) “MINI Car Dealers”, “MINI Dealers”, “Car Dealers”, or “Dealers” shall mean all of the authorized MINI dealers that are signatories to a Dealer Agreement for MINI passenger cars with the MINI Division of BMW NA or an Affiliated Entity.

MINI Car Dealer Agreement

(I) “MINI Car Dealer Agreement”, “MINI Passenger Car Dealer Agreement”, “Car Dealer Agreement”, “Passenger Car Dealer Agreement”, “Dealer Agreement”, “Dealer Agreement for Cars”, Dealer Agreement for Passenger Cars, “Dealer Agreement for MINI Passenger Cars”, or “Agreement” shall mean this Dealer Agreement.

4

MINI Dealer Car Operations

(m) “MINI Dealer Car Operations”, “MINI Dealer Operations”, “MINI Car Operations”, or “Car Operations” shall mean all activities of the Dealer relating to the promotion and sale of MINI Products, the Supply of Original MINI Parts, customer service for MINI Products, and/or all other operations of Dealer governed by this Agreement, such as sales of certified pre-owned MINI Vehicles.

MINI Division

(n) “MINI Division” shall mean the MINI Division of BMW of North America, LLC or an Affiliated Entity that is responsible for all aspects of the distribution and marketing of MINI passenger cars in the United States.

MINI Products

(o) “MINI Products” shall mean MINI Vehicles and Original MINI Parts.

MINI Vehicle(s)

(p) “MINI Vehicle(s)” shall mean new passenger cars bearing the trademarks of the heritage-rich MINI brand and MINI make, which were purchased from the Rover Group in 1994, that are now manufactured by the BMW Group and sold by the MINI Division of BMW of North America, LLC or an Affiliated Entity. The MINI make and the MINI brand do not include: 1) the BMW or ROLLS-ROYCE makes or brands of the BMW Group or vehicles badged with BMW or ROLLS-ROYCE trademarks; or 2) any other make or brand of the BMW Group. The only new vehicles and the only Line-Make authorized to be sold or serviced under this Agreement are MINI passenger cars, which are badged with MINI trademarks. Other than passenger cars, no other line of vehicles is authorized to be sold or serviced under this Agreement, e.g., light trucks (including sport utility vehicles, pick-up trucks, and minivans), medium trucks, heavy trucks, and motorcycles are lines of vehicles not covered by this Agreement.

Net Purchase Price

(q) “Net Purchase Price” shall mean the actual price at which Dealer purchased the certain MINI Product from the MINI Division of BMW of North America, LLC or an Affiliated Entity, which price shall include the addition or deduction of any and all rebates, refunds, credit allowances, discounts, and other payments or adjustments made by the MINI Division of BMW of North America, LLC or an Affiliated Entity relative to such MINI Product. “Net Purchase Price” shall not include payments or adjustments in connection with Dealer advertising association activities (if applicable).

5

Original MINI Parts

(r) “Original MINI Parts” shall mean: (i) any genuine parts, accessories, and equipment for MINI Vehicles manufactured by or on behalf of and/or sold by the BMW Group and/or the MINI Division of BMW of North America, LLC or an Affiliated Entity and/or bearing the authorized trademarks of the MINI brand, which parts, accessories, and equipment usually are described as “Original” in packaging; and (ii) any equipment designed for use in MINI Dealer Operations (including special MINI tools) and any non-automotive accessories and other equipment, including aftersales, MotoringGear, lifestyle, and gift items bearing the trademarks of the MINI brand, which are supplied to Dealer by or on behalf of the MINI Division of BMW of North America, LLC or an Affiliated Entity.

Primary Market Area

(s) “Primary Market Area” shall mean the area designated by the MINI Division of BMW of North America, LLC or an Affiliated Entity in which the Dealer is expected to focus its activities under this Dealer Agreement. Evaluation of the Dealer’s performance shall be primarily based upon the Dealer’s activities in its Primary Market Area.

United States

(t) “United States” shall mean the 50 United States, the District of Columbia, and the Commonwealth of Puerto Rico.

6

PARAGRAPH 2 — APPOINTMENT OF CAR DEALER

Dealer Appointment

(a) Subject to the terms of this Agreement, the MINI Division appoints Dealer as a dealer of MINI Products and grants Dealer the non-exclusive right to buy and/or sell and/or service MINI Products. Dealer accepts such appointment and agrees to be bound by this Agreement.

While Dealer recognizes that its performance will be primarily measured based upon its activities in its Primary Market Area, Dealer agrees that this appointment does not confer upon it the exclusive right to deal in MINI Products in any specific geographic area within the United States, nor does it limit the persons within the United States to whom Dealer may sell MINI Products for use therein.

Dealer agrees that it will not sell MINI Products for resale in the United States or for resale or use outside the United States. In addition, Dealer agrees to abide by the MINI Division’s Export Policy and all amendments and modifications thereto.

Dealer acknowledges that the MINI Division reserves the right to appoint additional MINI Car Dealers, whether located near Dealer’s location or elsewhere, as the MINI Division in its sole discretion deems necessary or appropriate. The MINI Division agrees that it will not appoint additional representation without first conferring individually with the MINI Car Dealer(s) in the Dealer’s state of operation whose Primary Market Area would be subject to adjustment if representation is added to the proposed location so that the MINI Division can determine whether other alternatives to additional representation are satisfactory to the MINI Division. If a decision is made to proceed with establishment of additional representation, the MINI Division will provide such MINI Car Dealer(s) no less than thirty (30) days written notice of such decision.

7

PARAGRAPH 3 — DEALER AGREEMENT AND OPERATING STANDARDS

Dealer Agreement

(a) All currently effective Addenda to the Dealer Agreement for MINI passenger cars and all Addenda to be issued to Dealer by the MINI Division, all of which may be amended, canceled, or superseded from time to time, are hereby fully incorporated into this Dealer Agreement (“Incorporated Documents”). Unless the context otherwise indicates, the term “Agreement” shall mean this document, the Incorporated Documents, and the documents referred to therein, including, but not limited to, policies, procedures, programs, and guidelines issued from time to time by the MINI Division. The terms used in this Agreement are defined in Paragraph 1 of this Agreement. Dealer hereby acknowledges receipt of this Agreement and agrees to become familiar with its terms.

Operating Standards

(b) Dealer is required to comply with the operating guidelines that the MINI Division establishes and agrees to conform its operations to those operating guidelines.

8

PARAGRAPH 4 — TERM

Term

(a) This Agreement shall continue in full force and effect and shall govern all relations and transactions between the parties commencing on the effective date hereof and continuing as follows:

(1) If Dealer has fulfilled all of its obligations hereunder and no Improvement Addendum is currently in force: 1) this Agreement shall expire five (5) years from the effective date hereof and the MINI Division will renew the Agreement unless it is terminated earlier in accordance with the applicable provisions of this Agreement; or 2) when the MINI Division develops a superseding Agreement, the MINI Division will form a project group consisting of two MINI passenger car dealers per region, one selected by the MINI Division and the other selected by MINI passenger. car dealers. The project group will review the superseding Agreement and advise the MINI Division on it. In the event that the project group reviews a superseding Agreement, and the MINI Division offers Dealer an opportunity to enter into that Agreement, Dealer shall enter into the superseding Agreement.

(2) If Dealer has outstanding obligations as of the effective date of this Agreement and/or an Improvement Addendum is in force, this Agreement shall expire on the earlier of three years from the effective date hereof or sixty (60) days following the earliest “Compliance Date” specified in said Addendum, unless otherwise terminated in accordance with the applicable provisions of this Agreement.

9

PARAGRAPH 5 — CAR DEALER OWNERSHIP AND MANAGEMENT

Ownership and Management

(a) This is a PERSONAL SERVICES AGREEMENT. The MINI Division is entering into this Agreement in reliance upon the qualifications, abilities, and integrity of the Dealer Operator and upon the representation of the Dealer’s Owners that the Dealer Operator will have full managerial authority for the operations and activities of Dealer. In order to induce the MINI Division to enter into this Agreement, Dealer states that:

Dealer’s Owners

(1) The beneficial owners, record owners, members, and partners, if any, of Dealer are (include record owners if different from beneficial):

NAME % RECORD OR BENEFICIAL

Additional Names Attached

10

Dealer’s Officers

(2) The following persons are Dealer’s Officers (if Dealer is an LLC, include the names of the members and the officers of the member):

NAME TITLE

Dealer’s Corporate Directors

(3) If Dealer is a corporation or company, the following are its Directors (if Dealer is an LLC, include the directors of the member):

NAME TITLE

Dealer Operator

(4) The following person shall be in complete charge of Dealer’s MINI Car Operations with authority to make all operating decisions on behalf of Dealer with respect to Dealer’s MINI Car Operations and is the person upon whom the MINI Division can rely to act on Dealer’s behalf:

NAME TITLE

General Manager

(5) The following is Dealer’s General Manager (if none, enter “NONE”):

NAME TITLE

Successor(s)

(6) The Dealer’s Owners have nominated the following individual(s) as proposed Dealer Owners of a Successor Dealer to be established if this Agreement is terminated because of the death or permanent disability of any of the Dealer’s Owners (if none, enter “NONE”):

NAME TITLE

11

Because of the importance that the MINI Division places on the statements and representations of the Dealer’s Owners and the qualifications of the Dealer Operator, Dealer agrees that there will be no change in the: (a) identity of the Dealer’s Owners ((1) above); (b) the Dealer Operator ((4) above); (c) the Successor(s) ((6) above); or (d) Dealer’s name, identity, business organization or structure, without the prior written consent of the MINI Division.

To enable the MINI Division to maintain effectively the MINI Dealer network, Dealer further agrees to provide the MINI Division with forty-five (45) days prior written notice of any proposed change in the ownership of Dealer, which would change the interests in, or control of, Dealer, or of any proposed disposition of Dealer’s MINI assets. Any such change in ownership or disposition of Dealer’s MINI assets shall not be effective without the prior written consent of the MINI Division, which consent will not be unreasonably withheld. Dealer acknowledges and agrees that all proposed owners of all or a portion of the Dealer shall be required to meet the MINI Division’s appointment criteria and comply with the MINI Division’s ownership policies, procedures, and limitations. The MINI Division shall respond to Dealer’s notification within forty-five (45) days after Dealer has furnished to the MINI Division all completed applications and information reasonably requested to evaluate the proposal.

Without limiting other considerations in determining whether the MINI Division will provide consent, this Agreement may not be transferred, assigned, or assumed until all indebtedness of Dealer to the MINI Division of BMW NA, its subsidiaries, or affiliates has been fully satisfied and unless the transferee, assignee, or party assuming this Agreement agrees and commits to fulfill and complete all of the obligations under this Agreement and the Improvement Addendum (if applicable) and fully comply with all MINI Division policies, procedures, programs, and guidelines.

12

Dealer recognizes that the MINI Division has a vital interest in ensuring that MINI Dealers employ qualified personnel. Therefore, Dealer agrees to employ personnel who meet the qualifications for each position within the Dealer. The MINI Division agrees that Dealer has the right to decide and is responsible for all matters concerning management and personnel.

Dealer has designated herein certain individuals as officers, directors, managers and/or individuals with responsibility for Dealer’s MINI Car Operations. Dealer agrees to notify the MINI Division in writing of any change in the designated individuals (2, 3, and 5 above) and recognizes that such designation shall not relieve Dealer of its responsibility for performance under this Agreement.

Dealer agrees that the MINI Division may rely upon the Dealer Operator and General Manager (if applicable) to act on Dealer’s behalf on any and all matters and that such reliance shall not alter Dealer’s responsibilities under this Agreement.

13

PARAGRAPH 6 — OWNERSHIP CHANGES AND TRANSFERS OF AGREEMENT

Transfer, Sale, or Assignment by Dealer

(a) (1) In view of the nature, purposes, and objectives of the MINI Division and this Agreement, and the differences in operating requirements among dealerships of differing sizes and types of markets, the MINI Division expressly reserves the right to select the dealers with whom it will enter into such agreements so as to maintain a high quality network of dealers. Furthermore, Dealer agrees that the MINI Division has the right to approve or decline to approve any prospective purchaser based on his, her, or its character, reputation, automotive experience, performance (including, but not limited to, customer satisfaction, market penetration, and profitability), potential impact on the MINI brand, management, compliance with the MINI Division’s ownership policies, procedures, and limitations, compliance with the law and agreements, capital, financial qualifications, or other qualifications for appointment as an owner of a dealer.

(2) Dealer shall not transfer, sell, or assign, or attempt to transfer, sell, or assign, the Dealer’s assets, any ownership interest in the Dealer, or this Agreement, or sell or transfer any right or delegate any duty, obligation, or responsibility of Dealer under this Agreement, without the prior written consent and approval of the MINI Division. If a transfer, sale, or assignment of a Dealer’s stock or assets is approved by the MINI Division, then the MINI Division shall offer the transferee or assignee of Dealer the right to enter into a new Agreement in substantially the same form as the Agreement then currently offered by the MINI Division to its Dealers.

Ownership, Policies and Procedures

(b) The MINI Division fully incorporates by reference its ownership policies and procedures into this Agreement.

Ownership Limitations

(c) (1) The combined SPG of all the MINI dealers owned directly or indirectly by any individual, partnership, trust, corporation, or other entity cannot exceed 10% of the SPG of all MINI dealers in the United States at any time. The MINI Division can withhold its consent to any change of ownership that would take any individual’s, partnership’s, trust’s, corporation’s, or other entity’s direct or indirect ownership interest above 10%. Dealer acknowledges and agrees that the MINI Division’s 10% ownership limit is fair and reasonable.

(2) In any metropolitan area defined by the MINI Division as a multiple point market no individual, partnership, trust, corporation, or any other entity can directly or indirectly own an interest in more than 50% of the MINI dealers in the market. The MINI Division can withhold its consent to any change of ownership that would violate this Paragraph. Dealer acknowledges and agrees that the ownership limit described in this Paragraph is fair and reasonable.

14

PARAGRAPH 7 — RIGHT OF FIRST REFUSAL

Right of First Refusal

(a) The MINI Division recognizes the investment that Dealer has committed to operate a MINI dealership. Dealer recognizes the importance to the MINI Division of continuing dealership operations from approved locations to provide for the effective sales and service of MINI Products. Accordingly, whenever Dealer intends to dispose of Dealer’s MINI assets, change control of the Dealer, or change majority ownership from that listed in Paragraph 5(a)(1), the MINI Division shall have the first right to purchase Dealer’s MINI assets or ownership interests pursuant to this Paragraph. Dealer agrees to disclose to the prospective buyer that any sale or disposition shall be subject to the terms of this Agreement and any other information provided to Dealer which impacts the MINI Dealer Operations or the market in which the Dealer operates.

The MINI Division will advise Dealer if it will exercise the right of first refusal within forty-five (45) days after Dealer has furnished to the MINI Division all completed applications and information in accordance with Paragraph 5. If the MINI Division exercises the right, the MINI Division will assume the proposed buyer’s rights and obligations under the written agreement the proposed buyer negotiated with Dealer (the “Buy/Sell Agreement”). The purchase price shall be that set forth in the Buy/Sell Agreement.

The MINI Division shall have the right to perform due diligence in connection with Paragraph 7 while the MINI Division decides whether to exercise its right of first refusal. If the MINI Division exercises its right, the MINI Division’s right to conduct due diligence shall continue. Dealer agrees to fully cooperate with the MINI Division in connection with its due diligence.

In the event the MINI Division exercises its right of first refusal, the MINI Division may assign the Buy/Sell Agreement to any party. The MINI Division shall remain responsible to guarantee the purchase price to be paid by the assignee.

Dealer shall transfer the assets and any applicable real estate free and clear of all liens and encumbrances. Any property shall be transferred by Warranty Deed, where possible, conveying marketable title. Deeds will be in the proper form for recording. Possession will be deemed transferred when the deed is delivered. Dealer shall furnish copies of, and will assign where required, all agreements, licenses, easements, permits, or other documents necessary for the conduct of Dealer’s MINI Car Operations.

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Subject to the limitation set forth below, if the MINI Division exercises its right under this Paragraph, the MINI Division will reimburse Dealer for all reasonable and acceptable expenses, excluding brokerage commissions, incurred by Dealer in connection with the development of the Buy/Sell Agreement prior to the MINI Division’s exercise of its right. Dealer shall supply the MINI Division with reasonable documentation to support all those expenses and all copies of materials generated during the negotiation and development of the Buy/Sell Agreement in anticipation of the sale (including environmental reports, accounting reviews, among others). Dealer agrees that the expenses the MINI Division will pay to Dealer pursuant to Paragraph 7 shall not exceed the lesser of actual expenses or an aggregate of Fifty Thousand Dollars ($50,000.00). Any dispute regarding reimbursement shall be presented for review under Paragraph 24.

This Paragraph shall not apply in the event that Dealer proposes to change majority ownership, dispose of its assets, or otherwise enter into a proposed Buy/Sell Agreement with: 1) an immediate family member (spouse, child, brother, sister, parent, grandchild, or spouse of child) of a Dealer Owner; 2) an individual who is listed on the Successor Addendum; 3) an individual who is currently employed by Dealer and has been actively employed by Dealer for at least three consecutive years in the Dealer’s MINI Car Operations and is otherwise qualified as a Dealer Operator; or 4) an individual who is currently listed as a Dealer’s Owner in Paragraph 5 and has been so listed for the past three consecutive years and is otherwise qualified as a Dealer Operator.

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PARAGRAPH 8 — DEALER FACILITIES

Dealer Facilities

(a) Dealer agrees that Dealer Facilities shall satisfy all applicable provisions of this Agreement, including reasonable space, facility, and MINI Corporate Identification requirements in the Dealer Operating Requirements Addendum and/or Dealer Facilities Guidelines. The MINI Division recognizes the investment Dealer has in its facilities and hereby approves the location of the following Dealer Facilities for the exclusive purpose of:

(1) A showroom and sales facility for MINI Vehicles at:

Address:

(2) Service and parts facilities for MINI Vehicles at:

Address:

(3) Facilities for the display and sale of certified pre-owned MINI Vehicles at:

Address:

(4) Facilities for the display and sale of pre-owned MINI Vehicles at:

Address:

(5) Satellite(s) authorized pursuant to Paragraph 8(b) of the Agreement at:

(6) Other facilities (indicate the nature of the facility, e.g., storage facility):

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Facility and Satellite Authorization

(b) Dealer shall operate its MINI Car Operations only at the authorized locations listed in Paragraph 8(a) of the Agreement. Any proposed change in the Dealer’s authorized locations, including the establishment or relocation of satellite locations, requires the MINI Division’s prior written consent. To the extent that a proposed change is approved and involves the establishment or relocation of a satellite of the Dealer authorized to operate under this Agreement, the location of the satellite shall be listed in Paragraph 8(a) of the Agreement and shall be identified as a satellite. Accordingly, such a listing and identification constitutes authorization to operate a satellite under this Agreement and a new Dealer Agreement shall not be issued. Dealer agrees that satellite locations are not necessarily permanent and that Dealer shall discontinue operations at a satellite upon receipt of one hundred twenty (120) days written notice from the MINI Division. Dealer further agrees that the termination or withdrawal of approval of a satellite does not constitute the termination or failure to renew this Agreement.

Unless otherwise provided herein, Dealer shall conduct Dealer’s MINI Car Operations and keep MINI Products exclusively at the authorized Dealer Facilities designated above.

In the event that Dealer desires to: (1) change its principal place of business from that first set forth in this Agreement; (2) change any location of the Dealer Facilities; (3) establish any additional locations for either operating its business or storage of MINI Products; (4) make any major structural or design change in the Dealer Facilities; or (5) change the usage or function of any locations or facility approved herein or otherwise utilize such locations or facilities for any functions other than the approved functions, Dealer must obtain the prior written approval of the MINI Division for any such change or establishment.

Dedication to the MINI Brand

(c) The MINI passenger car showroom shall be totally dedicated to the MINI brand, shall be compliant with all MINI Corporate Identity requirements and standards, and shall be, at a minimum, architecturally separated from the showrooms of line-makes other than MINI passenger cars. Furthermore, the showroom shall have a sales staff fully dedicated to the MINI brand. All authorized facilities under this Agreement other than the MINI passenger car showroom, including, but not limited to, all customer-facing areas such as the areas for the sale of Original MINI Parts, MINI service, and MINI customer relations, shall be compliant with all MINI Corporate Identity requirements and standards and shall have staff dedicated to the MINI brand.

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Facilities Compliance

(d) Recognizing that Dealer’s Facilities affect Dealer’s ability to discharge properly its responsibilities under this Agreement and the Dealer Operating Requirements Addendum, Dealer will ensure that Dealer’s Facilities comply with the applicable provisions of this Agreement, including such reasonable requirements and standards as the MINI Division may prescribe from time to time.

Pre-Owned Vehicle Facilities

(e) Dealer must obtain the MINI Division’s prior written approval for all MINI branded locations and facilities from which pre-owned MINIS are sold, including certified pre-owned MINIS. The MINI Division’s approval of such locations will not be unreasonably withheld.

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PARAGRAPH 9 — BASIC OBLIGATIONS OF MINI DIVISION

Assistance to Dealer

(a) The MINI Division will assist Dealer in Dealer’s MINI Car Operations through such means and upon such terms and conditions as the MINI Division considers necessary and appropriate, including, among other things:

(1) Sales, technical, and process training, delivered in person or electronically, prior to introduction of new MINI Vehicles or on an ongoing basis;

(2) Sales, service, and parts literature and other printed materials relating to MINI Products;

(3) National advertising campaigns for MINI Vehicles;

(4) Periodic suggestions and evaluations to assist Dealer in the conduct of its MINI Car Operations; and

(5) Technical Assistance Hotline and Parts Telephone Support.

Allocation of Vehicles

(b) The MINI Division agrees to sell and deliver MINI Products to Dealer in accordance with the provisions of this Agreement:

(1) In making such sales and deliveries, the MINI Division will consider Dealer’s preferences, as well as its compliance with the resale and use restrictions of the Dealer Agreement, and will endeavor to make a fair and equitable allocation and distribution of the MINI Products available to it among its MINI Dealers. The MINI Division reserves the right to reduce allocation of MINI Vehicles to Dealers which do not comply with the terms and conditions of the Dealer Agreement or the Dealer Operating Requirements Addendum;

(2) Dealer recognizes the possibility that from time to time MINI Products may not be available in sufficient quantities. In such event, Dealer agrees that the MINI Division, in the exercise of its business judgment, may determine the method and manner of the allocation of MINI Products between Dealer and the MINI Division’s other Dealers. Upon Dealer’s written request, the MINI Division agrees to provide Dealer with an explanation of the method used to distribute such MINI Products; and

(3) Dealer recognizes that when introducing new MINI Products, the MINI Division may require certain prerequisites be in place at the MINI Dealer, i.e., training, equipment, tools, parts, displays, and customer information, prior to the MINI Division distributing such MINI Products to the Dealer. Such prerequisites shall help ensure customer satisfaction, consistent communication of MINI brand values, and product acceptance in the market. Dealer agrees that its failure to meet the prerequisites will delay the distribution of new MINI Products to Dealer until the prerequisites are met.

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Supply of MINI Products to Dealer

(c) The MINI Division agrees to sell and deliver MINI Products to Dealer in accordance with this Agreement and the ability of the Dealer to store, display, sell, and service MINI Products, as reflected in its Dealer Operating Requirements Addendum. The MINI Division shall have no obligation to supply and Dealer shall not be entitled to receive MINI Products which exceed the Dealer’s ability to store, display, sell, or service MINI Products as evidenced by its Dealer Operating Requirements Addendum.

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PARAGRAPH 10 — BASIC OBLIGATIONS OF DEALER

MINI Sales, Service, and Parts Supply

(a) Dealer assumes the responsibility for the promotion and sale of MINI Products, the supply of Original MINI Parts, and customer service for MINI Products.

Conduct of Business

(b) In the conduct of its business, Dealer will:

(1) Safeguard and promote the reputation of MINI Products, the trademarks of MINI, and the MINI brand;

(2) Help reintroduce the heritage-rich MINI brand in the United States after being absent from the country for more than thirty years;

(3) Refrain from negligent or willful conduct which may be harmful to the reputation or to the marketing of MINI Products or inconsistent with the public interest;

(4) Refrain from all deceptive, misleading, or unethical practices; and

(5) Comply with all applicable local, state, and federal laws.

Compliance with Dealer Operating Requirements and Standards for MINI Dealers

(c) Dealer, recognizing that its responsibilities under this Agreement demand the most effective use of its available facilities, capital, and personnel, agrees to comply with its Dealer Operating Requirements Addendum. Dealer shall review said Addendum with MINI Division representatives at the Retail Business Plan Review, satisfy outstanding obligations under its Improvement Addendum, if applicable, and comply with all reasonable standards established by the MINI Division from time to time relating to Dealer’s MINI Car Operations.

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Issuance of Improvement Addendum

(d) The MINI Division will notify Dealer in writing if Dealer fails to comply with any obligation, responsibility, or requirement under the Dealer Agreement or the Dealer Operating Requirements Addendum (“Deficiency”).

(1) If Dealer fails to remedy the Deficiency following notice, the MINI Division will issue to Dealer an Improvement Addendum or amend an existing Improvement Addendum, listing the Deficiency(s) and providing Dealer a reasonable date by which the Dealer must satisfy the Deficiency(s).

(2) Should Dealer reasonably request an extension of time in writing to comply with an Improvement Addendum, a justified request for extension will not be unreasonably withheld; however, under no circumstances is the MINI Division obligated to grant more than two extensions.

(3) Dealer’s failure to satisfy the Deficiency(s) will jeopardize the Dealer’s ability to renew the Dealer Agreement and could subject Dealer to early termination of this Agreement.

(4) An Improvement Addendum will be canceled once Dealer remedies the Deficiency(s).

(5) An Improvement Addendum may be superseded by the MINI Division at any time to reflect a Dealer’s progress toward satisfaction of a Dealer’s Deficiency(s).

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PARAGRAPH 11 — CUSTOMER SATISFACTION

Customer Satisfaction

(a) The MINI Division and Dealer agree to conduct their respective businesses in a manner that promotes and supports the image and reputation of MINI, MINI Products, the MINI Division, MINI Dealers, and the BMW Group. The MINI branding strategy, the price-value relationship of MINI Products, and excellent customer care are essential elements of image and reputation in all dealings and transactions with customers.

Dealer, as the direct link to the MINI customer, is responsible for satisfying customers in all matters, except those directly related to product design and manufacturing. Dealer will take all reasonable steps to ensure that each customer is satisfied with MINI Products and with the services and the practices of Dealer. Dealer will recommend to the MINI Division methods of reasonably satisfying customers. The MINI Division will support Dealer’s customer satisfaction efforts through counseling, training opportunities, and providing survey results.

When requested by the MINI Division, Dealer shall submit a plan detailing its customer satisfaction programs. That plan shall include continuous reinforcement to all Dealer personnel of the importance of customer satisfaction, necessary training for Dealer personnel, and methods of conveying to customers that the Dealer is committed to their satisfaction.

Following consultation with and notice from the MINI Division or its authorized representative, Dealer shall remedy, to the satisfaction of the MINI Division, any practice or method of operation which would have a detrimental effect upon customer satisfaction or would impair the reputation or image of MINI, MINI Products, the MINI Division, MINI Dealers, or the BMW Group.

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PARAGRAPH 12 — GENERAL REQUIREMENTS FOR DEALER’S CAR OPERATIONS

Business Hours

(a) Throughout the term of this Agreement, the Dealer Facility shall be operated during, and for not less than, the customary business hours of the trade in the community or locality in which Dealer is located. When necessary to accommodate customers’ needs, however, Dealer shall extend its regular business hours.

