-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PKRujdv4nGclbq/I9dNX8Ve4/vkWr1Sg2UNX7/RRGLWEfNmLWWpStFN+h+OcPbXb QSsccTLQaRPOk4wQXYqzLg== 0000950136-97-000638.txt : 19970520 0000950136-97-000638.hdr.sgml : 19970520 ACCESSION NUMBER: 0000950136-97-000638 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNITED AUTO GROUP INC CENTRAL INDEX KEY: 0001019849 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-AUTO DEALERS & GASOLINE STATIONS [5500] IRS NUMBER: 223086739 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12297 FILM NUMBER: 97607574 BUSINESS ADDRESS: STREET 1: 375 PARK AVE STREET 2: 22ND FL CITY: NEW YORK STATE: NY ZIP: 10152 BUSINESS PHONE: 2122233300 MAIL ADDRESS: STREET 1: 375 PARK AVENUE STREET 2: 22ND FL CITY: NEW YORK STATE: NY ZIP: 10152 10-Q 1 QUARTERLY REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO __________ COMMISSION FILE NUMBER 1-12297 UNITED AUTO GROUP, INC. (Exact name of registrant as specified in its charter) DELAWARE 22-3086739 (State or other jurisdiction (I.R.S. Employer of incorporation or Identification No.) organization) 375 PARK AVENUE, NEW YORK, NEW YORK 10152 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212) 223-3300 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes...x... No......... THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S CLASSES OF COMMON STOCK AS OF MAY 13, 1997: VOTING COMMON STOCK, $0.0001 PAR VALUE 17,191,851 NON-VOTING COMMON STOCK, $0.0001 PAR VALUE 605,454 TABLE OF CONTENTS PART I PAGE 1. Financial Statements and Supplementary Data Consolidated Condensed Balance Sheets as of March 31, 1997 and December 31, 1996 1 Consolidated Condensed Statements of Income for the three months ended March 31, 1997 and 1996 3 Consolidated Condensed Statements of Cash Flows for the three months ended March 31, 1997 and 1996 4 Notes to Consolidated Condensed Financial Statements 6 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 PART II 1. Legal Proceedings 12 2. Changes in Securities 12 6. Exhibits and Reports on Form 8-K 13 Signatures 23 UNITED AUTO GROUP, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (Dollars in Thousands) (UNAUDITED) MARCH 31, DECEMBER 31, 1997 1996 -------- -------- ASSETS AUTO DEALERSHIPS Cash and cash equivalents $ 36,083 $ 66,875 Accounts receivable, net 61,314 52,018 Inventories 213,629 168,855 Other current assets 13,673 11,823 -------- -------- Total current assets 324,699 299,571 -------- -------- Property and equipment, net 24,859 22,341 Intangible assets, net 187,428 177,194 Other assets 11,244 6,587 -------- -------- TOTAL AUTO DEALERSHIP ASSETS 548,230 505,693 AUTO FINANCE Cash and cash equivalents 3,569 2,688 Finance assets, net 17,870 9,723 Other assets 1,995 4,846 -------- -------- TOTAL AUTO FINANCE ASSETS 23,434 17,257 -------- -------- TOTAL ASSETS $571,664 $522,950 ======== ======== See Notes to Consolidated Condensed Financial Statements -1- UNITED AUTO GROUP, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (Dollars in Thousands) (UNAUDITED) MARCH 31, DECEMBER 31, 1997 1996 -------- -------- LIABILITIES AND STOCKHOLDERS' EQUITY AUTO DEALERSHIPS Floor plan notes payable $215,409 $170,170 Short-term debt 6,069 6,069 Accounts payable 21,411 22,187 Accrued expenses 18,319 17,585 Current portion of long-term debt 5,136 5,444 -------- -------- Total current liabilities 266,344 221,455 -------- -------- Long-term debt 11,777 11,121 Due to related party 1,428 1,334 Deferred income taxes 4,867 4,867 -------- -------- TOTAL AUTO DEALERSHIP LIABILITIES 284,416 238,777 -------- -------- AUTO FINANCE Short-term debt 913 1,001 Accounts payable and other liabilities 2,872 1,704 -------- -------- TOTAL AUTO FINANCE LIABILITIES 3,785 2,705 -------- -------- Commitments and contingent liabilities STOCKHOLDERS' EQUITY Voting common stock 2 2 Additional paid-in capital 283,180 284,502 Retained earnings (accumulated deficit) 281 (3,036) -------- -------- TOTAL STOCKHOLDERS' EQUITY 283,463 281,468 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' $571,664 $522,950 ======== ======== See Notes to Consolidated Condensed Financial Statements -2- UNITED AUTO GROUP, INC. CONSOLIDATED CONDENSED STATEMENTS OF INCOME (In Thousands, Except Per Share Amounts) (UNAUDITED) THREE MONTHS ENDED MARCH 31, 1997 1996 AUTO DEALERSHIPS Vehicle sales $340,833 $233,139 Finance and insurance 13,483 9,942 Service and parts 33,884 18,638 -------- -------- Total revenues 388,200 261,719 Cost of sales, including floor plan interest 340,588 232,502 -------- -------- Gross profit 47,612 29,217 Selling general and administrative expenses 41,756 27,618 Operating income 5,856 1,599 Other income (expense), net (172) (128) -------- -------- INCOME BEFORE INCOME TAXES-AUTO DEALERSHIPS 5,684 1,471 -------- -------- AUTO FINANCE Revenues 985 412 Interest expense (144) (86) Operating and other expenses (937) (590) -------- -------- LOSS BEFORE INCOME TAXES-AUTO FINANCE (96) (264) -------- -------- TOTAL COMPANY Income before minority interests and provision for income taxes 5,588 1,207 Minority interests (36) (500) Provision for income taxes (2,235) (536) -------- -------- NET INCOME $ 3,317 $ 171 ======== ======== NET INCOME PER COMMON SHARE $ 0.19 $ 0.02 ======== ======== SHARES USED IN COMPUTING NET INCOME PER COMMON SHARE 17,758 7,449 ======== ======== See Notes to Consolidated Condensed Financial Statements -3- UNITED AUTO GROUP, INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Dollars in Thousands) (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1997 1996 --------------------- --------------------- AUTO AUTO AUTO AUTO DEALERSHIPS FINANCE DEALERSHIPS FINANCE ----------- ------- ----------- ------- OPERATING ACTIVITIES: Net income (loss) $3,375 $(58) $318 $(147) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 1,642 103 746 319 Gain on sales of loans - (361) - (206) Loans originated - (23,417) - (19,847) Loans repaid or sold - 19,057 - 18,758 Minority interests portion of 36 - 500 - income Changes in operating assets and liabilities: Finance assets - (654) - 40 Accounts receivable (5,412) - (9,137) - Inventories (34,534) - (8,459) - Floor plan notes payable 36,273 - 18,686 - Accounts payable and accrued (1,801) 1,168 2,065 1,660 expenses Other (2,314) 90 (409) (336) ------- ------ --- ----------- ----------- Net cash provided by (used in) operating activities: (2,735) (4,072) 4,310 241 ------- ------ ----- ---
See Notes to Consolidated Condensed Financial Statements -4- UNITED AUTO GROUP, INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Dollars in Thousands) (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1997 1996 --------------------- -------------------- AUTO AUTO AUTO AUTO DEALERSHIPS FINANCE DEALERSHIPS FINANCE ----------- ------- ----------- ------- INVESTING ACTIVITIES: Purchase of equipment and improvements $(2,565) $(27) $(1,034) $(61) Dealership acquisitions (7,929) - (8,142) - Investment in auto finance subsidiary (5,000) 5,000 (3,700) 3,700 Funding for subsequent acquisition (1,881) - - - Advances to related parties (679) - (32) - Investment in and advances to uncombined investee - - (245) - ------ ------ ------ ------ Net cash provided by (used in) investing activities (18,054) 4,973 (13,153) 3,639 ------ ------ ------ ------ FINANCING ACTIVITIES: Proceeds from issuance of stock 201 - 8,606 - Repurchase of common stock (8,821) - - - Proceeds from borrowings of long-term debt 1,250 - 7,100 - Deferred financing costs (1,550) - - - Net repayments of short-term debt - - (5,990) - Payments of long-term debt and capitalized lease obligations (1,177) - (699) - Advances from affiliates 94 - 42 - Borrowings from warehouse credit line - 17,258 - 14,590 Payments of warehouse credit line - (17,278) - (17,668) ------ ------- ------ ------- Net cash provided by (used in) financing activities (10,003) (20) 9,059 (3,078) ------- ------ ------ ------ Net increase (decrease) in cash and cash equivalents (30,792) 881 216 802 Cash and cash equivalents, beginning of period 66,875 2,688 4,697 531 ------ ------ ------ ------ Cash and cash equivalents, end of period $36,083 $3,569 $4,913 $1,333 ======= ====== ====== ======
See Notes to Consolidated Condensed Financial Statements -5- UNITED AUTO GROUP, INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (In Thousands, Except Per Share Amounts) (UNAUDITED) 1. BASIS OF PRESENTATION The information presented as of March 31, 1997 and 1996, and for the three month periods then ended, is unaudited, but includes all adjustments (consisting only of normal recurring accruals) which the management of United Auto Group, Inc. (the "Company" or "UAG") believes to be necessary for the fair presentation of results for the periods presented. The results for any interim period are not necessarily indicative of the results for a full year. These consolidated condensed financial statements should be read in conjunction with the Company's audited financial statements for the year ended December 31, 1996, which are included as part of the Company's Annual Report on Form 10-K. 2. NET INCOME PER COMMON SHARE In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128"). SFAS 128 establishes standards for computing and presenting earnings per share for periods ending after December 15, 1997. Basic and diluted earnings per share, calculated pursuant to SFAS 128, are not expected to be materially different from net income per common share as reflected in the accompanying Consolidated Condensed Statements of Income. 3. INVENTORIES Inventories consisted of the following at the balance sheet dates: MARCH 31, DECEMBER 31, 1997 1996 ---- ---- New vehicles $147,565 $109,414 Used vehicles 55,269 50,060 Parts, accessories and other 10,795 9,381 ------ ----- Total inventories $213,629 $168,855 ======= ======= 4. BUSINESS COMBINATIONS Effective March 1, 1997, the Company acquired a 100% interest in Shannon Automotive Ltd., which owns two automobile dealerships located in Houston, Texas, for a total of $7,000 in cash and 297,872 shares of common stock. The acquisition agreement provides for an additional contingent cash payment to the extent that such shares have an aggregate market value of less than $7,000 on the date they become freely tradable. The acquisition has been accounted for under the purchase method, and the accompanying financial statements reflect the results of operations from the date of acquisition. -6- UNITED AUTO GROUP, INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED) (In Thousands, Except Per Share Amounts) (UNAUDITED) 5. PRO FORMA RESULTS OF OPERATIONS The following unaudited pro forma summary presents the consolidated results of operations of the Company for the three months ended March 31, 1997 and 1996 after reflecting the pro forma adjustments that would be necessary to present those results as if the acquisition of Shannon Automotive, Ltd. had been consummated as of January 1, 1996. The results of operations for the three months ended March 31, 1996 also reflect acquisitions completed in 1996 as if these acquisitions had been consummated as of the first day of the year. THREE MONTHS ENDED MARCH 31, 1997 1996 ---- ---- Revenues $400,773 $394,197 ======== ======== Income before minority interests and provision for income taxes $6,062 $6,044 ====== ====== Net income $3,601 $3,445 ====== ====== Net income per common share $0.20 $0.19 ===== ===== The foregoing pro forma results are not necessarily indicative of results of operations that would have been reported had the acquisitions been completed as of January 1, 1996. The pro forma results do not reflect a reduction of cost of sales related to reduced interest on floor plan notes payable resulting from the application of unused proceeds from the Company's initial public sale of common stock. If the reduction of the floor plan interest expense were reflected, then pro forma net income (and net income per common share) would have been $4,025 ($.22 per share) for the three months ended March 31, 1996. -7- UNITED AUTO GROUP, INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED) (In Thousands, Except Per Share Amounts) (UNAUDITED) 6. SUPPLEMENTAL CASH FLOW INFORMATION The following table presents certain supplementary information to the Consolidated Condensed Statements of Cash Flows: THREE MONTHS ENDED MARCH 31, 1997 1996 ----------------------------------------- AUTO AUTO AUTO AUTO DEALERSHIPS FINANCE DEALERSHIPS FINANCE ----------- ------- ----------- ------- SUPPLEMENTAL INFORMATION: Cash paid for interest $1,429 $72 2,289 $59 Cash paid for income taxes 96 12 - 2 NON-CASH FINANCING AND INVESTING ACTIVITIES: Dealership acquisition costs financed by issuance of stock 7,350 - - - Dealership acquisition costs financed by long-term debt - - 2,100 - Capitalized lease obligations 274 100 - - 7. RELATED PARTY TRANSACTIONS During 1996, the Company was owed amounts by former minority shareholders and related entities. During the three months ended March 31, 1996, the Company recognized approximately $774 of interest thereon in the Consolidated Condensed Statements of Income. -8- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The Company retails new and used automobiles and light trucks, operates service and parts departments and sells various aftermarket products, including finance and insurance contracts. For the quarter ended March 31, 1997, UAG had revenues of approximately $388.2 million and retailed 9,751 new and 5,949 used vehicles. For the quarter ended March 31, 1997, vehicle sales represented 87.8% of the Company's revenues, service and parts accounted for 8.7% of revenues, and finance and insurance represented the remaining 3.5%. New vehicle revenues include sales to retail customers and to leasing companies providing consumer automobile leasing. Used vehicle revenues include amounts received for used vehicles sold to retail customers, leasing companies providing consumer leasing, other dealers and wholesalers. Finance and insurance revenues are generated from sales of accessories such as radios, cellular phones, alarms, custom wheels, paint sealants and fabric protectors, as well as amounts received as fees for placing extended service contracts, credit insurance policies, and financing and lease contracts. UAG dealerships market a complete line of aftermarket automotive products and services through its wholly-owned subsidiary, United AutoCare. Service and parts revenues include fees paid by consumers for repair and maintenance service and the sale of replacement parts. Through its automobile finance subsidiary, Atlantic Auto Finance, the Company derives revenues from the purchase, sale and servicing of motor vehicle installment contracts originated by both UAG and third-party dealerships. The Company's selling expenses consist of advertising and compensation for sales department personnel, including commissions and related bonuses. General and administrative expenses include compensation for administration, finance and general management personnel, rent, insurance and utilities. Interest expense consists of interest charges on all of the Company's interest-bearing debt other than floor plan inventory financing. Interest expense on floor plan debt is included in cost of sales. The Company made a number of acquisitions in 1996 and 1997. Each of these acquisitions has been accounted for using the purchase method of accounting and as a result, the Company's financial statements include the results of operations of the acquired dealerships only from the date of acquisition. -9- RESULTS OF OPERATIONS The following discussion and analysis relates to the Company's consolidated historical results of operations for the three months ended March 31, 1997, and 1996. THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31, 1996 Auto Dealerships Revenues. Revenues increased by $126.5 million, or 48.3%, from $261.7 million to $388.2 million due principally to acquisitions. Dealerships acquired subsequent to March 31, 1996 contributed $117.0 million of revenues in the three months ended March 31, 1997. Sales of new and used vehicles increased by $107.7 million, or 46.2%, from $233.1 million to $340.8 million. Dealerships acquired subsequent to March 31, 1996 contributed $100.6 million of that increase. Unit retail sales of new and used vehicles increased by 30.2% and 47.8%, respectively, due principally to acquisitions. For the three months ended March 31, 1997, the Company retailed 9,751 new vehicles (62.1% of total vehicle sales) and 5,949 used vehicles (37.9% of total vehicle sales). For the three months ended March 31, 1996, the Company retailed 7,490 new vehicles (65.0% of total vehicle sales) and 4,025 used vehicles (35.0% of total vehicle sales). The increase in the relative proportion of used vehicle sales to new vehicle sales was due principally to the expansion of existing used vehicle operations and the establishment of additional retail used vehicle centers in response to the increased popularity of used vehicles. New vehicle selling prices increased by an average of 12.3% due primarily to changes in the mix of models sold and changes in manufacturer pricing. Used vehicle selling prices increased by an average of 15.2% due to an increase in consumer demand and a change in the mix of used vehicles sold. Finance and insurance revenues (aftermarket product sales) increased by $3.6 million, or 35.6%, from $9.9 million to $13.5 million due principally to acquisitions and the establishment of United AutoCare. Service and parts revenues increased by $15.3 million, or 81.8%, from $18.6 million to $33.9 million due principally to acquisitions. Gross Profit. Gross profit increased by $18.4 million, or 63.0%, from $29.2 million to $47.6 million. Gross profit as a percentage of revenues increased from 11.2% to 12.3%. This increase was due principally to acquisitions. Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by $14.1 million, or 51.2%, from $27.6 million to $41.7 million due principally to acquisitions and an increase in the infrastructure required to manage the substantial increase in the company's operations and the planned expansion of its business in the future. Such expenses as a percentage of revenue increased from 10.6% to 10.8%. -10- Auto Finance Loss before Income Taxes. The pretax loss from operations at Atlantic Finance decreased by $0.2 million from a loss of $0.3 million to a loss of $0.1 million. Total Company Provision for Income Taxes. The 1997 provision for income taxes is $2.2 million compared to $0.5 million in 1996. The estimated effective tax rate declined to 40.0% from 44.4% in 1996. LIQUIDITY AND CAPITAL RESOURCES CASH AND LIQUIDITY REQUIREMENTS The cash requirements of the Company are primarily for the acquisition of new dealerships, working capital and expansion of existing facilities. Historically, these cash requirements have been met through issuances of equity and borrowings under various credit agreements. At March 31, 1997, the Company's dealerships had working capital of $58.4 million. During the three months ended March 31, 1997, operating activities resulted in net cash used by dealership operations of $2.7 million. Net cash used for dealership financing activities during the three months ended March 31, 1997 totaled $10.0 million due principally to the repurchase of 397,000 shares of the Company's common stock under an announced stock repurchase program and financing costs in connection with a new borrowing facility. The Company finances substantially all of its new and used vehicle inventory under revolving floor plan financing arrangements with various lenders. The floor plan lenders pay the manufacturer directly with respect to new vehicles. The Company makes monthly interest payments on the amount financed but is not required to make loan principal repayments prior to the sale of new and used vehicles. Substantially all of the assets of the Company's dealerships are subject to security interests in favor of their floor plan lenders. At March 31, 1997, the Company had approximately $36.1 million of cash available to fund operations and acquisitions. In addition, on March 20, 1997, the Company entered into a senior credit facility in the amount of $50 million provided by a syndicate of banks led by The Bank of Nova Scotia and Morgan Guaranty Trust Company of New York. Borrowings under this agreement are expected to be used principally for acquisitions. The Company's principal source of growth has come, and is expected to continue to come, from acquisitions of automobile dealerships. The Company believes that its existing capital resources will be sufficient to fund its current acquisition commitments. To the extent the Company pursues additional significant acquisitions, it will need to raise additional capital either through the public or private issuance of equity or debt securities or through additional bank borrowings. Certain issuances of equity securities would require the prior approval of certain automobile manufacturers. -11- 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 similar periods of decline and recession as the general economy. The Company believes that the industry is influenced by general economic conditions and particularly by consumer confidence, the level of personal discretionary spending, interest rates and credit availability. SEASONALITY The Company's combined business is modestly seasonal overall. The greatest seasonalities exist with the dealerships in the New York metropolitan area, for which the second and third quarters are the strongest with respect to vehicle related sales. The service and parts business at all dealerships experiences relatively modest seasonal fluctuations. EFFECTS OF INFLATION The Company believes that the relatively moderate rates of inflation over the last few years have not had a significant impact on revenue or profitability. The Company does not expect inflation to have any near-term material effects on the sale of its products and services. However, there can be no assurance that there will be no such effect in the future. The Company finances substantially all of its inventory through various revolving floor plan arrangements with interest rates that vary based on the prime rate or LIBOR. Such rates have historically increased during periods of increasing inflation. The Company does not believe that it would be placed at a competitive disadvantage should interest rates increase due to increased inflation since most other automobile dealers have similar floating rate borrowing arrangements. PART II ITEM 1 - LEGAL PROCEEDINGS The Company and its subsidiaries are involved in litigation that has arisen in the ordinary course of business. None of these matters, either individually or in the aggregate, are expected to have a material adverse effect on the Company's results of operations or financial condition. ITEM 2 - CHANGES IN SECURITIES RECENT SALES OF UNREGISTERED SECURITIES On March 6, 1997, the Company acquired a dealership group located in Houston, Texas for a purchase price of $7.0 million in cash and 297,872 shares of Voting Common Stock. In connection with such transaction, the Company issued 37,457 shares of Voting Common Stock to the party that brokered the transaction. Such shares were issued in reliance on Section 4(2) of the Securities Act of 1933, as amended, as a transaction not involving any public offering. -12- ITEM 6 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) Reports on Form 8-K. The Company filed the following Current Reports on Form 8-K during the quarter ended March 31, 1997: 1. January 23, 1997, reporting under Items 5 and 7 (announcement of new chief financial officer). 2. March 3, 1997, reporting under Items 5 and 7 (announcement of Hanna and Staluppi acquisitions). 3. March 10, 1997, reporting under Items 2 and 7 (announcement of new chief executive officer and Ford acquisition). (b) Exhibits ***3.1 Third Restated Certificate of Incorporation. *3.2 Restated Bylaws. *4.1 Specimen Common Stock certificate. *10.1.1.1 Registration Rights Agreement, dated as of October 15, 1993, among the Company and the investors listed therein. *10.1.1.2 Amendment to Registration Rights Agreement, dated as of July 31, 1996, among the Company and the investors listed therein. *10.1.2 Waiver, Consent and Modification Agreement, dated as of September 22, 1995, among the Company and its stockholders. *10.1.3 Letter Agreement, dated September 22, 1996, between the Company and J.P. Morgan Capital Corporation. *10.1.4 Form of Warrant. *10.1.5 Form of Additional Warrant. *10.1.6 Employment Agreement, dated as of June 21, 1996, between the Company and Carl Spielvogel. *10.1.7 Severance Agreement, dated April 5, 1996, among the Company, Trace and Ezra P. Mager. *10.1.8 Stock Option Plan of the Company. *10.1.9 Registration Rights Agreement, dated as of August 1, 1995, among the company and the parties listed on Schedule I thereto. *10.1.10 Sublease, dated August 1994, between Overseas Partners, Inc. and the Company. *10.1.11 Letter, dated July 24, 1996, from Chrysler Corporation to the Company. *10.1.12 Agreement, dated July 24, 1996, between the Company and Toyota Motor Sales U.S.A., Inc. *10.1.13 Non-employee Director Compensation Plan of the Company. *10.1.14 Form of Agreement among the Company, certain of its affiliates and American Honda Motor Co., Inc. *10.1.15 Form of Option Certificate of the Company in favor of Samuel X. DiFeo and Joseph C. DiFeo. -13- *10.1.16 Form of Registration Rights Agreement among the Company and the parties listed on Schedule U thereto. 10.1.17 Registration Rights Agreement, dated March 6, 1997, between the Company and Kevin J. Coffey 10.1.18 Consulting Agreement, dated March 3, 1997, between the Company and Carl Spielvogel. 10.1.19 Credit Agreement, dated as of March 20, 1997, among the Company, the Guarantors party thereto, the Banks party thereto, The Bank of Nova Scotia, as Administrative Agent, and Morgan Guaranty Trust Company of New York, as Documentation Agent. 10.1.20 Pledge Agreement, dated as of March 20, 1997, among the Company, the pledgors named therein and The Bank of Nova Scotia, as Administrative Agent. *10.2.1.1 Honda Automobile Dealer Sales and Service Agreement, dated October 5, 1995, between American Honda Motor Co. Inc. and Danbury Auto Partnership. *10.2.1.2 American Honda Motor Co. Standard Provisions. *10.2.2.1 Lexus Dealer Agreement, dated October 5, 1992, between Lexus, a division of Toyota Motor Sales, U.S.A., Inc, and Somerset Motors Partnership. *10.2.2.2 Lexus Dealer Agreement Standard Provisions. *10.2.3.1 Mitsubishi Motor Sales of America, Inc. Dealer Sales and Service Agreement, dated August 29, 1994, between Mitsubishi Motor Sales of America, Inc. and Rockland Motors Partnership, as amended August 20, 1996. *10.2.3.2 Mitsubishi Motor Sales of America, Inc. Dealer Sales and Service Agreement Standard Provisions. *10.2.4.1 BMW of North America, Inc. Dealer Agreement, dated January 1, 1994, between BMW of North America, Inc. and DiFeo BMW Partnership, as amended October 21, 1996. *10.2.4.2 BMW of North America, Inc. Dealer Standard Provisions Applicable to Dealer Agreement. *10.2.5.1 Term Dealer Sales and Service Agreement, dated July 3, 1996, between American Suzuki Motor Corporation and Fair Hyundai Partnership, as amended September 6, 1996. *10.2.5.2 Suzuki Dealer Sales and Service Agreement Standard Provisions. *10.2.6.1 Toyota Dealer Agreement, dated May 5, 1995, between Toyota Motor Distributors, Inc. and Hudson Motors Partnership. *10.2.6.2 Toyota Dealer Agreement Standard Provisions. *10.2.7.1 Oldsmobile Division Dealer Sales and Service Agreement, dated October 2, 1992, between General Motors Corporation, Oldsmobile Division and J&F Oldsmobile-Isuzu Partnership, as amended December 20, 1993 and July 23, 1996. *10.2.7.2 General Motors Dealer Sales and Service Agreement Standard Provisions. *10.2.8.1 Chevrolet-Geo Dealer Sales and Service Agreement, dated November 1, 1995, between General Motors Corporation, Chevrolet Motor Division and Fair Chevrolet-Geo Partnership. *10.2.9.1 Nissan Dealer Term Sales and Service Agreement, between the Nissan Division of Nissan Motor Corporation in U.S.A. and DiFeo Nissan Partnership. *10.2.9.2 Nissan Dealer Sales and Service Agreement Standard Provisions. - -14- *10.2.10.1 Chrysler Corporation Term Sales and Service Agreement, dated August 16, 1995, between Fair Chrysler Plymouth Partnership and Chrysler Corporation. *10.2.10.2 Chrysler Corporation Sales and Service agreement Additional Terms and Provisions. *10.2.11 Chrysler Corporation Eagle Sales and Service Agreement, dated October 8, 1992, between DiFeo Jeep-Eagle Partnership and Chrysler Corporation. *10.2.12 Chrysler Corporation Chrysler Sales and Service Agreement, dated August 16, 1995, between DiFeo Chrysler Plymouth Jeep Eagle Partnership and Chrysler. *10.2.13 Chrysler Corporation Plymouth Sales and Service Agreement, dated November 13, 1992, between DiFeo Chrysler Plymouth Jeep Eagle Partnership and Chrysler Corporation. *10.2.14 Toyota Dealer Agreement, dated May 5, 1995, between Toyota Motor Distributors, Inc. and County Auto Group Partnership. *10.2.15.1 Hyundai Motor America Dealer Sales and Service Agreement, dated October 12, 1992, between Hyundai Motor America and Fair Hyundai Partnership as amended November 22, 1993, October 12, 1995, March 14, 1996 and September 18, 1996. *10.2.15.2 Hyundai Motor America Dealer Sales and Service Agreement Standard Provisions. *10.2.16 Hyundai Motor America Dealer Sales and Service Agreement, dated November 22, 1993, as amended April 1, 1994, and November 3, 1995, between Hyundai Motor America and DiFeo Hyundai Partnership. *10.2.17 Toyota Dealer Agreement, dated August 23, 1995, between Toyota Motor Distributors, Inc. and OCT Partnership. *10.2.18 Mitsubishi Motor Sales of America, Inc. Sales and Service Agreement, dated June 30, 1994, between Mitsubishi Motor Sales of America, Inc. and OCM Partnership. *10.2.19 Chrysler Corporation Jeep Sales and Service Agreement, dated October 8, 1992, between DiFeo Jeep-Eagle Partnership and Chrysler Corporation. *10.2.20 Chevrolet-Geo Dealer Sales and Service Agreement, dated November 1, 1995 between General Motors Corporation, Chevrolet Motor Division and DiFeo Chevrolet-Geo Partnership. *10.2.21 Isuzu Dealer Sales and Service Agreement, dated as of September 16, 1996 between American Isuzu Motors, Inc. and Fair Cadillac-Oldsmobile-Isuzu Partnership. *10.2.22 Isuzu Dealer Sales and Service Agreement Additional Provisions. *10.2.23 Loan and Security Agreement, dated as of October 1, 1992, between General Motors Acceptance Corporation and Hudson Motors Partnership, as amended April 7, 1993. *10.2.24 Unconditional, Continuing Guaranty of Payment of the Company and its affiliates named therein, dated as of October 1, 1992, in favor of General Motors Acceptance Corporation, as amended April 7, 1993. *10.2.25 Term Loan and Borrowing Base Credit Line Loan Agreement, dated as of April 7, 1993, between General Motors Acceptance Corporation and DiFeo-EMCO Management Partnership. *10.2.26 Settlement Agreement, dated as of October 3, 1996, among the Company and certain of its affiliates, on the one hand, and Samuel X. DiFeo, Joseph C. DiFeo and certain of their affiliates, on the other hand. *10.2.27 Form of Agreement and Plan of Merger used in the Minority Exchange of the DiFeo Group. -15- *10.2.28 Form of Lease of certain facilities in the DiFeo Group. *10.2.29 Lease Agreement, dated September 27, 1990, between J&F Associates and TJGHCC Associates. *10.2.30 Lease Agreement, dated October 1, 1992, between Manly Chevrolet, Inc. and County Toyota, Inc. *10.2.31 Sublease, dated October 1, 1992, between DiFeo BMW, Inc. and DiFeo BMW Partnership. *10.3.1 Receivables Purchase Agreement, dated as of June 28, 1995, between Atlantic Auto Funding Corporation and Atlantic Auto Finance Corporation. *10.3.2 Loan and Security Agreement, dated as of June 28, 1995, among Atlantic Auto Funding Corporation, Atlantic Auto Finance Corporation and Citibank, N.A. *10.3.3 Support Agreement of the Company, dated as of June 28, 1995, in favor of Atlantic Auto Funding Corporation. *10.3.4 Purchase Agreement, dated as of June 14, 1996, between Atlantic Auto Finance Corporation and Atlantic Auto Second Funding Corporation. *10.3.5 Transfer and Administration Agreement, dated as of June 14, 1996, among Atlantic Auto Second Funding Corporation, Atlantic Auto Finance Corporation and Morgan Guaranty Trust Company of New York. *10.3.6 Support Agreement of the Company, dated as of June 18, 1996, in favor of Atlantic Auto Second Funding Corporation. *10.3.7 Pooling and Servicing Agreement relating to Atlantic Auto Grantor Trust 1996-A, dated as of June 20, 1996, among Atlantic Auto Third Funding Corporation, Atlantic Auto Finance Corporation and The Chase Manhattan Bank. *10.3.8 Insurance and Indemnity Agreement, dated as of June 20, 1996, among Financial Security Assurance Inc., Atlantic Auto Third Funding Corporation and Atlantic Auto Finance Corporation. *10.3.9 Master Spread Account Agreement, dated as of June 20, 1996, among Atlantic Auto Third Funding Corporation, Financial Security Assurance Inc. and The Chase Manhattan Bank. *10.3.10 Lease Agreement, dated as of March 18, 1994, between Perinton Hills and the Company, including guaranty of lease of Atlantic Auto Finance Corporation. *10.4.1 Amended and Restated Stock Purchase Agreement, dated as of July 1, 1995, among the Company, Landers Auto Sales, Inc., Steve Landers, John Landers and Bob Landers. *10.4.2 Promissory Note of the Company, dated August 1, 1995, in favor of Steve Landers and John Landers. *10.4.3 Promissory Note of the Company, dated August 1, 1995, in favor of Steve Landers and John Landers. *10.4.4 Guarantee of the Company, dated as of August 1, 1995, in favor of Steve Landers and John Landers. *10.4.5 Employment Agreement, dated as of August 1, 1995, between Landers Auto Sales, Inc. and Steve Landers. *10.4.6 Lease, dated as of August 1, 1995, among Steve Landers, John Landers, Bob Landers and Landers Auto Sales, Inc., regarding Jeep-Eagle premises. -16- *10.4.7 Lease, dated as of August 1, 1995, among Steve Landers, John Landers, Bob Landers and Landers Auto Sales, Inc., regarding Oldsmobile-GMC premises. *10.4.8 Shareholders' Agreement, dated as of August 1, 1995, among the Company, United Landers, Inc., Landers Auto Sales, Inc., Steve Landers and John Landers. *10.4.9 Chrysler Corporation Eagle Sales and Service Agreement, dated August 16, 1995, between United Landers Auto Sales, Inc. and Chrysler Corporation. *10.4.10 Chrysler Corporation Jeep Sales and Service Agreement, dated August 16, 1995, between United Landers Auto Sales, Inc. and Chrysler Corporation. *10.4.11 Chrysler Corporation Dodge Sales and Service Agreement, dated August 16, 1995, between United Landers Auto Sales, Inc. and Chrysler Corporation. *10.4.12 Chrysler Corporation Plymouth Sales and Service Agreement, dated August 16, 1995, between United Landers Auto Sales, Inc. and Chrysler Corporation. *10.4.13 Chrysler Corporation Chrysler Sales and Service Agreement, dated August 16, 1995, between United Landers Auto Sales, Inc. and Chrysler Corporation. *10.4.14 Oldsmobile Division Dealer Sales and Service Agreement, dated November 1, 1995, between General Motors Corporation, Oldsmobile Division and United Landers Auto Sales, Inc. *10.4.15 GMC Truck Division Dealer Sales and Service Agreement, dated November 1, 1995, between General Motors Corporation, GMC Truck Division and United Landers Auto Sales, Inc. *10.4.16 Security Agreement and Master Credit Agreement, dated October 25, 1993, between Landers Oldsmobile-GMC Inc. and Chrysler Credit Corporation. *10.4.17 Security Agreement and Master Credit Agreement, dated May 17, 1989, between Landers Jeep-Eagle, Inc. and Chrysler Credit Corporation. *10.4.18 Continuing Guaranty of United Landers, Inc., dated August 15, 1994, in favor of Chrysler Credit Corporation. *10.4.19 Commercial Loan Agreement, dated December 5, 1994, between Landers Oldsmobile-GMC, Inc. and The Benton State Bank. *10.4.20 Commercial Security Agreement, dated December 5, 1994, between Landers Oldsmobile-GMC, Inc. and The Benton State Bank. *10.4.21 Agreement, dated July 31, 1995, between the Company and General Motors Corporation, Oldsmobile Division. *10.5.1 Stock Purchase Agreement, dated as of November 17, 1995, among the Company, UAG Atlanta, Inc., Atlanta Toyota, Inc, and Carl H. Westcott. *10.5.2 Promissory Note of UAG Atlanta, Inc., dated January 16, 1996, in favor of Carl H. Westcott. *10.5.3 Guaranty of the Company, dated as of January 16, 1996, in favor of Carl H. Westcott. *10.5.4 Promissory Note of Atlanta Toyota, Inc., dated January 16, 1996, in favor of First Extended Service Corporation. *10.5.5 Guaranty of the Company, dated as of January 16, 1996, in favor of Carl H. Westcott. *10.5.61 Lease Agreement, dated as of January 3, 1996, between Carl Westcott and Atlanta Toyota, Inc. -17- *10.5.7 Lease Guaranty of the Company, dated as of January 16, 1995, in favor of Carl Westcott. *10.5.8 Toyota Dealer Agreement, dated January 16, 1996, between Southeast Toyota Motor Distributors, Inc. and Atlanta Toyota, Inc. *10.5.9 Wholesale Floor Plan Security Agreement, dated May 24, 1996, between World Omni Financial Corp. and Atlanta Toyota, Inc. *10.5.10 Continuing Guaranty of the Company in favor of World Omni Financial Corp. and certain affiliates. *10.5.11 Inventory Financing Payment Agreement, dated May 24, 1996, among Atlanta Toyota, Inc., Fidelity Warranty Services, Inc. and World Omni Financial Corp. *10.5.12 Shareholders' Agreement, dated as of July 31, 1996, among the Company, UAG Atlanta, Inc., Atlanta Toyota and John Smith. *10.5.13 Employment Agreement, dated as of January 16, 1996, among the Company, UAG Atlanta, Inc. and John Smith. *10.6.1 Stock Purchase Agreement, dated as of March 1, 1996, among the Company, UAG Atlanta II, Inc., Steve Rayman Nissan, Inc., Steven L. Rayman and Richard W. Keffer, Jr. *10.6.2 Employment Agreement, dated as of May 1, 1996, among the Company, UAG Atlanta II, In., Steve Rayman Nissan, Inc. and Bruce G. Dunker. *10.6.3 Lease Agreement, dated as of May 1, 1996, among Steven L. Rayman, Richard W. Keffer, Jr. and Steve Rayman Nissan, Inc. *10.6.4 Nissan Dealer Term Sales and Service Agreement, between the Nissan Division of Nissan Motor Corporation in U.S.A. and United Nissan, Inc. *10.6.5 Wholesale Floor Plan Security Agreement, dated April 29, 1996, between World Omni Financial Corp. and United Nissan, Inc. *10.6.6 Continuing Guaranty of the Company, dated April 29, 1996, in favor of World Omni Financial Corp. and certain affiliates. *10.7.1 Stock Purchase Agreement, dated as of June 7, 1996, among the Company, UAG Atlanta III, Inc. Hickman Nissan, Inc., Lynda Jane Hickman and Lynda Jane Hickman as Executrix under the will of James Franklin Hickman, Jr., deceased. *10.7.2 Nissan Dealer Term Sales and Service Agreement, between the Nissan Division of Nissan Motor Corporation in U.S.A. and Peachtree Nissan, Inc. *10.7.3 Automotive Wholesale Financing and Security Agreement, dated July 12, 1996, between Nissan Motor Acceptance Corporation and Peachtree Nissan, Inc. *10.7.4 Guaranty of the Company and UAG Atlanta III, Inc., dated July 12, 1996, in favor of Nissan Motor Acceptance Corporation. *10.7.5 Promissory Note of UAG Atlanta III, Inc., dated July 12, 996, in favor of Lynda Jane Hickman, as Executrix under the will of James Franklin Hickman, Jr. *10.7.6 Guaranty of Note of Hickman Nissan, Inc., dated July 12, 1996, in favor of Lynda Jane Hickman, as Executrix under the will of James Franklin Hickman, Jr. *10.7.7 Guaranty of Note of the Company, dated July 12, 1996, in favor of Lynda Jane Hickman, as Executrix under the will of James Franklin Hickman, Jr. *10.7.8 Lease Agreement, dated July 12, 1996, between Lynda Jane Hickman, as Executrix under the will of James Franklin Hickman, Jr., and Hickman Nissan, Inc. -18- *10.7.9 Lease Agreement, dated July 12, 1996, between Argonne Enterprises, Inc. and Hickman Nissan, Inc. *10.7.10 Guaranty of Lease of the Company, dated July 12, 1996, in favor of Lynda Jane Hickman, Jr. *10.7.11 Guaranty of Lease of the Company, dated July 12, 1996, in favor of Argonne Enterprises, Inc. *10.8.1 Stock Purchase Agreement, dated as of June 6, 1996, among the Company, UAG West, Inc., Scottsdale Jaguar, LTD., SA Automotive, LTD., SL Automotive, LTD., SPA Automotive, LTD., LRP, LTD., Sun BMW, LTD., Scottsdale Management Group, LTD., 6725 Dealership LTD., Steven Knappenberger Revocable Trust Dated April 15, 1983, as amended, Brochick 6725 Trust dated December 29, 1992, Beskind 6725 Trust dated December 29, 1992, Steven Knappenberger, Jay P. Beskind December 29, 1992, Knappenberger 6725 Trust dated and George W. Brochick, as amended on October 21, 1996 by Amendment No. 1, Amendment No. 2 and Amendment No. 3. *10.8.2 Purchase and Sale Agreement, 6905 E. McDowell Road, dated June 6, 1996, among Steven Knappenberger, as Trustee of the Steven Knappenberger Revocable Trust II, Bruce Knappenberger, as Trustee of the Bruce Knappenberger Trust and UAG West, Inc. and Steven Knappenberger. *10.8.3 Form of Employment Agreement between the Company, UAG West, Inc., and Steven Knappenberger. *10.8.4 Form of Broker's Agreement between UAG West, Inc. and KBB, Inc. *10.8.5.1 Form of Audi Dealer Agreement. *10.8.5.2 Audi Standard Provisions. *10.8.6.1 Form of Acura Automobile Dealer Sales and Service Agreement. *10.8.6.2 Acura Standard Provisions. *10.8.7.1 Form of BMW of North America Dealer Agreement. *10.8.8.1 Form of Porsche Sales and Service Agreement. *10.8.8.2 Form of Addendum to Porsche Sales and Service Agreement. *10.8.9.1 Form of Land Rover North America, Inc. Dealer Agreement. *10.8.9.2 Land Rover Standard Provisions. *10.8.10 Sublease, dated June 7, 1988, between Max of Switzerland and Scottsdale Porsche & Audi, Ltd. *10.8.11 Lease, dated October 1990, between Lisa B. Zelinsky and R.J. Morgan Corporation of America and Scottsdale Hyundai, Ltd. *10.8.12 Sublease, dated July 1, 1995, between Camelback Automotive, Inc. and LRP Ltd. *10.8.13 Lease, dated February 27, 1995, between Lee S. Maas and Sun BMW Ltd. *10.8.14 Form of Shareholders' Agreement among UAG West, Inc., SK Motors, Ltd., and the Knappenberger Revocable Trust. *10.8.15 Form of Management Agreement among the Company, UAG West, Inc. and Scottsdale Jaguar, Ltd. *10.8.16 Form of Lease Agreement between 6725 Agent and Scottsdale Jaguar, Ltd. *10.8.17 Form of Indemnification Agreement among the Company, UAG West, Inc., Scottsdale Jaguar, Ltd., Steven Knappenberger, and certain other individuals and trusts. -19- *10.8.18 Form of Real Estate Loan and Security Agreement, made by SA Automotive, Ltd. for the benefit of Chrysler Financial Corporation. *10.8.19 Form of Security Agreement and Master Credit Agreement of Chrysler Credit Corporation. *10.8.20 Form of Continuing Guaranty of each of the Company and UAG West, Inc. in favor of Chrysler Credit Corporation. *10.9.1 Stock Purchase Agreement, dated August 5, 1996, among the Company, UAG Atlanta IV, Inc., Charles Evans BMW, Inc. and Charles F. Evans. *10.9.2 Stock Purchase Agreement, dated August 5, 1996, among the Company, UAG Atlanta IV, Inc., Charles Evans Nissan, Inc. and Charles F. Evans. *10.9.3 Form of Dealer Agreement between BMW North America, Inc. and Charles Evans BMW Inc. *10.9.4 Form of Nissan Dealer Term Sales and Service Agreement between Nissan Motor Corporation in U.S.A. and Charles Evans Nissan, Inc. *10.9.5 Form of Lease Agreement between Charles F. Evans and Charles Evans BMW, Inc. *10.9.6 Form of Lease Guaranty of the Company in favor of Charles F. Evans. *10.9.7 Form of Lease Agreement between Charles F. Evans and Charles Evans Nissan, Inc. *10.9.8 Form of Lease Guaranty of the Company in favor of Charles F. Evans. *10.9.9 Form of Purchase and Sale Agreement for Charles Evans BMW Property between Charles F. Evans and the Company. *10.9.10 Form of Purchase and Sale Agreement for Charles Evans Nissan Property between Charles F. Evans and the Company. *10.9.11 Form of Inventory Financing and Security Agreement between BMW Financial Services NA, Inc. and UAG Atlanta IV Motors Inc. *10.9.12 Form of Guaranty of the Company in favor of BMW Financial Services NA, Inc. *10.9.13 Form of Inventory Financing and Security Agreement between BMW Financial Services NA, Inc. and Conyers Nissan, Inc. *10.9.14 Form of Guaranty of the Company in favor of BMW Financial Services NA, Inc. *10.10.1 Stock Purchase Agreement, dated September 5, 1996, among the Company, UAG Tennessee, Inc., Standefer Motor Sales, Inc., Charles A. Standefer and Charles A. Standefer and Karen S. Nicely, trustees under the Irrevocable Trust Agreement of Charles B. Standefer for the primary benefit of children, dated December 21, 1992. *10.10.2 Form of Nissan Dealer Term Sales and Service Agreement between Nissan Motor Corporation in U.S.A. and Conyers Nissan, Inc. *10.10.3 Form of Lease Agreement between Standefer Investment Company and Standefer Motor Sales, Inc. *10.10.4 Form of Lease Guaranty of the Company in favor of Standefer Investment Company. *10.10.5 Form of Security Agreement and Master Credit Agreement between Chrysler Credit Corporation and Standefer Motor Sales, Inc. *10.10.6 Form of Continuing Guaranty of each of the Company and UAG Tennessee, Inc. in favor of Chrysler Credit Corporation. **10.11.1 Agreement and Plan of Merger, dated December 16, 1996, among Crown Jeep Eagle, Inc., Berylson, Inc., Shannon Automotive, Ltd., Kevin J. Coffey, Paul J. Rhodes, the Company, UAG Texas, Inc. and UAG Texas II, Inc. -20- 10.11.2 Chrysler Corporation Dodge Sales and Service Agreement, dated April 2, 1997, between Shannon Automotive, Ltd. and Chrysler Corporation (substantially similar to exhibit 10.2.10.1 to the Company's Registration Statement on Form S-1, Registration No. 333-09429). 10.11.3 Chrysler Corporation Jeep Sales and Service Agreement, dated April 2, 1997, between Shannon Automotive, Ltd. and Chrysler Corporation (substantially similar to exhibit 10.2.10.1 to the Company's Registration Statement on Form S-1, Registration No. 333-09429). 10.11.4 Chrysler Corporation Eagle Sales and Service Agreement, dated April 2, 1997, between Shannon Automotive, Ltd. and Chrysler Corporation (substantially similar to exhibit 10.2.10.1 to the Company's Registration Statement on Form S-1, Registration No. 333-09429). 10.11.5 Chrysler Corporation Chrysler Sales and Service Agreement, dated April 2, 1997, between Shannon Automotive, Ltd. and Chrysler Corporation (substantially similar to exhibit 10.2.10.1 to the Company's Registration Statement on Form S-1, Registration No. 333-09429). 10.11.6 Chrysler Corporation Plymouth Sales and Service Agreement, dated April 2, 1997, between Shannon Automotive, Ltd. and Chrysler Corporation (substantially similar to exhibit 10.2.10.1 to the Company's Registration Statement on Form S-1, Registration No. 333-09429). 10.11.7 Automobile Flooring and Security Agreement, dated as of March 6, 1997, amended as of March 26, 1997, between Bank of America National Trust and Savings Association and Shannon Automotive, Ltd. 10.11.8 Guaranty of the Company, dated March 6, 1997, in favor of Bank of America National Trust and Savings Association. 10.11.9 Guaranty of UAG Texas, Inc., dated March 6, 1997, in favor of Bank of America National Trust and Savings Association. 10.11.10 Guaranty of UAG Texas II, Inc., dated March 6, 1997, in favor of Bank of America National Trust and Savings Association. 10.12.1 Stock Purchase Agreement, dated February 7, 1997, among the Company, UAG Nevada, Inc., Gary Hanna Nissan, Inc., The Gary W. Hanna Family Trust Restated December 18, 1990 and Gary W. Hanna. 10.13.1 Stock Purchase Agreement, dated February 19, 1997, among the Company, UAG East, Inc., Amity Auto Plaza Ltd., Massapequa Imports Ltd., Westbury Nissan Ltd., Westbury Superstore Ltd., J&S Auto Refinishing Ltd., Florida Chrysler Plymouth Jeep Eagle Inc., Palm Auto Plaza Inc., West Palm Infiniti Inc., West Palm Nissan Inc., Northlake Auto Finish Inc., John A. Staluppi and John A. Staluppi, Jr. 10.14.1 Stock Purchase Agreement, dated March 5, 1997, among the Company, Marshal Mize Ford, Inc., Wade Ford, Inc., Wade Ford Buford, Inc., Marshal D. Mize, Alan K. Arnold, Lewis J. Dyer and Gary R. Billings. -21- 27.1 Financial Data Schedule. - ------------------------ * Incorporated herein by reference to the identically numbered exhibit to the Company's Registration Statement on Form S-1, Registration No. 333-09429. ** Incorporated herein by reference to the identically numbered exhibit to the Company's Current Report on Form 8-K filed on December 24, 1996, File No. 1-12297. *** Incorporated herein by reference to the identically numbered exhibit to the Company's Annual Report on Form 10-K filed on March 14, 1997, File No. 1-12297. -22- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. UNITED AUTO GROUP, INC. By: /s/ Marshall S. Cogan ---------------------------- Marshall S. Cogan Chairman of the Board and Chief Executive Officer Date: May 15, 1997 By: /s/ James R. Davidson ---------------------------- James R. Davidson Senior Vice President-Finance (Principal Accounting Officer) Date: May 15, 1997 -23- EX-10.1.17 2 REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and entered into this 6th day of March, 1997, by and among UNITED AUTO GROUP, INC., a Delaware corporation (the "Company") and KEVIN J. COFFEY, an individual resident of the State of Texas (the "Stockholder"). IN CONSIDERATION of the mutual promises and covenants set forth herein, and intending to be legally bound, the parties hereto hereby agree as follows: 1. RESTRICTIONS ON TRANSFERABILITY OF SECURITIES; REGISTRATION RIGHTS 1.1. CERTAIN DEFINITIONS. The following terms shall have the meanings set forth below: (a) "Holder" shall mean the Stockholder and any holder of Registrable Securities to whom the rights conferred by this Agreement have been transferred in compliance with Section 1.2 hereof. (b) "Other Stockholders" shall mean persons who, by virtue of agreements with the Company other than this Agreement, are entitled to include their securities in certain registrations hereunder. (c) "Prior Holder" shall mean any person or entity who has previously been granted rights pursuant to an agreement with the Company (the "Prior Registration Rights Agreements") to have shares of UAG Stock (as defined below) registered under the Securities Act of 1933, as amended (the "Securities Act"). (d) "Registrable Securities" shall mean shares of the Company's common stock, $.0001 par value per share (the "UAG Stock") issued to the Stockholder pursuant to that certain Agreement and Plan of Merger dated December 16, 1996 between and among Crown Jeep Eagle, Inc., Berylson, Inc., Shannon Automotive, Ltd., Coffey, Rhodes, UAG, UAG Texas, Inc. and UAG Texas II, Inc. (the "Merger Agreement"), provided that Registrable Securities shall not include any shares of UAG Stock which have previously been registered or which have been sold to the public or which have been sold in a private transaction in which the transferor's rights under this Agreement are not assigned. (e) The terms "register," "registered" and "registration" shall refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and applicable rules and regulations thereunder and the declaration or ordering of the effectiveness of such registration statement. (f) "Registration Expenses" shall mean all expenses incurred in effecting any registration pursuant to this Agreement, including, without limitation, all registration, qualification, and filing fees, printing expenses, escrow fees, fees and disbursements of counsel for the Company, blue sky fees and expenses, and expenses of any regular or special audits incident to or required by any such registration, but shall not include (i) Selling Expenses (as hereafter defined), (ii) fees and disbursements of counsel for the Holders, (iii) the compensation of regular employees of the Company, which shall be paid in any event by the Company, and (iv) blue sky fees and expenses incurred in connection with the registration or qualification of any Registrable Securities in any state, province or other jurisdiction in a registration pursuant to Section 1.3 hereof to the extent that the Company shall otherwise be making no offers or sales in such state, province or other jurisdiction in connection with such registration. (g) "Restricted Securities" shall mean any Registrable Securities required to bear the legend set forth in Section 1.2(c) hereof. (h) "Rule 144" shall mean Rule 144 as promulgated by the SEC under the Securities Act, as such Rule may be amended from time to time, or any similar successor rule that may be promulgated by the SEC. (i) "Rule 145" shall mean Rule 145 as promulgated by the SEC under the Securities Act, as such Rule may be amended from time to time, or any similar successor rule that may be promulgated by the SEC. (j) "Selling Expenses" shall mean all underwriting discounts, selling commissions and stock transfer taxes applicable to the sale of Registrable Securities. 1.2. RESTRICTIONS ON TRANSFER. (a) Each Holder agrees not to make any disposition of all or any portion of the Registrable Securities unless and until (i) there is then in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with such registration statement, or (ii) the transferee has agreed in writing for the benefit of the Company to be bound by this Section 1.2 (unless waived by the Company) and (A) such Holder shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition and (B) if reasonably -2- requested by the Company, such Holder shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company, that such disposition will not require registration of such shares under the Securities Act, it being understood that the Company will not require opinions of counsel for transactions made pursuant to Rule 144 except in unusual circumstances. (b) Notwithstanding the provisions of subparagraphs (i) and (ii) of paragraph (a) above, no such registration statement or opinion of counsel shall be necessary for a transfer by a Holder which is (A) a partnership to its partners in accordance with partnership interests, or (B) to the Holder's family member or a trust for the benefit of an individual Holder or one or more of his family members, provided the transferee will be subject to the terms of this Section 1.2 to the same extent as if he were an original Holder hereunder. (c) Each certificate representing Registrable Securities shall (unless otherwise permitted by the provisions of this Agreement) be stamped or otherwise imprinted with a legend substantially similar to the following (in addition to any legend required under applicable state securities laws): THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL OR OTHER EVIDENCE, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED. (d) The Company shall be obligated to promptly reissue certificates without legends at the request of any Holder thereof if the Holder shall have obtained an opinion of counsel (which counsel may be counsel to the Company) reasonably acceptable to the Company to the effect that the securities proposed to be disposed of may lawfully be so disposed of in compliance with the Securities Act without registration, qualification or legend. (e) Any legend endorsed on an instrument pursuant to applicable state securities laws and the stop-transfer instructions with respect to such securities shall be removed upon receipt by the Company of an order of the appropriate blue sky authority authorizing such removal or if the Holder shall request such removal and shall have obtained and delivered to the Company an opinion of counsel reasonably acceptable to the Company to the effect that such legend and/or stop-transfer instructions are no longer required pursuant to applicable state securities laws. -3- 1.3. COMPANY REGISTRATION. (a) Right to Piggyback. If, at any time after the second anniversary of this Agreement, the Company shall determine to register any of its securities either for its own account or the account of a security holder or holders exercising their respective demand registration rights, other than a registration relating solely to employee benefit plans, or a registration relating solely to a Rule 145 transaction, or a registration on any registration form that does not permit secondary sales, the Company will: (i) promptly give to each Holder written notice thereof, which notice briefly describes the Holders' rights under this Section 1.3 (including notice deadlines); and (ii) use its best efforts to include in such registration (and any related filing or qualification under applicable blue sky laws), except as set forth in Section 1.3(b) below, and in any underwriting involved therein, all the Registrable Securities specified in a written request or requests, made by any Holder and received by the Company within twenty (20) days after the written notice from the Company described in clause (i) above is mailed or delivered by the Company, provided that such Holders shall have requested for inclusion in such registration at least twenty-five (25%) of the aggregate number of the Registrable Securities which have been issued to the Holder prior to the date of such written request. Such written request may specify all or a part of a Holder's Registrable Securities. (b) Underwriting. If the registration of which the Company gives notice is for a registered public offering involving an underwriting, the Company shall so advise the Holders as a part of the written notice given pursuant to Section 1.3(a)(i). In such event, the right of any Holder to registration pursuant to this Section 1.3 shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company and the other holders of securities of the Company with registration rights to participate therein distributing their securities through such underwriting) enter into an underwriting agreement in customary form with the representative of the underwriter or underwriters selected by the Company. Notwithstanding any other provision of this Section 1.3, if the representative of the underwriters advises the Company in writing that marketing factors require a limitation on the number of shares to be underwritten, the representative may (subject to the limitations set forth below) exclude all Registrable Securities from, or limit the number of Registrable Securities to be included -4- in, the registration and underwriting. The Company shall so advise all Holders of securities requesting registration, and the number of shares of securities that are entitled to be included in the registration and underwriting shall be allocated first to the Company for securities being sold for its own account and thereafter as set forth in Section 1.9. If any person does not agree to the terms of any such underwriting, he shall be excluded therefrom by written notice from the Company or the underwriter. Any Registrable Securities or other securities excluded or withdrawn from such underwriting shall be withdrawn from such registration. If shares are so withdrawn from the registration and if the number of shares of Registrable Securities to be included in such registration was previously reduced as a result of marketing factors, the Company shall then offer to all persons who have retained the right to include securities in the registration the right to include additional securities in the registration in an aggregate amount equal to the number of shares so withdrawn, with such shares to be allocated among the persons requesting additional inclusion in accordance with Section 1.9 hereof. 1.4. EXPENSES OF REGISTRATION. All Registration Expenses incurred in connection with any registration, qualification or compliance pursuant to Section 1.3 hereof shall be borne by the Company. All Selling Expenses relating to securities so registered shall be borne by the holders of such securities pro rata on the basis of the number of shares of securities so registered on their behalf. 1.5. REGISTRATION PROCEDURES. In the case of each registration effected by the Company pursuant to Section 1.3 hereof, the Company will keep each Holder advised in writing as to the initiation of each registration and as to the completion thereof. At its expense, the Company will use its best efforts to: (a) keep such registration effective for a period of one hundred twenty (120) days or until the Holder or Holders have completed the distribution described in the registration statement relating thereto, whichever first occurs, provided that such 120-day period shall be extended for a period of time equal to the period the Holder refrains from selling any securities included in such registration at the request of any underwriter; (b) prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement; -5- (c) furnish such number of prospectuses and other documents incident thereto, including any amendment of or supplement to the prospectus, as a Holder from time to time may reasonably request; (d) notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading or incomplete in the light of the circumstances then existing, and at the request of any such Holder, prepare and furnish to such Holder a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading or incomplete in the light of the circumstances then existing; provided, however, the Company shall not be obligated to prepare and furnish any such prospectus supplements or amendments relating to any material nonpublic information at any such time as the Board of Directors of the Company has determined that, for good business reasons, the disclosure of such material nonpublic information at that time is contrary to the best interests of the Company in the circumstances and is not otherwise required under applicable law (including applicable securities laws); (e) cause all such Registrable Securities registered pursuant hereunder to be listed on each securities exchange and/or included in any national quotation system on which similar securities issued by the Company are then listed or included; (f) provide a transfer agent and registrar for all Registrable Securities registered pursuant to such registration statement and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration; (g) otherwise use its best efforts to comply with all applicable rules and regulations of the SEC, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve (12) months, but not more than eighteen months, beginning with the first month after the effective date of the registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act; and (h) in connection with any underwritten offering pursuant to a registration statement filed pursuant to Section 1.3 hereof, -6- the Company will enter into an underwriting agreement reasonably necessary to effect the offer and sale of Registrable Securities, provided such underwriting agreement contains customary underwriting provisions and provided further that if the underwriter so requests the underwriting agreement will contain customary indemnity and contribution provisions. 