Signs, Pylons, and Displays

(b) Subject to local requirements, Dealer agrees to display conspicuously at and around the Dealer Facility such MINI approved signs, pylons, and displays as the MINI Division shall reasonably require.

Dealer’s Corporate and Trade Name

(c) Dealer agrees that its corporate name and its trade name (also known as the Dealer’s dba) for its MINI Dealer Car Operations shall comply with all applicable MINI Division policies, procedures, programs, and guidelines related thereto.

Exclusive Ownership of MINI Trademarks and Non-Exclusive Trademark License

(d) Dealer acknowledges that the exclusive ownership, and the validity, of the MINI trademarks (including, without limitation, the MINI logo), both registered and at common law, resides within the BMW Group, and Dealer shall not contest the same during the term of the Agreement or at any time thereafter. Dealer further acknowledges that it is only pursuant to the nonexclusive trademark license granted herein that Dealer can use MINI trademarks or MINI trade names in connection with the sale of MINI Products and that Dealer has no other such license. Dealer further acknowledges that the MINI trademarks are famous and highly distinctive throughout the world, and that the MINI trademarks have achieved the highest degree of recognition within the automotive industry and other related industries throughout the world. Dealer and the MINI Division agree to cooperate with each other in preventing any acts of trademark infringement, dilution, or unfair competition with respect to any MINI trademark, but the BMW Group (or the MINI Division, as the BMW Group’s agent with respect to trademark matters) shall have sole control over all actions and legal proceedings to suppress infringement, dilution, or any act of unfair competition with respect to any MINI trademark. Dealer acknowledges, and shall not contest, the BMW Group’s right and authority to bring any action for infringement, dilution, or unfair competition with respect to any MINI trademark.

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Use of MINI Trademarks by Dealer

(e) The MINI Division grants Dealer a non-exclusive license to use the MINI trademarks subject to the terms and conditions of this Agreement, including, but not limited to, the BMW Group and the MINI Division trademark policies and guidelines. Dealer agrees that it will use the trademarks solely in connection with the promotion and sale of MINI Products and consumer service for MINI Products only in such manner, at such location, to such extent, and for such purposes as the MINI Division may specify from time to time. No MINI trademark may be used except in the color, size, form, and style approved by the MINI Division. Moreover, without the express prior written consent of the MINI Division, Dealer shall not use any MINI trademark (including the letters “MINI”) as part of its corporate business name. Dealer shall promptly change or discontinue its use of any MINI trademark upon the MINI Division’s request. Dealer agrees that the sole source and origin of MINI Products is the MINI Division and the BMW Group. Dealer shall not use the MINI trademarks in any manner which may tend to cause a likelihood of confusion concerning the source or origin of MINI Products. Dealer shall not use the MINI trademarks in any manner which is likely to cause confusion among the public, deceive or mislead the public, or impair the goodwill of the MINI Division or MINI Products. Without the MINI Division’s prior written consent, Dealer shall not use MINI trademarks in connection with, or associated with, any other trademark or brand. In the event Dealer desires to utilize the MINI trademarks in any material, including signage or advertisements, which also contains reference to another line or automotive make, Dealer agrees to provide the MINI Division with thirty (30) days prior written notice of such use. The MINI Division shall have the sole discretion to grant or deny approval for such use of the MINI trademarks. Dealer acknowledges that the MINI Division shall be irreparably harmed by any breach by Dealer of any provision of this Agreement concerning the use of the MINI trademarks. Dealer acknowledges that the BMW Group or the MINI Division may, at their discretion, terminate this license or the MINI Division may terminate this Agreement for any violation of the BMW Group or the MINI Division trademark policies or guidelines or the breach of this provision or other related provisions in this Agreement. Dealer agrees to pay all costs, fees, and expenses, including attorneys fees, of the MINI Division associated with or arising from any legal claim or proceeding for the enforcement of any provision of this Agreement concerning the use of the MINI trademarks or the MINI brand.

The MINI Division agrees to provide Dealer with written notice and an opportunity to cure violations of trademark policies and guidelines, the infringement of MINI trademarks or trade names, and attempts to dilute MINI trademarks or the MINI brand. The length of the cure period will be based on the circumstances presented, but in no event will the cure period exceed thirty (30) days.

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Dealer Web Sites and Internet Use

(f) Dealer and MINI Division both recognize the importance of e-commerce to the mutual benefit of MINI passenger car dealers, MINI passenger car customers, and the MINI Division. E-commerce shall be a core element of the MINI passenger car business model. Dealer shall maintain a world wide web site or otherwise maintain a presence and advertise on the Internet (and any other public computer networks that are developed and are acceptable to the MINI Division) in connection with the Dealer’s business. All such activities shall be in compliance with the law and any applicable MINI Division e-commerce standards or Internet or web site policies, including functionality policies, that exist or are subsequently developed. Among other purposes, the MINI Division will use its Internet web site(s) to provide sales leads to Dealers, to facilitate sales, and to facilitate the flow of MINI Product and sales information among the MINI Division, MINI Dealers, and consumers. Dealer shall be required to use a MINI Corporate Identity web-site template and future generations of the template that will be provided to it by the MINI Division. Dealer agrees to use the template to provide for the handling of sales leads and on-line sales by MINI passenger car dealers to retail customers. Dealer also agrees to include on its web sites information that the MINI Division requires in the manner and form selected by the MINI Division. Dealer further agrees to list a link on its web sites to http://www.MINIUSA.com. If Dealer is requested to provide a link to additional web sites by the MINI Division in writing, Dealer shall add such links to its web sites. Dealer also shall not add links to its MINI passenger car web sites for line-makes other than MINI passenger cars without the prior written consent of the MINI Division. Dealer agrees that it shall provide input to the MINI Division and any ecommerce work groups of MINI passenger car dealers on e-commerce initiatives that Dealer, a work group or groups, and/or the MINI Division believe should be considered for inclusion in the MINI business model.

Dealer shall not use any MINI trademarks on its web sites in a manner inconsistent with the terms of this Agreement, without the MINI Division’s prior written authorization, or in a manner that is not acceptable to the MINI Division. Furthermore, Dealer may not post MINI Division or BMW Group proprietary, confidential, or copyrighted material or information on its web sites without the prior written approval of the MINI Division or the BMW Group. In addition, Dealer agrees to obtain the MINI Division’s prior written approval for any Internet domain name Dealer may use or intend to use and/or home page address. Dealer also agrees that it shall not cybersquat on any unauthorized domain names including MINI trademarks or trade names. Finally, Dealer agrees that it shall be responsible for the activities and actions it undertakes on the Internet and at its web sites.

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Sales of Certified Pre-Owned and Other Pre-Owned MINI Vehicles

(g) Dealer shall not use any MINI trademark in connection with the sale of certified or non-certified pre-owned MINIS unless the Dealer fully complies with all requirements of the MINI Division as to the standards, practices, and facilities for the sale of pre-owned MINIS under the MINI trademarks. Dealer agrees to adhere to the terms and conditions associated with the sales and service activities for certified pre-owned MINIS and to all policies, procedures, programs, and guidelines established and updated from time to time by the MINI Division for certified pre-owned MINIs. Furthermore, Dealer shall not certify any MINIS which do not meet the requirements for certification and shall not submit claims, information, or reports to the MINI Division identifying as certified, vehicles that do not meet certification requirements or vehicles that have not been certified.

Insurance

(h) Dealer shall maintain comprehensive and excess liability insurance policies in an amount sufficient to meet all reasonably anticipated contingencies, including legal judgments entered against Dealer. In no event shall the aggregate value of the policies be less than Five Million Dollars ($5,000,000.00). The policies must be issued by an insurance company with an “A-” or better rating by A.M. Best or a similar rating agency acceptable to the MINI Division. Dealer must provide the MINI Division with copies of such policies upon request and a certificate of insurance each time the policies are renewed.

Training

(i) Dealer agrees that its personnel will be trained in such special training courses as may be offered from time to time by the MINI Division. Dealer shall require its personnel to meet with the MINI Division personnel in the dealership or at other appropriate locations for the purposes of training and to use training materials as may be suggested from time to time by the MINI Division.

Advertising and Marketing

(j) Dealer agrees to advertise MINI Products and customer service for MINI Products in accordance with the standards set forth in Paragraph 10(b) and such other reasonable policies, standards, and guidelines as the MINI Division may establish from time to time. Such advertising shall include, among other things, listings in approved web sites and local classified telephone directories identifying Dealer as an authorized dealer in MINI Products.

Both the MINI Division and Dealer recognize the need of maintaining uniformly high standards of ethical advertising of a quality and dignity consistent with the reputation of MINI Products in order to maintain public confidence and respect in Dealer, the MINI Division, and MINI Products. Accordingly, Dealer agrees not to publish or cause to be published any advertising in any media whatsoever relating to MINI Products and customer service for MINI Products which is likely to deceive and/or mislead the public or to impair the goodwill or image of the MINI Division or MINI Products. The MINI Division reserves the right to require Dealer to cease any advertising inconsistent with this provision including the right to prohibit Dealer from using MINI trademarks in advertising.

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MINI passenger car marketing and advertising shall be consistent with MINI brand values and the image that the MINI brand projects into the marketplace. Dealer agrees, warrants, and represents that any and all of its marketing, advertising, and solicitation messages and materials, in any and all media, shall be consistent with, conform with, and shall not compromise, the MINI brand image. In order to properly develop the MINI brand image and to create efficiencies for MINI passenger car dealers, MINI Division will provide certain marketing and advertising materials for Dealer use. Marketing, advertising, and solicitation materials that Dealer desires to disseminate that have not been provided by MINI Division shall be submitted to MINI Division for its approval prior to use.

Dealer Submissions to MINI Division

(k) The submission of false or fraudulent claims, reports, statements, or information by Dealer to MINI Division, BMW NA, or an Affiliated Entity is strictly prohibited and may result in the termination of this Agreement.

Compliance with Laws

(I) Dealer shall comply with all applicable local, state, and federal laws and regulations, including, but not limited to, laws and regulations requiring licensing and/or registration. Dealer agrees to disclose information as the MINI Division may reasonably request with respect to the foregoing.

Compliance with this Agreement and MINI Division Policies, Procedures, Programs, and Guidelines

(m) Dealer shall comply with the terms and conditions of this Agreement and all existing and subsequently developed or amended MINI policies, procedures, programs, and guidelines.

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PARAGRAPH 13 — DEALER’S SALES OF MINI VEHICLES

Sales Promotion

(a) Dealer shall actively and effectively promote the sale of the full line of authorized MINI Vehicles and shall promote and sell such MINI Vehicles primarily in its Primary Market Area in accordance with the terms and conditions of this Agreement and through such means as reasonably may be required by the MINI Division from time to time.

Sales Performance

(b) Within the limitations, if any, resulting from the quantity of MINI Vehicles made available to Dealer by the MINI Division, Dealer shall achieve the best possible sales performance obtainable for MINI Vehicles. Such sales performance shall be evaluated on the basis of such reasonable and equitable criteria as may be determined from time to time by the MINI Division.

Sales Leads

(c) Dealer shall follow up all sales leads provided to Dealer by the MINI Division (or any of its subsidiaries, affiliated companies, or vendors), whether obtained through the MINI Division’s web site or otherwise, promptly and courteously within the time periods set forth by the MINI Division in writing to Dealers or in the Dealer’s Operating Requirements Addendum. Dealer acknowledges that the MINI Division may divert any sales leads not followed up on by a Dealer within the time periods set forth by the MINI Division, in writing to Dealers or in the Dealer’s Operating Requirements Addendum, to other Dealers.

Demonstrators

(d) For purposes of demonstration, Dealer shall have available at all times such number of the most current model MINI Vehicles as required pursuant to the Dealer’s Operating Requirements Addendum.

Strategic Business Plan

(e) Each Dealer shall develop a strategic business plan with objectives for the following year. The annual strategic business plan will be discussed with and presented to MINI Division representatives at an annual strategic business plan review. The final strategic business plan, as accepted by the MINI Division, shall represent the goals and objectives of Dealer and contain the action plans developed by Dealer to achieve those goals and objectives and, in the case of an Improvement Addendum, address the means of complying with the terms and conditions of this Agreement.

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Primary Market Area

(f) The MINI Division will assign to Dealer in writing a geographic area consisting of a collection of zip code areas or census tracts, which shall be the Dealer’s Primary Market Area. The Dealer’s Primary Market Area is the area in which a Dealer will primarily promote and sell MINI Vehicles. The Dealer’s Primary Market Area will be used to evaluate the Dealer’s performance obligations and objectives under this Agreement. The MINI Division may adjust a Dealer’s Primary Market Area at any time and will provide written notice to the Dealer of any adjustment. Dealer agrees that it has no right or interest in any Primary Market Area. In assigning or changing the Dealer’s Primary Market Area, the MINI Division will exercise its best business judgment based on the facts and circumstances at the time that any assignment or change is made.

Performance Evaluation

(g) Dealer and the MINI Division agree that their primary purpose is to satisfy customers by properly servicing and promoting the sale of MINI Products within Dealer’s Primary Market Area, consistent with MINI brand values. Dealer and the MINI Division will work together to achieve this purpose.

(1) Dealer’s compliance with the retail business plan and Dealer’s sales, service, and customer satisfaction performance will be regularly reviewed and evaluated. The MINI Division will provide to Dealer, in writing, its evaluation of Dealer’s performance. Any written comments submitted by Dealer to the MINI Division shall become part of a performance evaluation report.

(2) The MINI Division shall evaluate Dealer’s performance based on, but not limited to:

(i) Dealer’s sales of MINI Products in Dealer’s Primary Market Area;

(ii) Registrations attributable to Dealer in its Primary Market Area;

(iii) The sales and registrations of competitive passenger cars in Dealer’s Primary Market Area;

(iv) Feedback from Dealer’s customers measured by the results of the customer satisfaction surveys provided to Dealer by the MINI Division;

(v) The trend of Dealer’s performance over a reasonable period of time;

(vi) Significant local conditions that may have affected Dealer’s performance;

(vii) The general vehicle purchasing trends of the public; and

(viii) Dealer’s compliance with its Dealer Operating Requirements Addendum, its retail business plan objectives, and Best Practices.

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Down Payments and Trade-Ins

(h) Payments received from customers, whether in money or in kind, which are to be applied towards the subsequent purchase of a new MINI Vehicle, shall be held for such customers in accordance with applicable law until such time as the transaction with respect to which such payments were received is consummated or terminated.

Consumer Disclosures

(i) Dealer shall deliver to purchasers of MINI Vehicles an itemized invoice and disclose any other information or give any notice provided by the MINI Division intended for consumers or required by law.

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PARAGRAPH 14 — CUSTOMER SERVICE

Scope and Quality

(a) Dealer shall provide the best possible customer service for all owners of MINI Vehicles whether or not the MINI Vehicle was sold by Dealer and shall promote its customer service and the sale of Original MINI Parts. Dealer shall not engage in any service practice with respect to any MINI Products if the MINI Division has reasonably objected to the nature or quality of such practice or the practice is detrimental to customers or inconsistent with the purposes of this Agreement.

Disclosure and Use of Original MINI Parts

(b)(1) Dealer shall not use any parts other than Original MINI Parts or parts expressly approved (e.g., authorized remanufactured parts) by the MINI Division in the performance of warranty service in connection with the MINI New Passenger Car Limited Warranty, parts warranties, and/or other MINI warranties.

(2) Dealer recognizes that its customers have a right to expect that any product that they purchase from Dealer meets the high quality standards associated with MINI Products. In order to avoid confusion and minimize potential customer dissatisfaction, in any case where Dealer sells for use in the repair of any MINI Product any parts which are not Original MINI Parts or parts approved by the BMW Group or the MINI Division of BMW NA, Dealer shall disclose to the customer that such parts are not Original MINI Parts or parts approved by the BMW Group or the MINI Division of BMW NA, and consequently, that such parts are not warranted by the MINI Division. Such disclosure shall be in writing, conspicuous, and set forth on the parts invoice, service, or repair order. Dealer will also, by appropriate written notice, advise the customer of the source of such parts and the extent of any warranty given by the supplier or manufacturer of such parts.

(3) Dealer shall not represent in any manner, sell or offer for sale as new, Original MINI Parts or parts approved (e.g., authorized remanufactured parts) by the BMW Group or the MINI Division of BMW NA, any parts which are not in fact new, Original MINI Parts or parts approved by the BMW Group or the MINI Division of BMW NA.

Pre-Delivery Inspection

(c) Before delivery to the customer, Dealer shall inspect, prepare, and condition each new MINI Vehicle in accordance with quality certification and other pre-delivery inspection procedures furnished from time to time by the MINI Division to Dealer. Evidence of satisfactory completion will be determined at the discretion of the MINI Division, through customer responses to surveys or inspection documents maintained in the Dealer’s vehicle history file.

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MINI Service and Warranty Information Booklet and MINI Owner’s Manual

(d) Upon delivery to a customer of a new MINI Vehicle, Dealer will also deliver to the customer the MINI Service and Warranty Information booklet supplied by the MINI Division for such MINI Vehicle, properly completed and stamped with Dealer’s corporate or business name, the customer warranty information, including notification of any laws, rules, or regulations addressed in subparagraph (e) below when required by applicable state law, and the appropriate MINI Owner’s Manual. In addition, Dealer shall have copies of applicable warranty information on display and ready for customer use.

Compliance with Consumer Protection Statutes, Policies, Procedures, and Guidelines

(e) Dealer acknowledges the existence and applicability of various “repair or replace” laws, damage disclosure laws, other consumer protection laws, rules, and regulations, and the MINI Division disclosure policies, procedures, and guidelines. Dealer agrees to comply fully with the requirements of such laws, rules, regulations, policies, procedures, and guidelines, including, but not limited to, delivering all required disclosures, booklets, and manuals to consumers, and Dealer shall take no action which adversely affects the MINI Division’s rights and duties under these laws, rules, and regulations.

Moreover, Dealer agrees to use its best efforts to notify the MINI Division promptly in writing of all situations in which “repair or replace” laws are or may be applicable. Dealer further agrees to take such other action as the MINI Division may reasonably require.

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PARAGRAPH 15 — DEALER’S RECORDS AND REPORTS AND ACCESS TO DEALER’S PREMISES

Financial Records

(a) Dealer shall keep accurate and current books of account in accordance with accounting practices reasonably satisfactory to the MINI Division so as to enable the MINI Division to develop comparative data in order, among other things, to furnish to Dealer, for Dealer’s benefit, business management assistance.

Management Information Systems Requirements

(b) To facilitate the efficient operation of the MINI passenger car dealer network and the accurate and prompt disclosure to the MINI Division of dealership operations and financial information, Dealer agrees to install and maintain management information system facilities which are compatible with the computer systems, hardware, and software used by the MINI Division and comply with MINI information management requirements and standards.

Financial Statements

(c) Dealer shall deliver or mail to the MINI Division the following:

(1) On or before the tenth (10th) day of each calendar month, on such forms as the MINI Division reasonably may require, a financial and operating statement reflecting Dealer’s MINI Car Operations for the preceding month and Dealer’s total MINI Car Operations from the beginning of the calendar year to the end of the preceding month (the statements referenced in this Paragraph shall also reflect the financial and operating results for any other line-makes of the BMW Group for which Dealer is an authorized dealer); and

(2) Within three and one-half (3-1/2) months after the end of the calendar year, a financial and operating statement for such year. In the event the MINI Division so requests in writing, such statement shall be reviewed by a certified public accountant.

Additional Reports

(d) Dealer will furnish to the MINI Division, on such forms and at such times as the MINI Division reasonably may require, complete and accurate reports of Dealer’s sales and inventories of new MINI Vehicles, of certified pre-owned MINI Vehicles, of other pre-owned vehicles, and of Original MINI Parts. Dealer will also furnish to the MINI Division such other reports as the MINI Division reasonably may require from time to time. Dealer shall maintain such records for at least five (5) years.

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Access to Dealer’s Premises and Records

(e) Until the expiration or prior termination of this Agreement and thereafter until consummation of all the transactions referred to in Paragraph 22 hereof, the MINI Division, through its representatives, employees, and other designees, shall have the right, at all reasonable times during regular business hours, to inspect Dealer’s MINI Car Operations, including the Dealer’s Facility and records and accounts of Dealer relating to Dealer’s MINI Car Operations. Dealer shall cooperate fully with, and take all actions necessary to facilitate, such inspections.

Confidentiality

(f) The MINI Division of BMW NA will not furnish any financial data submitted to it by Dealer to any third party unless: 1) authorized by Dealer; 2) required by law, regulation, order, or judicial, alternate dispute resolution, or administrative process; 3) pertinent to judicial, alternate dispute resolution, or administrative proceedings; or 4) required to generate composite or comparative data for analytical purposes. Dealer agrees to keep confidential and not disclose, directly or indirectly, information that BMW NA designates as confidential and provides to Dealer.

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PARAGRAPH 16 — DEALER’S PURCHASES OF MINI VEHICLES

Dealer’s Purchase Price

(a) The MINI Division will sell MINI Vehicles to Dealer at such prices and upon terms as may be established from time to time by the MINI Division. Dealer shall be responsible for payment of any and all sales taxes, use taxes, excise taxes, and other governmental or municipal charges imposed or levied or based upon the sale of MINI Vehicles by the MINI Division to or through Dealer.

Payment

(b) Payment for each MINI Vehicle purchased by Dealer shall be made in cash at the time of delivery unless the invoice provides otherwise, in which event the terms of the invoice shall govern. Receipt of any check, draft, or other commercial paper shall not constitute payment until the MINI Division has received cash in the full amount thereof. In the event of non-payment, Dealer shall pay all of the MINI Division’s collection charges, including attorneys fees and costs.

Line of Wholesale Credit

(c) During the term of this Agreement, Dealer shall maintain exclusively for MINI Vehicles an unrestricted line or lines of wholesale credit with a financing institution or institutions satisfactory to the MINI Division in amounts as specified in the Dealer Operating Requirements Addendum.

Shipment to Dealer

(d) The MINI Division will endeavor, whenever practicable, to follow Dealer’s requests with regard to route and method of shipment of MINI Vehicles, but the MINI Division reserves the right to ship MINI Vehicles purchased by Dealer hereunder by whatever mode of transportation, by whatever route, and from whatever point the MINI Division may select. All shipping charges for MINI Vehicles will be borne by Dealer.

Claims Processing

(e) In order to facilitate the processing of claims for damage against the carrier or carrier’s insurer, Dealer hereby authorizes the MINI Division to process, and the MINI Division agrees that it will so process at its own cost and expense, all such claims in the MINI Division’s name, but for Dealer’s account, in such manner and on such basis as the MINI Division may reasonably determine. The MINI Division shall not, however, be obliged to retain counsel or commence legal proceedings against carrier or carrier’s insurer with respect to any such claims. Dealer also authorizes the MINI Division to settle or compromise any such claims for less than the full amount thereof as the MINI Division may in its sole judgment determine without the prior approval of Dealer.

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Immediately upon delivery of any MINI Products to Dealer, Dealer shall make a careful inspection of such products and shall note any damage in the MINI Products so delivered on the appropriate carrier delivery forms, which shall be signed by both the representatives of the carrier and the representatives of the Dealer. Dealer shall also follow any other pertinent procedures that may be established from time to time by the MINI Division and will cooperate with the MINI Division in processing any claims. Failure by Dealer to note any deficiency or damage upon delivery to Dealer and failure to follow any other pertinent procedures established by the MINI Division shall constitute a waiver by Dealer of the MINI Division’s obligation to process any claim and Dealer shall be solely responsible for asserting and processing any such claims against the carrier.

Passing of Risk

(f) All MINI Vehicles sold to Dealer shall be at Dealer’s risk and peril from the time of delivery at the MINI Division’s established place of delivery whether to Dealer, Dealer’s agent, or a common carrier, and during all subsequent transportation. It shall be the obligation of Dealer to insure against such risks for its benefit and at its expense.

Repair and Sale of Damaged MINI Vehicles

(g) In the event that any MINI Vehicle sold by the MINI Division to Dealer should become damaged prior to its delivery by Dealer to a customer, Dealer shall, applying BMW Group or MINI Division approved repair practices and procedures, repair fully such damage so that such MINI Vehicle shall be placed in first-class salable condition prior to delivery. Dealer shall not market any MINI Vehicle if the quality or condition thereof has been reasonably objected to by the MINI Division. Dealer shall comply with all state laws applicable to such sales and shall disclose to the customer all damage and repairs in accordance with applicable state law. Dealer will also disclose all damage when processing wholesale or retail trades of MINI Vehicles.

Option to Repurchase Damaged Vehicles

(h) In order to protect the integrity of MINI Vehicles and Dealer’s and the MINI Division’s reputation in the marketplace, Dealer agrees to notify the MINI Division whenever any of Dealer’s new and unused MINI Vehicles are substantially damaged. For the period of ten (10) business days from the MINI Division’s receipt of notice from a Dealer, the MINI Division shall have the first option to repurchase from Dealer such damaged MINI Vehicles at a price equal to the Net Purchase Price originally paid by Dealer to the MINI Division less any monies or other consideration received by Dealer in connection with or relating to such damaged MINI Vehicles. Dealer agrees to assign its rights under any insurance contract with respect to such MINI Vehicles to the MINI Division. In the event the MINI Division exercises its option to repurchase as granted above, the MINI Division reserves the right to make any payment hereunder directly to any party having a security interest in the MINI Vehicle being repurchased. The MINI Division shall not be liable for any interest expense under this Paragraph 16 on returned vehicles, unless repurchased under this subparagraph (h).

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PARAGRAPH 17 — DEALER’S INVENTORY AND PURCHASE OF ORIGINAL MINI PARTS

Minimum Inventory of Original MINI Parts

(a) Dealer shall acquire and at all times maintain at least a minimum inventory of available Original MINI Parts necessary to satisfy adequately the needs of the market.

Dealer’s Purchase Price

(b) The MINI Division shall sell Original MINI Parts to Dealer at such prices and upon such terms as may be established from time to time by the MINI Division. Dealer is responsible for any and all sales taxes, excise taxes, use taxes, and other governmental or municipal charges imposed or levied or based upon the sale of Original MINI Parts by the MINI Division to Dealer, except federal excise taxes which may be included in the purchase price of the MINI Division of BMW NA to Dealer. In the event of any increase in the prices established by the MINI Division for Original MINI Parts, Dealer will have the right to cancel all orders for Original MINI Parts affected by the increase which are pending and unfilled at the time Dealer obtains notice of the increase, provided that the MINI Division is notified in writing of such cancellation within ten (10) days from the time Dealer obtains notice of the increase.

Payment

(c) Dealer’s orders for Original MINI Parts will be filled on the basis of payment terms established from time to time by the MINI Division for Dealer’s account. Such terms may provide for open account, limited open account, C.O.D., or cash. Dealer will be invoiced at the time of shipment through the electronic Dealer Communications System. Dealer shall receive a month-end statement. Dealer shall render payment for the total amount of the monthly statement in accordance with the terms stated therein. Unless otherwise indicated in writing, full payment is due upon receipt of said statement. In the event of non-payment, Dealer shall pay all of the MINI Division’s collection charges, including attorneys fees and costs.

Delivery

(d) Delivery of Original MINI Parts ordered by Dealer shall be made by common carrier, U.S. mail, or express mail, and if practical, in accordance with Dealer’s specific request. If freight charges are to be paid by the MINI Division, the most economical transportation will be selected.