1.6. INDEMNIFICATION. (a) The Company will indemnify each Holder, each of its officers, directors and partners, legal counsel, and accountants and each person controlling such Holder within the meaning of Section 15 of the Securities Act, with respect to which registration, qualification, or compliance has been effected pursuant to this Section 1, and each underwriter, if any, and each person who controls within the meaning of Section 15 of the Securities Act any underwriter, against all expenses, claims, losses, damages, and liabilities (or actions, proceedings, or settlements in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any prospectus, offering circular, or other document (including any related registration statement, notification, or the like) incident to any such registration, qualification, or compliance, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or any violation by the Company of the Securities Act or any rule or regulation thereunder applicable to the Company or relating to action or inaction required of the Company in connection with any such registration, qualification, or compliance, and will reimburse each such Holder, each of its officers, directors, partners, legal counsel, and accountants and each person controlling such Holder, each such underwriter, and each person who controls any such underwriter, for any legal and any other expenses reasonably incurred in connection with investigating and defending or settling any such claim, loss, damage, liability, or action, provided that the Company will not be liable in any such case to the extent that any such claim, loss, damage, liability, or expense arises out of or is based on any untrue statement or omission based upon written information furnished to the Company by such Holder or underwriter and stated to be specifically for use therein. It is agreed that the indemnity agreement contained in this Section 1.6(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of the Company (which consent has not been unreasonably withheld). (b) Each Holder will, if Registrable Securities held by him are included in the securities as to which such registration, qualification, or compliance is being effected, indemnify the Company, each of its directors, officers, partners, legal counsel, and accountants and each underwriter, if any, of the Company's securities covered by such a registration statement, -7- each person who controls the Company or such underwriter within the meaning of Section 15 of the Securities Act, each other such Holder and Other Stockholder, and each of their officers, directors, and partners, and each person controlling such Holder or Other Stockholder, against all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any such registration statement, prospectus, offering circular, or other document, or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company and such Holders, Other Stockholders, directors, officers, partners, legal counsel, and accountants, persons, underwriters, or control persons for any legal or any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability, or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement, prospectus, offering circular or other document in reliance upon and in conformity with written information furnished to the Company by such Holder and stated to be specifically for use therein; provided, however, that the obligations of such Holder hereunder shall not apply to amounts paid in settlement of any such claims, losses, damages, or liabilities (or actions in respect thereof) if such settlement is effected without the consent of such Holder (which consent shall not be unreasonably withheld) and (ii) that in no event shall any indemnity under this Section 1.6 exceed the gross proceeds from the offering received by such Holder. (c) Each party entitled to indemnification under this Section 1.6 (the "Indemnified Party") shall give notice to the party required to provide indemnification (the "Indemnifying Party") promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of such claim or any litigation resulting therefrom, provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or any litigation resulting therefrom, shall be approved by the Indemnified Party (whose approval shall not unreasonably be withheld), and the Indemnified Party may participate in such defense at such party's expense, and provided further that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Section 1, to the extent such failure is not prejudicial. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified of a release from all liability in respect to such claim or litigation. Each Indemnified Party shall furnish such -8- information regarding itself or the claim in question as an Indemnifying Party may reasonably request in writing and as shall be reasonably required in connection with defense of such claim and litigation resulting therefrom. (d) If the indemnification provided for in this Section 1.6 is held by a court of competent jurisdiction to be unavailable to an Indemnified Party with respect to any loss, liability, claim, damage, or expense referred to therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party hereunder, shall contribute to the amount paid or payable by such Indemnified Party as a result of such loss, liability, claim, damage, or expense in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and of the Indemnified Party on the other in connection with the conduct, statements or omissions that resulted in such loss, liability, claim, damage, or expense as well as any other relevant equitable considerations. The relative fault of the Indemnifying Party and of the Indemnified Party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the Indemnifying Party or by the Indemnified Party and the parties' relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission. (e) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into by the Indemnifying Party and the Indemnified Party in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control. 1.7. INFORMATION BY HOLDER. Each Holder of Registrable Securities shall furnish to the Company such information regarding such Holder and the distribution proposed by such Holder as the Company may reasonably request in writing and as shall be reasonably required in connection with any registration, qualification, or compliance referred to in this Section 1. 1.8. RULE 144 REPORTING. With a view to making available the benefits of certain rules and regulations of the SEC that may permit the sale of the Restricted Securities to the public without registration, the Company agrees to use its best efforts to: (a) make and keep public information regarding the Company available as those terms are understood and defined in Rule 144 under the Securities Act; -9- (b) file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Securities and Exchange Act of 1934 (the "Exchange Act"); and (c) so long as a Holder owns any Restricted Securities, furnish to the Holder forthwith upon written request a written statement by the Company as to its compliance with the reporting requirements of Rule 144 and of the Securities Act and the Exchange Act, a copy of the most recent annual or quarterly report of the Company, and such other reports and documents so filed as a Holder may reasonably request in availing itself of any rule or regulation of the SEC allowing a Holder to sell any such securities without registration. 1.9. ALLOCATION OF REGISTRATION OPPORTUNITIES. Subject to the rights of the Prior Holders contained in the Prior Registration Rights Agreements, notwithstanding any other provision of this Section 1.9, in any circumstance in which all of the Registrable Securities and other shares of the Company with registration rights (the "Other Shares") requested to be included in a registration on behalf of the Holders or Other Stockholders cannot be so included as a result of limitations of the aggregate number of shares of Registrable Securities and Other Shares that may be so included, the number of shares of Registrable Securities and Other Shares that may be so included shall be allocated among the Prior Holders, the Holders and the Other Stockholders requesting inclusion of shares, first to the Prior Holders and then to the Holders and the Other Stockholders pro rata on the basis of the number of shares of Registrable Securities held by such Holders and Other Stockholders; provided, however, that, if any Holder or Other Stockholder does not request inclusion of the maximum number of shares of Registrable Securities and Other Shares allocated to him pursuant to the above-described procedure, the remaining portion of his allocation shall be reallocated among those requesting Holders and Other Stockholders whose allocations did not satisfy their requests pro rata on the basis of the number of shares of Registrable Securities and Other Shares which would be held by such Holders and Other Stockholders, assuming conversion, and this procedure shall be repeated until all of the shares of Registrable Securities and Other Shares which may be included in the registration on behalf of the Holders and Other Stockholders have been so allocated. 1.10. DELAY OF REGISTRATION. No Holder shall have any right to take any action to restrain, enjoin, or otherwise delay any registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 1. -10- 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDER 2.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to the Stockholder as follows: (a) The execution, delivery and performance of this Agreement by the Company has been duly authorized by all requisite corporate action and will not violate any provision of law, any order of any court or other agency of government, the Certificate of Incorporation or Bylaws of the Company, or any provision of any material indenture, agreement or other instrument to which it or any of its properties or assets is bound, or conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any such material indenture, agreement or other instrument, or result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of the Company. (b) This Agreement has been duly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to applicable bankruptcy, insolvency and other similar laws affecting the enforceability of creditors' rights generally, general equitable principles, the discretion of courts in granting equitable remedies and public policy considerations. 2.2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER. The Stockholder represents and warrants to the Company as follows: (a) The execution, delivery and performance of this Agreement by the Stockholder will not violate any provision of law, any order of any court or any agency or government, or any provision of any material indenture or agreement or other instrument to which he or any of his properties or assets is bound, or conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any such material indenture, agreement or other instrument, or result in the creation or imposition of any lien, charge, or encumbrance of any nature whatsoever upon any of the properties or assets of the Stockholder. (b) This Agreement has been duly executed and delivered by the Stockholder and constitutes the legal, valid and binding obligation of the Stockholder, enforceable against the Stockholder in accordance with its terms, subject to applicable bankruptcy, insolvency and other similar laws affecting the enforceability of creditors' rights generally, general equitable -11- principles, the discretion of courts in granting equitable remedies and public policy considerations. 3. MISCELLANEOUS 3.1. LOCKUP AGREEMENT. In consideration for the Company's agreeing to its obligations under this Agreement, each Holder agrees that upon prior notice by the Company to such Holder and effective upon the request of the underwriters managing a public offering for sale by the Company of its securities, such Holder shall be obligated for the lesser of 120 days or the length of time the Company has agreed to be bound not to sell, loan, grant any option for the purchase of, or otherwise dispose of any Registrable Securities (other than those included in the registration and other than to any transferee which agrees to be bound by this Section 3.1) without the prior written consent of such underwriters. 3.2. GOVERNING LAW. This Agreement shall be governed in all respects by the laws of the State of Delaware, as if entered into by and between Delaware residents exclusively for performance entirely within Delaware. 3.3. SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto. 3.4. ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement constitutes the full and entire understanding and agreement between the parties with regard to the subject hereof and thereof. Neither this Agreement nor any term hereof may be amended, waived, discharged or terminated, except by a written instrument signed by the Company and the Holders of at least fifty-one percent (51%) of the Registrable Securities and any such amendment, waiver, discharge or termination shall be binding on all the Holders, but in no event shall the obligation of any Holder hereunder be materially increased, except upon the written consent of such Holder. 3.5. NOTICES, ETC. All notices and other communications required or permitted hereunder shall be in writing and shall be mailed by United States first-class mail, postage prepaid, or delivered personally by hand or nationally recognized courier addressed (a) if to a Holder, as indicated in the stock records of the Company or at such other address as such Holder shall have furnished to the Company in writing, or (b) if to the Company, at United Auto Group, Inc., 375 Park Avenue, Suite 2201, New York, New York 10152 or at such other address as the Company shall have furnished to each Holder in writing. All such notices and other -12- written communications shall be effective on the date of mailing or delivery. 3.6. DELAYS OR OMISSIONS. No delay or omission to exercise any right, power or remedy accruing to any Holder, upon any breach or default of the Company under this Agreement shall impair any such right, power or remedy of such Holder nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any Holder of any breach or default under this Agreement or any waiver on the part of any Holder of any provisions or conditions of this Agreement must be made in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any Holder, shall be cumulative and not alternative. 3.7. RIGHTS; SEVERABILITY. Unless otherwise expressly provided herein, a Holder's rights hereunder are several rights, not rights jointly held with any of the other Holders. In case any provision of the Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 3.8. INFORMATION CONFIDENTIAL. Each Holder acknowledges that the information received by them pursuant hereto may be confidential and for its use only, and it will not use such confidential information in violation of the Exchange Act or reproduce, disclose or disseminate such information to any other person (other than its employees or agents having a need to know the contents of such information, and its attorneys), except in connection with the exercise of rights under this Agreement, unless the Company has made such information available to the public generally or such Holder is required to disclose such information by a governmental body. 3.9. TITLES AND SUBTITLES. The titles of the paragraphs and subparagraphs of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement. 3.10. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. -13- 3.11. PRIOR REGISTRATION RIGHTS AGREEMENT. To the extent that any of the provisions herein conflict with any provisions of the Prior Registration Rights Agreements, such conflicts shall be resolved in favor of the rights granted in the Prior Registration Rights Agreements. IN WITNESS WHEREOF, the parties hereto have duly executed and sealed this Agreement or have caused this Agreement to be duly executed under seal on its behalf by an officer or representative thereto duly authorized, all as of the date first above written. UNITED AUTO GROUP, INC. By: /s/ George Lowrance ---------------------------------- Its: Executive Vice President ---------------------------------- ATTEST: [CORPORATE SEAL] By: -------------------------- /s/ Kevin J. Coffey (SEAL) ---------------------------------- KEVIN J. COFFEY -14- EX-10.1.18 3 CONSULTING AGREEMENT UNITED AUTO GROUP, INC. 375 Park Avenue New York, NY 10152 March 7, 1997 Mr. Carl Spielvogel c/o United Auto Group, Inc. 375 Park Avenue New York, NY 10152 Re: Consulting Agreement -------------------- Dear Carl: This letter will set forth our mutual agreement regarding your resignation as Chief Executive Officer of United Auto Group, Inc. (the "Company") and your continuing to serve as a consultant to the Company. 1. Your resignation as Chief Executive Officer will be effective as of April 17, 1997 (your "Termination Date"). Until such date, you may continue to occupy your current office and have the services of your secretary. 2. Your resignation as Chairman of the Board of Directors of the Company, as a member of all committees thereof (including the Executive Committee), and as an officer, employee, director and committee member of any and all subsidiaries and affiliates of the Company will also be effective as of April 17, 1997 (except for your resignation as a director of Foamex International Inc., which will be effective as of the date hereof), and you agree to execute the forms of resignation attached as Exhibit A hereto and any additional documents necessary to effect all of the above resignations as of such date. 3. In consideration for the covenants made by you under this letter and subject to your execution and delivery on March 14, 1997 of your irrevocable written confirmation that the seven-day revocation period referenced in clause 13 below has expired and that you have elected not to revoke the agreement set forth herein, the Company agrees to pay you the following amounts, and to provide you with the following benefits, in full satisfaction of all amounts required Mr. Carl Spielvogel March 7, 1997 Page 2 to be provided to you under your Employment Agreement, dated as of June 21, 1996 (your "Employment Agreement"): (i) on April 1, 1997, a bonus in the amount of $375,000 and, on your Termination Date, base salary earned as of your Termination Date and not yet paid, (ii) a monthly payment, payable in accordance with the Company's normal pay practices, for the period commencing on your Termination Date and ending December 31, 2000 (the "Salary Continuation Period"), at the rate of $83,333 per month, (iii) on your Termination Date, full title in the Company automobile currently being used by you, (iv) an unaccountable monthly allowance through December 31, 2000, payable at the time of each payment under subclause (ii) above, in the amount of $8,333; (v) continued participation in the Company's life insurance plan, on the same basis as for other Company employees, in accordance with the terms and conditions of such plan and to the extent such coverage is not prevented by applicable law or regulation and continued reimbursement for your coverage under your prior employer's medical and dental plans on a "tax grossed-up basis"; provided, however, that such participation and reimbursement will cease on the earlier of (A) December 31, 2000, and (B) the date or dates you receive similar coverage and benefits under the plans and programs of a subsequent employer (such coverage and benefits to be determined on a coverage-by-coverage, or benefit-by-benefit, basis); (vi) the accelerated vesting of all unvested stock options, and the grant of options (as described more fully in clause 4 below) and (vii) all reasonable attorney's fees and expenses (not to exceed $18,000) incurred by you in connection with the negotiation of this letter. 4. Subject to your execution and delivery on March 14, 1997 of your irrevocable written confirmation that the seven day revocation period referenced in clause 13 below has expired and that you have elected not to revoke the agreement set forth herein, (i) the Company confirms that the Stock Option Committee of the Company's Board of Directors has granted you an option under the Company's Stock Option Plan to purchase up to 100,000 shares of the Company's common stock at an exercise price equal to the reported closing price of such common stock on April 16, 1997 on the New York Stock Exchange, which option shall be fully vested and exercisable from April 17, 1997 and shall have the terms and conditions set forth in the Stock Option Agreement attached hereto as Exhibit B and (ii) notwithstanding any prior agreements to the contrary, all options previously granted to you and referenced Mr. Carl Spielvogel March 7, 1997 Page 3 in Section 3.1(c) of your Employment Agreement will, as previously contemplated, be fully vested and exercisable from April 17, 1997 through and including April 17, 2001. To the extent any such options have not been exercised on or prior to April 17, 2001, they will be immediately forfeited. To the extent the issuance of shares upon exercise of any of the options referred to in this clause 4 is not currently registered under the Securities Act of 1933, the Company will file a registration statement on Form S-8 on or before April 30, 1997 covering such issuance and shall use its best efforts to keep all such registrations effective until April 17, 2001. It is understood that the Stockholders Agreement referred to in Section 3.1(c)(iv) of your Employment Agreement is no longer in effect. The Company shall use commercially reasonable efforts to obtain from J.P. Morgan Securities Inc. a release from the 180-day lock-up agreement as of April 17, 1997, for the 26,118 shares owned by you and the shares issuable upon exercise of your options. 5. The provisions of Section 4.3(a) of your Employment Agreement (regarding confidentiality) shall survive the execution of this letter agreement and continue, without time limitation. Additionally, the provisions of Section 4.3(b) of your Employment Agreement (regarding non-competition) shall survive the execution of this letter agreement, and continue through April 16, 1998. You agree that the Company will suffer irreparable damage if the terms of any such provisions are breached and, in addition to all other remedies available to the Company, that the Company will be entitled as a matter of right to injunctive relief in respect of any such breach. 6. The provisions of Sections 6.1, 6.2, 6.5 and 6.8 of your Employment Agreement will also survive the execution of this letter agreement. 7. You affirm that you will not make any statements at any time that disparage the reputation of the Company or any of its affiliates, or any officers, directors, employees or agents of the Company or any of its affiliates, or, until December 31, 2000, any automobile dealers or manufacturers. The Company, on behalf of itself and its executive officers, agrees that it will not make any statements at any time that disparage your reputation. 8. The form of press release confirming your resignation described in clauses 1 and 2 herein shall be subject Mr. Carl Spielvogel March 7, 1997 Page 4 to our mutual agreement. Any statements by the Company or you to third parties or to employees of the Company regarding the termination of your employment shall be consistent with such press release or subject to our mutual agreement. 9. For the period commencing on your Termination Date and ending on December 31, 2000, subject to your other personal and business commitments, you agree to provide such consulting services at mutually convenient times and places as the Company may reasonably request, which requests shall be consistent with your knowledge and responsibilities as former Chief Executive Officer and Chairman of the Board of Directors of the Company. Notwithstanding anything to the contrary in this letter, but without limiting any other remedies available to the Company, a breach of this clause 9 will not entitle the Company to withhold payments set forth in clauses 3(ii) and (iv) or to offset any alleged damages for such breaches against such payments. 10. In consideration for the payments set forth in this letter, you and your heirs, executors, administrators, legal representatives, agents, successors in interest and assigns, hereby knowingly and voluntarily waive and unconditionally release and forever discharge, as of the date hereof and as of your Termination Date, from all or any manner of actions, causes and causes of actions, suits, debts, obligations, damages, complaints, liabilities, losses, covenants, contracts, controversies, agreements, promises, variances, trespasses, judgments, and expenses (including attorneys' fees and costs), executions, claims and demands whatsoever at law or in equity which you ever had, now have, or which you hereafter can, shall or may have against the Company on or prior to the date of this letter and your Termination Date, as the case may be. This release and waiver includes but is not limited to any rights or claims under United States federal, state or local law and the national or local law of any foreign country (statutory or decisional), for payments due or benefits required to be provided under your Employment Agreement, for wrongful or abusive discharge, for breach of your Employment Agreement or any other contract, or for discrimination based upon race, color, ethnicity, sex, age, national origin, religion, disability, sexual orientation, or any other unlawful criterion or circumstance, including rights or claims under the Age Discrimination in Employment Act of 1967, as amended. In this clause 10, the word "Company" means United Mr. Carl Spielvogel March 7, 1997 Page 5 Auto Group, Inc. and its respective subsidiaries, affiliates, employees, officers, directors, holders of 5% or more of the Company's common stock (and their affiliates), representatives and agents, past or present, and any person or entity which may succeed to the rights and liabilities of any such entities or persons by assignment or otherwise. Notwithstanding the foregoing, nothing in this clause 10 shall be deemed to release or waive any obligations of the Company under this letter, your stock option agreements or the Registration Rights Agreement, dated October 15, 1993, as amended (collectively, the "Agreements"). 11. Subject to your execution and delivery on March 14, 1997 of your irrevocable written confirmation that the seven day revocation period referenced in clause 13 below has expired and that you have elected not to revoke the agreement set forth herein, in consideration for your covenants in this letter, the Company hereby unconditionally releases and forever discharges , as of the date hereof and as of your Termination Date, you from all or any manner of actions, causes and causes of actions, suits, debts, obligations, damages, complaints, liabilities, losses, covenants, contracts, controversies, agreements, promises, variances, trespasses, judgments, and expenses (including attorneys' fees and costs), executions, claims and demands whatsoever at law or in equity which the Company ever had, now has, or which the Company hereafter can, shall or may have on or prior to the date of this letter and your Termination Date, as the case may be. Notwithstanding the foregoing, nothing in this clause 11 shall be deemed to release or discharge any of your obligations under any of the Agreements. 12. You affirm that, prior to the execution of this letter, you have consulted with an attorney concerning the terms and conditions set forth herein, and that you have been given up to 21 days to consider signing this letter. 13. For a period of seven days following your signing of this letter, you may revoke and cancel the agreement set forth herein. 14. You will be under no obligation to seek other employment and there shall be no offset against amounts due you under this letter on account of any remuneration attributable to any subsequent employment that you may obtain except as specifically provided in Mr. Carl Spielvogel March 7, 1997 Page 6 clause 3 above; however, during the Salary Continuation Period, you hereby agree to inform the Company upon your participation in employee benefit plans or programs of a subsequent employer which provide medical, dental, hospitalization or life insurance coverage by such subsequent employer to the extent you are provided with coverage and benefits similar to those you are receiving from the Company. 15. You agree, for so long as this letter agreement is otherwise confidential, that you will not disclose the fact of this letter or any of its terms or provisions to any person without the prior written consent of the Company; provided, however, that nothing in this clause 15 shall prohibit disclosure of such information to the extent required by law, nor prohibit disclosure by you to any legal or financial consultant, member of your immediate family or prospective employer, if such person first agrees to be bound by the confidentiality provisions of this clause 15. It is acknowledged that this letter will be filed by the Company with the Securities and Exchange Commission pursuant to applicable law. 16. This letter may be executed in any number of counterparts, each of which when so executed and delivered shall constitute an original and which all together shall constitute one agreement, with such counterparts being deliverable by facsimile with the original being transmitted by overnight courier. 17. This letter shall bind and inure to the benefit of the Company's successors and permitted assigns. 18. Except for clauses 10 and 11 herein, if any term or provision of this letter, or the application thereof, shall, to any extent, be invalid or unenforceable, the remaining terms and provisions of this letter or the application thereof shall not be invalidated thereby, and each term and provision hereof shall be construed with all other remaining terms and provisions hereof to effect the intent of the Company and you to the fullest extent permitted by law. In the event clause 10 shall be invalid or unenforceable, then this entire agreement shall become null and void and any payments of any kind made to you hereunder shall be returned. 19. This letter may not be amended, waived or modified, in whole or in part, except by a writing signed by each of you and the Company. Mr. Carl Spielvogel March 7, 1997 Page 7 20. Except for clause 10 herein, nothing herein expressed or implied is intended or shall be construed to confer upon or give to any person or entity (other than you or your beneficiaries and the Company) any rights or remedies under or by reason of this letter. 21. You understand that nothing contained in this letter shall be deemed or construed as an admission of wrongdoing or liability on your part or on the part of the Company. 22. This letter (including the provisions of your Employment Agreement explicitly incorporated by reference herein) and the other Agreements constitute the entire agreement between you and the Company and supersede all other prior agreements and understandings, oral and written, between you and the Company with respect to the subject matter hereof. 23. This letter shall be construed and enforced in accordance with, and shall be governed by, the laws of the State of New York without giving effect to that State's choice of law principles. 24. The payments due to you hereunder shall be subject to reduction to satisfy all applicable Federal, State and local income and employment tax withholding obligations. To the extent payments hereunder are not withheld, (a) you represent and warrant to the Company that you shall pay all taxes due thereon and (b) you shall furnish such form (but not your income tax return) reasonably requested by the Company to evidence such payment. You shall indemnify the Company from all taxes, interest, penalty or other loss (including reasonable attorneys' fees) arising from any failure by the Company to withhold any such payments. 25. Any disputes arising under or in connection with this letter shall, at the election of either you or the Company, be resolved by binding arbitration, to be held in New York City in accordance with the rules and procedures of the American Arbitration Association. Judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. Each party shall bear his or its own costs of the arbitration or litigation. Pending the resolution of any arbitration or court proceeding, the Company shall continue payment of all amounts due you under this letter and all benefits to which you are entitled at the time the dispute arises. Mr. Carl Spielvogel March 7, 1997 Page 8 If the foregoing is acceptable to you, please sign, date and return the attached copy of this letter to the undersigned by hand or by express mail. Carl, I don't want the formal terms of this letter to obscure our appreciation for your valuable service to the Company. As you begin a new phase of your career, let me assure you that all of us wish you great success in your new endeavors. Very truly yours, UNITED AUTO GROUP, INC. By: /s/ Marshall S. Cogan -------------------------- Marshall S. Cogan Vice Chairman and Chairman of the Executive Committee AGREED: /s/ Carl Spielvogel March 7, 1997 --------------------- --------------- Carl Spielvogel Date EXHIBIT A FORMS OF RESIGNATION Board of Directors United Auto Group, Inc. 375 Park Avenue New York, New York 10152 I, Carl Spielvogel, hereby resign as Chief Executive Officer of United Auto Group, Inc. ("UAG") as of April 17, 1997. Furthermore, as of that date, I hereby resign as Chairman of the Board of Directors of UAG, as a member of all committees thereof (including the Executive Committee), and as an officer, employee, director and committee member of any and all subsidiaries and affiliates of UAG. - ------------------- ---------- Carl Spielvogel Date Board of Directors Foamex International Inc. 1000 Columbia Avenue Linwood, Pennsylvania 19061 I, Carl Spielvogel, hereby resign from the Board of Directors of Foamex International Inc. and all committees thereof as of March 7, 1997. - ------------------- ---------- Carl Spielvogel Date EXHIBIT B STOCK OPTION AGREEMENT ---------------------- This Stock Option Agreement ("Agreement") is dated as of April 17, 1997, and is entered into between United Auto Group, Inc., a Delaware corporation (the "Company"), and Carl Spielvogel ("Executive"). W I T N E S S E T H: WHEREAS, the Company is a party to an employment agreement with Executive, dated as of June 21, 1996 (as amended, supplemented or otherwise modified from time to time, the "Employment Agreement"); and WHEREAS, the Company is a party to a consulting agreement with Executive, dated March 7, 1997 (the "Consulting Agreement"); and WHEREAS, pursuant to the Employment Agreement and Consulting Agreement, the Company is granting the Executive options to purchase shares of voting common stock, par value $0.0001 per share (the "Common Stock"), of the Company, on the terms and conditions set forth herein and in the Employment and Consulting Agreements. NOW, THEREFORE, the parties hereby agree: 1. Grant of Options. The Company hereby grants to the Executive an option (the "Option") to purchase, at the exercise price of $_____ per share, 100,000 shares of Common Stock. 2. Exercisability of Options. The Option will be fully vested and exercisable as of the date of this Agreement. 3. Method of Exercising Options. (a) The Executive may exercise the Option by delivering to the Company a written notice stating the number of shares that the Executive has elected to purchase at that time from the Company and full payment of the purchase price of the shares then to be purchased. Payment of the purchase price of the shares may be made (i) by certified or bank cashier's check payable to the order of the Company, or (ii) in the discretion of the Board of Directors of the Company or duly authorized committee thereof, by such other method as may be approved by such board or committee from time to time. (b) At the time of exercise, the Executive shall pay to the Company such amount as is necessary to satisfy the Company's obligation to withhold Federal, state or local income or other taxes incurred by reason of the exercise or the transfer of shares thereupon. 4. Issuance of Shares. As promptly as practicable after receipt of notification of exercise, full payment of purchase price and satisfaction of tax withholding as provided in Section 3, the Company shall issue or transfer to the Executive the number of shares as to which the Options have been so exercised and shall deliver to the Executive a certificate or certificates therefor, registered in his name. 5. Terms and Conditions of Exercise. (i) The Option shall terminate on April 17, 2001. (ii) The Option shall not be transferable, except by will or the laws of descent and distribution, provided that Executive may at any time transfer all or a portion of the Option to his spouse, any of his descendants or trusts for the benefit of Executive, his spouse or his descendants, subject to all of the terms and conditions of the Option. (iii) Whenever the word "Executive" is used in any provision of this Agreement under circumstances where the provision should logically be construed to apply to the executors, the administrators, personal representatives, or the person or persons to whom the Option may be transferred pursuant to clause (ii) of this Section 5, the word "Executive" shall be deemed to include such person or persons. 6. Rights as Stockholder. The Executive or a transferee of the Option shall have no rights as a stockholder with respect to any shares of Common Stock covered by the Option until he shall have become the holder of record of such shares. 7. Recapitalizations, Reorganizations, Etc. (a) The existence of the Option shall not affect the power of the Company or its stockholders to accomplish adjustments, recapitalizations, reorganizations or other changes in the Company's capital structure or its business, or any merger or consolidation of the Company, or any issue of stock or of options, warrants or rights to purchase stock or securities ahead of or affecting any of the shares of Common Stock or the rights thereof or convertible into or exchangeable for shares of Common Stock, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act. (b) Upon any change in the outstanding shares of Common Stock by reason of any recapitalization, merger, -2- consolidation, spin-off, combination or exchange of shares or other corporate change, or any distributions to common shareholders other than ordinary cash dividends, the Company shall make such substitutions or adjustments as are appropriate and equitable, as to the number or kind of shares of Common Stock or other securities covered by the Option and the exercise price thereof. 8. Notice. Any notice required or permitted hereunder shall be in writing and shall be sufficiently given if personally delivered or if sent by telegram, telex, facsimile transmission or by registered or certified mail, postage prepaid, with return receipt requested, as follows: (a) If to the Company: United Auto Group, Inc. 375 Park Avenue New York, New York 10152 Facsimile: (212) 223-5148 Attn: General Counsel or to such other address or to the attention of such other person as the Company shall designate by written notice to the Executive; and (b) If to the Executive: Mr. Carl Spielvogel 720 Park Avenue New York, NY 10021 or to such other address as the Executive shall designate by written notice to the Company. Any notice given hereunder shall be deemed to have been given at the time of receipt thereof by the party to whom such notice is given. 9. Non-Qualified Option. The Option is not an "incentive stock option" within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended. 10. Any disputes arising under or in connection with this Agreement shall be resolved as provided in clause 25 of the Consulting Agreement. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. UNITED AUTO GROUP, INC. -3- By: ---------------------------------- Philip N. Smith, Jr. Vice President, Secretary and General Counsel ---------------------------------- Carl Spielvogel -4- EX-10.1.19 4 CREDIT AGREEMENT CONFORMED COPY $50,000,000 CREDIT AGREEMENT dated as of March 20, 1997 among United Auto Group, Inc., The Guarantors Party Hereto, The Banks Listed Herein, The Bank of Nova Scotia, as Administrative Agent and Morgan Guaranty Trust Company of New York, as Documentation Agent TABLE OF CONTENTS Page ARTICLE I. DEFINITIONS.......................................................1 Section 1.1. Definitions.............................................1 Section 1.2. Accounting Terms and Determinations....................15 ARTICLE II. THE CREDITS.....................................................15 Section 2.1. Commitments to Lend....................................15 Section 2.2. Method of Borrowing....................................15 Section 2.3. Notes..................................................17 Section 2.4. Maturity of Loans; Mandatory Prepayments...............17 Section 2.5. Interest Rates.........................................19 Section 2.6. Fees...................................................21 Section 2.7. Optional Termination or Reduction of Commitments.......21 Section 2.8. Method of Electing Interest Rates......................21 Section 2.9. Mandatory Termination and Reduction of Commitments.....22 Section 2.10. Optional Prepayments...................................23 Section 2.11. General Provisions as to Payments......................23 Section 2.12. Funding Losses.........................................24 Section 2.13. Computation of Interest and Fees.......................24 ARTICLE III. CONDITIONS.....................................................24 Section 3.1. Initial Borrowing......................................24 Section 3.2. All Borrowings.........................................25 ARTICLE IV. REPRESENTATIONS AND WARRANTIES..................................27 Section 4.1. Existence and Power....................................27 Section 4.2. Corporate and Governmental Authorization; No Contravention.......................................27 Section 4.3. Binding Effect.........................................27 Section 4.4. Financial Information..................................28 Section 4.5. Litigation.............................................28 Section 4.6. Compliance with ERISA..................................28 Section 4.7. Environmental Matters..................................29 Section 4.8. Taxes..................................................29 Section 4.9. Subsidiaries...........................................29 Section 4.10. Regulatory Restrictions on Borrowing...................29 Section 4.11. Full Disclosure........................................29 Section 4.12. Representations in Collateral Documents True and Correct.......................................30 Section 4.13. Capitalization and Subsidiaries........................30 Section 4.14. Ownership of Properties; Absence of Liens and Encumbrances.......................................31 Section 4.15. Licenses, Permits, Etc.................................31 Section 4.16. Payment of Dividends by Subsidiaries...................31 Section 4.17. Certain Agreements.....................................32 Section 4.18. Compliance with Certain Agreements.....................32 i ARTICLE V. COVENANTS........................................................32 Section 5.1. Information............................................32 Section 5.2. Payment of Obligations.................................35 Section 5.3. Maintenance of Property; Insurance.....................35 Section 5.4. Conduct of Business and Maintenance of Existence.......35 Section 5.5. Compliance with Laws...................................36 Section 5.6. Inspection of Property, Books and Records..............36 Section 5.7. Mergers and Sales of Assets............................36 Section 5.8. Use of Proceeds........................................37 Section 5.9. Negative Pledge........................................37 Section 5.10. Limitation on Debt.....................................38 Section 5.11. Leverage Ratio.........................................39 Section 5.12. Working Capital........................................39 Section 5.13. Borrower Fixed Charge Coverage Ratio...................40 Section 5.14. Consolidated Fixed Charge Coverage Ratio...............40 Section 5.15. Restricted Payments....................................40 Section 5.16. Investments............................................40 Section 5.17. Transactions with Affiliates...........................41 Section 5.18. Additional Equity......................................41 Section 5.19. Additional Guarantors and Collateral...................41 Section 5.20. Further Assurances.....................................42 Section 5.21. Limitation on Floor Plan Amendments....................42 Section 5.22. External Inventory Audits..............................42 Section 5.23. Ownership of Subsidiaries..............................43 ARTICLE VI. DEFAULTS........................................................43 Section 6.1. Events of Default......................................43 Section 6.2. Notice of Default......................................45 ARTICLE VII. THE AGENTS.....................................................46 Section 7.1. Appointment and Authorization..........................46 Section 7.2. Agents and Affiliates..................................46 Section 7.3. Action by Agents.......................................46 Section 7.4. Consultation with......................................46 Section 7.5. Liability of Agent.....................................46 Section 7.6. Indemnification........................................47 Section 7.7. Credit Decision........................................47 Section 7.8. Successor Agent........................................47 Section 7.9. Agents' Fees...........................................48 ARTICLE VIII. CHANGE IN CIRCUMSTANCES.......................................48 Section 8.1. Basis for Determining Interest Rate Inadequate or Unfair...................................48 Section 8.2. Illegality.............................................48 Section 8.3. Increased Cost and Reduced Return......................49 Section 8.4. Taxes..................................................50 Section 8.5. Base Rate Loans Substituted for Affected Euro-Dollar Loans......................................52 ARTICLE IX. GUARANTY........................................................53 Section 9.1. The Guaranty...........................................53 Section 9.2. Guaranty Unconditional.................................53 ii Section 9.3. Discharge Only Upon Payment In Full; Reinstatement In Certain Circumstances..................................54 Section 9.4. Waiver by each Guarantor...............................54 Section 9.5. Subrogation and Contribution...........................54 Section 9.6. Stay of Acceleration...................................54 Section 9.7. Limit of Liability.....................................55 Section 9.8. Release Upon Sale......................................55 ARTICLE X. MISCELLANEOUS....................................................55 Section 10.1. Notices................................................55 Section 10.2. No Waivers.............................................55 Section 10.3. Expenses; Indemnification..............................56 Section 10.4. Sharing of Set-Offs....................................56 Section 10.5. Amendments and Waivers Release of Collateral.............................................56 Section 10.6. Successors and Assigns.................................57 Section 10.7. Collateral.............................................59 Section 10.8. Governing Law; Submission to Jurisdiction..............59 Section 10.9. Counterparts; Integration; Effectiveness...............59 SECTION 10.10. WAIVER OF JURY TRIAL...................................59 Schedule 3.2(f) Subsidiaries Not Wholly-Owned Schedule 4.5 Litigation Schedule 4.13(a) Authorized, Issued and Outstanding Capital Stock of the Borrower Schedule 4.13(b) Equity Ownership of the Borrower Schedule 4.13(c) Subsidiaries Schedule 4.13(d) Certain Partnership Interests Schedule 4.13(e) Outstanding Options and Warrants Schedule 4.13(f) Encumbrances of Capital Stock of Corporate Subsidiaries Schedule 4.15 Certain Licenses, Permits, Etc. Schedule 4.16 Restrictions on Payment of Dividends by Subsidiaries Schedule 4.17 Certain Agreements Schedule 5.9 Existing Liens Schedule 5.10 Existing Debt Exhibit A Note Exhibit B-1 Opinion of Special Counsel for the Obligors Exhibit B-2 Opinion of General Counsel of the Borrower Exhibit C Opinion of Special Counsel for the Agent Exhibit D Assignment and Assumption Agreement Exhibit E Pledge Agreement iii AGREEMENT dated as of March 20, 1997 among UNITED AUTO GROUP, INC., the GUARANTORS party hereto, the BANKS listed on the signature pages hereof, THE BANK OF NOVA SCOTIA, as Administrative Agent and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Documentation Agent. The parties hereto agree as follows: ARTICLE I. DEFINITIONS Section 1.1. Definitions. The following terms, as used herein, have the following meanings: "Acquisition" means an acquisition of an Automobile Dealership. "Adjusted Consolidated Net Income" means Consolidated Net Income adjusted to eliminate income or loss attributable to an acquisition not included in the Borrower's Plan of Acquisitions. "Adjusted London Interbank Offered Rate" has the meaning set forth in Section 2.5(b). "Adjusted Pre-Tax Income" means, at any date, the income before income taxes of any Automobile Dealership calculated for the four consecutive fiscal quarters of such Automobile Dealership most recently ended on or prior to such date with pro forma adjustments consistent with reporting requirements of the Securities and Exchange Commission. "Administrative Agent" means The Bank of Nova Scotia in its capacity as administrative agent for the Banks hereunder, and its successors in such capacity. "Affiliate" means (i) any Person that directly, or indirectly through one or more intermediaries, controls the Borrower (a "Controlling Person") or (ii) any Person (other than the Borrower or a Subsidiary) which is controlled by or is under common control with a Controlling Person. As used herein, the term "control" means possession, directly or indirectly, of the power to vote 10% or more of any class of voting securities of a Person or to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise. "Agent" means either the Administrative Agent or the Documentation Agent, and "Agents" means both of them. "Applicable Lending Office" means, with respect to any Bank, (i) in the case of its Base Rate Loans, its Domestic Lending Office and (ii) in the case of its Euro-Dollar Loans, its Euro-Dollar Lending Office. 1 "Assignee" has the meaning set forth in Section 10.6(c). "Automobile Dealership" means a business that operates a dealership or dealerships for the retail sales of new and/or used automobiles or trucks and businesses ancillary to the operation of such dealerships owned or operated by the Borrower or its Subsidiaries, including service and parts operations, body shops, the sale of finance, extended warranty and insurance products (including after-market items), the financing of the purchase of new and/or used vehicles and the purchase, sale and servicing of finance contracts for new and/or used vehicles. "Bank" means each lender listed on the signature pages hereof, each Assignee which becomes a Bank pursuant to Section 10.6(c), and their respective successors. "Base Rate" means, for any day, a rate per annum equal to the higher of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the Federal Funds Rate for such day. "Base Rate Loan" means (i) a Loan which bears interest at the Base Rate plus the Base Rate Margin pursuant to the applicable Notice of Borrowing or Notice of Interest Rate Election or the provisions of Article 8 or (ii) an overdue amount which was a Base Rate Loan immediately before it became overdue. "Base Rate Margin" has the meaning set forth in Section 2.5(a). "Benefit Arrangement" means at any time an employee benefit plan within the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and which is maintained or otherwise contributed to by any member of the ERISA Group. "Borrower" means United Auto Group, Inc., a Delaware corporation, and its successors. "Borrower Fixed Charge Coverage Ratio" means, at any date, the ratio of (i) the sum of distributions to the Borrower from Subsidiaries plus payments to the Borrower from tax-sharing arrangements plus management fees paid to the Borrower plus all other cash income of the Borrower, all calculated for the four consecutive fiscal quarters most recently ended on or prior to such date or, if four fiscal quarters have not elapsed since the IPO Closing Date, for the period from January 1, 1997 to such date to (ii) cash operating expenses of the Borrower (other than any nonrecurring expenses incurred in connection with the IPO and the transactions contemplated thereby and the fees paid or payable by the Borrower to the Agents and the Banks in connection with this Agreement and the other Loan Documents on or prior to the Effective Date) for such period including, but not limited to, rental expense, selling, general and administrative expense, interest expense, cash tax payments and cash payments made for -2- scheduled amortization of long term Debt of the Borrower during such period, all calculated on a cash receipts and disbursements basis. "Borrower's Plan of Acquisitions" means all acquisitions consummated or to be consummated by the Borrower on or prior to the IPO Closing Date, but including in any event the Borrower's acquisition of each of the Sun Automotive Group, the Evans Automotive Group and the Standefer Motor Sales, regardless of the date of consummation thereof. "Borrowing" means a borrowing hereunder consisting of Loans made to the Borrower on the same day pursuant to Article 2, all of which Loans are of the same Type (subject to Article 8) and, except in the case of Base Rate Loans, have the same initial Interest Period. A Borrowing is a "Base Rate Borrowing" if such Loans are Base Rate Loans or a "Euro-Dollar Borrowing" if such Loans are Euro-Dollar Loans. "Collateral" means collateral subject to the Collateral Documents. "Collateral Documents" means the Pledge Agreement, any additional pledges or security agreements required to be delivered pursuant to the Loan Documents and any other instruments or agreements executed pursuant to the foregoing. "Commitment" means, with respect to each Bank, the amount set forth opposite the name of such Bank on the signature pages hereof, as such amount may be reduced from time to time pursuant to Section 2.7. "Consolidated Capital Expenditures" means, for any period, the additions to property, plant and equipment and other capital expenditures of the Borrower and its Consolidated Subsidiaries for such period, as the same are or would be set forth in a consolidated statement of cash flows of the Borrower and its Consolidated Subsidiaries for such period, but excluding any such additions which are financed by long-term Debt of the Borrower or any of its Consolidated Subsidiaries. "Consolidated Current Assets" means at any date the current assets of the Borrower and its Consolidated Subsidiaries determined as of such date on a consolidated basis. "Consolidated Current Liabilities" means at any date (i) the current liabilities of the Borrower and its Consolidated Subsidiaries on a consolidated basis plus (ii) the current liabilities of any Person (other than the Borrower or any of its Consolidated Subsidiaries) which are Guaranteed by the Borrower or a Consolidated Subsidiary, all determined as of such date. -3- "Consolidated Debt" means at any date the Debt of the Borrower and its Consolidated Subsidiaries, determined on a consolidated basis as of such date. "Consolidated EBITDA" means, for any period, Consolidated Net Income for such period plus, to the extent deducted in determining Consolidated Net Income for such period, the aggregate amount of (i) Consolidated Interest Expense, (ii) consolidated income tax expense (excluding any income tax expense attributable to Atlantic Auto Finance Corporation or any Encumbered Subsidiary) and (iii) consolidated depreciation, amortization and other similar non-cash charges (excluding any such items attributable to Atlantic Auto Finance Corporation or any Encumbered Subsidiary). "Consolidated Fixed Charge Coverage Ratio" means, at any date, the ratio of (i) the sum of (A) Consolidated EBITDA for the four consecutive fiscal quarters of the Borrower and its Consolidated Subsidiaries most recently ended on or prior to such date or, if four fiscal quarters have not elapsed since the IPO Closing Date, for the period from January 1, 1997 to such date plus (B) Consolidated Rental Expense for such period minus (C) Consolidated Capital Expenditures for such period to (ii) the sum of Consolidated Interest Expense, consolidated cash income tax payments (excluding any cash income tax payments attributable to Atlantic Auto Finance Corporation or any Encumbered Subsidiary) and Consolidated Rental Expense for such period. "Consolidated Interest Expense" means, for any period, the interest expense (other than any interest expense with respect to any floor plan financing, but only to the extent reflected in cost of goods sold in accordance with generally accepted accounting principles) of the Borrower and its Consolidated Subsidiaries determined on a consolidated basis for such period. "Consolidated Net Income" means, for any fiscal period, the net income of the Borrower and its Consolidated Subsidiaries, determined on a consolidated basis for such period, exclusive of (i) any equity in any earnings or loss attributable to Atlantic Auto Finance Corporation or any Encumbered Subsidiary except to the extent received in cash by the Borrower or a Consolidated Subsidiary and (ii) the effect of any extraordinary or other non-recurring gain to the extent such gain exceeds extraordinary or other non-recurring loss. "Consolidated Net Worth" means at any date the consolidated stockholders' equity of the Borrower and its Consolidated Subsidiaries determined as of such date, exclusive of any investment in Atlantic Auto Finance Corporation or any Encumbered Subsidiary. -4- "Consolidated Rental Expense" means, for any period, the rental expense of the Borrower and its Consolidated Subsidiaries determined on a consolidated basis for such period. "Consolidated Subsidiary" means at any date any Subsidiary or other entity (other than Atlantic Auto Finance Corporation, any Encumbered Subsidiary and their respective Subsidiaries) the accounts of which would be consolidated with those of the Borrower in its consolidated financial statements if such statements were prepared as of such date. "Consolidated Working Capital" means at any date the amount by which Consolidated Current Assets exceed Consolidated Current Liabilities as of such date. "Debt" of any Person means at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business, (iv) all obligations of such Person as lessee which are capitalized in accordance with generally accepted accounting principles, (v) all non-contingent obligations (and, for purposes of Section 5.9 and the definitions of Material Debt and Material Financial Obligations, all contingent obligations) of such Person to reimburse any bank or other Person in respect of amounts paid under a letter of credit or similar instrument, (vi) all Debt secured by a Lien on any asset of such Person, whether or not such Debt is otherwise an obligation of such Person and (vii) all Debt of others Guaranteed by such Person. "Default" means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default. "Derivatives Obligations" of any Person means all obligations of such Person in respect of any rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of the foregoing transactions) or any combination of the foregoing transactions. "Documentation Agent" means Morgan Guaranty Trust Company of New York in its capacity as documentation agent for the Banks hereunder, and its successors in such capacity. -5- "Domestic Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in New York City are authorized by law to close. "Domestic Lending Office" means, as to each Bank, its office located at its address set forth on the signature pages hereof and identified as its Domestic Lending Office or such other office as such Bank may hereafter designate as its Domestic Lending Office by notice to the Borrower and the Administrative Agent. "Effective Date" means the date this Agreement becomes effective in accordance with Section 10.9. "Encumbered Subsidiary" means any Subsidiary whose ability to declare or pay any dividend or make any other distribution, or to advance or loan funds, to the Borrower is restricted (other than by Permitted Restrictions). "Environmental Laws" means any and all federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, plans, injunctions, permits, concessions, grants, franchises, licenses, agreements and other governmental restrictions relating to the environment, the effect of the environment on human health or to emissions, discharges or releases of pollutants, contaminants, Hazardous Substances or wastes into the environment including, without limitation, ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, Hazardous Substances or wastes or the clean-up or other remediation thereof. "Equity Issuance" means the issuance of any equity securities by the Borrower (other than (i) the IPO, (ii) pursuant to the exercise of employee stock options, (iii) pursuant to stock options or warrants outstanding on the Effective Date and set forth in Schedule 4.13(e) or (iv) in connection with an Equity Refinancing). "Equity Refinancing" means the redemption or other retirement of capital stock of the Borrower exclusively with the proceeds of a substantially simultaneous sale of capital stock of the Borrower (other than Redeemable Stock). "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, or any successor statute. "ERISA Group" means the Borrower, any Subsidiary and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower or any Subsidiary, are treated as a single employer under Section 414 of the Internal Revenue Code. -6- "Euro-Dollar Business Day" means any Domestic Business