Claims for Incomplete Delivery

(e) All claims for incomplete delivery of Original MINI Parts must be made by Dealer in writing immediately upon Dealer’s receipt of shipment.

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Return of Defective Original MINI Parts

(f) Dealer shall not sell, offer for sale, or install any Original MINI Parts if the nature or quality thereof has been reasonably objected to by the MINI Division. Dealer may, after receipt of written authorization from the MINI Division, return defective Original MINI Parts to the MINI Division for credit, together with the original invoice indicating Dealer’s purchase price of such Original MINI Parts. Such Original MINI Parts shall be shipped, shipping charges prepaid, to the destination specified by the MINI Division. Dealer will be reimbursed for shipping charges prepaid by it on authorized returns of defective Original MINI Parts based on the lowest applicable rate of transportation by common carrier.

Right to Return Original MINI Parts

(g) Dealer will notify the MINI Division of any Original MINI Parts ordered by Dealer in error within sixty (60) days after receipt of shipment. Dealer may return such Original MINI Parts, no later than sixty (60) days after Dealer’s receipt of specific authorization from the MINI Division, for credit, which credit shall be applied to Dealer’s account based on the invoiced price of the returned Original MINI Parts. Such Original MINI Parts shall be returned, shipping charges prepaid, to the destination specified by the MINI Division.

Dealer may also return, after receipt of written authorization from the MINI Division, Original MINI Parts shipped to Dealer due to the MINI Division’s shipping error. Such Original MINI Parts shall be shipped, shipping charges prepaid, to the destination specified by the MINI Division and Dealer shall be credited for such prepaid shipping charges as well as for the invoiced prices of the returned Original MINI Parts.

Non-Returnable Materials, Parts, and Assemblies

(h) Dealer will not be entitled to return: (1) any materials which have been acquired or specially fabricated by the MINI Division upon Dealer’s order; (2) unlisted Original MINI Parts or assemblies; or (3) any Original MINI Parts or assemblies not purchased by Dealer from the MINI Division.

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PARAGRAPH 18 — ADDITIONAL PROVISIONS GOVERNING DEALER’S PURCHASE OF MINI PRODUCTS AND DEALER’S INVENTORIES

Taxes

(a) Dealer shall provide the MINI Division with all of its tax identification numbers. With regard to each purchase of MINI Products, Dealer represents and warrants that:

(1) Such MINI Products are being purchased from the MINI Division by Dealer for resale in the ordinary course of Dealer’s business;

(2) Dealer has complied with all of the applicable provisions of local and state laws required for the collection and payment by Dealer of all sales, use, and excise taxes and other governmental or municipal charges applicable to all such resale transactions; and

(3) Dealer has furnished to the MINI Division all resale certificates or similar documents required to perfect an exemption from any applicable sales and use taxes.

Dealer shall be responsible for payment of any and all taxes and other governmental or municipal charges imposed or levied in connection with the sale to Dealer by the MINI Division of MINI Products or equipment supplied to Dealer by the MINI Division.

In the event that any MINI Products are put to a taxable use by Dealer or are in fact purchased by Dealer for purposes other than resale in the ordinary course of Dealer’s business, Dealer shall make timely return and payment to the appropriate taxing authorities, as required by Paragraph 16(a), with respect to MINI Vehicles, and Paragraph 17(b), with respect to Original MINI Parts, of all applicable sales, use, and excise taxes, and other governmental or municipal charges imposed or levied or based upon the sale of such MINI Products by the MINI Division to Dealer, and Dealer shall hold the MINI Division harmless from any and all claims and demands which may be made by such taxing authorities against the MINI Division with respect thereto.

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Purchase Money Security Interest

(b) In order to assure its prompt and unconditional payment to the MINI Division of BMW NA upon the terms and as when due of any and all indebtedness, obligations, or liabilities of Dealer to the MINI Division for the purchase of MINI Products (“Obligations”), Dealer hereby grants, assigns, and transfers to the MINI Division of BMW NA a continuing first and senior lien on and security interest in all such MINI Products sold on credit, open account, or limited open account to Dealer by the MINI Division, all accessions and additions thereto, and all proceeds and products of such MINI Products, whether now owned or hereafter acquired as well as a security interest in cash incentives, holdbacks, bonuses, or other MINI Division payables (the “Collateral”). In furtherance thereof and in recognition of the MINI Division of BMW NA’s status as a secured party having all the rights and remedies of a secured party under Article 9 of the Uniform Commercial Code:

(1) In the event Dealer is in default of any Obligations or any of the events described in Paragraph 20(b) and (c) of this Agreement shall occur, and at any time thereafter, the MINI Division may declare Dealer in default and may exercise the following rights and remedies, in addition to all other rights and remedies it has as a secured party under the Uniform Commercial Code:

(i) To declare all Obligations of Dealer to the MINI Division immediately due and payable; and

(ii) To require Dealer to assemble the Collateral and make it available to the MINI Division for possession at a place designated by the MINI Division which is reasonably convenient to both parties.

(2) With respect to all proceeds of the Collateral, including, without limitation, payments received by Dealer from a customer upon delivery of any MINI Product constituting Collateral and cash deposits received from a customer in anticipation of a future delivery of a MINI Product constituting Collateral to such customer, Dealer grants to the MINI Division an irrevocable power of attorney to endorse all cash and non-cash proceeds of the Collateral to effect collection thereof, it being understood and intended by Dealer that such power of attorney is coupled with an interest; and Dealer shall:

(i) Upon demand by the MINI Division, whether or not Dealer is in default of any Obligations, deposit not later than the business day following receipt, all proceeds of the Collateral or any portion thereof, in a separate bank account designated for that purpose and under the sole control of the MINI Division;

(ii) Not commingle any proceeds of the Collateral to which the MINI Division is entitled with other funds or property of Dealer until delivery of such proceeds to the MINI Division has been completed, it being agreed and understood that the proceeds to which the MINI Division is entitled shall be that portion of the proceeds upon sale of a MINI Product constituting Collateral which equals the Obligations with respect to such MINI Product; and

(iii) Hold any proceeds of the Collateral to which the MINI Division is entitled under Paragraph 18(b)(2) hereof separate and apart and upon express trust for the MINI Division until such delivery or deposit.

(3) Dealer shall hold in trust each deposit of cash received from a customer in anticipation of a future delivery of a MINI Product constituting Collateral to such customer until such delivery is consummated.

(4) Dealer shall not sell, pledge, assign, transfer, lease, resell, or otherwise dispose of any type of Collateral herein described or any interest in Collateral except in the ordinary course of Dealer’s business or as may be authorized in writing by the MINI Division.

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(5) Dealer shall execute and deliver promptly to the MINI Division one or more financing statements pursuant to the Uniform Commercial Code in the form suitable for filing to perfect a purchase money security interest in the Collateral and which are otherwise satisfactory to the MINI Division. Dealer irrevocably appoints the MINI Division as its attorney in fact, to sign and file, in Dealer’s name, financing statements at any time with respect to the Collateral and the proceeds thereof, it being understood and intended by Dealer that such power of attorney is coupled with an interest.

(6) The remedies provided in this Paragraph 18(b) shall be in addition to any other rights and remedies provided for in this Agreement or under applicable law.

Return or Diversion of MINI Vehicles on Dealer’s Failure to Accept

(c) In the event Dealer should fail or refuse for any reason (other than an error by the MINI Division) to accept any MINI Vehicle delivered to Dealer’s Facility, Dealer will reimburse the MINI Division for all expenses incurred by the MINI Division in returning such MINI Vehicle to the original point or in diverting it to another destination, as the case may be; but in no event shall Dealer be required to pay the MINI Division an amount in excess of the expense of returning such MINI Vehicle to its original point of delivery to Dealer. Dealer forfeits any further rights it may have with respect to such rejected MINI Vehicle(s).

Failure of or Delay in Delivery

(d) The MINI Division will not be under any liability to Dealer for failure to deliver or for delay in making delivery if such failure or delay results from any event brought by causes other than willful or grossly negligent conduct of the MINI Division, such as, for example, any event in the nature of force majeure, acts of God, acts of any government, foreign or civil wars, riots, interruptions of navigation, shipwrecks, strikes, lockouts, other labor troubles, embargoes, blockades, fires, explosions, sabotage, failures of the BMW Group or of any other supplier of the MINI Division to deliver, or delay of the BMW Group or of any other supplier of the MINI Division in making delivery.

Changes in Specifications

(e) MINI Products will be delivered by the MINI Division to Dealer in accordance with standards applicable at the time of their manufacture. The MINI Division and Dealer recognize and agree that the BMW Group and/or the MINI Division shall have the right, without limitation, at any time and from time to time, to make changes or modifications in the design specifications of MINI Products without notice. The MINI Division shall have no obligation to Dealer to make such change or modification with respect to MINI Products previously delivered to or ordered by Dealer or to make any refund or other adjustment for any MINI Products previously purchased by Dealer or being imported, manufactured, or sold, whether or not the price of such MINI Products is affected thereby. No change shall be considered a model year change unless so specified by the BMW Group.

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Changes by Dealer on MINI Products and Compliance with Safety, Air Pollution, Noise Control, and Consumer Warranty Requirements

(f) Dealer agrees not to make any modifications or alterations to MINI Vehicles which alters the original engineering and/or operating specifications of the vehicle. The MINI Division may request Dealer to make such changes or refrain from making such changes on MINI Products as may be prescribed from time to time by the BMW Group, and Dealer agrees to comply promptly with such requests. Dealer also agrees to take such steps and render such reports in connection with the National Traffic and Motor Vehicle Safety Act of 1966, the Consumer Product Safety Ad, the Magnuson-Moss Warranty Act, or any other legislation or regulation pertaining to safety, air pollution, noise control, or warranties to consumers, as may be required of motor vehicle dealers, distributors, or manufacturers or as the BMW Group or the MINI Division may request from time to time, and to comply with all such legislation and regulations in conducting Dealer’s MINI Car Operations. The MINI Division will reimburse Dealer for the reasonable cost of any Original MINI Parts, and labor in accordance with current warranty rates and procedures, which may be used by Dealer in making changes on MINI Products requested by the MINI Division and/or the BMW Group. Dealer agrees to indemnify and hold harmless the BMW Group and the MINI Division from and against any and all claims and liabilities arising from Dealer’s failure or alleged failure to comply, in whole or in part, with any obligation assumed by Dealer pursuant to this Paragraph. Dealer will communicate to the MINI Division all suggestions with respect to improvements in MINI Products it may have or develop as a result of its experience.

Inventories

(g) Dealer agrees that, in addition to maintaining at least the minimum inventory of Original MINI Parts required under Paragraph 17(a), Dealer will acquire, and at all times maintain, such inventory of available MINI Products as is necessary in accordance with the current and reasonably foreseeable volume of Dealer’s business and to further Dealer’s sales activities and to assure satisfactory customer service and supply of Original MINI Parts.

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PARAGRAPH 19 — WARRANTY TO CUSTOMERS

MINI Warranties

(a) Each MINI Vehicle supplied by the MINI Division will be warranted to the customer by the MINI Division in accordance with the MINI New Passenger Car Limited Warranty, the Limited Emissions Warranties, and the Limited Warranty against Rust Perforation. Each Original MINI Part supplied by the MINI Division will be warranted to the customer by the MINI Division in accordance with the Limited Warranty on Original MINI Parts.

Incorporation of MINI Warranties in Dealer’s Sales

(b) Dealer agrees to make all sales of MINI Vehicles and Original MINI Parts in such a way that its customers acquire all rights in accordance with the MINI New Passenger Car Limited Warranty, the Limited Emissions Warranties, the Limited Warranty against Rust Perforation, or the Limited Warranty on Original MINI Parts, as the case may be. Dealer will supply consumers with a copy of such warranties in such fashion as may from time to time be required by the MINI Division or by applicable law.

Exclusion of Warranties

(c) TO THE EXTENT PERMITTED BY APPLICABLE LAW, EXCEPT AS SPECIFICALLY PROVIDED FOR IN THE MINI NEW PASSENGER CAR LIMITED WARRANTY, THE LIMITED EMISSIONS WARRANTIES, THE LIMITED WARRANTY AGAINST RUST PERFORATION, AND THE LIMITED WARRANTY ON ORIGINAL MINI PARTS, ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, ARE EXCLUDED AND THE MINI DIVISION MAKES NO OTHER WARRANTIES, EXPRESS OR IMPLIED, TO CONSUMERS. THE EXCLUSION ALSO APPLIES TO INCIDENTAL, CONSEQUENTIAL, SPECIAL, OR INDIRECT DAMAGES FOR ANY BREACH OF EXPRESS OR IMPLIED WARRANTY, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND/OR FITNESS, IF ANY, APPLICABLE TO MINI PRODUCTS.

Warranty Policies and Procedures

(d) Dealer agrees to comply with the provisions of the Warranty Policies and Procedures Manual supplied by the MINI Division to Dealer and any future versions of the Warranty Policies and Procedures Manual applicable to a warranty claim. All such manuals and documents referred to therein are fully incorporated into this Agreement. Dealer further agrees to follow the procedures established from time to time by the MINI Division for the processing and disposition of warranty claims and the return and disposition of Original MINI Parts claimed to be defective. Dealer will also comply with all requests of the MINI Division for the performance of service in

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response to warranty claims and will maintain detailed records of time and parts consumption as prescribed by the MINI Division. Upon complying with such procedures and requests and maintaining such records, Dealer will be entitled to reimbursement for warranty claims in the amounts for reimbursement specified in the applicable Warranty Policies and Procedures Manual for warranty claims provided that Dealer has the necessary equipment and qualified service personnel, as specified by the MINI Division, to effect necessary warranty repairs. Dealer must also have documentation in support of its claims and Dealer acknowledges and agrees that the MINI Division may request Dealer to provide documentation to the MINI Division at any time in connection with such claims.

Strict adherence to the procedures established for processing warranty claims is necessary in order for the MINI Division to process such claims fairly and expeditiously. The MINI Division will be under no obligation with respect to warranty claims not made strictly in accordance with such procedures and in a timely manner. Dealer’s obligation hereunder extends to all MINI Vehicles and MINI Products under warranty presented to Dealer by a customer, regardless of whether Dealer sold the MINI Vehicle or MINI Product to such customer.

Dealer is not authorized to assume or incur any other or additional warranty obligations or liabilities on behalf of either the BMW Group or the MINI Division. Any such other or additional obligations assumed or incurred by Dealer shall be solely the responsibility of Dealer, including the disclosure of the identity of the supplier or warrantor, the existence of a warranty, and the specific terms and conditions of such warranty to the consumer.

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PARAGRAPH 20 — TERMINATION PRIOR TO EXPIRATION DATE AND SUCCESSION

Termination by Dealer

(a) Dealer shall have the right to terminate this Agreement at any time by sending notice of such termination to the MINI Division, by certified mail, return receipt requested, telegram, or overnight mail service at least sixty (60) days in advance of the effective date thereof.

Immediate Termination by the MINI Division for Cause

(b) Except to the extent a greater notice period is required by any applicable statute, in which case the minimum notice period shall be deemed to be the minimum period required by such law, the MINI Division shall have the right to terminate this Agreement for cause, with immediate effect, by sending notice of such termination to Dealer by certified mail return receipt requested, telegram, or overnight mail service, if any of the following events should occur:

(1) Any material misrepresentation by any of the persons listed in Paragraph 5 of the Dealer Agreement as to any fact relied upon by the MINI Division in entering into this Agreement or approving such persons;

(2) Conviction of Dealer or of any of the persons listed in Paragraph 5 of the Dealer Agreement, or pleading guilty or pleading nolo contendre by any of the foregoing, of any felony or for any material violation of law if the MINI Division has reason to believe that such conviction or plea may adversely affect the conduct of Dealer’s MINI Car Operations or would tend to be harmful to the BMW Group, the MINI Division, the reputation of MINI Products, or the marketing of MINI Products;

(3) Submission by Dealer to the MINI Division of false or fraudulent reports, statements, or information, or false or fraudulent claims for reimbursement, refunds, or credits, such as, for example, false or fraudulent warranty claims;

(4) Grossly negligent or willful conduct on the part of Dealer or of any of the persons listed in Paragraph 5 of the Dealer Agreement that the MINI Division determines, in the reasonable exercise of its discretion, to be harmful to the goodwill of the BMW Group or the MINI Division, the reputation of MINI Products, or the marketing of MINI Products;

(5) Closure or cessation of Dealer’s MINI Car Operations for a period of six (6) consecutive business days, unless such closure or cessation of operation is caused by some event beyond the control of the Dealer, such as strikes, civil war, riots, fires, floods, earthquakes, or other acts of God, and Dealer does not immediately resume its customary operations after the cause of the closure or cessation of operations is removed;

(6) Dissolution or liquidation of Dealer, if a partnership, corporation, or a limited liability company;

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(7) Insolvency or business failure of Dealer, Dealer’s inability to pay its debts as such debts become due, appointment of a receiver or custodian for all or any part of the property of Dealer, assignment for the benefit of creditors by Dealer, the commencement of a case or proceeding under any bankruptcy or insolvency laws by or against Dealer or any person or entity owning or holding, beneficially or otherwise, a majority or controlling interest in Dealer, or the subjection of all or any MINI Products to execution or other judicial process;

(8) Termination of BMW NA’s authorization as a MINI importer;

(9) The conduct, directly or indirectly, of any dealership operation at any location, other than that specifically approved herein for such operation, without the prior written approval of the MINI Division;

(10) Any attempted or actual sale, transfer, or assignment by Dealer of the Dealer’s assets, any ownership interest in the Dealer, this Agreement, or any of the rights granted to Dealer hereunder, or any attempted or actual transfer, assignment, or delegation by Dealer of any of the responsibilities assumed by it under this Agreement, without the prior written consent and approval of the MINI Division, including, but not limited to, any attempted or actual sale, transfer, or assignment of Dealer’s assets or any ownership interest in the Dealer relating to the conduct of MINI Car Operations hereunder to a person or entity that does not meet the MINI Division’s appointment criteria for a Dealer Agreement For MINI Passenger Cars.

(11) Any attempted or actual sale, transfer, or assignment of Dealer assets or stock that does not comply with the ownership limitations set forth in this Agreement or the MINI Division’s ownership policies or procedures;

(12) Any change of a Dealer’s executive management (the Dealer Operator and/or any of the Dealer’s Owners and/or Officers that are identified in Paragraph 5 of this Agreement) without the MINI Division’s prior written consent and approval;

(13) Any attempted or actual pledging of Dealer stock or this Agreement as security for an obligation;

(14) The termination of, or any conduct that warrants the termination of, a dealer agreement for any of the other line-makes of the BMW Group under which Dealer is an authorized dealer;

(15) The loss of licenses, permits, or authorization necessary for Dealer to perform its obligations under this Agreement; and

(16) Any dilution or attempt to dilute the MINI brand or trademarks, the infringement of MINI trademarks, or the violation of the trademark provisions in this Agreement or the BMW Group or the MINI Division trademark policies or guidelines.

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Termination by the MINI Division on Sixty (60) Days Notice

(c) Except to the extent a greater notice period is required by any applicable statute, in which case the notice period shall be deemed to be the period required by such statute, the MINI Division shall have the right to terminate this Agreement, on sixty (60) days notice, if any of the following situations exist and the MINI Division has previously sent a written notice to Dealer with respect thereto:

(1) Any disagreement or personal difficulties between or among any of the persons listed in Paragraph 5 of the Dealer Agreement which the MINI Division has a reasonable basis to believe would have a materially adverse effect on the conduct of Dealer’s MINI Car Operations or the presence in the management of Dealer of any person who the MINI Division has a reasonable basis to believe does not have the requisite qualifications for the position;

(2) Impairment of the reputation or financial standing of Dealer or any of the persons listed in Paragraph 5 of the Dealer Agreement or ascertainment by the MINI Division of any facts existing at or prior to the time of execution of this Agreement which tend to impair such reputation or financial standing;

(3) Any reduction in value of Dealer’s MINI Products or any act on the part of the Dealer, including without limitation, the existence of any liens or encumbrances upon MINI Products, which to any degree imperils the prospect of full performance or satisfaction of the Obligations of Dealer to the MINI Division; or any change in the financial or other condition of Dealer which the MINI Division has reason to believe unreasonably impairs the MINI Division’s security or increases its risk hereunder. By way of example, such impairments might include failure to pay for MINI Products in accordance with the terms and conditions of sales and failure to establish and/or maintain for the duration of the Agreement, net working capital and/or adequate exclusive unrestricted wholesale lines of credit;

(4) The importation, exportation, distribution, or sale of: (a) MINI vehicles which are not originally manufactured or designed for use in the United States; or (b) MINI Products: (i) for resale in the United States; (ii) for resale or use outside the United States; or (iii) in violation of the MINI Division’s Export Policy.

(5) Refusal to permit the MINI Division to examine or audit Dealer’s accounts and records as provided herein upon receipt by Dealer from the MINI Division of written notice requesting such permission or information;

(6) Failure of Dealer to furnish accurate sales or financial information and failure to submit the information and related supporting data in a timely fashion;

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(7) Subject to provisions contained herein with regard to any change in ownership occurring by reason of the death or permanent disability of Dealer’s Owner(s), any change in Dealer’s Owner(s) holding a majority or controlling ownership interest in Dealer, or any change, whether voluntary or by operation of law, in the ownership of beneficial interests in Dealer, or any appointment of Dealer Operator, without the prior written consent of the MINI Division;

(8) Dealer’s failure to take any actions pursuant to the National Highway Traffic Safety Administration and Motor Vehicle Safety Act of 1966, the Consumer Product Safety Act, the Magnuson-Moss Warranty Act, damage disclosure statutes, or any other law, statute, or regulation pertaining to safety, air pollution, noise control, or warranties to consumers which may be required of motor vehicle dealers or which the MINI Division may request in implementing any action undertaken by the MINI Division or the BMW Group; or

(9) Any breach or violation of any material obligation contained in this Agreement or in connection with any transaction between the MINI Division and Dealer, or the failure of Dealer to satisfy any Deficiency(s) contained in the Improvement Addendum, or any material failure by Dealer to comply with a requirement established by the MINI Division and communicated to Dealer in accordance with this Agreement.

During the period such a situation as defined in this Paragraph 20 continues to exist, the MINI Division may modify its terms of payment with respect to Dealer to such extent as the MINI Division may consider appropriate, irrespective of Dealer’s credit standing or payment record.

Termination upon Offering to Enter into a New or Amended MINI Car Dealer Agreement

(d) The MINI Division may terminate this Agreement at any time by providing Dealer with ninety (90) days prior notice thereof and offering to enter into a new or amended form of MINI Car Dealer Agreement with Dealer in a form being generally offered to eligible or qualified MINI Car Dealers in accordance with Paragraph 4.

Termination for Failure of BMW NA to be Licensed

(e) If BMW NA or an Affiliated Entity fails to obtain or maintain any license, permit, or authorization necessary for the MINI Division or an Affiliated Entity to perform its obligations under this Agreement or if any such license, permit, or authorization is suspended or revoked, and such suspension or revocation continues for a period of six (6) consecutive business days, either party may terminate this Agreement by providing written notice to the other party.

No Waiver by Failure to Terminate

(f) In the event the MINI Division shall be entitled to terminate this Agreement pursuant to the provisions of Paragraph 20(b) or (c), but shall fail to do so, such failure shall not be considered a waiver of the rights of the MINI Division to so terminate the Agreement.

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Termination upon Death or Permanent Disability

(g) Death or permanent disability of any of Dealer’s Owners holding a majority or controlling ownership interest in Dealer or the permanent disability of Dealer Operator may, at the MINI Division’s option, result in the termination of this Agreement, upon written notice by the MINI Division to Dealer. The MINI Division shall provide such notice within a reasonable time after such death or permanent disability. Termination hereunder shall be effective sixty (60) days from the date of such notice.

Successor in Event of Death or Permanent Disability

(h) Notwithstanding the provisions in Paragraph 20(g), in the event of the death or permanent disability of any of the Dealer’s Owners, if the beneficial interest in Dealer passes directly to the surviving spouse and children, or to any of them, and if:

(1) Either or both of the persons included in Paragraph 5 (a)(4) and (5) of the MINI Car Dealer Agreement remain(s) unchanged; or

(2) Within ninety (90) days after the death or permanent disability of such Dealer Owners, arrangements are completed for the assumption of the management of Dealer by persons acknowledged in writing by the MINI Division to be satisfactory to it;

then the MINI Division will not terminate the Agreement by reason of such death or permanent disability before the end of twelve (12) months after the death or permanent disability of such Dealer Owners and, if the Agreement expires sooner than twelve (12) months after the death or permanent disability of such Dealer Owners, the MINI Division will offer to enter into a new Agreement with Dealer for an extension period equal to the difference between twelve (12) months and the number of days between the date of death or permanent disability of such Dealer Owners and the expiration date of this Agreement. Such new Agreement will be in substantially the same form as the Agreement then currently offered by.the MINI Division or an Affiliated Entity to its Dealers. Prior to the expiration of such extension period and after completion of the MINI Division’s evaluation of the performance of Dealer’s management during such period, the MINI Division will review with Dealer the changes, if any, in the management or equity interests of Dealer required by the MINI Division as a condition to renewing or extending the aforementioned new Agreement with Dealer.

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Successor Nominee

(i) Dealer may amend the Dealer Agreement to nominate a Successor, designating proposed Dealer Owners of a Successor Dealer to be established if this Agreement is terminated because of death or permanent disability. A Successor Nominee, however, must be an individual and shall not be a trust, partnership, corporation, or any other entity. Dealer may also cancel a Successor Nominee by providing notice to the MINI Division that it intends to amend the Dealer Agreement to delete and/or substitute a new Successor Nominee. The request to amend the Dealer Agreement or to cancel a Successor Nominee must be executed by all of Dealer’s Owners and be received by the MINI Division prior to such death or permanent disability. In the case of the nomination of a Successor, any proposed Dealer Owners must be acceptable to the MINI Division. If a Successor Nominee is not acceptable to the MINI Division, Dealer and the MINI Division will create a developmental plan which, if successfully accomplished, will qualify the Successor Nominee to eventually become a Dealer Owner.

In the case of cancellation of a Successor Nominee, the MINI Division agrees to delete the name of the party listed in Paragraph 5(a)(6) upon receipt of that notice. If, due to changed circumstances, the MINI Division believes or has a reasonable basis to believe the Successor Nominee is or should be disqualified, the MINI Division will notify Dealer that the proposed owner is no longer acceptable. A subsequent Successor Nominee will be designated or a developmental plan will be created by mutual agreement between the MINI Division and Dealer.

If the MINI Division has notified Dealer Owners in writing before the death or permanent disability of such owners that the MINI Division does not plan to continue to have a dealer at Dealer’s location, the MINI Division shall accept a Successor Nominee upon the Successor’s written commitment to relocate Dealer’s MINI Car Operations within a reasonable time to a mutually acceptable location.

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PARAGRAPH 21 — CONTINUATION OF BUSINESS RELATIONS

Continuation of Business Relations After Expiration or Prior Termination

(a) This Agreement can be extended or renewed only through an express written instrument to that effect executed in accordance with Paragraph 25(q) of the Dealer Agreement. Any business relations of any nature whatsoever between the MINI Division and Dealer after the expiration of the Agreement, or after its prior termination pursuant to Paragraph 20, without such written instrument, shall not operate as an extension or renewal of the Agreement. Nevertheless, all such business relations, so long as they are continued, shall be governed by terms identical with the provisions of this Agreement.

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PARAGRAPH 22 — RIGHTS AND LIABILITIES UPON EXPIRATION OR PRIOR TERMINATION

Cancellation of Pending Orders and Post Expiration and Termination Obligations

(a) Upon the expiration or prior termination of this Agreement all pending orders of Dealer for MINI Products previously accepted by the MINI Division will be considered canceled and Dealer shall immediately do the following:

(1) MINI Signs — Dealer shall remove, at its own expense, all MINI signs displayed at Dealer’s Facility and sell and deliver (deliver only if the signs are leased) the same to the MINI Division at Dealer’s Facility in suitable condition and packing for transportation. To the extent that the Dealer purchased those signs, the MINI Division of BMW NA will pay to Dealer, promptly following such delivery, Dealer’s purchase price for such signs reduced by straight-line depreciation on the basis of a seven-year useful life. To the extent that the Dealer leased those signs, there shall be no repurchase and the lease(s) shall be automatically terminated;

(2) Discontinuance of Use of MINI Trademarks — Dealer acknowledges that the license and right to the use of the MINI trademarks ceases upon Dealer’s voluntary resignation or termination as a Dealer, or upon the expiration of this Agreement, whichever occurs first. In such event, Dealer shall immediately cease holding itself out as a MINI dealer and refrain from using MINI trademarks and trade names in any fashion whatsoever. Moreover, Dealer agrees not to use any similar trademarks or trade names and shall refrain from any other activity which states or implies that it is authorized to deal in or service MINI Products. If Dealer shall refuse or neglect to comply with the provisions of Paragraph 22(a)(1) and (2), Dealer agrees that the BMW Group and the MINI Division of BMW NA shall suffer irreparable harm from the unauthorized use of MINI trademarks and/or trade names. Furthermore, Dealer shall reimburse the MINI Division of BMW NA for all costs and expenses (including attorneys fees) incurred by the MINI Division in connection with legal proceedings to require Dealer’s compliance;

(3) Orders and Files — Dealer shall transfer to the MINI Division of BMW NA, or the MINI Division’s designee or designees, all orders for sale by Dealer of MINI Vehicles and Original MINI Parts then pending with Dealer, all deposits made thereon, whether in cash or in kind, and all of its warranty files and files of prospective customers for MINI Products, or complete copies of all such files;

(4) Customer Lists — Dealer shall provide the MINI Division of BMW NA with the correct names, addresses, and telephone numbers of all customers who purchased MINI Vehicles from Dealer and the service records of all current and active service customers. To the extent they are available for such customers, Dealer will provide the MINI Division with correct facsimile numbers and email addresses for the customers; and

(5) Literature — Dealer shall deliver to the MINI Division of BMW NA at the MINI Division’s place of business, or to the MINI Division’s designee or designees, free of charge, any and all technical or service literature, advertising, other printed material, compact discs, diskettes, and any other technological medium relating to MINI Products then in Dealer’s possession which were acquired or obtained by Dealer from the MINI Division, such as, for example, sales instruction manuals and promotional materials.

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Purchase of Dealer’s Inventory of MINI Products by the MINI Division

(b) Within ninety (90) days of the expiration or prior termination of this Agreement and provided further that all of Dealer’s Obligations to the MINI Division have been paid or satisfied in full, the MINI Division, upon Dealer’s compliance with the provisions hereinafter set forth, will purchase from Dealer and Dealer will sell and deliver to the MINI Division, the following:

(1) New MINI Vehicle Inventory — the MINI Division will purchase all new, unused, undamaged, and unmodified MINI Vehicles then unsold in Dealer’s inventory which are in first-class salable condition and of the then current model year or the immediately preceding model year, provided that such MINI Vehicles were purchased by Dealer from the MINI Division (or in the ordinary course of business from other Dealers). The price for such MINI Vehicles shall be the Net Purchase Price at which they were originally purchased from the MINI Division;

(2) New Original MINI Parts Inventory — the MINI Division will purchase all new, unused, and undamaged Original MINI Parts (other than the special MINI tools specifically covered in Paragraph 22(b)(3) below), in original packaging, not classified as obsolete or “special” by the MINI Division, and listed in the then current MINI Parts Price List, then unsold in Dealer’s inventory which are in first-class, salable condition; provided such Original MINI Parts were purchased by Dealer from the MINI Division. The price at which the MINI Division will purchase such Original MINI Parts shall be the price last established by the MINI Division under the MINI Division standard parts order for the sale of identical Original MINI Parts to dealers, less a 15% handling and restocking charge; and

(3) Special MINI Tools — the MINI Division will purchase all required special MINI tools applicable to MINI Vehicles including electronic testing equipment and computer hardware and software, if any, provided that such tools were purchased by Dealer from the MINI Division, and provided any sets of such tools are complete and no parts or components are missing or otherwise unusable. The price at which the MINI Division will purchase such special MINI tools shall be reasonably determined by the MINI Division, but in no event will such price be less than Dealer’s purchase price for such tools reduced by straight-line depreciation on the basis of a three-year useful life.

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Any and all items to be sold by Dealer to the MINI Division pursuant to the provisions of Paragraph 22(b)(2) and (3) shall be delivered by Dealer to the MINI Division at Dealer’s Facilities in suitable condition and boxed and/or packed for transportation, which transportation shall be at the MINI Division’s expense. In the event Dealer fails to so box and pack any Original MINI Parts or special MINI tools to be sold hereunder, the MINI Division may do so and deduct the expenses of such boxing and packing from the applicable price thereof.

As a condition precedent to the obligations of the MINI Division under Paragraph 22(b) to repurchase any MINI Vehicles, Original MINI Parts, or special MINI tools, Dealer shall permit the MINI Division and the MINI Division’s designee or designees, at such time and for such periods of time as the MINI Division reasonably shall determine, to enter Dealer’s Facility for the purpose of inspection and/or taking an inventory of all or any part of Dealer’s stock of MINI Vehicles, Original MINI Parts, and special MINI tools. At the request of the MINI Division, Dealer shall comply in all respects with the provisions of all applicable bulk sales acts or similar statutes protecting a transferee of personal property with respect to liabilities of the transferor.

In making payments in accordance with Paragraph 22(b), the MINI Division reserves the right to do the following:

(i) To pay any financial institution retaining a security interest in any of the items to be repurchased by the MINI Division such sums as are necessary to obtain good, unencumbered, and marketable title to such items;

(ii) To pay any claimant, in accordance with any applicable statute, such sums as may be necessary to acquire good, unencumbered, and marketable title, free of any interest, right or claim of such claimant, to the items being repurchased by the MINI Division; and

(iii) To set off the amount due Dealer including, without limitation, amounts due Dealer from the MINI Division for the repurchase of MINI Products hereunder against any amount which may be due the MINI Division from Dealer, including, without limitation, reimbursement of expenses incurred by the MINI Division pursuant to (i) or (ii) above.

Notwithstanding anything to the contrary contained in Paragraph 22, in no event will the MINI Division be required to purchase any item from Dealer unless Dealer is able to convey title to such item free and clear of all liens, claims, encumbrances, and security interests.

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PARAGRAPH 23 — INDEMNIFICATION

Indemnification by the MINI Division

(a) Subject to the provisions of Paragraph 23, the MINI Division shall indemnify and hold Dealer harmless against any judgment which may be rendered against Dealer, plus reasonable attorneys fees and court costs, resulting from lawsuits seeking monetary damages commenced against Dealer by third parties concerning:

(1) Bodily injury or property damage (including damage to MINI Products) claimed to have been caused by an alleged defect in the design, manufacture, or assembly of MINI Products; provided, however, that any claimed defect in manufacture or assembly was not such as should have been detected by Dealer in a reasonable inspection of the MINI Products, whether in the performance of the Dealer’s pre-delivery inspection and conditioning, during the course of repair and/or maintenance, or otherwise;

(2) Failure of MINI Products to conform, because of changes in standard equipment or material component parts, to any description thereof set forth in advertisements or product brochures made available to Dealer by the MINI Division and allegedly relied on by the first retail purchaser thereof, unless Dealer shall have received written notice of such changes from the MINI Division prior to the date of delivery of the affected MINI Product to such purchaser; or

(3) Any damage to MINI Products repaired by the MINI Division prior to the time any affected MINI Product is delivered to the Dealer, unless Dealer shall have received notice of such damage and repair from the MINI Division prior to the date of delivery of the affected MINI Product to the first retail purchaser thereof.

In the event that any lawsuit making allegations as set forth in (1) through (3) above is brought naming Dealer as a defendant, the MINI Division will, following receipt of notice as provided in subparagraph (c) of this Paragraph, undertake at its sole expense and through counsel selected or approved by the MINI Division, the defense of said action on behalf of Dealer.

The MINI Division is specifically authorized by Dealer to settle or to continue to defend any such lawsuit brought against Dealer, provided that the MINI Division shall be solely liable for the payment of the amount of any settlement which it effects or judgment that is rendered.

Should the MINI Division for any reason refuse to undertake the defense of Dealer when it is otherwise obligated to do so under this subparagraph, Dealer may conduct its own defense and, in that event, the MINI Division’s liability shall be limited solely to the costs of such defense, including reasonable attorneys fees, court costs, and the amount of any judgment or final settlement paid by Dealer (provided, however, that Dealer shall notify the MINI Division in writing within twenty (20) days of such judgment or settlement).

The MINI Division shall have the right to decline to accept Dealer’s defense or, after accepting the defense but prior to trial, to tender the defense back to Dealer, and Dealer shall accept such tender if the MINI Division reasonably concludes that the allegations or claims being pursued are no longer those set forth in (1) through (3) above.

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Indemnification by Dealer

(b) Subject to the provisions of Paragraph 23, Dealer shall indemnify and hold the MINI Division harmless against any judgment which may be rendered against the MINI Division, plus reasonable attorneys fees and court costs, resulting from lawsuits seeking monetary damages commenced against the MINI Division by third parties concerning:

(1) Dealer’s alleged failure to perform or negligent or willfully malfeasant performance of: (i) the service obligations assumed by it pursuant to Paragraph 14 of this Agreement; or (ii) any maintenance or repair service on MINI Products or such other motor vehicles or products as may be sold or serviced by Dealer;

(2) Dealer’s alleged breach of any contract between Dealer and Dealer’s customer; provided, however, that the breach was not caused by any act or omission on the part of the MINI Division which the MINI Division unreasonably failed to notify Dealer of prior to the date of Dealer entering into the contract with its customer; or

(3) Dealer’s alleged independent warranties, misleading statements, misrepresentations, or unfair or deceptive acts or practices, whether through advertisements or otherwise, affecting any individual or entity; provided, however, that the alleged warranties, statements, representations, deceptive acts or practices or advertisements are not based on information or material produced or supplied by the MINI Division and are not subsequently superseded or withdrawn by the MINI Division upon notification to Dealer.

In the event that any lawsuit making allegations as set forth in (1) through (3) above is brought naming the MINI Division as a defendant, Dealer will, following receipt of notice as provided in Paragraph 23(c), undertake at its sole expense and through counsel selected by Dealer and approved by the MINI Division, the defense of said action on behalf of the MINI Division. Dealer is specifically authorized by the MINI Division to settle or to continue to defend any such lawsuit brought against the MINI Division, provided that Dealer shall be solely liable for the payment of the amount of any settlement which it effects or judgment that is rendered.

Should Dealer for any reason refuse to undertake the defense on behalf of the MINI Division when it is otherwise obligated to do so under this subparagraph, the MINI Division may conduct its own defense and, in that event, Dealer’s liability shall be limited solely to the costs of such defense including reasonable attorneys fees, court costs, and the amount of any judgment or final settlement paid by the MINI Division (provided, however, that the MINI Division shall notify Dealer in writing within twenty (20) days of such judgment or settlement).

Dealer shall have the right to decline to accept the MINI Division’s defense or, after accepting the defense but prior to trial, to tender the defense back to the MINI Division, and the MINI Division shall accept such tender, if Dealer reasonably concludes that the allegations being pursued are no longer those set forth in (1) through (3) above.

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Notification

(c) Whenever a lawsuit is commenced against either the MINI Division or Dealer or both of them, and either party seeks indemnification from the other, each shall, within fifteen (15) days after service of the complaint notify the other in writing of any request to assume its defense and to indemnify it, and shall provide at the time copies of any pleadings or other court papers which have been served upon the party giving notice, as well as all information then available regarding the first customer, the plaintiff, and the circumstances giving rise to the suit.

IN THE EVENT THIS PROVISION IS FOR ANY REASON NOT COMPLIED WITH, SUBPARAGRAPHS (a) AND (b) OF PARAGRAPH 23 SHALL NOT APPLY FOR PURPOSES OF THAT LAWSUIT OR WITH RESPECT TO ANY CLAIM OR LAWSUIT ARISING OUT OF ALLEGATIONS OR TRANSACTIONS ANTEDATING THE FIRST CLAIM OR LAWSUIT INVOLVING THE AFFECTED MINI PRODUCT.

The request to assume the defense and to indemnify shall be accepted or rejected, in writing, by the party to whom it is delivered within thirty (30) days following its receipt. Prior to receipt of a response to its request, each party agrees to take all reasonable steps to ensure that the defense to the action is in no way prejudiced, whether by action or inaction. If the request is accepted, the party making the request shall cooperate fully in the defense of the suit in such manner and to such extent as the party assuming the defense may reasonably require; provided, however, that subparagraphs (a) and (b) of Paragraph 23 shall be applicable commencing with the date on which the request is accepted and any expenses or other obligations incurred prior to such acceptance by the party making the request shall be borne solely by such party.

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Allegations Involving Both the MINI Division and Dealer

(d) If at any time in a lawsuit it is alleged that there is liability on the part of both the MINI Division (on any or all of the bases set forth in Paragraph 23(a)) and Dealer (on any or all of the bases set forth in Paragraph 23(b)), each party shall be responsible for its own defense, including costs and attorneys fees, unless at any time after the commencement of such suit one party offers to undertake the total defense and the other party agrees thereto in writing, in which event the provisions of subparagraphs (a) and (b) hereof shall be controlling, as appropriate to the circumstances of such agreement.

The responsibility of the MINI Division or Dealer for its own defense pursuant to this subparagraph (d), or pursuant to any other circumstances not within the scope of Paragraph 23, shall in no way affect or alter the legal rights, if any, either may have to indemnification or contribution from the other.

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PARAGRAPH 24 — ALTERNATE DISPUTE RESOLUTION

Alternate Dispute Resolution

(a) The MINI Division and Dealer agree to minimize disputes between them. However, in the event that disputes arise, the MINI Division and Dealer agree that they will attempt to resolve all matters between them before any formal action is taken to seek any administrative or judicial adjudication or governmental review.

A MINI BOARD (“BOARD”) will act as the Administrator of all disputes between the MINI Division and Dealer arising out of this Agreement. The BOARD will consist of two representatives of the MINI Division who will be selected by the MINI Division and two representatives of MINI Dealers who will be selected by the MINI passenger car dealer organization. The BOARD will determine eligibility requirements, develop procedures to ensure a fair and equitable decision (“ADR PROCEDURES”), and select individuals to participate in a DISPUTE RESOLUTION PANEL (“PANEL”) to hear an eligible dispute. The PANEL shall consist of at least one MINI Division representative, one MINI Car Dealer representative, and one independent person, selected by the BOARD, or a designated facilitator company chosen by the BOARD.

The BOARD shall also monitor the dispute resolution process, periodically report to the MINI Division and the MINI passenger car dealer organization on the effectiveness of this process and, when required, make recommendations for changes in this process.

The MINI Division and Dealer agree that the process outlined in this Paragraph 24 and developed by the BOARD in the ADR PROCEDURES shall be mandatory. The PANEL’s recommendation will be non-binding, unless prior to appearing before the PANEL the parties agree to be bound by the decision of the PANEL. The purpose of the PANEL will be to recommend a resolution and work with the parties to reach a fair and equitable solution to their dispute in a cost-effective, efficient manner, and to avoid formal adjudication or government intervention.

If either party to this Agreement fails to refer a matter subject to Paragraph 24 to the dispute resolution process or initiates any action in court or an administrative agency prior to issuance of a PANEL recommendation on a dispute, that party shall pay all costs, fees and expenses, including attorneys fees, of the other party which arise out of the enforcement of this Paragraph 24.

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PARAGRAPH 25 — MISCELLANEOUS PROVISIONS

Approval or Consent by the MINI Division

(a) Any approval or consent given by the MINI Division must be in writing and signed by duly authorized representatives of the MINI Division.

Divisibility

(b) If any provision of this Agreement contravenes or is prohibited by the laws of any state or other jurisdiction which are held to be applicable to this Agreement, such provision shall be limited to the extent necessary so that it will not render this Agreement invalid, unlawful, or unenforceable, in whole or part, under such laws, but all other provisions of this Agreement shall remain in full force and effect.

Termination of Prior Agreements

(c) This Agreement terminates and supersedes all prior written or oral agreements, if any, between the MINI Division and Dealer relating to the subject matter hereof, except with respect to any trade indebtedness which may be owing by either the MINI Division or Dealer to the other and except that this Agreement shall not operate to cancel any of Dealer’s unfilled orders with the MINI Division for any MINI Products placed with the MINI Division pursuant to the provisions of any agreement terminated or superseded by this Agreement.

Notices

(d) Any notices under or pursuant to the provisions of this Agreement shall be directed to the respective addresses of the parties as stated in the Dealer Agreement or, if either of the parties shall have specified another address by notice to the other party in writing, to the address last specified. The parties shall advise each other promptly, in writing, of any change of address.

No Implied Waivers

(e) Except as otherwise provided in this Agreement, the failure of either party at any time to require performance by the other party of any provision hereof shall in no way affect the full right to require such performance at any time thereafter, nor shall the waiver by either party of a breach of any provision hereof constitute a waiver of any succeeding breach of the same or any other provision or constitute a waiver of the provision itself.

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Dealer Not an Agent and Disclaimer of Further Liability by the MINI Division and the BMW Group

(f) Dealer is not an agent of the MINI Division, and the MINI Division owes no fiduciary duty to Dealer. Dealer will conduct its MINI Car Operations on its own behalf and for its own account. Dealer has no power or authority to act for or to bind the MINI Division and/or the BMW Group and shall not represent directly, indirectly, or by implication that the Dealer has any such power or authority. Furthermore, except as expressly provided in this Agreement, the MINI Division will not be liable for any expenditure made or incurred by Dealer in connection with Dealer’s performance of its obligations pursuant to the Agreement.

Dealer agrees that it has no rights, without limitation, arising from or in connection with any agreement between the MINI Division and any other MINI dealer and that Dealer is not a third party beneficiary of any such agreement. In addition, nothing herein grants Dealer any rights to enforce any such agreement. Dealer also agrees that no third party shall have any enforceable rights under this Agreement.

Accounts Payable

(g) All monies or accounts due Dealer shall be net of Dealer’s indebtedness to BMW NA, its subsidiaries, affiliates, and MINI Division. The MINI Division of BMW NA may: (1) deduct any amounts due or to become due from Dealer to BMW NA, its subsidiaries, affiliates, and MINI Division; and/or (2) set-off and/or recoup any amounts due from Dealer from any amounts in the possession of, or being held by, BMW NA, its subsidiaries, affiliates, and MINI Division relating to this Agreement or any other agreement between Dealer and any of those parties.

Continuing Security Interests

(h) Except as specifically provided by any other provision of this Agreement, the security interests granted to the MINI Division of BMW NA, hereunder, shall not be affected by any provision in any other instrument, including, but not limited to, invoices, purchase orders, purchase order acknowledgments, and other forms; and the terms of this Agreement relating to such security interests may only be modified, amended, or changed by a writing signed by both parties specifically referring td this Agreement.

Assignment of Security Interests

(i) The MINI Division of BMW NA may assign the security interests granted to it under this Agreement or any part thereof, including its security interests in particular items of Collateral and, upon notifying the Dealer, the assignee shall be entitled to the full performance of the covenants, rights, and remedies contained in Paragraph 18 of the Agreement in so far as they apply to the Collateral assigned. Dealer will not assert any claims, defenses, offsets, or recoupments against the assignee that it may have against the MINI Division.

Assignment of Dealer Agreement by the MINI Division of BMW NA

(j) The MINI Division of BMW NA may assign this Agreement to an Affiliated Entity or a successor without the approval or consent of Dealer, provided that the Affiliated Entity or successor becomes responsible for fulfilling the terms and conditions of the Dealer Agreement.

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Limitations Re Dealer Stock and Assets

(k) Dealer agrees that it shall not pledge its stock as security for any obligations to individuals or entities, including, but not limited to, corporations, partnerships, trusts, and financial institutions. Dealer, however, may pledge its assets, subject to the security interests provided for in this Agreement, as security to individuals or entities, including, but not limited to, corporations, partnerships, trusts, and financial institutions (the term assets as used herein excludes stock). Dealer further agrees that this Agreement is not an asset of the Dealer and may not be pledged as security for any obligation.

MINI Division’s Right to Specific Performance

(I) Since Dealer’s performance of its obligations under this Agreement is of such a nature that it is impossible to measure, in money, the damages which will be suffered by the MINI Division in the event Dealer should fail to perform any of its obligations, Dealer agrees that, in the event of any such failures or performance on its part, the MINI Division shall be entitled to maintain an action or proceeding to compel the specific performance by Dealer of these obligations and Dealer agrees not to urge in any such action or proceedings the claim or defense that the MINI Division has an adequate remedy at law.

Reservation of Rights

(m) The MINI Division reserves any and all rights not expressly set forth in this Agreement.

Headings

(n) The headings contained in this Agreement have been inserted for convenient reference only and shall not in any way affect the construction, interpretation, or meaning of the text.

Entire Agreement and Representations

(o) This Agreement contains the entire agreement between the MINI Division and Dealer. Dealer acknowledges that no representation or statement has been made to it on behalf of the BMW Group, the MINI Division and/or any agents, representatives, or employees of either the BMW Group or the MINI Division that in any way tend to change or modify any of the terms or provisions of the Agreement or that in any manner prevents this Agreement from becoming effective. Dealer further acknowledges that there is no other agreement or understanding, except those specifically provided for in this Agreement, either oral or written, between Dealer and the BMW Group and/or the MINI Division affecting this Agreement or relating to the subject matter hereof.

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Execution of Agreement

(p) This Agreement shall not become effective until signed by a duly authorized officer of Dealer, if a corporation; or by a duly authorized representative of Dealer, if a limited liability company; or by one of the general partners of Dealer, if a partnership; or by the named individual, if a sole proprietorship; and countersigned by two authorized MINI Division representatives.

Modification of Agreement

(q) No representative of the MINI Division shall have the authority to waive any of the provisions of this Agreement or to make any amendment or modification of or any other change in, addition to, or deletion of any portion of this Agreement or to make any other agreement which imposes any obligation on either the MINI Division or Dealer which is not specifically imposed by this Agreement or which renews or extends this Agreement; unless such waiver, amendment, modification, change, addition, deletion, or agreement is reduced to writing and signed by two authorized representatives of the MINI Division and by the authorized representative of Dealer specified in Paragraph 25(p) of this Agreement.

New Jersey Law

(r) This Agreement shall be deemed to have been entered into in the State of New Jersey and shall be construed and interpreted in accordance with New Jersey law. Furthermore, any questions as to the validity of this Agreement, the performance of any of its terms and conditions, or of any contractual rights or obligations of the parties to this Agreement, shall be governed by and resolved in accordance with New Jersey law.

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EX-10.12

EXHIBIT 10.12

DEALER AGREEMENT

smart center EXAMPLE

smart USA Distributor LLC

Passenger Car Dealer Agreement

Table of Contents

DEALER AGREEMENT	PAGE
smart USA STATEMENT OF COMMITTMENT		7
A. Appointment of Dealer		7
B. Term		8
C. Additional Provisions		8
D. Dealership Ownership		8
E. Dealership Facilities		8
F. Modification of Agreement		9
G. Execution of Agreement		9
H. Mutual Release		9
I. Certification		9
J. Final Paragraph		10
STANDARD PROVISIONS
I. Acquisition, Delivery and Inventory of smart USA Passenger car products		11
A. Prices and Terms of Sale		11
B. Availability and Allocation of Products		11
C. Delivery of Products		11
D. Passage of Title		11
E. Risk of Damage or Loss		11
F. Delay or Failure of Delivery		11
G. Diversion and Storage Charges		12
H. Security Interest		12
1 Grant of Security Interest		12
2 Default in Payment		12
3 Assembly of Collateral, Payment of Costs and Notices		12
4 Recording and Further Assurances		13
5 Records and Schedules of Inventory		13
I. Changes of Design, Specifications or Options		13
J. Discontinuance of Manufacture or Importation		13
K. Minimum Vehicle Inventories		13
L. Product Modifications		13

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smart USA Distributor LLC

Passenger Car Dealer Agreement

Table of Contents

DEALER AGREEMENT (CONTINUED)	PAGE
II. Dealer’s Marketing and Sales of smart USA Passenger Car Products		14
A. Dealer’s General Responsibilities		14
B. Export Policy		14
C. smart USA Dealer Association		14
D. Pre-Owned Vehicles		15
E. Dealer Market Area		15
F. Evaluation of Dealer’s Marketing and Sales Performance		15
III. Dealer’s Service Obligations		16
A. Customer Service Standards		16
B. Dealer’s Specific Service Obligations		16
1 Pre-Delivery Inspections and Service		16
2 Warranty Repairs and Policy Service		16
3 Service/Retail Campaign Inspections and Corrections		17
4 Roadside Assistance Program		17
C. Use of Parts and Accessories in Non-Warranty Service		17
1 Quality Standards		17
2 Dealer’s Disclosures as to Use of and Warranties for Non-Genuine Parts and Accessories		17
D. Compliance with Safety and Emission Control Requirements		18
E. Compliance with Consumer Protection Statutes, Rules and Regulations		19
F. Insurance Requirements		19
IV. Dealer’s Service and Parts Organization		19
A. Organization and Standards		19
B. Service Equipment and Special Tools		20
1 smart USA Special Tools		20
2 smart USA Service Equipment		20
C. Parts Stocking and Service Levels		20
D. After Hours Delivery		20
E. Assistance Provided by smart USA Distributor		21
1 Service Manuals and Materials		21
2 Field Personnel Assistance		21
F. Evaluation of Dealer’s Service and Parts Performance		21
G. Additional Facilities or Locations		21

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smart USA Distributor LLC

Passenger Car Dealer Agreement

Table of Contents

DEALER AGREEMENT (CONTINUED)	PAGE
V. Customer Satisfaction Responsibilities		22
A. Dealer’s Customer Satisfaction Obligations		22
1 Dealer’s Customer Satisfaction Plan		22
2 Employee Training		22
3 Customer Assistance Response System		22
B. Evaluation of Dealer’s Customer Satisfaction Performance		22
VI. Dealership Facilities and Identification		22
A. Location and Facilities		22
B. Changes and Additions		23
C. Dealer’s Operating Hours		23
D. Corporate Identity		23
E. Evaluation and Dealership Facilities		23
F. Ownership and Use of smart Marks and smart USA Marks		24
1 Validity and Exclusive Ownership of smart Marks		24
2 Use by Dealer		24
3 Discontinuance of Use		24
4 Enforcement		25
VII. Warranties		25
VIII. Capital, Credit, Records and Uniform Systems		25
A. Net Working Capital		25
B. Flooring and Lines of Credit		25
C. Payment Terms		26
D. Uniform Accounting System		26
E. Records Maintenance		26
F. Examination of Dealership Accounts and Records		26
G. Taxes		27
H. Confidentiality		27
I. smart USA Dealer Communications System and Proprietary Manufacturer Systems		27
J. Sales Reporting		27

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smart USA Distributor LLC

Passenger Car Dealer Agreement

Table of Contents

DEALER AGREEMENT (CONTINUED)	PAGE
IX. Transfers		27
A. Sale of Assets or Ownership Interest		27
B. Right of First Refusal or Option To Purchase		28
1 Rights Granted		28
2 Exercise of smart USA Distributor’s Rights		29
3 Right of First Refusal		29
4 Option to Purchase		29
5 Dealer’s Obligations		30
X. Succession Rights Upon Death or Incapacity		30
A. Succession to Ownership After Death of Owner		30
B. Incapacity of Owner		31
C. Nomination of Successor Prior to Death or Incapacity of Owner		31
XI. Termination		32
A. Voluntary Termination by Dealer		32
B. Termination For Cause		32
1 Immediate Termination		32
2 Termination Upon Sixty Days Notice		34
3 Termination for Failure of Performance		34
4 Termination Upon Death or Incapacity		35
C. Termination Upon Termination of Distributorship		35
D. Termination for Failure of smart USA Distributor to be Licensed		35
E. Termination Upon offering to Enter into a New or Amended Passenger Car Dealer Agreement		35
F. Notice of Termination		35
G. Continuance of Business Relations		36
H. Repurchase Provisions		36
1 Distributor’s Obligations		36
2 Dealer’s Responsibilities		36
3 Payment by Distributor		37
XII. Defense and Indemnification		38
A. Defense and Indemnification By Distributor		38
B. Defense and Indemnification By Dealer		39
C. Conditional Defense and/or Indemnification		39
D. The Effect of Subsequent Developments		40
E. Time to Respond and Responsibilities of the Parties		40

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smart USA Distributor LLC

Passenger Car Dealer Agreement

Table of Contents

DEALER AGREEMENT (CONTINUED)	PAGE
XIII. Notice of Breach or Failure to Act in Good Faith		40
XIV. General Provisions		41
A. Notices		41
B. No Implied Waivers		41
C. Sole Agreement of the Parties		41
D. Dealer Not an Agent or Representative		41
E. Assignment of Rights or Delegations of Duties		41
F. No Franchise Fee		41
G. Benefit		42
H. Michigan Law		42
XV. Definitions		42
XVI. Additional Provisions		43

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smart USA DISTRIBUTOR LLC

smart USA Passenger Car Dealer Agreement

This PASSENGER CAR DEALER AGREEMENT is effective as of the day last set forth below by and between smart USA DISTRIBUTOR LLC (“Distributor”) and the natural person or entity identified as “Dealer” in the Final Paragraph of this Agreement.

smart USA STATEMENT OF COMMITMENT

This smart USA Passenger Car Dealer Agreement and all addendums hereto (collectively, the “Agreement”) state the commitment of Distributor and Dealer to each other as well as their relationship to the owners of smart USA Passenger Car Products.