Day on which commercial banks are open for international business (including dealings in dollar deposits) in London. "Euro-Dollar Lending Office" means, as to each Bank, its office, branch or affiliate located at its address set forth on the signature pages hereof and identified as its Euro-Dollar Lending Office or such other office, branch or affiliate of such Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice to the Borrower and the Administrative Agent. "Euro-Dollar Loan" means (i) a Loan which bears interest at a Euro-Dollar Rate pursuant to the applicable Notice of Borrowing or Notice of Interest Rate Election or (ii) an overdue amount which was a Euro-Dollar Loan immediately before it became overdue. "Euro-Dollar Margin" has the meaning set forth in Section 2.5(b). "Euro-Dollar Rate" means a rate of interest determined pursuant to Section 2.5(b) on the basis of an Adjusted London Interbank Offered Rate. "Euro-Dollar Reserve Percentage" has the meaning set forth in Section 2.5(b). "Event of Default" has the meaning set forth in Section 6.1. "Excess Cash Flow" means, for any fiscal year the excess (if any) of Adjusted Consolidated Net Income for such fiscal year over the amount set forth below opposite such fiscal year: 1997 $18,000,000 1998 $18,500,000 "Federal Funds Rate" means, for any day, the rate per annum (rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Domestic Business Day next succeeding such day, provided that (i) if such day is not a Domestic Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Domestic Business Day as so published on the next succeeding Domestic Business Day, and (ii) if no such rate is so published on such next succeeding Domestic Business Day, the Federal Funds Rate for such day shall be the average rate quoted to Morgan Guaranty Trust Company of New York on such day on such transactions as determined by the Administrative Agent. -7- "Floor Plan Financing Provider" means each provider of floor plan financing of inventory of the Borrower and its Subsidiaries. "Group of Loans" means at any time a group of Loans consisting of (i) all Loans which are Base Rate Loans at such time or (ii) all Euro-Dollar Loans having the same Interest Period at such time, provided that, if a Loan of any particular Bank is converted to or made as a Base Rate Loan pursuant to Article 8, such Loan shall be included in the same Group or Groups of Loans from time to time as it would have been in if it had not been so converted or made. "Guarantee" by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods or securities, or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the holder of such Debt or other obligation of the payment thereof or to protect such holder against loss in respect thereof (in whole or in part), provided that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. It is understood that the obligations of the Borrower under the Support Agreement dated as of June 28, 1995 between the Borrower and Atlantic Auto Funding Corporation constitute a Guarantee for purposes of this Agreement only to the extent of the liability, if any, of the Borrower for any breach of the representations and warranties of Atlantic Auto Finance Corporation contained in Section 4.01(g) of the Receivables Purchase Agreement dated as of June 28, 1995 between Atlantic Auto Funding Corporation and Atlantic Auto Finance Corporation. It also is understood that the obligations of the Borrower under the Support Agreement dated as of June 14, 1996 between the Borrower and Atlantic Auto Second Funding Corporation constitute a Guarantee for purposes of this Agreement only to the extent of the liability, if any, of the Borrower for any breach of the representations and warranties of Atlantic Auto Finance Corporation contained in Section 3.2 of the Purchase Agreement dated as of June 14, 1996 between Atlantic Auto Second Funding Corporation and Atlantic Auto Finance Corporation. "Guarantor" means, subject to Section 9.8, each Person who has executed this Agreement as a guarantor or becomes a guarantor pursuant to Section 5.20. "Hazardous Substances" means any toxic, radioactive or otherwise hazardous substance, including petroleum, its -8- derivatives, by-products and other hydrocarbons, or any substance having any constituent elements displaying any of the foregoing characteristics. "Indemnitee" has the meaning set forth in Section 10.3(b). (a) with respect to each Euro-Dollar Loan, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing or on the date specified in the applicable Notice of Interest Rate Election and ending one, two, three or six months thereafter, as the Borrower may elect in the applicable notice; provided that: (i) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; (ii) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (iii) below, end on the last Euro-Dollar Business Day of a calendar month; and (iii) if any Interest Period includes a date on which a scheduled payment of principal of the Loans is required to be made under Section 2.4 but does not end on such date, then (i) the principal amount (if any) of each Euro-Dollar Loan required to be repaid on such date shall have an Interest Period ending on such date and (ii) the remainder (if any) of each such Euro-Dollar Loan shall have an Interest Period determined as set forth above. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended, or any successor statute. "Investment" means any investment in any Person, whether by means of share purchase, capital contribution, loan, Guarantee, time deposit or otherwise (but not including any demand deposit). "IPO" means the Borrower's initial public offering of the New Voting Stock pursuant to the Registration Statement. "IPO Closing Date" means October 28, 1996. "Leverage Ratio" means at any date the ratio of Consolidated Debt (excluding floor plan financings) at such date to Consolidated EBITDA for the period of four consecutive fiscal quarters most recently ended on or prior to such date. -9- "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind, or any other type of preferential arrangement that has the practical effect of creating a security interest, in respect of such asset. For the purposes of this Agreement, the Borrower or any Subsidiary shall be deemed to own, subject to a Lien, any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset. "Loan" means a Base Rate Loan or a Euro-Dollar Loan and "Loans" means Base Rate Loans, Euro-Dollar Loans or both. "Loan Documents" means this Agreement, the Notes and the Collateral Documents. "London Interbank Offered Rate" has the meaning set forth in Section 2.5(b). "Material Adverse Effect" means (i) a material adverse effect upon the condition (financial or otherwise), business, performance, properties, operations, assets or prospects of the Borrower, or of the Borrower and its Subsidiaries taken as a whole, (ii) a material adverse effect upon the ability of the Borrower or any of its Subsidiaries to perform its obligations under the Loan Documents or (iii) any adverse effect upon the rights or obligations of any Agent or Bank under the Loan Documents or upon the ability of the Banks or the Administrative Agent to enforce the Loan Documents. "Material Debt" means Debt (other than the Notes) of the Borrower and/or one or more of its Subsidiaries, arising in one or more related or unrelated transactions, in an aggregate principal or face amount exceeding $1,000,000. "Material Financial Obligations" means a principal or face amount of Debt and/or a net payment or collateralization obligation in respect of Derivatives Obligations of the Borrower and/or one or more of its Subsidiaries, arising in one or more related or unrelated transactions, exceeding in the aggregate $1,000,000. "Material Plan" means at any time a Plan or Plans having aggregate Unfunded Liabilities in excess of $1,000,000. "Multiemployer Plan" means at any time an employee pension benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any member of the ERISA Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions, including for these purposes any Person which ceased to be a member of the ERISA Group during such five year period. -10- "Net Cash Proceeds" means, with respect to any Equity Issuance, an amount equal to the cash proceeds received by the Borrower from or in respect of such Equity Issuance, less any expenses reasonably incurred by the Borrower in connection therewith. "New Voting Stock" means the shares of the Borrower's voting common stock, par value $0.0001 per share, issued on the IPO Closing Date and registered under the Registration Statement. "1933 Act" means the Securities Act of 1933, as amended. "Non-Working Capital Borrowing" means any Borrowing the proceeds of which are to be used by the Borrower for Acquisitions and related costs, fees and expenses as permitted by Section 5.8 and subject to Section 3.2(b). "Non-Working Capital Loan" means a Loan made by a Bank to the Borrower pursuant to Section 2.1 the proceeds of which are to be used by the Borrower for Acquisitions and related costs, fees and expenses as permitted by Section 5.8 and subject to Section 3.2(b). "Notes" means promissory notes of the Borrower, substantially in the form of Exhibit A hereto, evidencing the obligation of the Borrower to repay the Loans, and "Note" means any one of such promissory notes issued hereunder. "Notice of Borrowing" has the meaning set forth in Section 2.2. "Notice of Interest Rate Election" has the meaning set forth in Section 2.8. "Obligor" means the Borrower and each Guarantor. "Parent" means, with respect to any Bank, any Person controlling such Bank. "Participant" has the meaning set forth in Section 10.6(b). "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Permitted Restrictions" means restrictions on the ability of any Subsidiary to declare or pay any dividend or make other distributions, or to advance or loan funds, to the Borrower (i) as set forth on Schedule 4.16 on the Effective Date, including restrictions imposed by existing floor plan financing arrangements; (ii) pursuant to modifications to any floor plan financing arrangement; provided that such modifications are not -11- materially more restrictive; (iii) applicable to a Person at the time such Person became a Subsidiary and not created in contemplation of such an event, (iv) resulting from manufacturer-imposed modifications to any franchise agreement or (v) imposed by applicable law. "Person" means an individual, a corporation, a limited liability company, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Plan" means at any time an employee pension benefit plan (other than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Internal Revenue Code and is maintained, or contributed to, or has at any time within the preceding five years been maintained, or contributed to, by any member of the ERISA Group for employees of any member of the ERISA Group. "Pledge Agreement" means each pledge agreement substantially in the form of Exhibit E hereto between each Obligor party thereto and the Administrative Agent entered into on or prior to the date of the initial Borrowing hereunder and any pledge agreement entered into pursuant hereto after the date of the initial Borrowing hereunder, in each case as amended from time to time. "Prime Rate" means the rate of interest publicly announced by The Bank of Nova Scotia in New York City from time to time as its prime commercial lending rate. "Principal Repayment Date" has the meaning set forth in Section 2.4. "Principal Shareholder" means any of the following principal shareholders of the Borrower: Trace International Holdings, Inc., Apollo Advisors, L.P., Harvard Private Capital Group, Inc., J.P. Morgan Capital Corporation and The Equitable Life Assurance Society of the United States or if any Principal Shareholder transfers any or all of its interest in the Borrower to an Affiliate of such Principal Shareholder, such Affiliate. "Quarterly Dates" means each March 31, June 30, September 30 and December 31. "Redeemable Stock" has the meaning set forth in Section 5.13. "Reduction Percentage" means, (i) in respect of Excess Cash Flow, 50%, and (ii) in respect of an Equity Issuance, 80%. "Reference Banks" means the respective LIBOR offices of Morgan Guaranty Trust Company of New York and The Bank of Nova -12- Scotia, and "Reference Bank" means any one of such Reference Banks. "Registration Statement" means Registration Statement No. 333-09429 on Form S-1 in the form declared effective and the prospectus filed to Rule 424(b) under the 1933 Act. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Required Banks" means at any time Banks having at least a majority of the aggregate amount of the Commitments or, if the Commitments shall have been terminated, holding Notes evidencing at least a majority of the aggregate unpaid principal amount of the Loans. "Restricted Payment" means (i) any dividend or other distribution on any shares of the Borrower's capital stock (except dividends payable solely in shares of its capital stock which is not Redeemable Stock) or (ii) any payment of cash or other property (other than capital stock of the Borrower which is not Redeemable Stock) on account of the purchase, redemption, retirement or acquisition of (a) any shares of the Borrower's capital stock or (b) any option, warrant or other right to acquire shares of the Borrower's capital stock (but not including payments of principal, premium (if any) or interest made pursuant to the terms of convertible debt securities prior to conversion). "Revolving Credit Period" means the period from and including the Effective Date to and including the Termination Date. "Seller Notes" means all notes issued by the Borrower or a Subsidiary to a seller in connection with an Acquisition. "Significant Subsidiary" means at any time a Subsidiary of the Borrower having (together with its Subsidiaries) (i) at least 10% of the total consolidated assets of the Borrower and its Subsidiaries (determined as of the last day of the most recent fiscal quarter of the Borrower) or (ii) at least 10% of the consolidated revenues of the Borrower and its Subsidiaries for the fiscal year of the Borrower then most recently ended. "Stock Repurchase Program" means the Borrower's stock buyback program with respect to the Borrower's common stock as described in the Borrower's Current Report on Form 8-K dated December 23, 1996 but only to the extent that the aggregate amount paid by the Borrower in respect of such program on or subsequent to the Effective Date does not exceed $820,000. "Subsidiary" means, as to any Person, any corporation or other entity of which securities or other ownership interests -13- having ordinary voting power to elect a majority of the board of directors or other Persons performing similar functions are at the time directly or indirectly owned by such Person; unless otherwise specified, "Subsidiary" means a Subsidiary of the Borrower. "Temporary Cash Investment" means any Investment in (i) direct obligations of the United States or any agency thereof, or obligations guaranteed by the United States or any agency thereof, (ii) commercial paper rated at least A-1 by Standard & Poor's Rating Group and P-1 by Moody's Investors Service, Inc., (iii) time deposits with, including certificates of deposit issued by, any office located in the United States of (A) any bank or trust company which is organized under the laws of the United States or any state thereof and has capital, surplus and undivided profits aggregating at least $1,000,000,000 or (B) any Bank, (iv) short-term deposits with any Floor Plan Financing Provider or (v) repurchase agreements with respect to securities described in clause (i) above entered into with an office of a bank or trust company meeting the criteria specified in clause (iii) above, provided in each case that such Investment matures within one year from the date of acquisition thereof by the Borrower or a Subsidiary. "Termination Date" means the date 364 days after the date hereof, or, if such day is not a Euro-Dollar Business Day, the prior Euro-Dollar Business Day. "Type" means the determination of whether a Loan is a Euro-Dollar Loan or a Base Rate Loan. "Unfunded Liabilities" means, with respect to any Plan at any time, the amount (if any) by which (i) the value of all benefit liabilities under such Plan, determined on a plan termination basis using the assumptions prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market value of all Plan assets allocable to such liabilities under Title IV of ERISA (excluding any accrued but unpaid contributions), all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the ERISA Group to the PBGC or any other Person under Title IV of ERISA. "United States" means the United States of America, including the States and the District of Columbia, but excluding its territories and possessions. "Working Capital Borrowing" means any Borrowing the proceeds of which are to be used by the Borrower for working capital purposes as permitted by Section 5.8 and subject to Section 3.2(b). -14- "Working Capital Loan" means a Loan made by a Bank to the Borrower pursuant to Section 2.1 the proceeds of which are to be used by the Borrower for working capital purposes as permitted by Section 5.8 and subject to Section 3.2(b). Section 1.2. Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with generally accepted accounting principles as in effect from time to time, applied on a basis consistent (except for changes concurred in by the Borrower's independent public accountants) with the most recent audited consolidated financial statements of the Borrower and its Consolidated Subsidiaries delivered to the Banks; provided that, if the Borrower notifies the Documentation Agent that the Borrower wishes to amend any covenant in Article 5 to eliminate the effect of any change in generally accepted accounting principles on the operation of such covenant (or if the Documentation Agent notifies the Borrower that the Required Banks wish to amend Article 5 for such purpose), then the Borrower's compliance with such covenant shall be determined on the basis of generally accepted accounting principles in effect immediately before the relevant change in generally accepted accounting principles became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Borrower and the Required Banks. ARTICLE II. THE CREDITS Section 2.1. Commitments to Lend. (a) During the Revolving Credit Period, each Bank severally agrees, on the terms and conditions set forth in this Agreement, to make loans to the Borrower from time to time in amounts such that the aggregate principal amount of Loans by such Bank at any one time outstanding shall not exceed the amount of its Commitment. Each Borrowing under this Section shall be in an aggregate principal amount of $2,500,000 or any larger multiple of $500,000 (except that any such Borrowing may be in the aggregate amount of the unused Commitments) and shall be made from the several Banks ratably in proportion to their respective Commitments. Within the foregoing limits, the Borrower may borrow under this Section, prepay Loans to the extent permitted by Section 2.10 and reborrow at any time during the Revolving Credit Period under this Section. Section 2.2. Method of Borrowing. (a) The Borrower shall give the Administrative Agent notice (a "Notice of Borrowing") not later than 10:30 A.M. (New York City time) on (x) the first Domestic Business Day before each Base Rate Borrowing and (y) the third Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying: -15- (i) the date of such Borrowing, which shall be a Domestic Business Day in the case of a Base Rate Borrowing or a Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing; (ii) the aggregate amount of such Borrowing; (iii) whether the Loans comprising such Borrowing are to bear interest initially at the Base Rate or a Euro-Dollar Rate; and (iv) in the case of a Euro-Dollar Borrowing, the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period. (b) Upon receipt of a Notice of Borrowing, the Administrative Agent shall promptly notify each Bank of the contents thereof and of such Bank's ratable share of such Borrowing and such Notice of Borrowing shall not thereafter be revocable by the Borrower. (c) Not later than 12:00 Noon (New York City time) on the date of each Borrowing, each Bank shall make available its ratable share of such Borrowing, in Federal or other funds immediately available in New York City, to the Administrative Agent at its address referred to in Section 10.1. Unless the Administrative Agent determines that any applicable condition specified in Article 2, 3 has not been satisfied, the Administrative Agent will make the funds so received from the Banks available to the Borrower at the Administrative Agent's aforesaid address. (d) Unless the Administrative Agent shall have received notice from a Bank prior to the date of any Borrowing that such Bank will not make available to the Administrative Agent such Bank's share of such Borrowing, the Administrative Agent may assume that such Bank has made such share available to the Administrative Agent on the date of such Borrowing in accordance with subsection (c) of this Section and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Bank shall not have so made such share available to the Administrative Agent, such Bank and the Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent, at (i) in the case of the Borrower, a rate per annum equal to the higher of the Federal Funds Rate and the interest rate applicable thereto pursuant to Section 2.5 and (ii) in the case of such Bank, the Federal Funds Rate. If such Bank shall repay to the Administrative Agent such corresponding amount, such amount -16- so repaid shall constitute such Bank's Loan included in such Borrowing for purposes of this Agreement. Section 2.3. Notes. (a) The Loans of each Bank shall be evidenced by a single Note payable to the order of such Bank for the account of its Applicable Lending Office in an amount equal to the aggregate unpaid principal amount of such Bank's Loans. (a) Each Bank may, by notice to the Borrower and the Documentation Agent, request that its Loans of a particular Type be evidenced by a separate Note in an amount equal to the aggregate unpaid principal amount of such Loans. Each such Note shall be in substantially the form of Exhibit A hereto with appropriate modifications to reflect the fact that it evidences solely Loans of the relevant Type. Each reference in this Agreement to the "Note" of such Bank shall be deemed to refer to and include any or all of such Notes, as the context may require. (b) Upon receipt of each Bank's Note pursuant to Section 3.1(a)(i), the Documentation Agent shall forward such Note to such Bank. Each Bank shall record the date, amount and Type of each Loan made by it and the date and amount of each payment of principal made by the Borrower with respect thereto, and may, if such Bank so elects in connection with any transfer or enforcement of its Note, endorse on the schedule forming a part thereof appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding; provided that the failure of any Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Notes. Each Bank is hereby irrevocably authorized by the Borrower so to endorse its Note and to attach to and make a part of its Note a continuation of any such schedule as and when required. Section 2.4. Maturity of Loans; Mandatory Prepayments. The Borrower shall repay, and there shall become due and payable, on each date set forth below (a "Principal Repayment Date"), an aggregate principal amount of the Loans equal to the amount set forth below with regard to such Principal Repayment Date (or, if less, the aggregate principal amount of all outstanding Loans); provided that in any event the outstanding Loans shall be repaid in full not later than the last Principal Repayment Date; provided further that if on the Termination Date the aggregate principal amount of Loans outstanding is less than $50,000,000, the scheduled repayments of the Loans shall be reduced in inverse order of maturity by an amount equal to the difference between $50,000,000 and the aggregate principal amount of the Loans outstanding on the Termination Date; provided that in the event that the aggregate principal amount of the Loans scheduled to be repaid on the last Principal Repayment Date shall have been so reduced to $4,000,000, the remaining amount of such difference -17- shall be applied to reduce the amount of subsequent scheduled repayments of the Loans ratably. Each such payment shall be applied to such Group or Groups of Loans as the Borrower may designate in the applicable Notice of Borrowing or Notice of Interest Rate Election (or, failing such designation, as determined by the Administrative Agent), and shall be applied to repay ratably the Loans of the several Banks included in such Group or Groups. Principal Amount Repayment of Date Repayment - ------------------------------------------------------- ----------------- 15 months after the Effective Date $4,000,000.00 18 months after the Effective Date $4,000,000.00 21 months after the Effective Date $4,000,000.00 24 months after the Effective Date $4,000,000.00 27 months after the Effective Date $4,000,000.00 30 months after the Effective Date $4,000,000.00 33 months after the Effective Date $4,000,000.00 36 months after the Effective Date $22,000,000.00 (i) In addition, the Loans shall be prepaid in the following amounts: (x) in the event that the Borrower or any of its Subsidiaries shall at any time, or from time to time, receive after the Effective Date hereof any Net Cash Proceeds of any Equity Issuance an amount equal to the Reduction Percentage of such Net Cash Proceeds; and (y) an amount, for each fiscal year of the Borrower and its Consolidated Subsidiaries ending after December 31, 1996, equal to the Reduction Percentage of Excess Cash Flow for such fiscal year. (ii) The prepayments required by clause (i)(x) of this subsection shall be made within five Domestic Business Days following receipt by the Borrower or any of its Subsidiaries, as the case may be, of such Net Cash Proceeds; provided that if the Reduction Percentage of the Net Cash Proceeds in respect of any Equity Issuance is less than $1,000,000, such prepayment shall be made upon receipt of proceeds such that, together with all other such amounts not previously applied, the Reduction Percentage of such Net Cash Proceeds is equal to at least $1,000,000; and provided further that if any such prepayment would otherwise require prepayment of Euro-Dollar Loans or portions thereof prior to the last day of the related Interest Period, such prepayment shall, unless the Administrative Agent otherwise notifies the Borrower upon the instructions of the Required Banks, be deferred to such last day. The prepayments required by clause (i)(y) of this subsection shall be made on the last Euro-Dollar Business -18- Day of the first fiscal quarter following the end of the related fiscal year. The Borrower shall give the Administrative Agent at least three Euro-Dollar Business Days' notice of each prepayment required pursuant to this subsection. (iii) The amount of any prepayment pursuant to this subsection or Section 3.2(g) shall be applied to reduce the amount of subsequent scheduled repayments of the Loans in inverse order of maturity; provided that in the event that the aggregate principal amount of the Loans scheduled to be repaid on the last Principal Repayment Date has been reduced to $4,000,000, the amount of any prepayment pursuant to this subsection or Section 3.2(g) shall be applied to reduce the amount of subsequent scheduled repayments of the Loans ratably. If any prepayment is required under this subsection prior to the Termination Date, the Commitments shall simultaneously be reduced in an amount equal to the amount of such prepayment. Section 2.5. Interest Rates. (a) Each Base Rate Loan shall bear interest on the outstanding principal amount thereof, for each day from the date such Loan is made until it becomes due, at a rate per annum equal to the sum of (x) 3.00% (the "Base Rate Margin") plus (y) the Base Rate for such day. Such interest shall be payable quarterly in arrears on each Quarterly Date and, with respect to the principal amount of any Base Rate Loan converted to a Euro-Dollar Loan, on each date a Base Rate Loan is so converted. Any overdue principal of or interest on any Base Rate Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 5.00% plus the Base Rate for such day. (a) Each Euro-Dollar Loan shall bear interest on the outstanding principal amount thereof, for each day during each Interest Period applicable thereto, at a rate per annum equal to the sum of 4.00% (the "Euro-Dollar Margin") plus the Adjusted London Interbank Offered Rate applicable to such Interest Period. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. The "Adjusted London Interbank Offered Rate" applicable to any Interest Period means a rate per annum equal to the quotient obtained (rounded upward, if necessary, to the next higher 1/100 of 1%) by dividing (i) the applicable London Interbank Offered Rate by (ii) 1.00 minus the Euro-Dollar Reserve Percentage. The "London Interbank Offered Rate" applicable to any Interest Period means the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which deposits in dollars are offered to each of the Reference Banks in the London interbank market at approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the first day -19- of such Interest Period in an amount approximately equal to the principal amount of the Euro-Dollar Loan of such Reference Bank to which such Interest Period is to apply and for a period of time comparable to such Interest Period. "Euro-Dollar Reserve Percentage" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion dollars in respect of "Eurocurrency liabilities" (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on Euro-Dollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Bank to United States residents). The Adjusted London Interbank Offered Rate shall be adjusted automatically on and as of the effective date of any change in the Euro-Dollar Reserve Percentage. (b) Any overdue principal of or interest on any Euro-Dollar Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the higher of (i) the sum of 6.00% plus the quotient obtained (rounded upward, if necessary, to the next higher 1/100 of 1%) by dividing (x) the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which one day (or, if such amount due remains unpaid more than three Euro-Dollar Business Days, then for such other period of time not longer than three months as the Administrative Agent may select) deposits in dollars in an amount approximately equal to such overdue payment due to each of the Reference Banks are offered to such Reference Bank in the London interbank market for the applicable period determined as provided above by (y) 1.00 minus the Euro-Dollar Reserve Percentage (or, if the circumstances described in clause (a) or (b) of Section 8.1 shall exist, at a rate per annum equal to the sum of 5.00% plus the Base Rate for such day) and (ii) the sum of 6.00% plus the Adjusted London Interbank Offered Rate applicable to such Loan at the date such payment was due. (c) The Administrative Agent shall determine each interest rate applicable to the Loans hereunder. The Administrative Agent shall give prompt notice to the Borrower and the Banks of each rate of interest so determined, and its determination thereof shall be conclusive in the absence of manifest error. (d) Each Reference Bank agrees to use its best efforts to furnish quotations to the Administrative Agent as contemplated by this Section. If any Reference Bank does not furnish a timely quotation, the Administrative Agent -20- shall determine the relevant interest rate on the basis of the quotation or quotations furnished by the remaining Reference Bank or Banks or, if none of such quotations is available on a timely basis, the provisions of Section 8.1 shall apply. Section 2.6. Fees. During the Revolving Credit Period, the Borrower shall pay to the Administrative Agent for the account of the Banks ratably in proportion to their Commitments a commitment fee at the rate of 0.50% per annum on the daily average amount by which the aggregate amount of the Commitments exceeds the aggregate outstanding principal amount of the Loans. Such commitment fee shall accrue from and including the Effective Date to but excluding the date of termination of the Commitments in their entirety. (a) Accrued fees under this Section shall be payable quarterly in arrears on each Quarterly Date and on the date of termination of the Commitments in their entirety. Section 2.7. Optional Termination or Reduction of Commitments. During the Revolving Credit Period, the Borrower may, upon at least three Domestic Business Days' notice to the Administrative Agent, (i) terminate the Commitments at any time, if no Loans are outstanding at such time or (ii) ratably reduce from time to time by an aggregate amount of $5,000,000 or a larger multiple of $1,000,000, the aggregate amount of the Commitments in excess of the aggregate outstanding principal amount of the Loans. Section 2.8. Method of Electing Interest Rates. (a) The Loans included in each Borrowing shall bear interest initially at the type of rate specified by the Borrower in the applicable Notice of Borrowing. Thereafter, the Borrower may from time to time elect to change or continue the type of interest rate borne by each Group of Loans (subject in each case to the provisions of Article 8 and the last sentence of this subsection (a)), as follows: (i) if such Loans are Base Rate Loans, the Borrower may elect to convert such Loans to Euro-Dollar Loans as of any Euro-Dollar Business Day and (ii) if such Loans are Euro-Dollar Loans, the Borrower may elect to convert such Loans to Base Rate Loans or elect to continue such Loans as Euro-Dollar Loans for an additional Interest Period, subject to Section 2.12 in the case of any such conversion or continuation effective on any day other than the last day of the then current Interest Period applicable to such Loans. Each such election shall be made by delivering a notice (a "Notice of Interest Rate Election") to the Administrative Agent not later than 10:30 A.M. (New York City time) on the third Euro-Dollar Business -21- Day before the conversion or continuation selected in such notice is to be effective. A Notice of Interest Rate Election may, if it so specifies, apply to only a portion of the aggregate principal amount of the relevant Group of Loans; provided that (i) such portion is allocated ratably among the Loans comprising such Group and (ii) the portion to which such Notice applies, and the remaining portion to which it does not apply, are each $2,500,000 or any larger multiple of $500,000. If no such notice is timely received prior to the end of an Interest Period, the Borrower shall be deemed to have elected that all Loans having such Interest Period be converted to Base Rate Loans. Notwithstanding the foregoing, the Borrower may not elect to convert any Loan to, or continue any Loan as, a Euro-Dollar Loan pursuant to any Notice of Interest Rate Election if at the time such notice is delivered a Default shall have occurred and be continuing. (b) Each Notice of Interest Rate Election shall specify: (i) the Group of Loans (or portion thereof) to which such notice applies; (ii) the date on which the conversion or continuation selected in such notice is to be effective, which shall comply with the applicable clause of subsection (a) above; (iii) if the Loans comprising such Group are to be converted, the new Type of Loans and, if the Loans being converted are to be Euro-Dollar Loans, the duration of the next succeeding Interest Period applicable thereto; and (iv) if such Loans are to be continued as Euro-Dollar Loans for an additional Interest Period, the duration of such additional Interest Period. Each Interest Period specified in a Notice of Interest Rate Election shall comply with the provisions of the definition of Interest Period. (c) Upon receipt of a Notice of Interest Rate Election from the Borrower pursuant to subsection (a) above, the Administrative Agent shall promptly notify each Bank of the contents thereof and such notice shall not thereafter be revocable by the Borrower. (d) An election by the Borrower to change or continue the rate of interest applicable to any Group of Loans pursuant to this Section shall not constitute a "Borrowing" subject to the provisions of Section 3.2. Section 2.9. Mandatory Termination and Reduction of Commitments. The Commitments shall terminate on the Termination Date or, if the conditions precedent set forth in Section 3.1 -22- have not been satisfied on or prior to March 31, 1997, on such date. Section 2.10. Optional Prepayments. (a) Subject in the case of any Euro-Dollar Borrowing to Section 2.12, the Borrower may, upon at least one Domestic Business Day's notice to the Administrative Agent, prepay the Group of Base Rate Loans or upon at least three Euro-Dollar Business Days' notice to the Agent, prepay any Group of Euro-Dollar Loans, in each case in whole at any time, or from time to time in part in amounts aggregating $2,000,000 or any larger multiple of $1,000,000, by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment. Each such optional prepayment of a Group of Loans shall be applied to prepay ratably the Loans of the Banks included in such Group. If such optional prepayment shall be applied to prepay any Working Capital Loans or Non-Working Capital Loans, as applicable, the Borrower shall specify in its notice to the Administrative Agent the amount of such Working Capital Loans or Non-Working Capital Loans, as applicable, to be prepaid. The amount of any prepayment pursuant to this subsection shall be applied to reduce ratably the amount of subsequent scheduled repayments of the Loans pursuant to Section 2.4. (a) Upon receipt of a notice of prepayment pursuant to this Section, the Administrative Agent shall promptly notify each Bank of the contents thereof and of such Bank's ratable share of such prepayment and such notice shall not thereafter be revocable by the Borrower. Section 2.11. General Provisions as to Payments. (a) The Borrower shall make each payment of principal of, and interest on, the Loans and of fees hereunder, not later than 12:00 Noon (New York City time) on the date when due, in Federal or other funds immediately available in New York City, to the Administrative Agent at its address referred to in Section 10.1. The Administrative Agent will promptly distribute to each Bank its ratable share of each such payment received by the Administrative Agent for the account of the Banks. Whenever any payment of principal of, or interest on, the Base Rate Loans or of fees shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day. Whenever any payment of principal of, or interest on, the Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case the date for payment thereof shall be the next preceding Euro-Dollar Business Day. If the date for any payment of principal is extended by operation of law or otherwise, interest thereon shall be payable for such extended time. -23- (b) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Banks hereunder that the Borrower will not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent that the Borrower shall not have so made such payment, each Bank shall repay to the Administrative Agent forthwith on demand such amount distributed to such Bank together with interest thereon, for each day from the date such amount is distributed to such Bank until the date such Bank repays such amount to the Administrative Agent, at the Federal Funds Rate. Section 2.12. Funding Losses. If the Borrower makes any payment of principal with respect to any Euro-Dollar Loan or any Euro-Dollar Loan is converted (pursuant to Article 2, 6, 8 or otherwise) on any day other than the last day of an Interest Period applicable thereto, or the last day of an applicable period fixed pursuant to Section 2.5(c), or if the Borrower fails to borrow, prepay, convert or continue any Euro-Dollar Loans after notice has been given to any Bank in accordance with Section 2.2(b), 2.10(b) or 2.8(c) the Borrower shall reimburse each Bank within 15 days after demand for any resulting loss or expense incurred by it (or by an existing or prospective Participant in the related Loan), including (without limitation) any loss incurred in obtaining, liquidating or employing deposits from third parties, but excluding loss of margin for the period after any such payment or conversion or failure to borrow, prepay, convert or continue, provided that such Bank shall have delivered to the Borrower a certificate as to the amount of such loss or expense, which certificate shall be conclusive in the absence of manifest error. Section 2.13. Computation of Interest and Fees. Interest based on the Prime Rate hereunder shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and paid for the actual number of days elapsed (including the first day but excluding the last day). All other interest and fees shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day). ARTICLE III. CONDITIONS Section 3.1. Initial Borrowing. The obligation of any Bank to make a Loan on the occasion of the initial Borrowing hereunder is subject to the satisfaction of the following conditions on or prior to the date of such initial Borrowing: -24- (a) the Documentation Agent shall have received the following, each dated on or prior to the date of the initial Borrowing hereunder (unless otherwise indicated below), in form and substance satisfactory to the Documentation Agent: (i) a duly executed Note for the account of each Bank complying with the provisions of Section 2.3; (ii) opinions of Willkie Farr & Gallagher, special counsel for the Obligors and Philip N. Smith, General Counsel of the Borrower, substantially in the respective forms of Exhibits B-1 and B-2 hereto and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request; (iii) an opinion of Davis Polk & Wardwell, special counsel for the Agents, substantially in the form of Exhibit C hereto and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request; (iv) duly executed counterparts of each of the Collateral Documents, together with evidence satisfactory to the Documentation Agent of the effectiveness and perfection of the Liens contemplated thereby (including the filing of UCC-1 financing statements and the delivery of any promissory notes and stock certificates comprising the Collateral); and (v) all documents either Agent may reasonably request relating to the existence of the Obligors, the corporate authority for and the validity of the Loan Documents, and any other matters relevant hereto, all in form and substance satisfactory to such Agent; (b) Except as set forth in Schedule 3.2(f), each Subsidiary identified as such in Schedule 4.13(c) is wholly-owned by the Borrower or another wholly-owned Subsidiary; (c) all fees and expenses required to be paid hereunder on or before the Effective Date have been, or will be, paid by the Effective Date; and (d) the Banks shall have received such financial projections for the Borrower and its Consolidated Subsidiaries (including Atlantic Auto Finance Corporation and any Encumbered Subsidiary) as requested by the Agents by the Effective Date. Section 3.2. All Borrowings. The obligation of any Bank to make a Loan on the occasion of any Borrowing hereunder, including the initial Borrowing, is subject to the satisfaction of the following conditions: -25- (a) receipt by the Administrative Agent of a Notice of Borrowing as required by Section 2.2; (b) the fact that, immediately after such Borrowing, the aggregate outstanding principal amount of the Loans will not exceed the aggregate amount of the Commitments and, with respect to a Working Capital Borrowing, that immediately after such Working Capital Borrowing, the aggregate outstanding principal amount of Working Capital Loans shall not exceed $5,000,000 and, with respect to a Non-Working Capital Borrowing, that immediately after such Non-Working Capital Borrowing, the aggregate outstanding principal amount of Non-Working Capital Loans shall not exceed $45,000,000; (c) the fact that, immediately before and after such Borrowing, no Default shall have occurred and be continuing; (d) the fact that the representations and warranties of the Obligors contained in this Agreement shall be true on and as of the date of such Borrowing in all material respects; (e) demonstration by the Borrower to the satisfaction of each Agent in its sole good faith discretion that the covenants described in Sections 5.11, 5.12, 5.13 and 5.15 are satisfied, on a pro forma basis giving effect to each Acquisition to be funded with the proceeds of such Borrowing; (f) except as set forth in Schedule 3.2(f), the fact that, on the date of such Borrowing, each Subsidiary identified in Schedule 4.13(c) is wholly-owned by the Borrower or another Subsidiary and each Subsidiary acquired by the Borrower or another Subsidiary after the Effective Date is not less than 80.1% owned by the Borrower or such Subsidiary; (g) the fact that immediately after giving effect to a Non-Working Capital Borrowing hereunder to be used by the Borrower to fund an Acquisition, such Acquisition will be consummated; provided that on the Termination Date, a Non-Working Capital Borrowing may be made by the Borrower to fund an Acquisition to be consummated within 60 days thereafter; provided that the Administrative Agent has received a copy of a signed letter of intent with respect to such Acquisition and the proceeds of such Non-Working Capital Borrowing are deposited in an escrow account with the Administrative Agent until the consummation of such Acquisition; if such Acquisition is not consummated within such 60 days, the funds deposited in such escrow account shall be applied to prepay the outstanding Loans under this Agreement (such prepayment to be applied to scheduled amortization as provided in Section 2.4(iii)); and -26- (h) receipt by the Administrative Agent of a notice designating such Borrowing as a Working Capital Borrowing or a Non-Working Capital Borrowing, as applicable, and setting forth the aggregate outstanding principal amount of Working Capital Loans or Non-Working Capital Loans, as applicable, after giving effect to such Borrowing. Subsections (e) and (g) hereof shall not apply to a Working Capital Borrowing. Each Borrowing hereunder shall be deemed to be a representation and warranty by the Borrower on the date of such Borrowing as to satisfaction of the applicable conditions specified above. ARTICLE IV. REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants, and each Guarantor represents and warrants with respect to itself only, that: Section 4.1. Existence and Power. Each Obligor is duly incorporated or organized (as applicable), validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (as applicable), and has all corporate or partnership powers (as applicable) and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. Section 4.2. Corporate and Governmental Authorization; No Contravention. The execution, delivery and performance by each Obligor of the Loan Documents to which it is a party are within the corporate or partnership powers (as applicable) of such Obligor, have been duly authorized by all necessary corporate or partnership action (as applicable), require no action by or in respect of, or filing with (except as expressly contemplated by the Collateral Documents), any governmental body, agency, official or other Person and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of such Obligor or of any agreement, judgment, injunction, order, decree or other instrument binding upon the Borrower or any of its Subsidiaries or result in the creation or imposition of any Lien (other than the Liens created by the Collateral Documents) on any asset of the Borrower or any of its Subsidiaries. Section 4.3. Binding Effect. This Agreement constitutes a valid and binding obligation of each Obligor and each Note and Collateral Document, when executed and delivered in accordance with this Agreement, will constitute a valid and binding obligation of each Obligor party thereto, in each case enforceable in accordance with its terms, subject to the effect of (a) any applicable bankruptcy, insolvency, moratorium or similar laws affecting creditors' rights generally and (b) -27- general principles of equity (regardless of whether considered in a proceeding in equity or at law). Section 4.4. Financial Information. (a) The consolidated balance sheet of the Borrower and its Subsidiaries as of December 31, 1996 and the related consolidated statements of income, changes in shareholders' equity and cash flows for the fiscal year then ended, reported on by Coopers & Lybrand L.L.P., a copy of which has been delivered to each of the Banks, fairly present, in conformity with generally accepted accounting principles, the consolidated financial position of the Borrower and its Subsidiaries as of such date and their consolidated results of operations and cash flows for such fiscal year. (a) The unaudited pro forma condensed consolidated balance sheet of the Borrower and its Subsidiaries as of June 30, 1996 and the related unaudited pro forma condensed consolidated statements of operations for the six months then ended and for the year ended December 31, 1995, set forth in the Registration Statement fairly present, in conformity with generally accepted accounting principles applied on a basis consistent with the financial statements referred to in subsection (a) of this Section, the consolidated financial position of the Borrower and its Subsidiaries, with respect to the unaudited pro forma condensed consolidated balance sheet, as if the events set forth in the section of the Registration Statement entitled, "Pro Forma Condensed Consolidated Financial Statements", with the exception of several events so noted therein, had occurred as of June 30, 1996 and, with respect to the unaudited pro forma condensed consolidated statements of operations, as if the events set forth in such section of the Registration Statement had occurred as of January 1, 1995. (b) Since December 31, 1996 there has been no material adverse change in the business, financial position, results of operations or prospects of the Borrower and its Consolidated Subsidiaries, considered as a whole. Section 4.5. Litigation. Except as set forth in Schedule 4.5, there is no action, suit or proceeding pending against, or to the knowledge of the Borrower threatened against or affecting, the Borrower or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official in which there is a reasonable possibility of an adverse decision which could materially adversely affect the business, consolidated financial position or consolidated results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole, or which in any manner draws into question the validity or enforceability of the Loan Documents. Section 4.6. Compliance with ERISA. Each member of the ERISA Group has fulfilled its obligations under the minimum -28- funding standards of ERISA and the Internal Revenue Code with respect to each Plan and is in compliance in all material respects with the presently applicable provisions of ERISA and the Internal Revenue Code with respect to each Plan. No member of the ERISA Group has (i) sought a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code in respect of any Plan, (ii) failed to make any contribution or payment to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement, which has resulted or could result in the imposition of a Lien or the posting of a bond or other security under ERISA or the Internal Revenue Code or (iii) incurred any liability under Title IV of ERISA other than a liability to the PBGC for premiums under Section 4007 of ERISA. Section 4.7. Environmental Matters. The Borrower has reasonably concluded that, to the best of its knowledge, the costs of compliance with Environmental Laws are unlikely to have a Material Adverse Effect. Section 4.8. Taxes. The Borrower and its Subsidiaries have filed all United States Federal income tax returns and all other material tax returns which are required to be filed by them and have paid all taxes due pursuant to such returns or pursuant to any assessment received by the Borrower or any Subsidiary except those being contested in good faith through appropriate proceedings. The charges, accruals and reserves on the books of the Borrower and its Subsidiaries in respect of taxes or other governmental charges are, in the opinion of the Borrower, adequate. Section 4.9. Subsidiaries. Each of the Borrower's corporate Subsidiaries is a corporation or other legal entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. Section 4.10. Regulatory Restrictions on Borrowing. The Borrower is not an "investment company" within the meaning of the Investment Company Act of 1940, as amended, a "holding company" within the meaning of the Public Utility Holding Company Act of 1935, as amended, or otherwise subject to any regulatory scheme which restricts its ability to incur debt. Section 4.11. Full Disclosure. All information heretofore furnished by the Borrower to either Agent or any Bank in writing for purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all such information hereafter furnished by the Borrower to either Agent or any Bank will be, true and accurate in all material respects on the date as of which such information is stated or certified. The Borrower has disclosed to the Banks in writing any and all -29- facts which materially and adversely affect or may affect (to the extent the Borrower can now reasonably foresee), the business, operations or financial condition of the Borrower and its Consolidated Subsidiaries, taken as a whole, or the ability of the Obligors to perform their obligations under the Loan Documents. Section 4.12. Representations in Collateral Documents True and Correct. Each of the representations and warranties of each Obligor contained in the Collateral Documents is true and correct. Section 4.13. Capitalization and Subsidiaries. Schedule 4.13(a), as supplemented from time to time by notice from the Borrower to the Administrative Agent, lists all of the authorized, issued and outstanding capital stock of the Borrower. Schedule 4.13(b) lists all owners as of the Effective Date of more than 5% of any class of the Borrower's capital stock and the number of shares of each class owned by each such owner. Set forth on Schedule 4.13(c) hereto, as supplemented from time to time by notice from the Borrower to the Administrative Agent, is a complete and accurate list of all of the Borrower's Subsidiaries, showing (as to each such Subsidiary) the jurisdiction of its incorporation, the number of shares of each class of capital stock authorized, the number of shares of each class of capital stock outstanding and the direct owner of the outstanding shares of each such class owned. Except as set forth in Schedule 4.13(d), as supplemented from time to time by notice from the Borrower to the Administrative Agent, all of the general and limited partnership interests of each Subsidiary that is a partnership are owned, legally and beneficially, by the Borrower or a wholly owned Subsidiary of the Borrower, in each case free and clear of all liens, security interests and other charges or encumbrances other than the liens and security interests created under the Pledge Agreement. Except as set forth in Schedule 4.13(e), as supplemented from time to time by notice from the Borrower to the Administrative Agent, there are no outstanding options, warrants, rights of conversion or purchase, or similar rights to acquire capital stock or partnership interests of the Borrower or any of its Subsidiaries or other similar agreements of any character whatsoever relating to any shares of capital stock or partnership interests of the Borrower or any such Subsidiaries; all of the issued and outstanding capital stock of the Borrower and each of its Subsidiaries that is a corporation has been duly authorized, validly issued and is fully paid and non-assessable; all of the partnership interests of each Subsidiary that is a partnership have been issued pursuant to the terms of its partnership agreement; except as set forth in Schedule 4.13(f), as supplemented from time to time by notice from the Borrower to the Administrative Agent, all of the issued and outstanding capital stock of each Subsidiary of the Borrower that is a corporation is directly owned, legally and beneficially, by the Borrower, in each case free and clear of all -30- liens, security interests and other charges or encumbrances other than the liens and security interests under the Pledge Agreement. Section 4.14. Ownership of Properties; Absence of Liens and Encumbrances. The Borrower and its Subsidiaries have good and sufficient title to and are in lawful possession of, or have valid leasehold interests in, or have the right to use pursuant to valid and enforceable agreements or arrangements, all of their respective properties and other assets (real or personal, tangible, intangible or mixed), except where the failure to have or possess the same with respect to such properties or other assets would not, in the aggregate, have a Material Adverse Effect. Except as disclosed on Schedule 5.9, there are no Liens on any property or asset of the Borrower or any of its Subsidiaries except for the security interests created under the Pledge Agreement and other Liens permitted by the provisions of Section 5.9. Section 4.15. Licenses, Permits, Etc. Except as disclosed in Schedule 4.15, (a) the Borrower and its Subsidiaries own or possess all licenses, permits, franchises, authorizations, patents, copyrights, service marks, trademarks and trade names, or rights thereto, that individually or in the aggregate are material, without known conflict with the rights of others; (b) to the best knowledge of the Borrower, no product of the Borrower infringes in any material respect any license, permit, franchise, authorization, patent, copyright, service mark, trademark, trade name or other right owned by any other Person; and (c) to the best knowledge of the Borrower, there is no material violation by any Person of any right of the Borrower or any of its Subsidiaries with respect to any patent, copyright, service mark, trademark, trade name or other right owned or used by the Borrower or any of its Subsidiaries. For purposes of this Section 4.15, "material" means material in relation to the business, operations, financial condition, assets or properties of the Borrower and its Subsidiaries, taken as a whole. Section 4.16. Payment of Dividends by Subsidiaries. Except as disclosed on Schedule 4.16, as supplemented from time to time by notice from the Borrower to the Administrative Agent, and except for restrictions imposed by applicable law, there are no restrictions on the ability of any Subsidiary to declare or pay any dividend or make any other distribution, or advance or loan funds, to the Borrower. -31- Section 4.17. Certain Agreements. Each Guarantor is obligated to make payments to the Borrower pursuant to agreements set forth in Schedule 4.17. Section 4.18. Compliance with Certain Agreements. Each Obligor is in compliance with the provisions of each of its financing agreements with floor plan lenders and franchise agreements, except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect. ARTICLE V. COVENANTS The Borrower agrees that, so long as any Bank has any Commitment hereunder or any amount payable under any Note remains unpaid: Section 5.1. Information. The Borrower will deliver to each of the Banks: (a) as soon as available and in any event within 90 days after the end of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its Subsidiaries as of the end of such fiscal year and the related consolidated statements of income, changes in shareholders' equity and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on in accordance with the rules and regulations promulgated by the Securities and Exchange Commission by Coopers & Lybrand L.L.P. or other independent public accountants of nationally recognized standing; (b) as soon as available and in any event within 45 days after the end of each of the first three quarters of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its Subsidiaries as of the end of such quarter and the related consolidated statements of income, changes in shareholders' equity and cash flows for such quarter and for the portion of the Borrower's fiscal year ended at the end of such quarter, setting forth in the case of such statements of income, changes in shareholders' equity and cash flows, in comparative form the figures for the corresponding quarter and the corresponding portion of the Borrower's previous fiscal year, all certified (subject to normal year-end adjustments) as to fairness of presentation, generally accepted accounting principles and consistency by the chief financial officer or the chief accounting officer of the Borrower; (c) simultaneously with the delivery of each set of financial statements referred to in clauses (a) and (b) above, a certificate of the chief financial officer or the -32- chief accounting officer of the Borrower (i) setting forth in reasonable detail the calculations required to establish whether the Borrower was in compliance with the requirements of Sections 5.7 to 5.15, inclusive, on the date of such financial statements and (ii) stating whether any Default exists on the date of such certificate and, if any Default then exists, setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (d) simultaneously with the delivery of each set of financial statements referred to in clause (a) above, a statement of the firm of independent public accountants which reported on such statements (i) whether anything has come to their attention to cause them to believe that any Default existed on the date of such statements and (ii) confirming the calculations set forth in the officer's certificate delivered simultaneously therewith pursuant to clause (c) above; (e) within five days after any officer of the Borrower obtains knowledge of any Default, if such Default is then continuing, a certificate of the chief financial officer or the chief accounting officer of the Borrower setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (f) promptly upon the mailing thereof to the shareholders of the Borrower, copies of all financial statements, reports and proxy statements so mailed; (g) promptly upon the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their equivalents) which the Borrower shall have filed with the Securities and Exchange Commission; (h) if and when any member of the ERISA Group (i) gives or is required to give