Distributor, the exclusive distributor of smart USA Passenger Car Products in the United States of America and Puerto Rico, brings to this relationship the peerless reputation and image of Daimler AG (“DAG”). DAG has produced automobiles longer than any other manufacturer in the world. It has never let sheer numbers of products, or the requirement of transportation alone, become the yardstick for the design of its products. Its devoted craftsmen have built, and continue to build, the finest automobiles in the world.

smart USA Passenger Car dealers are community leaders whose reputations, integrity and expertise are essential to the sales and servicing of smart USA Passenger Cars. They must have well located places of business with outstanding sales, service and parts facilities; they must be staffed by courteous and well trained personnel who are dedicated to serving smart USA customers during the acquisition and ownership experience; and they must be focused on attaining the collective long term goals reflected herein as well as their own individual goals.

smart USA owners are loyal, devoted and proud; their minds are open to new ideas; they are environmentally concerned and forward-looking; but they are also demanding towards the factory as far as the product is concerned and towards the dealer as to how it is sold and serviced. DAG, Distributor, and Dealer are committed to meeting and, where possible, exceeding those high expectations.

By executing this Agreement, and pursuant to its terms, Distributor and its smart USA passenger car dealers dedicate themselves jointly to serving and satisfying the past, present and future owners of smart USA Passenger Car Products.

A. APPOINTMENT OF DEALER

Distributor hereby appoints Dealer and grants it the non-exclusive right to buy and resell smart USA Passenger Car Products. Dealer accepts such appointment and understands that its appointment as a Dealer (i) does not grant it an exclusive right to sell smart USA Passenger Car Products in its Area of Responsibility (AOR) or in any other geographic area, and (ii) does not grant it any right to buy or resell vehicles or other products that are not smart USA Passenger Car Products.

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B. TERM

This Agreement shall have a term commencing on its effective date continuing until the date set forth in the Final Paragraph.

C. ADDITIONAL PROVISIONS

The accompanying smart USA Passenger Car Dealer Agreement Standard Provisions, Retail Capacity Addendum, Dealer Operating Covenant and Standards Addendum, Dealer Area of Responsibility Addendum, Dealer Improvement Addendum (if applicable), other facility addenda (if applicable) as identified in Paragraph E, and Communications Guidelines and Graphic Standards (if applicable) are hereby incorporated into and made a part of this Agreement. The data requirements reflected in the Retail Capacity Addendum, Dealer Operating Covenant and Standards Requirements Addendum, and Dealer Area of Responsibility Addendum are periodically updated with the current related addendum displayed electronically on a website accessible via Distributor’s satellite communication system. Dealer further agrees to be bound by and comply with the Warranty Manual, Dealership Facility Planning & Corporate Identification Manual and all other manuals, bulletins, instructions and directives issued to or which may issued to Dealer by Distributor during the term of this agreement.

D. DEALER OWNERSHIP

This is a personal service agreement. Distributor is entering into the Agreement in reliance upon the personal qualifications, reputation, integrity and expertise of Owners and upon their representation that they are committed to achieving the purposes and goals of this Agreement. Dealer agrees that there will be no change in the identity of Owner or in Dealer’s ownership, name, identity, business organization or structure without the prior written consent of Distributor, which consent shall not be unreasonably withheld. If Dealer is a corporation, limited liability company or any other entity, Dealer agrees to notify Distributor in writing of any change in the identity of its officers, directors, managing member, general partner or managing partner, as the case may be.

E. DEALER FACILITIES

Dealer agrees that the Dealership Facilities shall satisfy all applicable provisions of this Agreement, including the facility, space, appearance, layout, equipment and corporate identification requirements in the Retail Capacity Addendum, and Dealership Facility Planning & Corporate Identification Manual. Unless otherwise provided in the Retail Capacity Addendum, Distributor hereby approves the location (s) of the Dealership Facilities identified in the Final Paragraph for the exclusive purpose of: (i) a showroom and sales facility for smart USA Passenger Cars; (ii) a service, and parts facility for smart USA Passenger Cars; (iii) facilities for display and sale of pre-owned smart USA vehicles; and (iv) if applicable, other facilities for such other purposes(s) as may be identified in the Final Paragraph. Additional facilities will operate pursuant to the terms of the smart USA Passenger Car Dealer Agreement herein and the following Dealer Agreement Addenda if applicable: Service Center Addendum, Pre-Owned & Service Center Addendum, and Service Annex Addendum. Dealer shall not move, relocate or change the designated usage or function of the Approved Locations(s) or any of the Dealership Facilities without the prior written consent of Distributor. In particular, Dealer shall not add sales, service or parts operations for any other line of vehicles to the Dealership Facilities or at the Approved Location(s) without the prior written consent of the Distributor.

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F. MODIFICATION OF AGREEMENT

No waiver, modification or change of any of the terms of this Agreement or change or erasure of any printed part of this Agreement or addition to it (except filling of blank spaces and lines) will be valid or binding on Distributor unless approved in writing by the President of Distributor.

G. EXECUTION OF AGREEMENT

This Agreement shall not become effective until signed by a duly authorized officer of Dealer, if a corporation or limited liability Company, or by one of the general partners of Dealer, if a partnership, or by the named individual if a sole proprietorship, and countersigned by the President of Distributor.

H. MUTUAL RELEASE

Each party hereby releases the other from any and all claims and causes of action that it may have against the other for money damages arising from any event occurring up to and including the effective date of this Agreement, except for any accounts payable by one party to the other reflected on the smart USA Consolidated Statement or adjustments to any prior payment, credit or other benefit arising from any audit or other examination conducted by Distributor with respect thereto. This mutual release does not extend to claims that either party does not know or reasonably suspect to exist in its favor as of the effective date of this Agreement or that arise under Section XII of the Standard Provisions to this Agreement.

I. CERTIFICATION

By their signatures on the following page, the parties certify that they have read and understand the Agreement, including all of the additional provisions incorporated herein, and agree to be bound by and comply with all of its terms and conditions.

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J. FINAL PARAGRAPH

Dealer is EXAMPLE COPY, incorporated or formed under the laws of the State of EXAMPLE STATE doing business as (‘EXAMPLE COPY). Dealer is located in the City of EXAMPLE CITY which is in the State of EXAMPLE.

The Owners of Dealership (including all shareholders, general and limited partners, members and other owners) are as follows:

Name: EXAMPLE	60%
	% interest

The Dealer Operator of Dealer is as follows:

Name: EXAMPLE

Showroom and Sales Facility for smart USA Passenger Cars located at:

Address: EXAMPLE
City:        EXAMPLE	State: EXAMPLE	Zip: EXAMPLE

Service and Parts Facility for smart USA Passenger Cars located at:

Address: EXAMPLE
City:        EXAMPLE	State: EXAMPLE	Zip: EXAMPLE

Facilities for the display and sale of pre-owned smart USA Vehicles located at:

Address: EXAMPLE
City:        EXAMPLE	State: EXAMPLE	Zip: EXAMPLE

IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the XX^h day of XXXXXXXX, 20XX at smart center EXAMPLE — EXAMPLE CITY, EXAMPLE STATE XXXXX. This Agreement shall have a term commencing on its effective date and continuing until XXXXXXXX XX, 20XX.

Dealer:		smart USA Distributor LLC
By:		By:
	Dealer Signature		XXXXX XXXXXXX, President
Name:		By:
	Print Name		XXXXX XXXXXXX, Vice President
Title:
Attested by:

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smart USA DISTRIBUTOR LLC

smart USA PASSENGER CAR DEALER AGREEMENT

STANDARD PROVISIONS

I. ACQUISITION, DELIVERY AND INVENTORY OF smart USA PASSENGER CAR PRODUCTS

A. PRICES AND TERMS OF SALE

Distributor shall offer to sell to Dealer and Dealer shall have the right to purchase from Distributor smart USA Passenger Car Products in accordance with the provisions of this Agreement and the prices and other terms of sale that Distributor shall establish and revise from time to time. Such revised prices or terms shall apply to any smart USA Passenger Car Product not invoiced to Dealer by Distributor at the time the notice of such changes is given to Dealer (in the case of smart USA Passenger Cars), or upon issuance of a new or modified parts prices list or through change notices, letters, bulletins or revision sheets (in the case of Genuine smart USA Passenger Car Parts and Accessories), or at such other times as may be designated electronically or in writing by Distributor.

B. AVAILABILITY AND ALLOCATION OF PRODUCTS

Distributor will allocate smart USA Passenger Car Products among its passenger car dealers in a fair and equitable manner. Distributor will, upon Dealer’s request, explain the considerations and method used to allocate smart USA Passenger Car Products to Dealer.

C. DELIVERY OF PRODUCTS

Distributor will ship smart USA Passenger Car Products to Dealer by whatever mode of transportation, by whatever route, and from whatever point Distributor may select. Dealer shall pay Distributor such charges as Distributor in its sole discretion establishes for such transportation services.

D. PASSAGE OF TITLE

Title to each smart USA Passenger Car Product shall pass from Distributor to Dealer, or to the financial institution designated by Dealer, upon Distributor’s receipt of payment for said Product and upon the earlier of delivery of said Product to Dealer or to a carrier for transportation to Dealer.

E. RISK OF DAMAGE OR LOSS

Dealer shall bear the risk of damage to or loss of smart USA Passenger Car Products during transportation from the point of shipment; however, Distributor will, if requested by Dealer assign any claims and rights to Dealer that Distributor may have against the responsible carrier for damage to or loss of smart USA Passenger Car during said transportation for and on behalf of Dealer. To the extent required by law, Dealer shall notify the purchaser of a vehicle of any damage sustained by such vehicle prior to sale.

F. DELAY OR FAILURE OF DELIVERY

Distributor shall not be liable for delay or failure to deliver smart USA Passenger Car Products that it has previously agreed to deliver, where such delay or failure to deliver is the result of any event beyond the control of Distributor, including but not limited to any law or regulation of any governmental entity, acts of God, foreign or civil wars, riots, interruptions of navigation, shipwrecks, fires, floods, storms, strikes, lockouts, or other labor troubles, acts of terrorism, embargoes, blockades, or delay or failure of DAG or its affiliates to deliver smart USA Passenger Car Products.

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G. DIVERSION AND STORAGE CHARGES

Dealer shall be responsible for and shall pay all charges for demurrage, storage and other expense accruing after shipment to Dealer or to a carrier for transportation to Dealer. If diversions of shipments are made upon Dealer’s request or are made by Distributor as a result of Dealer’s failure or refusal to accept shipments made pursuant to Dealer’s orders, Dealer shall pay all additional charges and expenses incident to such diversions.

H. SECURITY INTEREST

1. Grant of Security Interest

As a security for the full payment of all sums from time to time owed by Dealer to Distributor under this Agreement, whether such sums are now or hereafter become due and owing, Dealer hereby grants to Distributor a security interest in the following items for which Distributor has not received payment (collectively referred to as “Collateral”):

(i) All Genuine smart USA Passenger Car Products, and other related items delivered by Distributor to Dealer hereunder on account (all such inventory hereinafter referred to collectively as “Inventory” and individually as “Item of Inventory”); and

(ii) All proceeds from any of the foregoing, including without limitation, insurance payable by reason of the loss, damage or destruction of any Item of Inventory; and all accounts and chattel paper of Dealer arising from its sale, lease or other disposition of Inventory now existing or hereafter arising, and all liens, securities, guarantees, remedies and privileges pertaining thereto, together with all rights and liens of Dealer relating thereto.

2. Default in Payment

Dealer shall be in default of this Agreement if: (i) Dealer shall fail to pay any amounts secured hereby when due or fail to perform any obligations under this Section I in a timely manner; (ii) there shall occur any material adverse change in the financial condition of Dealer; or (iii) a proceeding is commenced by or against Dealer under any bankruptcy or insolvency or similar statute or regulation or Dealer makes an assignment for the benefit of creditors or becomes insolvent; and, in any such case, Distributor may declare all sums secured by this Section I.H immediately due and payable and Distributor shall have all the rights and remedies afforded to a secured party after default under the Uniform Commercial Code or other applicable law in effect on the date of this Agreement.

3. Assembly of Collateral, Payment of Costs and Notices

Dealer shall, if requested by Distributor upon the occurrence of any default under Section I.H.2, assemble the Collateral and make it available to Distributor at a place or places designated by Distributor. Dealer also shall pay all costs of Distributor, including without limitation, attorneys fees incurred with respect to the enforcement of any of Distributor rights under this Section I.H.

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4. Recording and Further Assurances

Dealer shall provide any assistance necessary in the preparation of financing statements and such other instruments or documents and take any other action as Distributor may request in order to create or maintain the security interest intended to be created by this Section I.H., or to enable Distributor to exercise and enforce its rights hereunder. A carbon, photographic or other reproduction of this Agreement shall be sufficient as a financing statement and may be filed in lieu of a financing statement in any and all jurisdictions which accept such reproductions.

5. Records and Schedules of Inventory

Dealer shall keep accurate records itemizing and describing the kind, type and quantity of Inventory and shall furnish to Distributor within five (5) days of receipt of Distributor’s request therefore, a current schedule of inventory in form and substance satisfactory to Distributor (“Schedule of Inventory”), which shall be true and accurate in all respects. A physical inventory shall be conducted by Dealer no less than annually in connection with preparation of year-end financial statements of Dealer and, at Distributor’s request, a report of such inventory shall be promptly provided to Distributor.

I. CHANGES OF DESIGN, SPECIFICATIONS OR OPTIONS

Distributor may change the design or specifications of any smart USA Passenger Car Product or the options in any smart USA Passenger Car Product and shall be under no obligation to provide notice of same or to make any similar change to smart USA Passenger Car Products previously purchased by or shipped to Dealer. No change shall be considered a model year change unless so specified by Distributor.

J. DISCONTINUANCE OF MANUFACTURE OR IMPORTATION

DAG and/or Distributor may discontinue the manufacture, importation or distribution of all or part of any smart USA Passenger Car Product, whether passenger car parts, options or accessories, including any model, series or body style of any smart USA Passenger Car at any time without any obligation or liability.

K. MINIMUM VEHICLE INVENTORIES

Dealer agrees that it shall, at all times, maintain in showroom ready condition at least the minimum inventory of smart USA Passenger Cars that may be established by Distributor from time to time.

L. PRODUCT MODIFICATIONS

Dealer agrees that it will not install aftermarket accessories, equipment, or make any modifications to smart USA Passenger Cars that may impair or adversely affect their safety, emissions, structural integrity, performance or original vehicle warranty applicability.

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II. DEALER’S MARKETING AND SALES OF smart USA PASSENGER CAR PRODUCTS

A. DEALER’S GENERAL RESPONSIBILITIES

Dealer recognizes that customer satisfaction and the successful promotion and sale of smart USA Passenger Car Products are significantly dependent on Dealer’s advertising and sales promotion activities. Therefore, Dealer at all times shall:

1.	Actively and effectively promote and sell new and used smart USA Passenger Car Products to customers located within its Area of Responsibility:
2.	Advertise and merchandise smart USA Passenger Car Products, and use current smart USA showroom displays, sales materials and other promotional media;
3.	Organize a complete sales organization of the highest quality, ensure that its sale personnel meet the educational and management standards established by Distributor, and, at Dealer’s expense, have such personnel as are appropriate attend all training courses prescribed by Distributor;
4.	Comply with the Communications Guidelines and Graphic Standards, maintain a high standard of ethics in advertising, promoting and selling smart USA Passenger Car Products, and avoid engaging in any misrepresentation or unfair or deceptive practices. Dealer shall discontinue any advertising the Distributor considers injurious to Distributor’s or DAG’s business or reputation or to the smart Marks or smart USA Marks, or that are likely to be violative of applicable laws or regulations; and
5.	Accurately represent to customers the total selling price of smart USA Passenger Car Products. Dealer agrees to explain to customers of smart USA Passenger Car Products the items that make up the total selling price and to give the customers itemized invoices and all other information required by law. Dealer understands and hereby acknowledges that it may sell smart USA Passenger Car Products at whatever price Dealer desires, but not in excess of its MSRP established by Distributor and communicated to Dealer by Distributor in writing and/or electronically.

B. EXPORT POLICY

Dealer is authorized to sell smart USA Passenger Cars only to customers residing in the United States of America and Puerto Rico. Dealer agrees that it will not sell smart USA Passenger Cars for resale or use outside the United States of America and Puerto Rico. Dealer agrees to be bound by and comply with any export policy established by Distributor.

C. smart USA DEALER ASSOCIATION

Distributor considers participation by smart USA Passenger Car dealers in smart USA Passenger Car Dealer Advertising Associations to be a fundamental part of an overall marketing strategy for their businesses and smart USA Passenger Car Products. Distributor urges Dealer to cooperate in the establishment of such an association and to fund its fair share of advertising and merchandising programs undertaken by the association.

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D. PRE-OWNED VEHICLES

Dealer agrees to display and sell pre-owned smart USA vehicles distributed only by Distributor at the Approved Location(s). Dealer shall participate in programs as specified by Distributor for the sale of such vehicles, and shall maintain the minimum reasonable inventory established by Distributor from time to time for such operations. Dealer shall conduct its pre-owned smart USA vehicle operations in conformance with all standards set forth in this Agreement.

E. DEALER MARKET AREA

Distributor will assign to Dealer a geographic area consisting of a collection of zip codes or census tracts that is called an Area of Responsibilities (“AOR”). The AOR is a tool used by Distributor to evaluate Dealer’s performance of its primary obligations hereunder. Dealer agrees that it has no right or interest in any AOR, including rights of exclusivity, and Dealer acknowledges that the Distributor reserves the right to appoint additional smart USA Dealers, whether located near Dealer’s location or elsewhere, as the Distributor in its sole discretion deems necessary or appropriate and that Distributor may change or alter Dealer’s AOR at any time. If a decision is made by Distributor to change or alter Dealer’s AOR, Distributor will provide Dealer no less than thirty (30) days written notice of such decision. Distributor may, directly or indirectly, offer and sell smart USA Passenger Car Products in Dealer’s AOR to the following:

1.	Governmental or Municipal Authorities
2.	Certain Multi-national Fleet customers of DAG or a DAG group company
3.	Customers who refuse to purchase from Dealer

F. EVALUATION OF DEALER’S MARKETING AND SALES PERFORMANCE

Distributor will periodically evaluate Dealer’s sales and marketing performance under this Agreement. Dealer’s evaluation will be based on such reasonable criteria as Distributor may establish, including without limitation: (i) Dealer’s reasonable sales objectives that may be established by Distributor; (ii) Dealer’s sales of smart USA Passenger Cars as a percentage of registrations of smart USA Passenger Cars or Competitive Vehicles in Dealer’s AOR; (iii) the registrations of smart USA Passenger Cars as a percentage of registrations of Competitive Vehicles in Dealer’s AOR; (iv) Dealer’s sales or registrations of smart USA Passenger Cars as compared to sales or registrations of smart USA Passenger Cards by authorized smart USA passenger car dealers in other areas, including but not limited to the metropolitan area, market and/or region in which Dealer is located; and (v) Dealer’s performance in building and maintaining consumer satisfaction with Dealer and smart USA Passenger Car Products. Distributor will review such evaluations with Dealer, and Dealer shall take prompt corrective action if required to improve its performance.

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III. DEALER’S SERVICE OBLIGATIONS

A. CUSTOMER SERVICE STANDARDS

Dealer and Distributor agree that customer satisfaction and the future growth of their respective businesses is substantially dependent upon the ability of owners of smart USA Passenger Cars to obtain high-quality servicing from Dealer. Therefore, Dealer agrees to:

1.	Provide prompt, efficient and courteous service of the highest quality for all smart USA Passenger Cars, regardless of where purchased and whether or not under warranty.
2.	Provide prompt, efficient and courteous service of the highest quality for all versions of smart passenger cars equal to smart USA Passenger Cars not intended for sale in the United States of America and Puerto Rico (“Equal smart Passenger Cars”), which are then under DAG warranty;
3.	Accurately diagnose and advise customers of the necessary repairs, and obtain their consent prior to the initiation of such repairs;
4.	Professionally perform the necessary repairs; and
5.	Treat customers fairly at all times.

B. DEALER’S SPECIFIC SERVICE OBLIGATIONS

1. Pre-Delivery Inspections and Service

Dealer shall perform pre-delivery inspections and service on each smart USA Passenger Car prior to sale and delivery thereof by Dealer in accordance with the Warranty Manual.

2. Warranty Repairs and Policy Service

Dealer shall promptly, courteously and efficiently perform (i) warranty repairs on each smart USA Passenger Car Product and Equal smart Passenger Car that qualifies for such repairs under the provisions of any warranty furnished therewith by Distributor or DAG, and (ii) such other inspections, repairs or corrections on smart USA Passenger Car Products as may be approved or authorized by Distributor to be made at Distributor’s expense (hereinafter “policy service”). Dealer shall perform such repairs and service on each such smart USA Passenger Car Product and Equal smart Passenger Car as and when requested by owner or user (or in the case of policy service when requested by Distributor), without regard to where such smart USA Passenger Car was purchased and in accordance with the Warranty Manual. Distributor agrees to compensate Dealer for all warranty repairs and policy service, including labor, diagnosis and Genuine smart USA Passenger Car Parts and Accessories, in accordance with procedures and at rates to be established from time to time by Distributor. Unless otherwise approved in advance by Distributor, Dealer shall use only genuine smart USA Passenger Car Parts and Accessories when performing smart USA warranty repairs and policy service. Warranty repairs and policy service are provided for the benefit of customers, and Dealer agrees that the customer shall not be obligated to pay any charges for such work or any other services for which Dealer is reimbursed by Distributor, except as required by law.

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3. Service / Recall Campaign Inspections and Corrections

Dealer agrees to perform service/retail campaign inspections and/or corrections for owners or users of all smart USA Passenger Car Products and Equal smart Passenger Cars that qualify for such inspections and/or corrections in accordance with Distributor’s directives and the applicable procedures in the Warranty Manual. Distributor agrees to reimburse Dealer for all replacement parts and/or other materials required and used in connections with such work and for labor according to such directives and the applicable provisions of the Warranty Manual.

4. Roadside Assistance Program

Dealer agrees to participate in the smart USA Roadside Assistance Program as specified by Distributor.

C. USE OF PARTS AND ACCESSORIES IN NON-WARRANTY SERVICE

Subject to the provisions of Sections I.L and III.B.2, Dealer has the right to sell, install or use for making non-warranty repair products that are not Genuine smart USA Passenger Car Parts and Accessories.

1. Quality Standards

Dealer Acknowledges, however, that its customers expect that any parts or accessories that Dealer sells, installs or uses in the sale, repair or servicing of smart USA Passenger Cars are, or meet the high quality standards of, Genuine smart USA Passenger Cars Parts and Accessories. Dealer agrees that in sales, repairs or servicing where Dealer does not use genuine smart USA Passenger Car Parts and Accessories, Dealer will utilize only such other parts or accessories as:

(i)	Will not adversely affect the safety, structural integrity, performance, mechanical operation or emissions of the smart USA Passenger Car being sold, repaired or serviced; and
(ii)	Are equivalent in quality and design to Genuine smart USA Passenger Car Parts and Accessories.

Dealer further agrees that it will not offer to sell any parts or accessories that for reasons of quality or image are reasonably objected to by Distributor

2. Dealer’s Disclosures as to Use of and Warranties for Non-Genuine Parts and Accessories

In order to avoid confusion and to minimize potential customer dissatisfaction, in any non-warranty instance where Dealer sells, installs or uses non-Genuine smart USA Passenger Car Parts or Accessories, Dealer shall disclose such fact to the customer and shall advise the customer that the item is not included in warranties furnished by Distributor or DAG. Such disclosure shall be written, conspicuous and stated on the customer’s copy of the service or repair order or sale document. In addition, Dealer will clearly explain to the customer the extent of any warranty covering the parts or accessories involved and will deliver a copy of the warranty to the customer.

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D. COMPLIANCE WITH SAFETY AND EMISSION CONTROL REQUIREMENTS

Dealer agrees to comply and operate consistently with all applicable provisions of National Traffic and Motor Vehicle Safety Act of 1966, and the Federal Clean Air Act, as amended, including applicable rules and regulations issued from time to time there under, and all other applicable federal, state, and local motor vehicle safety and emission control statutes, rules, and regulations.

In event that the laws of the state in which Dealer is located require motor vehicle dealers or distributors to install in new or used motor vehicles, prior to their sale, any safety devices or other equipment not installed or supplied as standard equipment by DAG, then Dealer, prior to the sale of any smart USA passenger car on which such installations are required, shall properly install such devices or equipment on such smart USA Passenger Cars. Dealer shall comply at its expense with state and local laws pertaining to the installation and reporting of such equipment.

In the interest of motor vehicle safety and emission control, Distributor and Dealer agree to provide to each other such information and assistance as may reasonably be requested by the other in connection with the performance of obligations imposed on either party by the National Traffic and Motor Vehicle Safety Act of 1966, and the Federal Clean Air Act, as amended, and their rules and regulations, and all other applicable federal, state and local motor vehicle safety and emission control statutes, rules and regulations.

Dealer further agrees that should Distributor place any new smart USA Passenger Cars in Dealer’s stock on retail hold pending the resolution of any federal or state regulatory compliance issue, Distributor may, but shall not be required to, elect to repurchase said retail held smart USA Passenger Cars. Should Distributor so elect, Dealer agrees that it shall immediately sell the smart USA Passenger Cars back to Distributor and withhold from retail sale all such smart USA Passenger Cars still in its inventory at the time of said election as Distributor may reasonably determine. In the event of such a repurchase, the price to be paid by Distributor to Dealer shall be only the price paid by the Dealer to Distributor for said smart USA Passenger Car. Distributor shall not be obligated to reimburse any other costs to Dealer with respect to Dealer’s purchase or Distributor’s repurchase of the smart USA Passenger Cars. Distributor shall make payment to the Dealer immediately upon transfer of title to the smart USA Passenger Car to Distributor. During the period from Distributor’s repurchase of smart USA Passenger Cars until the smart USA Passenger Cars resale to Dealer, the subject smart USA Passenger Cars shall remain in the possession, custody and control of Dealer as bailee of Distributor. Upon the occurrence of the resolution of the event requiring the issuance of the retail hold and smart USA Passenger Car repurchase via the issuance of appropriate repair instructions to the Dealer, Distributor shall resell those smart USA Passenger Cars to Dealer and Dealer hereby agrees to accept those smart USA Passenger Cars and further agrees that it will only retail sell the smart USA Passenger Cars upon completion of the work by dealer required to bring the smart USA Passenger Car into regulatory compliance.

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E. COMPLIANCE WITH CONSUMER PROTECTION STATUTES, RULES AND REGULATIONS

Dealer agrees to comply and operate consistently with all applicable provisions of consumer protection statutes, rules and regulation (hereinafter “consumer protection laws”). Because certain customer complaints may impose liability upon distributor under consumer protection laws, Dealer agrees to provide prompt notice to Distributor to such complaints and take such other steps as Distributor may require. Dealer also agrees to provide applicable required customer notifications and disclosures as prescribed by consumer protection laws. Dealer will do nothing to affect adversely Distributor’s rights under consumer protection laws.

F. INSURANCE REQUIREMENTS

Dealer shall maintain, at Dealer’s expense, adequate fire, general liability, garage keepers liability, product liability, completed operations liability, automobile liability, workers compensation and casualty insurance issued by an insurer of recognized responsibility satisfactory to Distributor with coverage for each occurrence and in an aggregate amount acceptable to Distributor, and providing coverage for, among other things, death, bodily injury, property damage and loss of income claims that might arise under the doctrine of products liability and any other claims that might arise in connection with the dealership operations. All insurance shall be placed with a reputable insurance company having a Financial Size Category equal to or greater than 1x and Policyholders Rating of ‘A+’ or ‘A-’ (Excellent) as assigned by Alfred M. Best and Company, Inc., or any other insurance company approved by Distributor. Each insurance policy shall list Distributor as an additional insured, shall provide for thirty (30) day’s notice to Distributor prior to cancellation of such insurance, and shall give Distributor the right to pay any premium due to avoid cancellation of such insurance. The Dealer shall reimburse Distributor immediately upon demand for any amount paid by Distributor on behalf of the Dealer to maintain an insurance policy. Upon request, Dealer shall furnish Distributor with certificates of insurance, proof of payment of premiums and copies of insurance policies which evidence the Dealer’s compliance with the requirements of this paragraph. Prior to the expiration of any existing policy, the Dealer shall provide proof of the renewal of such policy or the acquisition of a replacement or substitute policy. In addition, the Dealer shall provide proof of insurance within five (5) days of any request by Distributor. Such insurance shall be maintained in full force and effect at Dealer’s sole cost throughout the term of this Agreement (and throughout any period during which Distributor has permitted Dealer to continue any of the dealership operations despite the expiration or termination of this Agreement).

IV. DEALER’S SERVICE AND PARTS ORGANIZATION

A. ORGANIZATION AND STANDARDS

Dealer agrees to organize and maintain a complete service and parts organization of the highest quality, including a qualified service manager, parts manager, diagnostic specialists, technicians and a sufficient complement of qualified service and parts personnel as recommended by Distributor. Dealer’s personnel will meet the educational, management and technical training standards reasonably established by Distributor and, at Dealer’s expense, will complete all service, parts and customer satisfaction training courses prescribed by Distributor.

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B. SERVICE EQUIPMENT AND SPECIAL TOOLS

Anything herein to the contrary notwithstanding, if Distributor determines that Dealer requires smart USA Special Tools and Service Equipment to service a model of smart USA Passenger Cars, Dealer acknowledges that it has no right to purchase such model from Distributor unless and until it has acquired all such smart USA Special Tools and Service Equipment and completed all related training courses prescribed by Distributor.

1. smart USA Special Tools

Dealer agrees to purchase from Distributor all smart USA Special Tools as may be reasonably required by Distributor and which are the minimum required for the service, maintenance, and repair of smart USA Passenger Cars regardless of size. Delivery of smart USA Special Tools by Distributor to Dealer will be automatic and via a timetable determined appropriate by Distributor in its reasonable discretion. Dealer may also acquire, at its own discretion, smart USA Special Tools for larger scale repairs.

Dealer agrees to maintain all smart USA Special Tools in operational condition and in calibration as designated by Distributor. Dealer will manage the inventory of smart USA Special Tools using a storage and inventory management system specified by Distributor. Dealer agrees that such inventory and/or physical inventory documentation will be subject to periodic inspection by Distributor.

In the event a dealer utilizes its own body shop, dealer agrees to acquire smart USA Special Tools for use in the repair of smart USA Passenger Cars as specified by the smart USA repair procedure. A Dealer that sublets body shop repairs shall use its best efforts to monitor, advise, and ensure that these locations are equipped with the necessary smart USA tools, repair instructions, and training support to perform the repairs.

2. smart USA Service Equipment

Dealer agrees to acquire approved Service Equipment designated as Basic Equipment (“BE”) pursuant to the Distributor Standard Service Equipment Program. Dealer agrees to maintain this equipment in operational condition and in calibration as designated by Distributor. Dealer agrees that such equipment and physical inventory documentation will be subject to periodic inspection by Distributor.

C. PARTS STOCKING AND SERVICE LEVELS

Dealer agrees to maintain its parts stock at minimum stocking and service levels reasonably established by Distributor.

D. AFTER-HOURS DELIVERY

Dealer agrees to provide Distributor, upon request, access to a secure area for after-hours parts or passenger car delivery.

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E. ASSISTANCE PROVIDED BY DISTRIBUTOR

1. Service Manuals and Materials

Distributor agrees to make available to Dealer copies of such service manuals and bulletins, publications, computer software and technical data as Distributor shall deem to be necessary for the needs of Dealer’s service and parts organization. Dealer shall be responsible for keeping such manuals and materials current and available for consultation by its employees.

2. Field Personnel Assistance

To assist Dealer in handling its responsibilities under this Agreement, Distributor agrees to make available, as determined by Distributor in its reasonable discretion, qualified field personnel who will, from time to time, advise and counsel Dealer on service-related subjects determined by Distributor in its reasonable discretion, including service policies, product and technical adjustments, repair and replacement of product components, customer relations, warranty administration, service and parts merchandising, and personnel/management training.

F. EVALUATION OF DEALER’S SERVICE AND PARTS PERFORMANCE

Distributor will periodically evaluate Dealer’s: (i) service performance in areas such as dealer’s service of smart USA Passenger Cars as a percentage of registrations of smart USA Passenger Cars in Dealer’s AOR, customer satisfaction, warranty administration, service repairs, service management, facilities, operating procedures and new vehicle pre-delivery service; and (ii) parts purchases, sales, operations, facilities, tools and equipment. Distributor will review such evaluations with Dealer, and Dealer shall take prompt action to improve the service and parts performance to satisfactory levels as Distributor may require. Such action shall, if requested by Distributor, include an action plan by Dealer for improvement of service and parts performance within a specific time period approved by Distributor, including but not limited to the establishment of additional space, facilities or locations for such operations.

G. ADDITIONAL FACILITIES OR LOCATIONS

If, with Distributor’s prior written consent, Dealer establishes additional facilities or locations for its service and parts operations, Dealer shall meet the facilities, identification, organizational, equipment, parts stocking and other standards reasonably established by Distributor from time to time for such facilities or locations.

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V. CUSTOMER SATISFACTION RESPONSIBILITIES

Distributor and Dealer intend to conduct their respective businesses in a manner with a goal of achieving the highest levels of customer satisfaction by marketing the finest products and providing the best service in the automotive industry.

A. DEALER’S CUSTOMER SATISFACTION OBLIGATIONS

Dealer will be responsible for satisfying smart USA customers in all matters except those that are directly related to product design and manufacturing. Dealer will take all reasonable steps to ensure that each customer is completely satisfied with smart USA Passenger Car Products and the services and practices of Dealer. Dealer will not engage in any practice or method of operation if its nature or quality may impair the reputation of Distributor or smart USA Passenger Car Products or DAG.

1. Dealer’s Customer Satisfaction Plan

Upon Distributor’s request. Dealer shall provide a detailed plan of Dealer’s customer satisfaction program to Distributor and shall implement such program on a continuous basis. This plan shall include an ongoing system for emphasizing customer satisfaction to all Dealers’ employees, for training Dealer employees and for conveying to customers that Dealer is committed to the highest possible level of customer satisfaction.

2. Employee Training

Dealer agrees to participate and to have its employees participate, at Dealer’s expense, in smart USA customer satisfaction training as required by Distributor.

3. Customer Assistance Response System

Dealer agrees to implement a system approved by Distributor that will respond immediately to requests for customer assistance from Distributor.

B. EVALUATION OF DEALER’S CUSTOMER SATISFACTION PERFORMANCE

Distributor periodically will evaluate Dealer’s customer satisfaction performance based on the following considerations and efforts by Dealer.

1. Distributor will provide Dealer with Customer Relationship Index reports or such other equivalent data as will permit Dealer to access its performance and maintain the highest level of customer satisfaction. Dealer agrees to review with its employees on a regular basis the results of the customer satisfaction reports or other data it receives.

2. Dealer shall continuously develop and implement specific action plans to improve its customer satisfaction performance and results. The plans are to be reviewed with Distributor on a basis that Distributor deems appropriate. Dealer will respond on a timely basis to requests from Distributor to take action on unsatisfactory customer satisfaction matters and to commit necessary resources to remedy deficiencies reasonably specified by Distributor.

VI. DEALERSHIP FACILITIES AND IDENTIFICATION

A. LOCATION AND FACILITIES

Dealer shall provide Dealership Facilities at the Approved Location(s) that (i) will enable Dealer to effectively perform its responsibilities under this Agreement, (ii) are satisfactory in space, appearance, layout, equipment, and corporate identification, and (iii) are otherwise substantially in accordance with the Retail Capacity Addendum, Dealership Facility Planning & Corporate Identification Manual, and such other standards as Distributor may establish from time to time. Dealer shall conduct its Dealership Operations only from the Approved Location(s). If the Approved Location(s) is of more than one place of business, Dealer shall use each such place of business only for the purposes specified therefore in Paragraph E and the Final Paragraph of this Agreement and, if applicable, in the Retail Capacity Addendum.

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B. CHANGES AND ADDITIONS

Dealer shall not move, relocate or change the designated usage or function of the Approved Location(s) or any of the Dealership Facilities, or substantially modify any of the Dealership Facilities, nor shall Dealer or any person named in the Final Paragraph of this Agreement directly or indirectly establish or operate any other locations or facilities for the sale or servicing of smart USA Passenger Car Products or for the conduct of any other of the Dealership Operations contemplated by this Agreement, without the prior written consent of Distributor. Any changes in the Approved Location(s) or the Dealership Facilities that may be agreed to by Distributor and Dealer may be reflected in a new Agreement or in a new Retail Capacity Addendum.

In particular, Dealer acknowledges that the addition of sales, service or parts operations for another line of vehicles to the Dealership Facilities or at the Approved Location(s) could adversely affect Dealer’s sales, service and parts performance with respect to smart USA Passenger Car Products. Accordingly, to give Distributor an adequate opportunity to evaluate the effect of such a proposed addition and to determine whether or not to consent thereto, Dealer agrees to notify Distributor in writing at least sixty (60) days before Dealer enters into any agreement or letter of intent with respect to the addition of such sales, service or parts operations to the Dealership Facilities or at the Approved Location(s).

C. DEALER’S OPERATING HOURS

Dealer agrees to conduct Dealership Operations during all days and hours that are customary and lawful for such operations in the community or locality in which Dealer is located and in accordance with industry standards. In addition, when necessary to accommodate customer needs, Dealer shall extend its operating hours.

D. CORPORATE IDENTITY

Subject to applicable governmental statutes, ordinances and regulations, Dealer agrees to erect, display and maintain, at Approved Location(s) only and at Dealer’s sole expense, such standard authorized product and service signs and other corporate identity elements as specified in the Dealership Facility Planning & Corporate Identification Manual or otherwise required by Distributor from time to time.

E. EVALUATION OF DEALERSHIP FACILITIES

Distributor will periodically evaluate the Dealership Facilities. In making such evaluations, Distributor may consider, among other things: the actual building and land provided by Dealer for the performance of its responsibilities under this Agreement; compliance with Distributor’s current requirements for Dealership Operations; the appearance, condition, layout and signage of the Dealership Facilities; and such other factors as in Distributor’s opinion may relate to Dealer’s performance of its responsibilities under this Agreement. Distributor will discuss such evaluations with Dealer, and Dealer shall take prompt action to comply with Distributor’s recommendations and minimum facility standards.

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F. OWNERSHIP AND USE OF smart MARKS AND smart USA MARKS

1. Validity and Exclusive Ownership of smart Marks and smart USA Marks

Dealer acknowledges the validity and DAG’s exclusive ownership of the smart Marks and smart USA Marks, and agrees not to contest the same during the term of the Agreement or at any time thereafter. Dealer and Distributor agree to cooperate with each other in preventing any acts of trademark infringement or unfair competition with respect to any smart Mark or smart USA Mark, but DAG or Distributor shall have sole control over all actions and legal proceedings to redress infringement of or any unfair competition with respect to any smart Mark or smart USA Mark.

2. Use by Dealer

Distributor grants Dealer a non-exclusive license to use the smart Marks and smart USA Marks subject to the terms and conditions of the Agreement and the Dealership Facility Planning & Corporate Identification Manual. Dealer agrees that it will use the smart Marks and smart USA Marks only in connection with the sale and servicing of smart USA Passenger Car Products and only in such manner, at such location, to such extent, and for such purposes as Distributor may specify from time to time. Dealer shall promptly change or discontinue its use of any smart Marks or smart USA Marks upon Distributor’s request. Dealer shall not use the smart Marks or smart USA Marks as part of its corporate or business name without Distributor’s prior written consent.

3. Discontinuance of Use

Upon termination of this Agreement, Dealer agrees that it shall immediately:

(i) Discontinue the use of the words smart or smart USA and the smart Marks and smart USA Marks, or any semblance of same, including without limitation, the use of all stationery, telephone directory listing and other printed material referring in any way to smart or smart USA or bearing any smart Mark or smart USA Marks;

(ii) Discontinue the use of the word smart, smart USA and “smart Center” or the smart Marks or smart USA Marks, or any semblance of same, as part of its business or corporate name, and file a change or discontinuance of such name with appropriate authorities;

(iii) Remove all product signs bearing said word(s) or smart Marks or smart USA Marks at Dealer’s sole cost and expense;

(iv) Cease representing itself as an authorized smart USA Passenger Car Dealer; and

(v) Refrain from any action, including without limitation, any advertising, stating or implying that it is authorized to sell or distribute smart USA Passenger Car Products.

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4. Enforcement

In the event Dealer fails to comply with the terms and conditions of this Section VI.F, Distributor shall have the right, in its sole discretion, to effect compliance through litigation and/or to enter upon Dealer’s premises and remove, without liability, all such product signs and identification bearing the word smart or smart USA or any smart Mark or smart USA Mark. Dealer agrees that it shall reimburse Distributor for any costs and expenses incurred in such litigation and/or removal, including reasonable attorney fees and expenses.

VII. WARRANTIES

The only warranties of Distributor or DAG applicable to smart USA Passenger Car Products shall be the New Vehicle Limited Warranty or such other written warranties that may be expressly furnished by Distributor or DAG. Except for its express limited liability under such written warranties, Distributor and DAG do not assume any additional warranty obligations or liabilities in connection with any smart USA Passenger Car Products. Dealer is not authorized to assume any additional obligations or liabilities on behalf of Distributor or DAG. Any such additional obligations assumed by Dealer shall be the sole responsibility of Dealer.

Dealer shall expressly incorporate in full and without modification any warranty furnished by Distributor or DAG with a smart USA Passenger Car as a conspicuous part of each order form or other contact for the sale of such a smart USA Passenger Car by Dealer to any buyer. Dealer shall make available to the buyer of each smart USA Passenger Car Product prior to purchase of such smart USA Passenger Car Product, copies of such applicable warranties as maybe furnished by Distributor or DAG. Dealer shall also provide to the buyer of each smart USA Passenger Car Product, in full and without modification, any owner’s manual, warranty booklet or other owner information which Distributor or DAG may provide to Dealer for delivery with such smart USA Product. Dealer agrees to abide by and implement in all other respects Distributor’s warranty procedures then in effect.

VII. CAPITAL, CREDIT, RECORDS AND UNIFORM SYSTEMS

A. NET WORKING CAPITAL

Dealer agrees to establish and maintain actual net working capital in an amount not less than the minimum net working capital specified by Distributor. Distributor will have the right to modify the amount of net working capital required, and Dealer agrees promptly to establish and maintain the required amount.

B. FLOORING AND LINES OF CREDIT

Dealer agrees to obtain and maintain at all times a confirmed and adequate flooring line with a bank or financial institution or other method of financing acceptable to Distributor to enable Dealer to perform its obligations pursuant to this Agreement.

Distributor may increase the required amounts of flooring or lines of credit, and Dealer agrees promptly to establish and maintain the increased amount.

Subject to the foregoing obligations, Dealer is free to do its financing business, wholesale, retail or both, with whomever it chooses and to engage in retail financing activity to the extent it desires.

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C. PAYMENT TERMS

All monies or accounts due Dealer from Distributor will be considered net of Dealer’s indebtedness to Distributor. Distributor may deduct or offset any amounts due or to become due from Dealer to Distributor, or any amounts held by Distributor, from or against any sums or accounts due or to become due from Dealer to Distributor. Payments by Dealer to Distributor shall be made in such a manner as prescribed by Distributor and shall be applied against Dealer’s indebtedness in accordance with Distributor’s policies and practices. If Dealer disputes any deduction or offset imposed by Distributor pursuant to this Section VII.C, it shall provide written notice of such dispute to Distributor within ninety (90) days of the date on which Distributor imposed such deduction or offset. If Dealer fails to provide such written notice to Distributor within that 90-day period, it shall be deemed to have waived any right that it may have to challenge such deduction or offset before any court, administrative agency or governmental body.

D. UNIFORM ACCOUNTING SYSTEM

Dealer agrees to maintain its financial books and record in accordance with the smart USA Accounting Requirements, as amended from time to time by Distributor. In addition, Dealer shall furnish to Distributor complete and accurate financial or operating information, including without limitation, a financial and/or operating statement covering the current month and calendar year-to-date operations and showing the true and accurate condition of Dealer’s business. Dealer shall promptly furnish to Distributor copies of any adjusted annual statements, including any and all adjusted year-end statements prepared for tax or any other purposes. All such information shall be furnished by Dealer to Distributor via Distributor’s electronic communications network and in such format and at such times as prescribed by Distributor. If requested by Distributor, Dealer shall furnish to Distributor an audited annual financial statement.

E. RECORDS MAINTENANCE

Dealer agrees to keep complete, accurate and current records regarding its sale, leasing and servicing of smart USA Car Products for a minimum of seven (7) years, exclusive of any retention period required by any government entity. Dealer shall prepare, keep current and retain records in support of requests for reimbursement for warranty and policy work performed by Dealer in accordance with the Warranty Manual.

F. EXAMINATION OF DEALERSHIP ACCOUNTS AND RECORDS

Distributor shall have the right at all reasonable times and during regular business hours to inspect the Dealership Facilities and to examine, audit and reproduce all records, accounts and supporting data relating to all dealership operations for any line of vehicles conducted in the Dealership Facilities or at the Approved Location(s), including without limitation, sales reporting, service and repair of smart USA Passenger Car Products by Dealer.

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G. TAXES

Dealer shall be responsible for and duly pay all sales taxes, use taxes, excise taxes and other governmental or municipal charges imposed, levied or based upon the purchases or sale of smart USA Passenger Car Products by Dealer, and shall maintain accurate records of the same.

H. CONFIDENTIALITY

Distributor agrees that it shall not provide any data or documents submitted to it by Dealer to any third party, other than DAG, unless authorized by Dealer, required by law, or required to generate composite or comparative data for analytic purposes. Dealer agrees to keep confidential and not to disclose, directly or indirectly, any information that Distributor designates as confidential. In addition, Dealer agrees to comply with all applicable laws relating to the handling, security, and sharing of lead and customer data provided by Distributor or DAG.

I. smart USA COMMUNICATIONS SYSTEM AND PROPRIETARY MANUFACTURER SYSTEMS

Distributor has established the smart USA Dealer Communications System (“DCS”) to retrieve information from and disseminate information to Dealer. The DCS collects parts, warranty and financial data from Dealer, and provides access to various reports, data bases and administrative messages to Dealer. Dealer shall utilize the DCS to provide such information to Distributor as Distributor shall specify from time to time. Dealer shall acquire, install and maintain at its expense the necessary equipment and systems compatible with the DCS, as well as other proprietary manufacturer systems, which are deemed necessary by Distributor and DAG to transact business and serve customers in the most efficient manner.

J. SALES REPORTING

Dealer agrees to accurately report to Distributor, with such relevant information as Distributor may reasonably require, the delivery of each smart USA Passenger Car and pre-owned smart USA vehicle to an ultimate consumer, and to furnish Distributor with such other reports as Distributor may reasonable require in accordance with Distributor’s Ultimate Consumer RDR Provision or such other sales reporting requirements (i.e. reporting of sales, customer traffic, and customer order banks) as Distributor may establish from time to time. All new car vehicles must be reported no later than 48 hours after delivery.

IX. TRANSFERS

A. SALE OF ASSETS OR OWNERSHIP INTEREST

This is a personal service agreement that Distributor has entered into in reliance upon personal qualifications, reputation, integrity, expertise and commitment of Owners and Dealer Operator. For this reason, Dealer agrees to obtain Distributor’s prior written consent to any proposed sale or transfer of Dealer’s principal assets or any ownership interest of Owner, which consent shall not be unreasonably withheld.

Distributor shall not be obligated to execute a new Agreement with a proposed transferee of such assets or ownership interest unless Dealer first makes arrangements acceptable to Distributor to satisfy any outstanding indebtedness to Distributor.

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B. RIGHT OF FIRST REFUSAL OR OPTION TO PURCHASE

1. Rights Granted

If a proposal to sell Dealer’s principle assets to transfer the majority ownership interest in Dealer is submitted by Dealer to Distributor, or in the event of the death of the majority Owner of Dealer, Distributor has the right of first refusal or option to purchase such assets or ownership interest, including any leasehold interest or reality. Distributor’s exercise of its right or option under this Section IX.B supersedes Dealer’s right to transfer its interest in, or ownership of, the dealership. Distributor’s right or option may be assigned by it to any third party and Distributor hereby guarantees the full payment to Dealer of the purchase price assigned to such assignee. Distributor may disclose the terms of any pending buy/sell agreement and any other relevant dealership performance information to any potential assignee. Distributor’s rights under this section IX.B will be binding on and enforceable against any assignee or successor in interest of Dealer or purchaser of Dealer’s assets. In the event the proposed sale of assets or transfer in majority interest (“Proposed Sale”) includes assets or interests that are not related to Dealer’s smart franchise, the right of first refusal shall apply only to portions of the Proposed Sale that relates to the smart franchise. If the buy/sell agreement does not specifically reference the portion of the purchase price of the Proposed Sale that relates to the smart franchise then Distributor shall reasonably determine the purchase price of the smart related portion of the Proposed Sale. In the event of a transfer of majority ownership interest in a dealership entity which holds both smart and non-smart related assets and liabilities, Dealer shall transfer all non-smart related assets and liabilities from the dealership entity prior to the closing of the transaction so that at the closing Distributor or its assignee is acquiring the ownership interest of an entity that holds only smart related assets and liabilities.

Anything herein to the contrary notwithstanding, Distributor shall not have a right of first refusal or option to purchase Dealer’s principle assets or the majority interest in Dealer if the proposed transferee is the spouse or a child of an Owner and such spouse or child meets the criteria then currently used by Distributor in qualifying owners of smart USA Passenger Car dealers. If the proposed transferee fails to meet such criteria due to insufficient personal qualifications or expertise, Distributor may, in its sole discretion, approve the transfer subject to the proposed transferee’s successful completion of such training as Distributor may require. If the proposed transferee fails to complete such training successfully or otherwise fails to meet the criteria then currently used by Distributor in qualifying such owners within the time period prescribed by Distributor, Distributor may thereafter exercise its right of first refusal or option to purchase under this section IX.B.

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2. Exercise of Distributor’s Rights

Distributor shall have sixty (60) days from the following events within which to exercise its option to purchase or right of first refusal: (i) Distributor’s receipt of all data and documentation customarily required by it to evaluate a proposed transfer of ownership; (ii) Distributor’s receipt of notice from Dealer of the death of the majority Owner of Dealer, or (iii) Distributor’s disapproval of any application submitted by Owner’s heirs pursuant to Section X. Distributor’s exercise of its right of first refusal under this Section IX.B neither shall be dependent upon nor require its prior refusal to approve the proposed transfer.

3. Right of First Refusal

If Dealer has entered into a bona fide written buy/sell agreement for its dealership business or assets, Distributor’s right under this Section IX.B is a right of first refusal, enabling Distributor to assume the buyer’s rights and obligations under such buy/sell agreement, and to cancel this Agreement and all rights granted Dealer. Upon Distributor’s request, Dealer agrees to provide other documents relating to the proposed transfer and any other information which Distributor deems appropriate, including, but not limited to, those reflecting other agreements or understandings between the parties to the buy/sell agreement. If Dealer refuses to provide such documentation or to state in writing that no such documents exist, it shall be conclusively presumed that the buy/sell agreement is not a bona fide agreement. If Dealer withdraws its proposal in writing within ten (10) days following Dealer’s receipt of Distributor’s notice exercising its right of first refusal, such right shall be null and void.

4. Option to Purchase

In the event of the death of the majority Owner of if Dealer submits a proposal which Distributor determines is not bona fide or in good faith, Distributor has the option to purchase the principal assets of Dealer utilized in Dealership Operations, including real estate and leasehold interest, and to cancel this Agreement and the rights granted Dealer hereunder. The purchase price of the dealership assets will be determined by good faith negotiations between the parties.