notice to the PBGC of any "reportable event" (as defined in Section 4043 of ERISA) with respect to any Plan which might constitute grounds for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Plan has given or is required to give notice of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC; (ii) receives notice of complete or partial withdrawal liability under Title IV of ERISA or notice that any Multiemployer Plan is in reorganization, is insolvent or has been terminated, a copy of such notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent to terminate, impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or appoint a trustee to administer any Plan, a copy of such -33- notice; (iv) applies for a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code, a copy of such application; (v) gives notice of intent to terminate any Plan under Section 4041(c) of ERISA, a copy of such notice and other information filed with the PBGC; (vi) gives notice of withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails to make any payment or contribution to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement or makes any amendment to any Plan or Benefit Arrangement which has resulted or could result in the imposition of a Lien or the posting of a bond or other security, a certificate of the chief financial officer or the chief accounting officer of the Borrower setting forth details as to such occurrence and action, if any, which the Borrower or applicable member of the ERISA Group is required or proposes to take; (i) simultaneously with the delivery of each set of financial statements referred to in clauses (a) and (b) above, (i) consolidating financial information (including balance sheets and statements of income) with respect to each Automobile Dealership group identified in the pro forma consolidated statement of operations for the year ended December 31, 1995 as set forth in the Registration Statement, (ii) consolidating financial information with respect to each Automobile Dealership group acquired other than pursuant to the Borrower's Plan of Acquisitions, (iii) consolidating financial information with respect to Atlantic Auto Finance Corporation and (iv) consolidating financial statements setting forth, with respect to the consolidating financial information referred in clauses (i), (ii) and (iii) above, in each case in comparative form, the corresponding figures for the corresponding period of the previous fiscal year and the corresponding figures from the consolidating financial projections being delivered pursuant to Section 3.1(g); (j) simultaneously with the delivery of the financial statements referred to in clause (a) above, commencing in 1997, a copy of the annual business plan of the Borrower and its Subsidiaries for the next succeeding year; (k) promptly upon obtaining knowledge of any material change in procedures in connection with any floor plan financing, a copy of a report setting forth the details and the purpose thereof; (l) promptly upon the issuance of any Seller Note (other than Seller Notes issued in connection with the acquisition of certain Automobile Dealerships pursuant to the Stock Purchase Agreement dated February 19, 1997 among the Borrower, UAG East, Inc., John A. Staluppi, John A. Staluppi, Jr. and certain of their affiliates), a certificate of Coopers & Lybrand L.L.P. or other independent -34- public accountants of nationally recognized standing setting forth in reasonable detail the calculations of the Adjusted Pre-Tax Income of the relevant Automobile Dealership; and (m) from time to time such additional information regarding the financial position or business of the Borrower and its Subsidiaries or any Guarantor as the Administrative Agent, at the request of any Bank, may reasonably request. Section 5.2. Payment of Obligations. The Borrower will pay and discharge, and will cause each Subsidiary to pay and discharge, at or before maturity, all their respective material obligations and liabilities (including, without limitation, tax liabilities and claims of materialmen, warehousemen and the like which if unpaid might by law give rise to a Lien), except where the same may be contested in good faith by appropriate proceedings, and will maintain, and will cause each Subsidiary to maintain, in accordance with generally accepted accounting principles, appropriate reserves for the accrual of any of the same. Section 5.3. Maintenance of Property; Insurance. (a) The Borrower will keep, and will cause each Subsidiary to keep, all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted; provided that this Section shall not prevent the Borrower or any Subsidiary from discontinuing the operation and the maintenance of any of its properties if such discontinuance is desirable in the conduct of its business and the Borrower has concluded that such discontinuance could not have a Material Adverse Effect. (b) The Borrower will, and will cause each of its Subsidiaries to, maintain (either in the name of the Borrower or in such Subsidiary's own name) with financially sound and responsible insurance companies, insurance on all their respective properties in at least such amounts, against at least such risks and with such risk retention as are usually maintained, insured against or retained, as the case may be, in the same general area by companies of established repute engaged in the same or a similar business; and will furnish to the Banks, upon request from the Administrative Agent, information presented in reasonable detail as to the insurance so carried. Section 5.4. Conduct of Business and Maintenance of Existence. Subject to Section 5.7, the Borrower will continue, and will cause each Subsidiary to continue, to engage, directly or indirectly, in the business of an Automobile Dealership, and will preserve, renew and keep in full force and effect, and will cause each Subsidiary to preserve, renew and keep in full force and effect their respective corporate existence and their respective rights, privileges and franchises necessary or desirable in the normal conduct of business; provided that nothing in this Section 5.4 shall prohibit (i) the merger of a Subsidiary into the Borrower or the merger or consolidation of a -35- Subsidiary with or into another Person if the corporation surviving such consolidation or merger is a Subsidiary and if, in each case, after giving effect thereto, no Default shall have occurred and be continuing or (ii) if the Borrower gives notice to the Banks requesting the consent of the Banks to the termination of the corporate existence of a Subsidiary by the tenth Domestic Business Day prior to such scheduled termination and the Required Banks do not respond negatively to such request by the fifth Domestic Business Day prior to such scheduled termination, the termination of the corporate existence of any Subsidiary if the Borrower in good faith determines that such termination is in the best interest of the Borrower and is not materially disadvantageous to the Banks. Notwithstanding the foregoing, at all times the Borrower will continue, and will cause each Subsidiary to continue, to engage, directly or indirectly, in the business of owning and operating Automobile Dealerships. Section 5.5. Compliance with Laws. The Borrower will comply, and cause each Subsidiary to comply, in all material respects with all applicable laws, ordinances, rules, regulations, and requirements of governmental authorities (including, without limitation, Environmental Laws and ERISA and the rules and regulations thereunder) except where the necessity of compliance therewith is contested in good faith by appropriate proceedings. Section 5.6. Inspection of Property, Books and Records. The Borrower will keep, and will cause each Subsidiary to keep, proper books of record and account in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities; and will permit, and will cause each Subsidiary to permit, representatives of any Bank at such Bank's expense to visit and inspect any of their respective properties, to examine and make abstracts from any of their respective books and records and to discuss their respective affairs, finances and accounts with their respective officers, employees and independent public accountants, all at such reasonable times and as often as may reasonably be desired. Section 5.7. Mergers and Sales of Assets. (a) The Borrower will not (i) consolidate or merge with or into any other Person or (ii) sell, lease or otherwise dispose of all or substantially all of its assets to any other Person; provided that the Borrower may merge with another Person if (x) the Borrower is the corporation surviving such merger and (y) after giving effect to such merger, no Default shall have occurred and be continuing. (a) (b) The Borrower will not make any Substantial Asset Disposition unless (i) such Substantial Asset Disposition is for cash in an amount not less than the fair market value of the -36- assets disposed of (as determined in good faith by the board of directors of the Borrower) and (ii) the proceeds of such Substantial Asset Disposition, net of reasonable expenses incurred in connection therewith and provision for taxes payable by reason thereof, are applied to the prepayment of the Loans (and if the Commitments are still in existence, to an equivalent reduction of the Commitments) within five Domestic Business Days of the consummation of such Substantial Asset Disposition. For this purpose, "Substantial Asset Disposition" means the sale, lease or other disposition, in a single transaction or a series of related transactions, of assets comprising more than 15% of the consolidated assets of the Borrower and its Subsidiaries, determined as of the last day of the fiscal quarter most recently ended on or prior to the date of such disposition. Section 5.8. Use of Proceeds. The proceeds of the Loans made under this Agreement will be used by the Borrower and its Subsidiaries, with respect to not more than $5,000,000 of such proceeds, for working capital purposes and, with respect to not more than $45,000,000 of such proceeds, for Acquisitions and related costs, fees and expenses. None of such proceeds will be used, directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of buying or carrying any "margin stock" within the meaning of Regulation U. Section 5.9. Negative Pledge. Neither the Borrower nor any Subsidiary will create, assume or suffer to exist any Lien on any asset now owned or hereafter acquired by it, except: (a) Liens existing on the Effective Date and set forth in Schedule 5.9;; (b) any Lien existing on any asset of any Person at the time such Person becomes a Subsidiary and not created in contemplation of such event; (c) any Lien on any asset securing Debt incurred or assumed for the purpose of financing all or any part of the cost of acquiring or improving such asset (it being understood that, for this purpose, the acquisition of a Person is also an acquisition of the assets of such Person); provided that such Lien attaches to such asset concurrently with or within 180 days after the acquisition thereof; (d) any Lien on any asset of any Person existing at the time such Person is merged or consolidated with or into the Borrower or a Subsidiary and not created in contemplation of such event; (e) any Lien existing on any asset prior to the acquisition thereof by the Borrower or a Subsidiary and not created in contemplation of such acquisition; -37- (f) any Lien arising out of the refinancing, extension, renewal or refunding of any Debt secured by any Lien permitted by any of the foregoing clauses of this Section, provided that such Debt is not increased and is not secured by any additional assets; (g) Liens arising in the ordinary course of its business which (i) do not secure Debt or Derivatives Obligations, (ii) do not secure any obligation in an amount exceeding $5,000,000 and (iii) do not in the aggregate materially detract from the value of the assets of the Borrower and its Subsidiaries, taken as a whole, or materially impair the use thereof in the operation of their business; (h) Liens on (i) any asset of an Automobile Dealership securing floor plan indebtedness or (ii) any retail installment receivables of Atlantic Auto Finance Corporation to be sold in a securitization transaction; (i) Liens created by the Collateral Documents; (j) a Lien on the real property of Sun Automotive Group; provided that so long as such Lien exists, upon the request of either Agent, the Borrower shall use commercially reasonable efforts to grant a second mortgage on such real property to the Agents and the Banks pursuant to documentation in form and substance satisfactory to the Agents; and (k) Liens securing Debt owed by a Subsidiary to the Borrower or another Subsidiary. Notwithstanding the foregoing, no Obligor will create, assume or suffer to exist any Lien on any Collateral other than Liens described in clause (a), (b), (c), (d), (e) or (i) above, or Liens described in clause (f) above relating to a Lien described in clause (a), (b), (c), (d), (e) or (i) above, which do not in the aggregate materially detract from the value of the Collateral. Section 5.10. Limitation on Debt. The Borrower will not, and will not permit any of its Subsidiaries to, incur or at any time be liable with respect to any Debt except: (a) Debt under this Agreement; (b) Debt secured by Liens permitted by Section 5.9; (c) Debt incurred for the purpose of financing all or any part of the cost of an Acquisition; provided that (i) the amount of any Seller Note will not exceed three times the Adjusted Pre-Tax Income of the Automobile Dealership to be acquired by the Borrower or a Subsidiary for the four -38- consecutive fiscal quarters of such Automobile Dealership then most recently ended for which financial statements are available in connection with such Acquisition and (ii) no payment of principal with respect to any Seller Note may be made on or prior to the last Principal Repayment Date; (d) Debt of any Person existing at the time such Person became a Subsidiary and not created in contemplation of such event; (e) Debt with respect to any floor plan financing of any Automobile Dealership or retail installment receivables-backed financing of Atlantic Auto Finance Corporation; (f) Debt set forth on Schedule 5.10 hereto; (g) Debt owing to the Borrower by a Subsidiary or Debt owing to a Subsidiary by the Borrower or another Subsidiary; and (h) Debt of the Borrower and its Subsidiaries not otherwise permitted by this Section incurred after the Effective Date in an aggregate principal amount at any time outstanding not to exceed $10,000,000, of which no more than $5,000,000 in aggregate principal amount shall constitute Debt of Subsidiaries. Section 5.11. Leverage Ratio. The Leverage Ratio will not exceed during any period set forth below the applicable ratio set forth below for such period: Period Ratio ------ ----- Effective Date - 06/29/97 2.75:1 06/30/97 - 12/30/97 2.50:1 12/31/97 - 03/30/98 2.25:1 03/31/98 - 09/29/98 2.10:1 09/30/98 - 12/30/98 2.00:1 Thereafter 1.75:1 Section 5.12. Working Capital. (a) Consolidated Working Capital will at all times be greater than $0. (a) (b) The Borrower will cause each Subsidiary to maintain such level of working capital as is necessary to satisfy the requirements of such Subsidiary's franchise agreements (if any). . Minimum Consolidated Net Worth. Consolidated Net Worth will at no time be less than the sum of (i) $260,000,000 and (ii) an amount equal to 50% of Consolidated Net Income for each fiscal quarter of the Borrower ending after December 31, -39- 1996 but prior to the date of determination, in each case, for which Consolidated Net Income is positive (but with no deduction on account of negative Consolidated Net Income for any fiscal quarter of the Borrower) plus (iii) 80% of the aggregate net proceeds, including the fair market value of property other than cash (as determined in good faith by the Board of Directors of the Borrower), received by the Borrower from the issuance and sale after December 31, 1996 of any capital stock of the Borrower (other than the proceeds of any issuance and sale of any capital stock (x) to a Subsidiary of the Borrower, (y) which is required to be redeemed, or is redeemable at the option of the holder, if certain events or conditions occur or exist or otherwise ("Redeemable Stock") or (z) if and to the extent such proceeds are used substantially simultaneously to redeem other capital stock of the Borrower (other than Redeemable Stock) or in connection with the conversion or exchange of any Debt of the Borrower into capital stock of the Borrower). Section 5.13. Borrower Fixed Charge Coverage Ratio. As of the last day of each fiscal quarter of the Borrower, the Borrower Fixed Charge Coverage Ratio will not be less than 1.05:1. Section 5.14. Consolidated Fixed Charge Coverage Ratio. As of the last day of each fiscal quarter of the Borrower, the Consolidated Fixed Charge Coverage Ratio will not be less than 1.35:1 Section 5.15. Restricted Payments. The Borrower will not declare or make and will not permit any Subsidiary to make any Restricted Payment other than in connection with (i) an Equity Refinancing or (ii) the Stock Repurchase Program. Section 5.16. Investments. Neither the Borrower nor any16 Subsidiary will hold, make or acquire any Investment in any Person other than: (a) Investments pursuant to the Borrower's Plan of Acquisition or in Automobile Dealerships that are owned; directly or indirectly, by the Borrower on the date hereof; (b) Temporary Cash Investments; (c) any Investment in a Consolidated Subsidiary or other Person operating an Automobile Dealership who, concurrently with the making of such Investment, becomes a Subsidiary; (d) Investments made by the Borrower in Atlantic Auto Finance Corporation, the aggregate unrecovered amount of which shall at no time exceed $28,000,000; (e) loans by Atlantic Auto Finance Corporation to the Borrower; provided that any such loan shall be due not later -40- than the Domestic Business Day following the day such loan was made; (f) Investments held by any Person at the time such Person becomes a Subsidiary and not acquired in anticipation of such event; (g) Investments made by Atlantic Auto Finance Corporation in the ordinary course of business in Persons other than the Borrower and its Consolidated Subsidiaries; (h) Investments made by any Consolidated Subsidiary in the Borrower or another Consolidated Subsidiary; and (i) Investments in the form of non-cash consideration for a sale of assets permitted under Section 5.7. Section 5.17. Transactions with Affiliates. The Borrower will not, and will not permit any Subsidiary to, directly or indirectly, pay any funds to or for the account of, make any investment (whether by acquisition of stock or indebtedness, by loan, advance, transfer of property, guarantee or other agreement to pay, purchase or service, directly or indirectly, any Debt, or otherwise) in, lease, sell, transfer or otherwise dispose of any assets (tangible or intangible) to or effect any transaction with, any Affiliate except on an arm's-length basis on terms at least as favorable to the Borrower or such Subsidiary as could have been obtained from a third party who was not an Affiliate; provided that the foregoing provisions of this Section shall not prohibit any such Person from declaring or paying any lawful dividend or other payment ratably in respect of all of its capital stock of the relevant class or making any other payment permitted under Section 5.16 so long as, after giving effect thereto, no Default shall have occurred and be continuing. Section 5.18. Additional Equity. In the event that equity securities of the Borrower are sold (i) by the Principal Shareholders and/or (ii) in connection with one or more Equity Refinancings, by the Borrower, through offerings registered under the 1933 Act or made pursuant to Rule 144A under the 1933 Act for an aggregate gross purchase price of more than $50,000,000, the Borrower will within 60 days of such event prepay an aggregate principal amount of the Loans equal to 80% of the aggregate gross purchase price received in connection with such offerings (or, if less, the aggregate principal amount of all outstanding Loans). Section 5.19. Additional Guarantors and Collateral. The Borrower agrees, within ten days after any Person hereafter becomes a Subsidiary, (a) to cause such Person to become a Guarantor hereunder, to the extent immediately prior to becoming a Subsidiary such Person was permitted so to become a Guarantor and (b) to pledge such Person's stock to the Agents and the Banks pursuant to a Pledge Agreement to the extent the Borrower is -41- permitted to do so, and in connection with the foregoing to deliver such opinions of counsel and other documents related to such Guarantor and its obligations hereunder or under such pledge agreement as the Administrative Agent may reasonably request. The Borrower will use commercially reasonable efforts to lift any applicable restrictions with respect to the foregoing; provided that any Subsidiary created in contemplation of an Acquisition shall not be required to become a Guarantor hereunder or have its stock pledged to the Agents and the Banks in accordance with this Section 5.20 until the tenth day after the consummation of such Acquisition. Section 5.20. Further Assurances. (a) The Borrower will, and will cause each of the other Obligors to, at the Borrower's sole cost and expense, do, execute, acknowledge and deliver all such further acts, deeds, conveyances, mortgages, assignments, notices of assignment and transfers as the Administrative Agent shall from time to time request, which may be necessary in the reasonable judgment of the Administrative Agent from time to time to assure, perfect, convey, assign and transfer to the Administrative Agent the property and rights conveyed or assigned pursuant to the Collateral Documents, or which may facilitate the performance of the terms of the Collateral Documents, or the filing, registering or recording of the Collateral Documents. (b) All costs and expenses in connection with the grant of any security interests under the Collateral Documents, including without limitation reasonable legal fees and other reasonable costs and expenses in connection with the granting, perfecting and maintenance of any security interests under the Collateral Documents or the preparation, execution, delivery, recordation or filing of documents and any other acts as the Administrative Agent may reasonably request in connection with the grant of such security interests shall be paid by the Borrower promptly upon demand. (c) The Borrower will not, and will not permit any of its Subsidiaries to, enter into or become subject to any agreement which would impair their ability to comply, or which would purport to prohibit them from complying, with the provisions of this Section (unless, with respect to any Person, such an agreement was in effect at the time such Person became a Subsidiary and was not entered into in anticipation of such event). Section 5.21. Limitation on Floor Plan Amendments. There shall be no modification to any floor plan financing arrangement which would have a Material Adverse Effect. Section 5.22. External Inventory Audits. The Borrower will cause a minimum of six floor plan audits to be performed annually by Floor Plan Providers (or other external auditors) -42- with respect to each Automobile Dealership presently owned or hereafter acquired by the Borrower and its Subsidiaries. Section 5.23. Ownership of Subsidiaries. Each Subsidiary identified as a wholly-owned Subsidiary of the Borrower or another Subsidiary in Section 4.13(c) on the Effective Date, as modified in accordance with Section 4.13 from time to time, will be wholly-owned by the Borrower or another Subsidiary at all times and each Subsidiary acquired by the Borrower, directly or indirectly, after the Effective Date will at no time be less than 80.1% owned, directly or indirectly, by the Borrower. ARTICLE VI. DEFAULTS Section 6.1. Events of Default. If one or more of the following events ("Events of Default") shall have occurred and be continuing: (a) the Borrower shall fail to pay when due any principal of any Loan or shall fail to pay within five Domestic Business Days of the due date thereof any interest, any fees or any other amount payable hereunder; (b) the Borrower shall fail to observe or perform any covenant contained in Article 5, other than those contained in Sections 5.1 through 5.6; provided that in the case of Sections 5.12 and 5.13, such failure shall have continued uncured for 10 days; (c) any Obligor shall fail to observe or perform any covenant or agreement (including those contained in Sections 5.1 through 5.6) contained in the Loan Documents (other than those covered by clause (a) or (b) above) for 30 days after notice thereof has been given to the Borrower by the Documentation Agent at the request of any Bank; (d) any representation, warranty, certification or statement made by any Obligor in any Loan Document or in any certificate, financial statement or other document delivered pursuant to any Loan Document shall prove to have been incorrect in any material respect when made (or deemed made); (e) the Borrower or any Subsidiary shall fail to make any payment in respect of any Material Financial Obligations when due or within any applicable grace period; (f) any event or condition shall occur which results in the acceleration of the maturity of any Material Debt or enables (or, with the giving of notice or lapse of time or -43- both, would enable) the holder of such Debt or any Person acting on such holder's behalf to accelerate the maturity thereof; (g) the Borrower or any Significant Subsidiary shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing; (h) an involuntary case or other proceeding shall be commenced against the Borrower or any Significant Subsidiary seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or an order for relief shall be entered against the Borrower or any Subsidiary under the federal bankruptcy laws as now or hereafter in effect; (i) any member of the ERISA Group shall fail to pay when due an amount or amounts aggregating in excess of $1,000,000 which it shall have become liable to pay under Title IV of ERISA; or notice of intent to terminate a Material Plan shall be filed under Title IV of ERISA by any member of the ERISA Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate, to impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or to cause a trustee to be appointed to administer any Material Plan; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated; or there shall occur a complete or partial withdrawal from, or a default, within the meaning of Section 4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which causes one or more members of the ERISA Group to incur a current payment obligation in excess of $1,000,000; (j) judgments or orders for the payment of money in excess of $1,000,000 shall be rendered against the Borrower -44- or any Subsidiary and such judgments or orders shall continue unsatisfied and unstayed for a period of 30 days; (k) any Lien created by any of the Collateral Documents shall at any time fail to constitute a valid and (to the extent required by the Collateral Documents) perfected Lien on all of the Collateral purported to be subject thereto, securing the obligations purported to be secured thereby, with the priority required by the Loan Documents, or any Obligor shall so assert in writing; (l) any Person or group of Persons (within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as amended), other than any Principal Shareholder, shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission under said Act) of 30% or more of the outstanding shares of common stock of the Borrower; or, during any period of 12 consecutive calendar months, individuals who were directors of the Borrower on the first day of such period (together with any new directors whose election by the board of directors of the Borrower or whose nomination for election by the stockholders of the Borrower was approved by a vote of a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) shall cease to constitute a majority of the board of directors of the Borrower; or (m) the obligations of any Guarantor which is a Significant Subsidiary under Article 9 shall be invalid or unenforceable, or any Obligor shall so assert in writing; then, and in every such event, the Documentation Agent shall (i) if requested by Banks having more than 50% in aggregate amount of the Commitments, by notice to the Borrower terminate the Commitments and they shall thereupon terminate, and (ii) if requested by Banks holding more than 50% of the aggregate principal amount of the Loans, by notice to the Borrower declare the Loans (together with accrued interest thereon) to be, and the Loans shall thereupon become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; provided that in the case of any of the Events of Default specified in clause 6.1(g) or 6.1(h) above with respect to the Borrower, without any notice to the Borrower or any other act by the Documentation Agent or the Banks, the Commitments shall thereupon terminate and the Loans (together with accrued interest thereon) shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower. Section 6.2. Notice of Default. The Documentation Agent shall give notice to the Borrower under Section 6.1(c) -45- promptly upon being requested to do so by any Bank and shall thereupon notify all the Banks thereof. ARTICLE VII. THE AGENTS Section 7.1. Appointment and Authorization. Each Bank irrevocably appoints and authorizes each Agent to enter into and act as its agent in connection with the Collateral Documents and to take such action as agent on its behalf and to exercise such powers under the Loan Documents as are delegated to such Agent by the terms hereof or thereof, together with all such powers as are reasonably incidental thereto. Section 7.2. Agents and Affiliates. The Bank of Nova Scotia and Morgan Guaranty Trust Company of New York shall each have the same rights and powers under the Loan Documents as any other Bank and may exercise or refrain from exercising the same as though it were not an Agent, and The Bank of Nova Scotia and Morgan Guaranty Trust Company of New York and their respective affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Borrower or any Subsidiary or affiliate of the Borrower as if it were not an Agent. Section 7.3. Action by Agents. The obligations of the Agents hereunder are only those expressly set forth herein. Without limiting the generality of the foregoing, neither Agent shall be required to take any action with respect to any Default, except as expressly provided in Article 6. Section 7.4. Consultation with Experts. Each Agent may consult with legal counsel (who may be counsel for any Obligor), independent public accountants and other experts selected by it and shall not be liable to any Bank or Agent for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts. Section 7.5. Liability of Agent. Neither Agent nor any of their respective affiliates nor any of the respective directors, officers, agents or employees of any of the foregoing shall be liable for any action taken or not taken by it in connection herewith (i) with the consent or at the request of the Required Banks (or all the Banks in any case where the relevant event