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5. Dealer’s Obligations

Upon Distributor’s exercise of its right or option and tender of performance under the buy/sell agreement or upon whatever terms may be expressed in the buy/sell agreement, Dealer shall forthwith transfer the affected real property by warranty deed conveying marketable title free and clear of all liens, claims, mortgages, encumbrances, tenancies and occupancies. The warranty deed shall be in proper form of recording, and Dealer shall deliver complete possession of the property and deed at the time of closing. Dealer shall also furnish to Distributor all copies of any easements, licenses, or other documents affecting the property or Dealership Operations and shall assign any permits or license that are necessary or desirable for the use of or appurtenant to the property of the conduct of such operations. Dealer also agrees to execute and deliver to Distributor instruments satisfactory to Distributor conveying title to all personal property, including leasehold interests, involved in the transfer or sale to Distributor. If any personal property is subject to any lien or charge of any kind, Dealer agrees to procure the discharge and satisfaction thereof prior to the closing of the sale of such property to the Distributor.

X. SUCCESSION RIGHTS UPON DEATH OR INCAPACITY

A. SUCCESSION TO OWNERSHIP AFTER DEATH OF OWNER

In the event that an Owner dies and his or her interest in Dealer passes directly to any person or persons (“Heirs”) who wish to succeed to Owner’s interest, then Owner’s legal representative must notify Distributor within sixty (60) days of the death of Owner of such Heir’s or Heirs’ intent to succeed Owner. The legal representative also must then designate a proposed Dealer Operator for Distributor’s approval. The effect of such notice from Owner’s legal representative will be to suspend any notice of termination provided for in Section X.B.4 issued hereunder.

Upon delivery of such notice, Owner’s legal representative shall immediately request any person(s) identified by it as intending to succeed Owner and the designated candidate for Dealer Operator to submit an application and to provide all personal and financial information that Distributor may reasonably and customarily require in connection with its review of such applications. All requested information must be provided promptly to Distributor and in no case later than thirty (30) days after receipt of such request from Owner’s legal representative. Distributor shall have sixty (60) days after its receipt of all requested information in which to: (i) review such application(s) pursuant to the then current criteria generally applied by Distributor in qualifying owners and/or dealer operators of smart USA passenger car dealers, and (ii) either approve or disapprove the application(s). If all requested information is not received by Distributor within thirty (30) days of Owner’s legal representative’s request, Distributor shall have no obligation to review and approve or disapprove such application(s). If Distributor approves the application(s), it shall offer to enter into a new smart USA Passenger Car Dealer Agreement with Owner’s Heir(s) in the form then currently in use, subject to such additional conditions and for such term as Distributor deems appropriate.

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In the event that Distributor does not approve the designated Heir(s) or designated candidate for Dealer Operator, or if Owner’s legal representative withdraws his or her notice of the intent of Heir(s) to succeed as Owner(s), or if the legal representative or any proposed Owner or Dealer Operator fails to timely provide the required information, Distributor may reinstate or issue a notice of termination. This Section X.A. is subject to, and shall not be deemed to waive, Distributor’s right to exercise its option to purchase as set forth in Section IX.

If Distributor has notified Dealer that it does not plan to continue to have a smart USA passenger car dealer in Dealer’s AOR, Distributor shall have no obligation to execute a new smart USA Passenger Car Dealer Agreement with Owner’s Heir(s) pursuant to this Section X.

B. INCAPACITY OF OWNER

The parties agree that, as used herein, incapacity shall refer to any physical or mental ailment that, in Distributor’s opinion, adversely affects an Owner’s ability to meet his or her obligations under this Agreement. Distributor may terminate this Agreement when an incapacitated Owner also is the Dealer Operator identified herein.

Prior to the effective date of any notice of termination, an incapacitated Owner who is also the Dealer Operator, or his or her legal representative, may propose a new candidate for the position of Dealer Operator. Such proposal shall be in writing and shall suspend any pending notice of termination until Distributor advises Dealer of its approval or disapproval of the new candidate. Upon receipt of such notice, Distributor and Dealer shall follow the qualification procedures set forth in Section X.A.

C. NOMINATION OF SUCCESSOR PRIOR TO DEATH OR INCAPACITY OF OWNER

An Owner owning a majority of Dealer’s stock may nominate a candidate to assume ownership and/or position of Dealer Operator of the dealership upon his or her death or incapacity.

As soon as practicable after such nomination, Distributor will request such personal financial information from the nominated Owner and/or Dealer Operator candidate as it reasonably and customarily may require in evaluating such candidates. Distributor shall apply criteria then currently used by Distributor in qualifying owners and/or dealer operators of smart USA passenger car dealers. Upon receipt of all requested information, Distributor shall either approve or disapprove such candidate. If Successor Addendum and shall remain in effect for five (5) years if the proposed candidate continues to comply with the then current criteria used by Distributor in qualifying such candidates. If Distributor does not initially qualify the candidate, Distributor agrees to review the reason(s) for its decision with Owner. Owner is free at any time to renew its nomination. However, in such instances, the candidate must again qualify pursuant to the then current criteria. Owner may, by written notice, withdraw a nomination at any time, even if Distributor has previously qualified said candidate.

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XI. TERMINATION

A. VOLUNTARY TERMINATION BY DEALER

Dealer shall have the right to terminate this Agreement at any time by sending notice of such termination to smart USA, by certified mail, return receipt requested, telegram, or overnight mail service at least sixty (60) days in advance of the effective date thereof.

B. TERMINATION FOR CAUSE

1. Immediate Termination

Dealer and Distributor agree that the following conduct is within Dealer’s control and is so contrary to the goals, purposes and objectives of this Agreement as to warrant its immediate termination. Accordingly, Dealer agrees that if it engages in any of the following types of conduct, Distributor shall have the right to terminate this Agreement immediately:

(i) Any attempted or actual sale, transfer or assignment by Dealer of this Agreement or any of the rights granted Dealer hereunder, or any attempted or actual transfer, assignment or delegation by Dealer of any of the responsibilities assumed by it under this Agreement, without prior written consent of Distributor;

(ii) Subject to the provisions of Section IX, a change by operation of law or otherwise in the direct or indirect ownership of Dealer, whether voluntary of involuntary, from that set forth in the Final Paragraph of this Agreement, except as expressly permitted herein, without the prior written consent of Distributor;

(iii) Removal, resignation, withdrawal or elimination from Dealer for any reason of the Dealer Operator; provided, however, Distributor shall give Dealer a reasonable period of time within which to replace such person with a Dealer Operator satisfactory to Distributor;

(iv) The failure of Dealer to conduct all Dealership Operations required by this Agreement during and for not less than the customary and lawful hours of five (5) consecutive business days, except in the event such closure or cessation of operation is caused by some physical event beyond the control of the Dealer, such as strikes, civil war, riots, fires, floods, earthquakes, or other acts of God;

(v) Any undertaking by Dealer to conduct, directly or indirectly, any of the Dealership Operations at a location or facility other than those specified in Paragraph E and the Final Paragraph of this Agreement for that Dealership Operation;

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(vi) Insolvency of Dealer; voluntary institution by Dealer of any proceeding under the federal bankruptcy laws or under any state insolvency law; institution against dealer of any proceeding under the federal bankruptcy laws or under any state insolvency law which is not vacated within thirty (30) days from the institution thereof; appointment of a receiver, trustee or other office having similar powers for Dealer or Dealer’s business, provided such appointment is not vacated within thirty (30) days of the date of such appointment; execution by Dealer of an assignment for the benefit of creditors; or any levy under attachment, foreclosure, execution or similar process whereby a third party acquires rights to a significant portion of the assets of Dealer necessary for the performance of Dealer’s responsibilities under this Agreement or to the operation or ownership of Dealer, which is not within thirty (30) days from the date of such levy vacated or removed by payment or bonding;

(vii) Any material misrepresentation by Dealer or any person named in the Final Paragraph of this Agreement as to any fact relied on by Distributor in entering into, amending or continuing with this Agreement, including without limitation any representation concerning the ownership, management, or capitalization of Dealer;

(viii) The conviction in a court of original jurisdiction of Dealer or Owner of a crime affecting the Dealership Operations or of any felony, or any willful failure to Dealer to comply with the provisions of any laws, ordinances, rules, regulations, or orders relating to the conduct of Dealership Operations;

(ix) The failure of Dealer to obtain or maintain any license, permit or authorization necessary for the conduct by Dealer of Dealership Operations pursuant to this Agreement, or the suspension or revocation of such license, permit or authorization.

1A. Submission by Dealer to Distributor of:

(i) A knowingly false or fraudulent report or statement;

(ii) a knowingly false or fraudulent claim (or statement in support thereof) for payment, reimbursement or for any discount, allowance, refund, rebate, credit or other incentive under any plan that may be offered by Distributor, whether or not Dealer offers or makes restitution;

(iii) False financial information;

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(iv) False sales reporting data; or

(v) Any false report of statement relating to pre-delivery inspection, testing, warranties, service, repair or maintenance required to the performed by Dealer; or

2. Termination Upon Sixty Days of Notice

The following conduct violates the terms and conditions of this Agreement and, if Dealer engages in such conduct, Distributor shall have the right to terminate this Agreement upon sixty (60) days notice if Dealer fails to cure such conduct within the sixty-day period provided in such notice:

(i) Failure of Dealer to pay Distributor for any smart USA Passenger Car Products;

(ii) Failure of Dealer to establish or maintain the required net working capital or adequate flooring and lines of credit;

(iii) Any dispute, disagreement or controversy among managers, officers or Owners of Dealer that, in the reasonable opinion of Distributor, adversely affects the ownership, operation, management, business, reputation or interests of Dealer or Distributor;

(iv) Impairment of the reputation or financial standing of Dealer subsequent to the execution of this Agreement;

(v) Refusal to permit Distributor to examine or audit Dealer’s accounting records as provided herein upon receipt by Dealer from Distributor of written notice requesting such permission or information;

(vi) Failure by Dealer to timely furnish accurate sales or financial information and related supporting data; or

(vii) Breach or violation by Dealer of any other term or provision of this Agreement.

3. Termination for Failure of Performance

If, upon evaluation of Dealer’s performance pursuant to Sections II.F, IV.F, V.B or VI.E herein, Distributor concludes that Dealer has failed to perform adequately its marketing and sales, service or customer satisfaction responsibilities or to provide adequate dealership facilities, Distributor shall issue to Dealer a Dealer Improvement Addendum notifying it of such failure(s). Distributor will endeavor to review promptly with Dealer the nature and extent of such failure(s) and will grant Dealer one hundred eighty (180) days or such other period as may be required by law to correct such failure(s). If Dealer fails or refuses to correct such failure(s) or has not made substantial progress towards remedying such failure(s) at the expiration of such period, Distributor may terminate this Agreement upon sixty (60) days notice or such other notice as may be required by law.

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4. Termination Upon Death or Incapacity

Subject to certain exceptions identified in Section X, Distributor may terminate this Agreement in the event of the death or an Owner or upon in the incapacity of any Owner’s legal representative. Termination upon either of these events shall be effective ninety (90) days from the date of such notice.

C. TERMINATION UPON TERMINATION OF DISTRIBUTORSHIP

Distributor may terminate this Agreement at any time by written notice to Dealer, such termination to be effective thirty (30) days after receipt of notice by Dealer unless otherwise mutually agreed in writing, if any licensing or distribution agreement pursuant to which Distributor is distributor for smart USA Passenger Car Products in the United States of America and Puerto Rico shall terminate or be terminated.

D. TERMINATION FOR FAILURE OF DISTRIBUTOR TO BE LICENSED

If Distributor fails to obtain or maintain any license, permit, or authorization necessary for Distributor’s performance of its obligations under this Agreement or if such license, permit or authorization is suspended or revoked, and such suspension or revocation continues for a period of five (5) days, either party may immediately terminate this Agreement by giving notice to the other party.

E. TERMINATION UPON OFFERING TO ENTER INTO A NEW OR AMENDED PASSENGER CAR DEALER AGREEMENT

Distributor may terminate this Agreement at any time on or after the expiration of the period commencing on the effective date of this Agreement and ending three (3) years thereafter by giving Dealer ninety (90) days prior notice thereof and offering to enter into a new or amended form of Passenger Car Dealer Agreement with Dealer in a form being offered generally to smart USA passenger car dealers.

F. NOTICE OF TERMINATION

Any notice of termination under this Agreement shall be in writing and shall be mailed to the person(s) designated to receive such notice, via overnight mail, or shall be delivered in person. Such notice shall be effective upon the date of receipt. Distributor shall state the grounds on which it relies in its termination of Dealer, and shall have the right to amend such notice as appropriate. Distributor’s failure to refer to additional grounds for termination shall not constitute a waver of its right later to rely upon such grounds.

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G. CONTINUANCE OF BUSINESS RELATIONS

Upon receipt of any notice of termination, Dealer agrees to conduct itself and its operation until the effective date of termination in a manner that will not injure the reputation or goodwill of the smart Marks or smart USA Marks or Distributor or DAG.

H. REPURCHASE PROVISIONS

1. Distributor’s Obligations

Upon the termination of this Agreement, Distributor shall have the right to cancel any and all shipments of smart USA Passenger Car Products scheduled for delivery to Dealer, and Distributor shall repurchase from Dealer the following:

(i) New, unused, unmodified and undamaged smart USA Passenger Cars then unsold in Dealer’s inventory that are of the then current or prior model year. The prices of such passenger cars shall be the same as those at which they were originally purchased by Dealer, less all prior refunds or other allowances made by Distributor to Dealer with respect thereto.

(ii) New, unused and undamaged Genuine smart USA Passenger Car Parts and Accessories then unsold in Dealer’s inventory that are in good and saleable condition and are listed in the current parts catalog. The prices for such parts and accessories shall be the prices last established by Distributor for the sale of the identical parts or accessories to smart USA passenger car dealers in the area in which Dealer is located less any discounts, allowances or prior refunds provided by Distributor to Dealers.

(iii) Special service tools recommended by Distributor for then owned smart USA Passenger Cars. The prices for such special service tools will be the price paid by Dealer less depreciation calculated on a straight-line basis over a three-year period, or such other price as the parties may negotiate.

(iv) Signs that Distributor has recommended for identification of Dealer. The price of such signs shall be the price paid by Dealer less appropriate depreciation calculated on a straight-line basis over a three-year period, or such other price as the parties may negotiate.

2. Dealer’s Responsibilities

Distributor’s obligations to repurchase the items set forth in this Section XI.H are contingent upon Dealer fulfilling all of the following obligations:

(i) Within thirty (30) days after the effective date of termination of this Agreement, Dealer shall deliver or mail to Distributor a detailed inventory of all items referred to in this Section XI.H that it requests Distributor repurchase and shall certify that such list is true and accurate.

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(ii) Dealer shall be entitled to request repurchase of only those items that it purchased from Distributor, unless Distributor agrees otherwise.

(iii) Dealer will deliver to Distributor at Distributor’s place of business and at Dealer’s expense all smart USA Passenger Car Products and special service tools to be repurchased by Distributor. If Dealer fails to do so, Distributor may transfer such items and deduct the cost therefore from the repurchase price.

(iv) Dealer will execute and deliver to Distributor instruments satisfactory to Distributor conveying good and marketable title to the aforesaid items to Distributor. If such items are subject to any lien or charge of any kind, Dealer will procure the discharge in satisfaction thereof prior to their repurchase by Distributor. Dealer will comply with the requirements of any state or federal laws that relate to the repurchase, including bulk sales or transfer laws.

(v) Dealer will provide to Distributor in writing the names and addresses of all of its smart USA Passenger Car service customers.

(vi) Dealer will deliver to Distributor at Distributor’s place of business or to a third party designated by the Distributor and at the Dealer’s expense any and all sales instruction manuals, promotional materials, technical or service literature, advertising and other printed materials, computer hardware and software or other media relating to smart USA Passenger Car Products then in Dealer’s possession and that were acquired or obtained by Dealer from Distributor.

(vii) Dealer will remove, at its own expense, all signage and corporate identification from Dealer’s Approved Location(s), including all smart Marks and smart USA Marks, before it is eligible for payment hereunder.

3. Payment by Distributor

Distributor will pay Dealer for such items as Dealer may request be repurchased and that quantity hereunder as soon as practicable upon Dealer’s compliance with all of the obligations set forth herein and upon computation of any outstanding indebtedness of Dealer to Distributor.

Distributor shall have the right to offset from any amounts to Dealer hereunder the total sum of Dealer’s outstanding indebtedness to Distributor.

If Dealer disagrees with Distributor’s valuation of any item herein, and Dealer and Distributor have not resolved their disagreement within ninety (90) days of the effective date of termination of this Agreement, Distributor shall pay to Dealer the amount of which it reasonably believes Dealer is entitled.

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XII. DEFENSE AND INDEMNIFICATION

A. DEFENSE AND INDEMNIFICATION BY DISTRIBUTOR

Distributor agrees to assume the defense of Dealer and to indemnify and hold Dealer harmless in any lawsuit naming Dealer as a defendant and involving any smart USA Passenger Car Product when the lawsuit also involves allegations of:

1. Bodily injury or property damage arising out of an occurrence allegedly caused solely by a defect or failure to warn of a defect in design, manufacture or assembly of a smart USA Passenger Car Product, provided that the defect could not reasonably have been discovered by Dealer during the pre-delivery inspections and service of the smart USA Passenger Car Product or otherwise;

2. Any misrepresentation or misleading statement or unfair or deceptive trade practice of Distributor; or

3. Any substantial damage to a smart USA Passenger Car Product purchased by Dealer from Distributor that was repaired by Distributor and where Dealer had not been notified of such damage in writing prior to the delivery of the subject passenger car, part or accessory to a retail customer; and

Provided:

4. That Dealer delivers to Distributor, in a manner to be designated by Distributor, within twenty (20) days of the service of any summons or complaint, copies of such documents and requests in writing a defense and/or indemnification therein (except as provided in Section XII.D below);

5. That the complaint does not involve allegations of dealer misconduct, including but not limited to, improper or unsatisfactory service or repair, misrepresentation, or any claim of Dealer’s unfair or deceptive trade practice;

6. That the smart USA Passenger Car Product which is the subject of the lawsuit was not altered by or for Dealer;

7. That Dealer agrees to cooperate fully in the defense of such action as Distributor may reasonably require; and

8. That Dealer agrees that Distributor may offset any recovery on Dealer’s behalf against any indemnification that may be required hereunder.

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B. DEFENSE AND INDEMNIFICATION BY DEALER

Dealer agrees to assume the defense of Distributor or DAG and to indemnify and hold them harmless in any lawsuit naming Distributor or DAG as a defendant when the lawsuit involves allegations of

1. Dealer’s failure to comply, in whole or in part, with any obligation assumed by Dealer under this Agreement;

2. Dealer’s negligent or improper inspection, preparation, repair or servicing of a new or used smart USA Passenger Car Product, or such other motor vehicles or equipment as may be sold or serviced by Dealer;

3. Dealer’s alleged breach of any contract or warranty other than that provided by Distributor or DAG;

4. Dealer’s alleged misleading statements, misrepresentations, or deceptive or unfair trade practices;

5. Any modification or alteration made by or on behalf of Dealer to a smart USA Passenger Car Product, except those made pursuant to the express written instruction or with the express written approval of Distributor;

6. Any change in the employment status or in the terms or conditions of employment of any officer, employee, or agent of Dealer or of any Owner or the Dealer Operator, including but not limited to claims for breach of employment contact, wrongful termination or discharge, tortuous interference with contract or economic advantage, and similar claims; and

Provided:

7. That Distributor delivers to Dealer, within twenty (20) days of the service of any summons or complaint, copies of such documents, and requests in writing a defense and/or indemnification therein (except as provided in Section XII.D below);

8. That Distributor agrees to cooperate fully in the defense of such action such as Dealer may reasonably require; and

9. That the complaint does not involve allegations of liability premised upon Distributor’s separate conduct or omissions.

C. CONDITIONAL DEFENSE AND/OR INDEMNIFICATION

In agreeing to defend and/or indemnify each other, Dealer and Distributor may make their agreement conditional on the continued existence of that state of facts as then known to such party and may provide for the withdrawal of such defense and/or indemnification at such time as facts arise which, if known at the time of the original request for a defense and/or indemnification, would have caused either Dealer or Distributor to refuse such request.

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The party withdrawing from its agreement to defend and/or indemnify shall give timely notice of its intent to withdraw. Such notice shall be in writing and shall be effective upon receipt. The withdrawing party shall be responsible for all costs and expenses of defense up to the date of receipt of its notice to withdrawal.

D. THE EFFECT OF SUBSEQUENT DEVELOPMENTS

In the event that subsequent developments in a case make clear that the allegations which initially precluded a request or an acceptance of a request for a defense and/or indemnification are no longer at issue therein or are without foundation, any party having a right to a defense and/or indemnification hereunder may tender such request to the other party and the non-tendering party shall be required to agree to such subsequent request for a defense and/or indemnification where the non-tendering party would not be unduly prejudiced by such delay.

E. TIME TO RESPOND AND RESPONSIBILITIES OF THE PARTIES

Dealer and Distributor shall have sixty (60) days from the receipt of a request for a defense and/or indemnification to conduct an investigation to determine whether or not, or under what conditions, it may agree to defend and/or indemnify pursuant to this Section.

If local rules require a response to the complaint in the lawsuit prior to the time provided hereunder for a response for such request, the requesting party shall take all steps necessary, including obtaining counsel, to protect its own interest in the lawsuit until Dealer or Distributor assumes the requested defense and/or indemnification. In the event that Dealer and Distributor agrees to assume the defense and/or indemnification of a lawsuit, it shall have the right to engage and direct counsel of its own choosing and, except in cases where the request is made pursuant to Section XII.D above, shall have the obligations to reimburse the requesting party for all reasonable costs and expenses including actual attorneys’ fees, incurred prior to such assumption.

XIII. NOTICE OF BREACH OR FAILURE TO ACT IN GOOD FAITH

In the interest of maintaining a harmonious relationship between Distributor and Dealer, if the Dealer believes that Distributor has breached this Agreement or has failed to act in good faith toward Dealer, Dealer shall report its belief and the bases therefore promptly, in writing, to the President of Distributor. For the purposes of this Section XII, the term “good faith” shall mean Distributor and its representatives acting in a fair, honest, commercially reasonable, equitable, and impartial manner toward Dealer. It is the intention of the parties that the purpose of the requirement of such notification by Dealer is to afford Distributor sufficient opportunity to consider the claim of Dealer and if, in the sole determination of Distributor, such claim is found to be meritorious, to undertake such measures as may be necessary to correct the condition of which Dealer complains.

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XIV. GENERAL PROVISIONS

A. NOTICES

Except as otherwise specifically provided herein, any notice required to be given by either party to the other shall be in writing, shall be delivered personally or by mail to the party at its address as stated in this Agreement, and shall be effective upon receipt by hand delivery or upon mailing.

B. IMPLIED WAIVERS

The failure of either party at any time to require performance by the other party of any provision herein shall in no way affect the right of such party to require such performance at any time thereafter. The waiver by any party of a breach of any provision herein shall not constitute a waiver of any succeeding breach of the same or any other provision or constitute a waiver of the provision itself.

C. SOLE AGREEMENT OF THE PARTIES

This Agreement terminates and supersedes all prior agreements between the parties relating to the subject matters covered herein. There are no prior agreements or understandings, either oral or written, between the parties affecting this Agreement or relating to the sale or service of smart USA Passenger Car Products, except as otherwise specifically provided for or referred to in this Agreement. Dealer acknowledges that no representations or statements other than those expressly set forth therein were made by Distributor or any officer, employee, agent, or representative thereof, or were relied upon by Dealer in entering into this Agreement.

D. DEALER NOT AN AGENT OR REPRESENTATIVE

Dealer is an independent business. This Agreement does not constitute Dealer the agent or legal representative of Distributor or DAG for any purposes whatsoever. Dealer is not granted any express or implied right or authority to assume or create any obligation on behalf of or in the name of Distributor or DAG or to bind Distributor or DAG in any manner whatsoever. No fiduciary obligations are created by this Agreement.

E. ASSIGNMENT OF RIGHTS OR DELEGATION OF DUTIES

This is a personal service agreement and may not be assigned or sold in whole or in part, directly or indirectly, voluntarily or by operation of law, by the Dealer without the prior written consent of Distributor. Any attempted transfer, assignment or sale without Distributor’s prior written consent will be void and not binding upon Distributor.

F. NO FRANCHISE FEE

Dealer warrants that it has paid no fee, nor has it provided any goods or services in lieu of same, to Distributor in consideration of entering into this Agreement. The sole consideration for Distributor’s entering into or continuing this Agreement is Owner’s and Dealer Operator’s ability, integrity, assurance of personal services, and expressed intention of deal fairly and equitably with Distributor and the public.

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G. BENEFIT

This Agreement is entered into by and between Distributor and Dealer for their sole and mutual benefit. Neither this Agreement nor any specific provision contained in it is intended or shall be construed to be for the benefit of any third party.

H. MICHIGAN LAW

This Agreement shall be deemed to have been entered into in the State of Michigan, and all questions concerning the validity, interpretation, or performance of any of its terms, or of any contractual rights or obligations of the parties hereto, shall be governed by and resolved in accordance with the internal laws of the State of Michigan, including, without limitation, its statutes of limitations.

XV. DEFINITIONS

As used in this Agreement, the parties agree that the following terms shall be defined exclusively as set forth below.

A.	DEALER: The natural person or entity that executes the Agreement and is authorized by Distributor to sell and service smart USA Passenger Car Products as defined herein.
B.	OWNER: The persons identified in Paragraph D and the Final Paragraph of this Agreement.
C.	DEALER OPERATOR: The person identified in Paragraph D and the Final Paragraph of this Agreement.
D.	DEALERSHIP FACILITIES: The buildings, improvements, fixtures and equipment situated at the Approved Location(s) and identified in Paragraph E and the Final Paragraph of this Agreement.
E.	APPROVED LOCATION(S): The location(s) and any facilities thereon designated in Paragraph E and the Final Paragraph of this Agreement that Distributor has approved for the Dealership Operation(s) specified therein.
F.	DEALERSHIP OPERATIONS: All dealer functions contemplated by this Agreement including, without limitation, sale and servicing of smart USA Passenger Car Products, use and display of smart Marks or smart USA Marks and smart USA Passenger Car Products, rental and leasing of smart USA Passenger Car, sale of pre-owned smart USA Vehicles, body shop work, financing or insurance services and any other activities undertaken by Dealer in connection with smart USA Passenger Car Products whether conducted directly or indirectly by Dealer.
G.	DAG: Daimler Aktiengesellschaft, a corporation of the Federal Republic of Germany and the manufacturer of smart USA Passenger Cars, and any successor thereto.

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H.	smart or smart USA MARKS: The various smart and smart USA trademarks, service marks, names, logos, and designs that Dealer is authorized to use in the sale and servicing of smart USA Passenger Car Products.
I.	smart USA PASSENGER CARS: All new smart USA passenger cars that Distributor is authorized to sell to smart USA passenger car dealers in the United States of America and Puerto Rico pursuant to a written distributor agreement between DAG and Distributor, and that Distributor, in its sole discretion, sells to Dealer for resale.
J.	GENUINE smart USA PASSENGER CAR PARTS AND ACCESSORIES: All smart USA passenger car parts and accessories manufactured by or on behalf of Distributor or DAG and such other parts and accessories specifically approve by DAG for use in servicing smart USA Passenger Cars that Distributor sells to Dealer for resale.
K.	smart USA PASSENGER CAR PRODUCTS: All smart USA Passenger Cars and Genuine smart USA Passenger Car Parts and Accessories that Distributor sells to Dealer for resale.
L.	COMPETITIVE VEHICLES: Those new vehicles that are considered by Distributor to be directly competitive with smart USA Passenger Cars.
M.	WARRANTY MANUAL: The smart USA Warranty Policies and Procedures Manual.

XVI. ADDITIONAL PROVISIONS

In consideration of Distributor’s agreement to appoint dealer as a smart USA Passenger Car dealer, Dealer further agrees:

All terms and conditions in this Agreement inconsistent with the laws and rules of the State in which Dealer’s smart USA dealership facilities specified in this Agreement are located are of no force and effect.

If any provision herein contravenes the laws or regulations of any state or other jurisdiction wherein this agreement is to be performed, or denies access to the procedures, forums, or remedies provided for by such laws or regulations, such provision shall be deemed to be modified to conform to such laws or regulations, and all other terms and provisions shall remain in full force.

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EX-12

Exhibit 12

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

	Year Ended December 31,
	2009			2008			2007			2006			2005
Income (loss) from continuing operations before taxes	$	129.4		$	(517.2	)	$	183.0		$	190.3		$	185.9
Less undistributed earnings of equity method investments		(13.8	)		(16.5	)		(4.1	)		(8.2	)		(4.3	)
Plus distributed earnings of equity method investments		21.3			3.5			6.2			0.3			—
Plus amortization of capitalized interest		0.8			0.8			0.6			0.5			0.3
	$	137.7		$	(529.4	)	$	185.7		$	182.9		$	181.9
Plus:
Fixed charges:
Other interest expense (includes amortization of deferred financing costs)	$	55.2		$	54.5		$	55.3		$	48.4		$	48.5
Debt discount amortization		13.0			14.0			12.9			11.1			—
Floor plan interest expense		35.7			64.2			73.1			58.2			45.2
Capitalized interest		0.9			4.8			5.5			7.1			4.0
Interest factor in rental expense		54.5			52.8			49.6			43.2			34.8
Total fixed charges	$	159.3		$	190.3		$	196.4		$	168.0		$	132.5
Less:
Capitalized interest	$	0.9		$	4.8		$	5.5		$	7.1		$	4.0
Earnings	$	296.1		$	(343.9	)	$	376.6		$	343.8		$	310.4
Ratio of earnings to fixed charges		1.9			—	(a)		1.9			2.0			2.3

(a) In the year ended December 31, 2008, earnings were insufficient to cover fixed charges by $534.2 million due to a non-cash impairment charge of $643.5 million.

EX-21

Exhibit 21

Legal Name	Jurisdiction	Assumed Name or d/b/a
Ascot Garage Company Limited	England & Wales
Atlantic Auto Funding Corporation	Delaware
Atlantic Auto Second Funding Corporation	Delaware
Atlantic Auto Third Funding Corporation	Delaware
Auto Care Insurance Agency, Inc.	Puerto Rico	United Auto Insurance
Auto Mall Payroll Services, Inc.	Florida
Automotive Media Holdings, LLC	Delaware
Automotive Strategy Limited	England & Wales
Brett Morgan Chevrolet-GEO, Inc.	Delaware	Landers Chevrolet Hummer
Central Ford Center, Inc.	Arkansas
Central Garage (Surrey) Limited	England & Wales
CJNS, LLC	Delaware	Jaguar North Scottsdale, Aston Martin Scottsdale
Classic Auto Group, Inc.	New Jersey	BMW of Turnersville, Chevrolet Cadillac Hummer of Turnersville, Turnersville Collision
Classic Enterprises, LLC	Delaware	Acura of Turnersville
Classic Imports, Inc.	New Jersey	Toyota Scion of Turnersville
Classic Management Company, Inc.	New Jersey	Turnersville Management
Classic Motors Sales, LLC	Delaware	Honda of Turnersville
Classic Nissan of Turnersville, LLC	Delaware	Nissan of Turnersville
Classic Oldsmobile-Pontiac-GMC, Ltd.	Texas	Round Rock Collision
Classic Special Advertising, Inc.	Texas
Classic Special Automotive GP, LLC	Texas
Classic Special Automotive, Ltd.	Texas	Round Rock Toyota Scion
Classic Special Hyundai, Ltd.	Texas	Round Rock Hyundai
Classic Special, LLC	Texas
Classic Turnersville, Inc.	New Jersey	Hyundai of Turnersville
County Auto Group Partnership	New Jersey
Covington Pike Dodge, Inc.	Delaware
Cruickshank Motors Limited	England & Wales	Kings Cheltenham and Gloucester, Kings Manchester, Kings Swindon, Mercedes-Benz Bedford, Mercedes-Benz Milton Keynes, Mercedes-Benz Northampton, Mercedes-Benz of Bath, Mercedes-Benz of Bristol, Mercedes-Benz of Cheltenham & Gloucester, Mercedes-Benz of Newbury, Mercedes-Benz of Swindon, Mercedes-Benz of Weston Super Mare
Cycle Holdings, LLC	Delaware
D. Young Chevrolet, LLC	Delaware	Penske Chevrolet and Penske Paint & Body
Dan Young Chevrolet, Inc.	Indiana
Dan Young Motors, LLC	Delaware	Penske Honda
Danbury Auto Partnership	Connecticut	Honda of Danbury

Legal Name	Jurisdiction	Assumed Name or d/b/a
Dealer Accessories, LLC	Delaware	Parts Warehouse and Tulsa Express Dealer
DiFeo Chrysler Plymouth Jeep Eagle	New Jersey
DiFeo Hyundai Partnership	New Jersey
DiFeo Leasing Partnership	New Jersey
DiFeo Nissan Partnership	New Jersey	Hudson Nissan
DiFeo Partnership, LLC	Delaware
DiFeo Tenafly Partnership	New Jersey	BMW of Tenafly
Edmond & Milburn Limited	England & Wales	North East Bodyshop (incl in MB Stockton)
Europa Auto Imports, Inc.	California	Mercedes Benz of San Diego, smart center San Diego and Penske Auto Collision
First Front (Wimbledon) Limited	England & Wales
Florida Chrysler-Plymouth, Inc.	Florida
FRN of Tulsa, LLC	Delaware
FW Mays & Company Limited	England & Wales
Gene Reed Chevrolet, Inc.	South Carolina
GMG Motors, Inc.	California	BMW of San Diego
Goodman Derby Limited	England & Wales	Audi Derby
Goodman Retail Limited	England & Wales	Bradford Audi, Harrogate Audi, Harrogate VW, Huddersfield Audi, Huddersfield SEAT, Huddersfield VW, Leeds Audi, Leeds VW, Mayfair Audi, Reading Audi, Slough Audi, Victoria Audi, Wakefield Audi, West London Audi
Goodman TPS Limited	England & Wales	TPS Leeds
Goodson North, LLC	Delaware	Goodson Honda North
Goodson Pontiac GMC, LLC	Delaware
Goodson Spring Branch, LLC	Delaware	Goodson Honda West and Goodson Collision Center
Graypaul Motors Limited	England & Wales	Graypaul Birmingham, Graypaul Edinburgh and Graypaul Nottingham
Guy Salmon Highgate Limited	England & Wales
Guy Salmon Honda Limited	England & Wales
Guy Salmon Limited	England & Wales	Guy Salmon Jaguar Thames Ditton, Guy Salmon Jaguar Gatwick, Guy Salmon Jaguar Ascot, Guy Salmon Jaguar Maidstone, Guy Salmon Land Rover Thames Ditton, Guy Salmon Land Rover Stockton Upon Avon, Guy Salmon Land Rover Sheffield, Guy Salmon Land Rover Wakefield, Guy Salmon Land Rover Knutsford, Guy Salmon Land Rover Stratford upon Avon, Guy Salmon Land Rover Gatwick, Guy Salmon Land Rover Ascot, Guy Salmon Land Rover Portsmouth, Guy Salmon Land Rover Maidstone, Guy Salmon Land Rover Bristol, Honda Redhill
Hallamshire Motor Company Limited	England & Wales
HBL, LLC	Delaware	Aston Martin Tysons Corner, Audi Tysons Corner, Mercedes-Benz Tysons Corner, Porsche Tysons Corner, smart center Tysons Corner and Tysons Corner Collision

Legal Name	Jurisdiction	Assumed Name or d/b/a
Hill Country Imports, Ltd.	Texas	Round Rock Honda
HT Automotive, LLC	Delaware	Tempe Honda
Hudson Motors Partnership	New Jersey	Hudson Toyota
Hughenden Motor Company Limited	England & Wales
HVPH Motor Corporation	Puerto Rico	Lexus de San Juan
John Fox Limited	England & Wales	Leicester Audi and Nottingham Audi
JS Imports, LLC	Delaware
Kings Motors Limited	England & Wales
KMPB, LLC	Delaware
KMT/UAG, Inc.	California	Kearny Mesa Toyota Scion
Landers Auto Sales, LLC	Delaware	Landers Chrysler Jeep Dodge and Landers Auto Body
Landers Buick-Pontiac, Inc.	Arkansas
Landers Ford North, Inc.	Delaware	Landers Ford North
Landers United Auto Group No. 2, Inc.	Arkansas
Late Acquisition I, LLC	Delaware
Late Acquisition II, LLC	Delaware
LRP, Ltd.	Arizona	Land Rover North Scottsdale
Mar Parts Limited	England & Wales
Maranello Concessionaires Limited	England & Wales	Ferrari Classic Parts
Maranello Holdings Limited	England & Wales
Maranello Sales Limited	England & Wales	Maranello Egham
Michael Chevrolet-Oldsmobile, Inc.	South Carolina
Michael Powles Limited	England & Wales	Bentley Leicester
Minden Limited	England & Wales
Motorcars Acquisition II, LLC	Delaware
Motorcars Acquisition III, LLC	Delaware	Infiniti of Bedford
Motorcars Acquisition IV, LLC	Delaware	Toyota of Bedford
Motorcars Acquisition V, LLC	Delaware	Cleveland Management
Motorcars Acquisition VI, LLC	Delaware	Bedford Collision
Motorcars Acquisition, LLC	Delaware	Mercedes Benz of Bedford, smart center Bedford
National City Ford, Inc.	Delaware
Natures Farm (UK) Limited	England & Wales
OCT Partnership	New Jersey	Gateway Toyota
Oxford Mazda Limited	England & Wales
PAG Acquisition 21, LLC	Delaware
PAG Acquisition 22, LLC	Delaware
PAG Acquisition 23, LLC	Delaware
PAG Acquisition 24, LLC	Delaware
PAG Acquisition 25, LLC	Delaware
PAG Acquisition 26, LLC	Delaware
PAG Acquisition 27, LLC	Delaware
PAG Acquisition 28, LLC	Delaware
PAG Atlanta Management, Inc.	Delaware
PAG Austin H1, LLC	Delaware

Legal Name	Jurisdiction	Assumed Name or d/b/a
PAG Austin S1, LLC	Delaware	smart center Round Rock
PAG Avondale H1, LLC	Delaware
PAG Chantilly M1, LLC	Delaware
PAG Clovis T1, Inc.	Delaware	Bingham Toyota
PAG East, LLC	Delaware	East Operations Management
PAG Goodyear F1, LLC	Delaware	Pioneer Ford
PAG Michigan Holdings, LLC	Delaware
PAG Michigan S1, LLC	Delaware	smart center Bloomfield
PAG North Scottsdale BE, LLC	Delaware	Bentley Scottsdale (& Rolls Royce, Bugatti and Lamborghini)
PAG Northern California Management, Inc.	Delaware
PAG Orlando General, Inc.	Delaware
PAG Orlando Limited, Inc.	Delaware
PAG Orlando Partnership, Ltd.	Florida	Central Florida Toyota Scion
PAG San Diego M1, LLC	Delaware
PAG San Jose S1, Inc.	Delaware	smart center Stevens Creek
PAG Santa Ana AVW, Inc.	Delaware	Commonwealth Audi Volkswagen
PAG Tempe M1, LLC	Delaware
PAG Turnersville AU, LLC	Delaware	Audi Turnersville
PAG West Acquisition 1, Inc.	Delaware
PAG West Acquisition 2, Inc.	Delaware
PAG West, LLC	Delaware
Palm Auto Plaza, LLC	Delaware	Palm Toyota Scion and Trail Auto Body
Peachtree Nissan, Inc.	Georgia
Pearlshadow Limited	England & Wales
Penske Automotive Europe Gmbh	Germany
Penske Automotive Group, Inc.	Delaware
Penske Direct, LLC	Delaware
Penske Sportwagenzentrum GmbH	Germany	PorscheZentrum Mannheim
Penske Wholesale Outlet, LLC	Delaware	Scottsdale Wholesale
Peter Pan Motors, Inc.	California	Peter Pan BMW
PMRC, LLC	Delaware	Penske Racing Museum
Prestage Limited	England & Wales
Prophets (Gerrards Cross) Limited	England & Wales
Prophets Garage Limited	England & Wales
PW Automotive, LLC	Delaware	Penske Wynn Ferrari Maserati
Quad Finance	England & Wales
R Stratton & Co Limited	England & Wales	Bentley Birmingham, Bentley Edinburgh and Bentley Manchester
R Stratton (Knutsford) Limited	England & Wales	Guy Salmon Land Rover Knutsford
Rectory Road Limited	England & Wales
Relentless Pursuit Enterprises, Inc.	California	Kearny Mesa Lexus
RHD Finance Limited	England & Wales
Rybridge Cars Limited	England & Wales
Rybrook Developments Ltd.	England & Wales
Ryburn Cars Limited	England & Wales
Rycar Limited	England & Wales
Rycom Vehicles Limited	England & Wales
Rycroft Vehicles Limited	England & Wales	Mercedes-Benz of Newcastle, Mercedes-Benz of Sunderland, Mercedes-Benz of Carlisle, Mercedes-Benz of Teeside, Kings Teeside, Kings Newcastle
Rydale Cardiff Limited	England & Wales

Legal Name	Jurisdiction	Assumed Name or d/b/a
Rydnal Limited	England & Wales
Ryland Cars Limited	England & Wales
Ryland Group Limited	England & Wales
Ryland Group Services Limited	England & Wales
Ryland Investments Limited	England & Wales
Ryland Leasing Limited	England & Wales
Ryland North West Limited	England & Wales
Ryland Properties Limited	England & Wales
Ryland Vehicles Limited	England & Wales
SA Automotive, Ltd.	Arizona	Acura North Scottsdale
Sandridge Limited	England & Wales
SAU Automotive, Ltd.	Arizona	Audi Chandler
Scottsdale 101 Management, LLC	Delaware	Scottsdale 101 Management
Scottsdale Ferrari, LLC	Arizona	Scottsdale Ferrari, Scottsdale Maserati
Scottsdale Jaguar, Ltd.	Arizona
Scottsdale Management Group, Ltd.	Arizona	Scottsdale Management
Scottsdale Paint & Body, LLC	Delaware	Penske Rapid Repair and Scottsdale Auto Body
Shannon Automotive, Ltd.	Texas
SHVP Motor Corporation	Puerto Rico
Sigma Motors, Inc.	Arizona	Mercedes Benz of Chandler and smart center Chandler
SK Motors, LLC	Delaware	Porsche North Scottsdale
SL Automotive, LLC	Delaware	Lexus of Chandler and Scottsdale Lexus
smart USA Distributor LLC	Delaware	smart USA
Smart USA Distributor of Puerto Rico LLC	Puerto Rico
Somerset Motors Partnership	New Jersey	Lexus of Bridgewater and Lexus of Edison
Somerset Motors, Inc.	New Jersey
Sun Motors, LLC	Delaware	BMW of North Scottsdale and MINI of North Scottsdale
Sunningdale Carriage Company Limited	England & Wales
Sytner Cars Limited	England & Wales	Porsche Leicester, Porsche Solihull, Porsche Centre Edinburgh, Porsche Centre Glasgow, Porsche Centre Mid Sussex and Porsche Centre Silverstone
Sytner Coventry Limited	England & Wales	Honda Gatwick and Sytner Coventry
Sytner Direct Limited	England & Wales
Sytner Finance Limited	England & Wales
Sytner Group Limited	England & Wales
Sytner Holdings Limited	England & Wales	Guy Salmon Jaguar Coventry, Guy Salmon Jaguar Northampton, Guy Salmon Jaguar Oxford, Guy Salmon Land Rover Coventry, Lexus Birmingham, Lexus Bristol, Lexus Cardiff, Lexus Leicester, Lexus Milton Keynes, Oxford Saab, Tollbar Warwick, Toyota World Birmingham, Toyota World Bridgend, Toyota World Bristol, Toyota World Bristol Central, Toyota World Cardiff, Toyota World Newport, Toyota World Solihull, Toyota World Tamworth

Legal Name	Jurisdiction	Assumed Name or d/b/a
Sytner Limited	England & Wales	Alpina, Rolls Royce Sunningdale, Sytner Chigwell, Sytner Docklands/Canary Wharf, Sytner Harold Wood, Sytner High Wycombe, Sytner Leicester, Sytner Nottingham, Sytner Sheffield, Sytner Solihull, Sytner Sunningdale
Sytner London Limited	England & Wales
Sytner of Leicester Limited	England & Wales
Sytner Properties (Grove Park) Limited	England & Wales
Sytner Properties (Harold Wood) Limited	England & Wales
Sytner Properties Limited	England & Wales
Sytner Retail Limited	England & Wales	Sytner Birmingham, Sytner Cardiff, Sytner Newport, Sytner Oldbury, Sytner Sutton
Sytner Sheffield Limited	England & Wales
Tamburro Enterprises, Inc.	Nevada
Tamsen GmbH	Germany
The Caxton Engineering Company Limited	England & Wales
Thomamsam	England & Wales
Thomson & Taylor (Brooklands) Limited	England & Wales
Tri-City Leasing, Inc.	California
Turnersville Auto Outlet, LLC	Delaware	Turnersville Auto Outlet
UAG Arkansas FLM, LLC	Delaware	Landers Ford Lincoln Mercury
UAG Atlanta H1, LLC	Delaware	Honda Mall of Georgia
UAG Atlanta IV Motors, Inc.	Georgia	United BMW (Gwinnett) and United BMW of Roswell
UAG Capitol, Inc.	Delaware	Capitol Honda
UAG Carolina, Inc.	Delaware
UAG Central NJ, LLC	Delaware	Ferrari Maserati of Central New Jersey
UAG Central Region Management, LLC	Indiana
UAG Chantilly AU, LLC	Delaware
UAG CHCC, Inc.	New Jersey
UAG Chevrolet, Inc.	New Jersey
UAG Citrus Motors, LLC	Delaware
UAG Classic, Inc.	Delaware
UAG Clovis, Inc.	Delaware	Honda North
UAG Connecticut I, LLC	Delaware
UAG Connecticut, LLC	Delaware
UAG Duluth, Inc.	Texas	Atlanta Toyota Scion, United Collision
UAG East, LLC	Delaware

Legal Name	Jurisdiction	Assumed Name or d/b/a
UAG Escondido A1, Inc.	Delaware	Acura of Escondido
UAG Escondido H1, Inc.	Delaware	Honda of Escondido
UAG Escondido M1, Inc.	Delaware	Mazda of Escondido
UAG Fairfield CA, LLC	Delaware	Audi of Fairfield
UAG Fairfield CM, LLC	Delaware	Fairfield Collision Center, Mercedes-Benz of Fairfield and smart center Fairfield
UAG Fairfield CP, LLC	Delaware	Porsche of Fairfield
UAG Fayetteville I, LLC	Delaware	Chevrolet Hummer of Fayetteville
UAG Fayetteville II, LLC	Delaware	Honda of Fayetteville
UAG Fayetteville III, LLC	Delaware	Acura of Fayetteville
UAG Finance Company, Inc.	Delaware
UAG Graceland II, Inc.	Delaware
UAG Houston Acquisition, Ltd.	Texas
UAG Hudson CJD, LLC	Delaware	Hudson Chrysler Jeep Dodge
UAG Hudson, Inc.	New Jersey
UAG International Holdings, Inc.	Delaware
UAG Kissimmee Motors, Inc.	Delaware
UAG Landers Springdale, LLC	Delaware	Toyota Scion of Fayetteville and Fayetteville Collision
UAG Los Gatos, Inc.	Delaware	Los Gatos Acura and Los Gatos Collision
UAG Marin, Inc.	Delaware	Marin Honda and Marin Honda Collision
UAG Memphis II, Inc.	Delaware	Wolfchase Toyota Scion and Wolfchase Collision
UAG Memphis IV, Inc.	Delaware
UAG Memphis Management, Inc.	Delaware
UAG Mentor Acquisition, LLC	Delaware	Honda of Mentor
UAG Michigan Cadillac, LLC	Delaware	Rinke Cadillac and Rinke Cadillac Collision
UAG Michigan H1, LLC	Delaware	Honda Bloomfield
UAG Michigan H2, LLC	Delaware
UAG Michigan Pontiac-GMC, LLC	Delaware
UAG Michigan T1, LLC	Delaware	Toyota of Warren, Scion of Warren
UAG Michigan TMV, LLC	Delaware	Toyota of Waterford and Toyota of Waterford Collision
UAG Minneapolis B1, LLC	Delaware	Motorwerks BMW, Motorwerks MINI
UAG Nanuet I, LLC	Delaware	Mercedes Benz of Nanuet
UAG Nanuet II, LLC	Delaware	Honda of Nanuet
UAG Nevada Land, LLC	Delaware
UAG Northeast, LLC	Delaware
UAG Oldsmobile of Indiana, LLC	Delaware
UAG Phoenix VC, LLC	Delaware
UAG Realty, LLC	Delaware
UAG Royal Palm M1, LLC	Delaware	Royal Palm Mazda
UAG Royal Palm, LLC	Delaware	Royal Palm Toyota
UAG San Diego A1, Inc.	Delaware	Kearny Mesa Acura
UAG San Diego AU, Inc.	Delaware	Audi of Escondido
UAG San Diego H1, Inc.	Delaware	Honda Mission Valley
UAG San Diego JA, Inc.	Delaware	Jaguar San Diego/AM Kearny Mesa
UAG San Diego Management, Inc.	Delaware
UAG Spring, LLC	Delaware

Legal Name	Jurisdiction	Assumed Name or d/b/a
UAG Stevens Creek II, Inc.	Delaware	Audi Stevens Creek and Porsche of Stevens Creek
UAG Sunnyvale, Inc.	Delaware
UAG Texas II, Inc.	Delaware
UAG Texas, LLC	Delaware
UAG Tulsa Holdings, LLC	Delaware
UAG Turnersville Motors, LLC	Delaware
UAG Turnersville Realty, LLC	Delaware
UAG UK Holdings Limited	England & Wales
UAG VK, LLC	Delaware	Volkswagen North Scottsdale
UAG West Bay AM, LLC	Delaware	Inskip Collision Center
UAG West Bay FM, LLC	Delaware
UAG West Bay IA, LLC	Delaware	Inskip Acura
UAG West Bay IAU, LLC	Delaware	Inskip Audi
UAG West Bay IB, LLC	Delaware	Inskip Bentley (Bentley Providence)
UAG West Bay II, LLC	Delaware	Inskip Infiniti
UAG West Bay IL, LLC	Delaware	Inskip Lexus
UAG West Bay IM, LLC	Delaware	Inskip Mercedes Benz, smart center Warwick
UAG West Bay IN, LLC	Delaware	Inskip Nissan
UAG West Bay IP, LLC	Delaware	Inskip Porsche
UAG West Bay IV, LLC	Delaware
UAG West Bay IW, LLC	Delaware	Inskip BMW, Inskip MINI
UAG Young II, Inc.	Delaware
UAG-Caribbean, Inc.	Delaware
United Auto Group UK Limited	England & Wales
United Auto Licensing, LLC	Delaware	UnitedAuto Licensing
United Auto Scottsdale Property Holdings, LLC	Delaware
United AutoCare Products, LLC	Delaware	United AutoCare
United Ford Broken Arrow, LLC	Delaware
United Ford North, LLC	Delaware
United Nissan, Inc.	Tennessee
United Nissan, Inc.	Georgia
United Ranch Automotive, LLC	Delaware	Audi North Scottsdale
UnitedAuto Dodge of Shreveport, Inc.	Delaware
UnitedAuto Fifth Funding, Inc.	Delaware
UnitedAuto Finance, Inc.	Delaware
UnitedAuto Fourth Funding, Inc.	Delaware
VPH Motor Corporation	Puerto Rico
West Palm Auto Mall, Inc.	Florida
West Palm Nissan, LLC	Delaware	Palm Nissan
West Palm S1, LLC	Delaware
Westbury Superstore Ltd.	New York	Westbury Toyota Scion
William Jacks Limited	England & Wales
William Jacks Properties Limited	England & Wales
William Jacks Services Limited	England & Wales
WTA Motors, Ltd.	Texas	BMW of Austin
Yarnolds of Stratford Limited	England & Wales	Guy Salmon Land Rover Stratford

Legal Name	Jurisdiction	Assumed Name or d/b/a
Young Automotive Holdings, LLC	Delaware
Young Management Group, Inc.	Indiana
Zycor 16 Limited	England & Wales
Zycor 17 Limited	England & Wales
Zycor 18 Limited	England & Wales
Zycor 5 Limited	England & Wales

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statements No. 333-105311, 333-14971, 333-26219, 333-50816, and 333-61835 on Form S-8 of our report dated February 24, 2010, relating to the consolidated financial statements and financial statement schedule of Penske Automotive Group, Inc. and subsidiaries (the “Company”), and the effectiveness of the Company’s internal control over financial reporting, appearing in this Annual Report on Form 10-K of Penske Automotive Group, Inc. for the year ended December 31, 2009.

/s/ Deloitte & Touche LLP

Detroit, Michigan
February 24, 2010

EX-23.2

Exhibit 23.2

Consent of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders:

UAG UK Holdings Limited:

We consent to the incorporation by reference in the registration statements (Nos. 333-105311, 333-14971, 333-26219, 333-50816, and 333-61835) each on Form S-8 of Penske Automotive Group, Inc. of our report dated February 24, 2010, with respect to the consolidated balance sheets of UAG UK Holdings Limited as of December 31, 2009 and 2008, and the related consolidated statements of income, equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2009, and the related financial statement schedule, and the effectiveness of internal control over financial reporting as of December 31, 2009, which report appears in the Annual Report on Form 10-K of Penske Automotive Group, Inc. for the year ended December 31, 2009. Neither the aforementioned financial statements nor the related financial statement schedule are presented in the Form 10-K.

/s/ KPMG Audit Plc

Birmingham, United Kingdom
February 24, 2010

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Roger S. Penske, certify that:

1. I have reviewed this annual report on Form 10-K of Penske Automotive Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Roger S. Penske

Roger S. Penske

Chief Executive Officer

February 24, 2010

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Robert T. O’Shaughnessy, certify that:

1. I have reviewed this annual report on Form 10-K of Penske Automotive Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Robert T. O’Shaughnessy

Robert T. O’Shaughnessy

Chief Financial Officer

February 24, 2010

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the annual report of Penske Automotive Group, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2009, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Roger S. Penske and Robert T. O’Shaughnessy, Principal Executive Officer and Principal Financial Officer, respectively, of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Roger S. Penske

Roger S. Penske

Chief Executive Officer

February 24, 2010

/s/ Robert T. O’Shaughnessy

Robert T. O’Shaughnessy

Chief Financial Officer

February 24, 2010

A signed original of this written statement required by Section 906 has been provided to Penske Automotive Group, Inc. and will be retained by Penske Automotive Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.