requires the consent of all the Banks in accordance with the terms and provisions of the Loan Documents) or (ii) in the absence of its own gross negligence or willful misconduct. Neither Agent nor any of their respective affiliates nor any of the respective directors, officers, agents or employees of any of the foregoing shall be responsible for or have any duty to ascertain, inquire into or verify (i) any statement, warranty or representation made in connection with the Loan Documents or any borrowing hereunder; (ii) the performance or observance of any of -46- the covenants or agreements of any Obligor; (iii) the satisfaction of any condition specified in Article 2, 3, except in the case of the Documentation Agent receipt of items required to be delivered to it; or (iv) the validity, effectiveness or genuineness of the Loan Documents or any other instrument or writing furnished in connection herewith. Neither Agent shall incur any liability by acting in reliance upon any notice, consent, certificate, statement, or other writing (which may be a bank wire, telex, facsimile transmission or similar writing) believed by it to be genuine or to be signed by the proper party or parties. Section 7.6. Indemnification. Each Bank shall, ratably in accordance with its Commitment, indemnify each Agent, its affiliates and their respective directors, officers, agents and employees (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so) against any cost, expense (including counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from such indemnitees' gross negligence or willful misconduct) that such indemnitees may suffer or incur in connection with the Loan Documents or any action taken or omitted by such indemnitees thereunder. Section 7.7. Credit Decision. Each Bank acknowledges that it has, independently and without reliance upon either Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon either Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under the Loan Documents. Section 7.8. Successor Agent. Either Agent may resign at any time by giving notice thereof to the Banks and the Borrower. Upon any such resignation, the Required Banks shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by the Required Banks, and shall have accepted such appointment, within 30 days after the retiring Agent gives notice of resignation, then the retiring Agent may, on behalf of the Banks, appoint a successor Agent, which shall be a commercial bank organized or licensed under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $50,000,000. Upon the acceptance of its appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation hereunder as Agent, the provisions of this Article shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent. -47- Section 7.9. Agents' Fees. The Borrower shall pay to each Agent for its own account fees in the amounts and at the times previously agreed upon between the Borrower and such Agent. ARTICLE VIII. CHANGE IN CIRCUMSTANCES Section 8.1. Basis for Determining Interest Rate Inadequate or Unfair. If at least two Euro-Dollar Business Days prior to the first day of any Interest Period for any Euro-Dollar Loan: (a) the Administrative Agent is advised by the Reference Banks that deposits in dollars (in the applicable amounts) are not being offered to the Reference Banks in the London interbank market for such Interest Period, or (b) Banks having 50% or more of the aggregate principal amount of the affected Loans advise the Administrative Agent that the Adjusted London Interbank Offered Rate as determined by the Administrative Agent will not adequately and fairly reflect the cost to such Banks of funding their Euro-Dollar Loans for such Interest Period, the Administrative Agent shall immediately give notice thereof to the Borrower and the Banks, whereupon until the Administrative Agent notifies the Borrower that the circumstances giving rise to such suspension no longer exist, (i) the obligations of the Banks to make Euro-Dollar Loans or to continue or convert outstanding Loans as or into Euro-Dollar Loans shall be suspended and (ii) each outstanding Euro-Dollar Loan shall be converted into a Base Rate Loan on the last day of the then current Interest Period applicable thereto. Unless the Borrower notifies the Administrative Agent at least one Domestic Business Day before the date of any Euro-Dollar Borrowing for which a Notice of Borrowing has previously been given that it elects not to borrow on such date, such Borrowing shall instead be made as a Base Rate Borrowing. Section 8.2. Illegality. If, on or after the date of this Agreement, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Euro-Dollar Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency issued after the date of this Agreement shall make it unlawful or impossible for any Bank (or its Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar Loans and such Bank shall so notify the Administrative Agent (which notice shall specify in reasonable detail the basis upon which it is being given), the Administrative Agent shall forthwith forward such notice to the -48- other Banks and the Borrower, whereupon until such Bank notifies the Borrower and the Administrative Agent that the circumstances giving rise to such suspension no longer exist, the obligation of such Bank to make Euro-Dollar Loans, or to convert outstanding Loans into Euro-Dollar Loans, shall be suspended. Before giving any notice to the Administrative Agent pursuant to this Section, such Bank shall designate a different Euro-Dollar Lending Office if such designation will avoid the need for giving such notice and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. If such notice is given, each Euro-Dollar Loan of such Bank then outstanding shall be converted to a Base Rate Loan either (a) on the last day of the then current Interest Period applicable to such Euro-Dollar Loan if such Bank may lawfully continue to maintain and fund such Loan to such day or (b) immediately if such Bank shall determine that it may not lawfully continue to maintain and fund such Loan to such day. Section 8.3. Increased Cost and Reduced Return. (a) If on or after the date hereof, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Applicable Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency issued after the date of this Agreement shall impose, modify or deem applicable any reserve (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding any such requirement included in an applicable Euro-Dollar Reserve Percentage), special deposit, insurance assessment or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Bank (or its Applicable Lending Office) or shall impose on any Bank (or its Applicable Lending Office) or the London interbank market any other condition affecting its Euro-Dollar Loans, its Note or its obligation to make Euro-Dollar Loans and the result of any of the foregoing is to increase the cost to such Bank (or its Applicable Lending Office) of making or maintaining any Euro-Dollar Loan, or to reduce the amount of any sum received or receivable by such Bank (or its Applicable Lending Office) under this Agreement or under its Note with respect thereto, by an amount deemed by such Bank to be material, then, within 15 days after demand by such Bank (with a copy to the Administrative Agent), the Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank for such increased cost or reduction. (a) If any Bank shall have determined that, after the date hereof, the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change in any such law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central -49- bank or comparable agency charged with the interpretation or administration thereof, or any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, (including any determination by any such authority, central bank or comparable agency that, for purposes of capital adequacy requirements, the Commitments hereunder do not constitute commitments with an original maturity of one year or less) has or would have the effect of reducing the rate of return on capital of such Bank (or its Parent) as a consequence of such Bank's obligations hereunder to a level below that which such Bank (or its Parent) could have achieved but for such adoption, change, request or directive (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Bank to be material, then from time to time, within 15 days after demand by such Bank (with a copy to the Administrative Agent), the Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank (or its Parent) for such reduction. (b) Each Bank will promptly notify the Borrower and the Administrative Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Bank to compensation pursuant to this Section and will designate a different Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. A certificate of any Bank claiming compensation under this Section and setting forth in reasonable detail the basis for such claim and the calculation of the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining such amount, such Bank may use any reasonable averaging and attribution methods. Section 8.4. Taxes. (a) For the purposes of this Section 8.4, the following terms have the following meanings: "Taxes" means any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings with respect to any payment by the Borrower or any Guarantor, as the case may be, pursuant to this Agreement or under any Note, and all liabilities with respect thereto, excluding (i) in the case of each Bank and either Agent, taxes imposed on its income, and franchise or similar taxes imposed on it, by a jurisdiction or any political subdivision thereof under the laws of which such Bank or either Agent (as the case may be) is organized or in which its principal executive office is located or, in the case of each Bank, in which its Applicable Lending Office is located and (ii) in the case of each Bank, any United States withholding tax imposed on such payments but only to the extent that such Bank is subject to United States withholding tax at the time such Bank first becomes a party to this Agreement. "Other Taxes" means any present or future stamp or documentary taxes and any other excise or property taxes, or -50- similar charges or levies, which arise from any payment made pursuant to this Agreement or under any Note or from the execution or delivery of, or otherwise with respect to, any Loan Document. (b) Any and all payments by the Borrower or any Guarantor to or for the account of any Bank or either Agent hereunder or under any Note shall be made without deduction for any Taxes or Other Taxes; provided that, if the Borrower or any Guarantor shall be required by law to deduct any Taxes or Other Taxes from any such payments, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) such Bank or either Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower or any Guarantor, as the case may be, shall make such deductions, (iii) the Borrower or such Guarantor, as the case may be, shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law and (iv) the Borrower shall furnish to the Administrative Agent, at its address referred to in Section 10.1, the original or a certified copy of a receipt evidencing payment thereof. (c) The Borrower agrees to indemnify each Bank and either Agent for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section) paid by such Bank or either Agent (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be paid within 15 days after such Bank or either Agent (as the case may be) makes demand therefor. (d) Each Bank organized under the laws of a jurisdiction outside the United States, on or prior to the date of its execution and delivery of this Agreement in the case of each Bank listed on the signature pages hereof and on or prior to the date on which it becomes a Bank in the case of each other Bank, and from time to time thereafter if requested in writing by the Borrower (but only so long as such Bank remains lawfully able to do so), shall provide the Borrower and the Administrative Agent with Internal Revenue Service form 1001 or 4224, as appropriate, or any successor form prescribed by the Internal Revenue Service, certifying that such Bank is entitled to benefits under an income tax treaty to which the United States is a party which exempts the Bank from United States withholding tax or reduces the rate of withholding tax on payments of interest for the account of such Bank or certifying that the income receivable pursuant to this Agreement is effectively connected with the conduct of a trade or business in the United States. Such forms shall be delivered by each such Bank on or before the date it becomes a party to this Agreement (or, in the case of an Assignee, Participant or other transferee under Section 10.6 of -51- this Agreement, on or before the date such person becomes an Assignee, Participant or other transferee) and on or before the date, if any, such Bank changes its Applicable Lending Office by designating a different jurisdiction of such Office under Section 8.4(f) hereof. In addition, each such Bank shall deliver such forms promptly upon the obsolescence or invalidity of any form previously delivered by such Bank. (e) For any period with respect to which a Bank has failed to provide the Borrower or the Administrative Agent with the appropriate form pursuant to Section 8.4(d) (unless such failure is due to a change in treaty, law or regulation occurring subsequent to the date on which such form originally was required to be provided), such Bank shall not be entitled to indemnification under Section 8.4(b) or (c) with respect to Taxes imposed by the United States; provided that if a Bank, which is otherwise exempt from or subject to a reduced rate of withholding tax, becomes subject to Taxes because of its failure to deliver a form required hereunder, the Borrower shall take such steps as such Bank shall reasonably request to assist such Bank to recover such Taxes. (f) If the Borrower or any Guarantor is required to pay additional amounts to or for the account of any Bank pursuant to this Section, then such Bank will change the jurisdiction of its Applicable Lending Office if, in the judgment of such Bank, such change (i) will eliminate or reduce any such additional payment which may thereafter accrue and (ii) is not otherwise disadvantageous to such Bank. Section 8.5. Base Rate Loans Substituted for Affected Euro-Dollar Section 8.10. Base Rate Loans Substituted for Affected Euro-Dollar Loans. If (i) the obligation of any Bank to make, or convert outstanding Loans to, Euro-Dollar Loans has been suspended pursuant to Section 8.2 or (ii) any Bank has demanded compensation under Section 8.3 or 8.4 with respect to its Euro-Dollar Loans and the Borrower shall, by at least one Domestic Business Day's prior notice to such Bank through the Administrative Agent, have elected that the provisions of this Section shall apply to such Bank, then, unless and until such Bank notifies the Borrower that the circumstances giving rise to such suspension or demand for compensation no longer exist: (a) all Loans which would otherwise be made by such Bank as (or continued as or converted into) Euro-Dollar Loans shall instead be Base Rate Loans (on which interest and principal shall be payable contemporaneously with the related Euro-Dollar Loans of the other Banks); and (b) after each of its Euro-Dollar Loans has been repaid (or converted to a Base Rate Loan), all payments of principal which would otherwise be applied to repay such Euro-Dollar Loans shall be applied to repay its Base Rate Loans instead. -52- If such Bank notifies the Borrower that the circumstances giving rise to such notice no longer apply, the principal amount of each such Base Rate Loan shall be converted into a Euro-Dollar Loan on the first day of the next succeeding Interest Period applicable to the related Euro-Dollar Loans of the other Banks. ARTICLE IX. GUARANTY Section 9.1. The Guaranty. Each Guarantor hereby unconditionally guarantees the full and punctual payment (whether at stated maturity, upon acceleration or otherwise) of the principal of and interest on each Note issued by the Borrower pursuant to this Agreement, and the full and punctual payment of all other amounts payable by the Borrower or any other Guarantor under the Loan Documents. Upon failure by the Borrower to pay punctually any such amount, the Guarantors shall be jointly and severally obligated forthwith on demand to pay the amount not so paid at the place and in the manner specified in this Agreement or the other Loan Documents. Section 9.2. Guaranty Unconditional. The obligations of each Guarantor hereunder shall be unconditional and absolute and, without limiting the generality of the foregoing, shall not be released, discharged or otherwise affected by: (a) any extension, renewal, settlement, compromise, waiver or release in respect of any obligation of the Borrower or any other Guarantor under the Loan Documents, by operation of law or otherwise; (b) any modification or amendment of or supplement to the Loan Documents; (c) any release, impairment, non-perfection or invalidity of any direct or indirect security for any obligation of the Borrower or any other Guarantor under the Loan Documents; (d) any change in the corporate existence, structure or ownership of the Borrower or any other Guarantor, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting the Borrower, any other Guarantor or their respective assets or any resulting release or discharge of any obligation of the Borrower or any other Guarantor contained in the Loan Documents; (e) the existence of any claim, set-off or other rights which the Guarantor may have at any time against the Borrower, any other Guarantor, either Agent, any Bank or any other Person, whether in connection herewith or any unrelated transactions, provided that nothing herein shall prevent the assertion of any such claim by separate suit or compulsory counterclaim; -53- (f) any invalidity or unenforceability relating to or against the Borrower or any other Guarantor for any reason of the Loan Documents, or any provision of applicable law or regulation purporting to prohibit the payment by the Borrower or any other Guarantor of the principal of or interest on any Note or any other amount payable by the Borrower or any other Guarantor under the Loan Documents; or (g) any other act or omission to act or delay of any kind by the Borrower, any other Guarantor, either Agent, any Bank or any other Person or any other circumstance whatsoever which might, but for the provisions of this paragraph, constitute a legal or equitable discharge of the Guarantor's obligations hereunder (other than, in each case, the payment of the Obligations in full). Section 9.3. Discharge Only Upon Payment In Full; Reinstatement In Certain Circumstances. Each Guarantor's obligations hereunder shall remain in full force and effect until the Commitments shall have terminated and the principal of and interest on the Notes and all other amounts payable by the Obligors under the Loan Documents shall have been paid in full. If at any time any payment of the principal of or interest on any Note or any other amount payable by the Obligors under the Loan Documents is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of any Obligor or otherwise, each Guarantor's obligations hereunder with respect to such payment shall be reinstated at such time as though such payment had been due but not made at such time. Section 9.4. Waiver by each Guarantor. Each Guarantor irrevocably waives acceptance hereof, presentment, demand, protest and any notice not provided for herein, as well as any requirement that at any time any action be taken by any Person against the Borrower or any other Guarantor or any other Person. Section 9.5. Subrogation and Contribution. Each Guarantor irrevocably waives, until such time as the Commitments shall have terminated and the principal of and interest on the Notes and all other amounts payable by the Obligors under the Loan Documents shall have been paid in full, any and all rights to which it may be entitled, by operation of law or otherwise, upon making any payment hereunder (i) to be subrogated to the rights of the payee against the Borrower with respect to such payment or against any direct or indirect security therefor, or otherwise to be reimbursed, indemnified or exonerated by or for the account of the Borrower in respect thereof or (ii) to receive any payment, in the nature of contribution or for any other reason, from any other Guarantor with respect to such payment. Section 9.6. Stay of Acceleration. If acceleration of the time for payment of any amount payable by any Obligor under the Loan Documents is stayed upon insolvency, bankruptcy or reorganization of the Borrower, all such amounts otherwise -54- subject to acceleration under the terms of this Agreement shall nonetheless be payable by each Guarantor hereunder forthwith on demand by the Documentation Agent made at the request of the requisite proportion of the Banks specified in Article 6 of the Agreement. Section 9.7. Limit of Liability. The obligations of each Guarantor hereunder shall be limited to an aggregate amount equal to the largest amount that would not render its obligations hereunder subject to avoidance under Section 548 of the United States Bankruptcy Code or any comparable provisions of any applicable state law. Section 9.8. Release Upon Sale. Upon any sale by the Borrower of a Subsidiary permitted by this Agreement, such Subsidiary shall automatically and without further action by any Bank or either Agent be released from its obligations, if any, as a Guarantor hereunder. ARTICLE X. MISCELLANEOUS Section 10.1. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telex, facsimile transmission or similar writing) and shall be given to such party: (a) in the case of the Borrower or either Agent, at its address, facsimile number or telex number set forth on the signature pages hereof, (b) in the case of any Guarantor, in care of the Borrower, (c) in the case of any Bank, at its address, facsimile number or telex number set forth on the signature pages hereof or (d) in the case of any party, such other address, facsimile number or telex number as such party may hereafter specify for the purpose by notice to the Administrative Agent and the Borrower. Each such notice, request or other communication shall be effective (i) if given by telex, when such telex is transmitted to the telex number specified in this Section and the appropriate answerback is received, (ii) if given by facsimile transmission, when transmitted to the facsimile number specified in this Section and confirmation of receipt is received, (iii) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (iv) if given by any other means, when delivered at the address specified in this Section; provided that notices to the Administrative Agent under Article 2 or Article 8 shall not be effective until received. Section 10.2. No Waivers. No failure or delay by either Agent or any Bank in exercising any right, power or privilege hereunder or under any Note shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein -55- provided shall be cumulative and not exclusive of any rights or remedies provided by law. Section 10.3. Expenses; Indemnification. (a) The Borrower shall pay (i) all out-of-pocket expenses of the Agents, including reasonable fees and disbursements of special counsel for the Agents, in connection with the preparation and administration of the Loan Documents, any waiver or consent thereunder or any amendment thereof or any Default or alleged Default thereunder and (ii) if an Event of Default occurs, all out-of-pocket expenses incurred by the Documentation Agent, the Administrative Agent or any Bank, including the fees and disbursements of counsel, in connection with such Event of Default and collection, bankruptcy, insolvency and other enforcement proceedings resulting therefrom. (a) The Borrower agrees to indemnify each Agent and each Bank, their respective affiliates and the respective directors, officers, agents and employees of the foregoing (each an "Indemnitee") and hold each Indemnitee harmless from and against any and all liabilities, losses, damages, costs and expenses of any kind, including, without limitation, the reasonable fees and disbursements of counsel, which may be incurred by such Indemnitee in connection with any investigative, administrative or judicial proceeding (whether or not such Indemnitee shall be designated a party thereto) brought or threatened relating to or arising out of the Loan Documents or any actual or proposed use of proceeds of Loans hereunder; provided that no Indemnitee shall have the right to be indemnified hereunder for such Indemnitee's own gross negligence or willful misconduct. Section 10.4. Sharing of Set-Offs. Each Bank agrees that if it shall, by exercising any right of set-off or counterclaim or otherwise, receive payment of a proportion of the aggregate amount of principal and interest due with respect to any Note held by it which is greater than the proportion received by any other Bank in respect of the aggregate amount of principal and interest due with respect to any Note held by such other Bank, the Bank receiving such proportionately greater payment shall purchase such participations in the Notes held by the other Banks, and such other adjustments shall be made, as may be required so that all such payments of principal and interest with respect to the Notes held by the Banks shall be shared by the Banks pro rata; provided that nothing in this Section shall impair the right of any Bank to exercise any right of set-off or counterclaim it may have and to apply the amount subject to such exercise to the payment of indebtedness of any Obligor other than its indebtedness hereunder. Section 10.5. Amendments and Waivers Release of Collateral. Any provision of this Agreement or the Notes may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Borrower and the Required Banks -56- (and, if the rights or duties of either Agent are affected thereby, by such Agent); provided that no such amendment or waiver shall, unless signed by all the Banks, (i) increase or decrease the Commitment of any Bank (except for a ratable decrease in the Commitments of all Banks) or subject any Bank to any additional obligation, (ii) reduce the principal of or rate of interest on any Loan or any fees hereunder, (iii) postpone the date fixed for any payment of principal of or interest on any Loan or any fees hereunder or for any scheduled reduction or termination of any Commitment, (iv) change the aggregate amount of Loans required to be repaid on any Principal Repayment Date, (v) release any Guarantor from its obligations hereunder, (vi) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Notes which shall be required for the Banks or any of them to take any action under this Section or any other provision of this Agreement or (vii) change Section 2.12, 8.3 or 8.4. Notwithstanding the foregoing, Article 9 may not be amended with respect to any Guarantor without the consent of such Guarantor. Any provision of the Collateral Documents may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the relevant Obligor and the Administrative Agent with the consent of the Required Banks; provided that no such amendment or waiver shall, unless signed by all the Banks, effect or permit a release of Collateral. Notwithstanding the foregoing, Collateral shall be released from the Lien of the Collateral Documents from time to time as necessary to effect any sale or pledge of assets permitted by the Loan Documents, and the Administrative Agent shall execute and deliver all release documents reasonably requested to evidence such release. Section 10.6. Successors and Assigns. (a) Subject to the further provisions of this Section 10.6 below, the provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Borrower may not assign or otherwise transfer any of its rights under this Agreement without the prior written consent of all Banks. (a) Any Bank may at any time grant to one or more banks or other institutions (each a "Participant") participating interests in its Commitment or any or all of its Loans. In the event of any such grant by a Bank of a participating interest to a Participant, whether or not upon notice to the Borrower and the Administrative Agent, such Bank shall remain responsible for the performance of its obligations hereunder, and the Borrower and the Administrative Agent shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement. Any agreement pursuant to which any Bank may grant such a participating interest shall provide that such Bank shall retain the sole right and responsibility to enforce the obligations of the Borrower hereunder including, without limitation, the right to approve any amendment, modification or waiver of any provision of this -57- Agreement; provided that such participation agreement may provide that such Bank will not agree to any modification, amendment or waiver of this Agreement described in clause (i), (ii), (iii), (iv) or (vi) of, or in the proviso in the penultimate sentence of, Section 10.5 without the consent of the Participant. The Borrower agrees that each Participant shall, to the extent provided in its participation agreement, be entitled to the benefits of Article 8 with respect to its participating interest. An assignment or other transfer which is not permitted by subsection (c) or (d) below shall be given effect for purposes of this Agreement only to the extent of a participating interest granted in accordance with this subsection (b). (b) Any Bank may at any time assign to one or more banks or other institutions (each an "Assignee") all, or a proportionate part (equivalent to an initial Commitment of not less than $5,000,000 or less if such amount represents the remaining amount of such Bank's Commitment) of all, of its rights and obligations under this Agreement and the Notes, and such Assignee shall assume such rights and obligations, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit D hereto executed by such Assignee and such transferor Bank, with (and subject to) the subscribed consent of the Borrower, which shall not be unreasonably withheld, and the Administrative Agent; provided that if an Assignee is an affiliate of such transferor Bank or was a Bank immediately prior to such assignment, no such consent shall be required. Upon execution and delivery of such instrument and payment by such Assignee to such transferor Bank of an amount equal to the purchase price agreed between such transferor Bank and such Assignee, such Assignee shall be a Bank party to this Agreement and shall have all the rights and obligations of a Bank with a Commitment as set forth in such instrument of assumption, and the transferor Bank shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required. Upon the consummation of any assignment pursuant to this subsection (c), the transferor Bank, the Administrative Agent and the Borrower shall make appropriate arrangements so that, if required, a new Note is issued to the Assignee. In connection with any such assignment, the transferor Bank shall pay to the Administrative Agent an administrative fee for processing such assignment in the amount of $3,500. If the Assignee is not incorporated under the laws of the United States of America or a state thereof, it shall deliver to the Borrower and the Administrative Agent certification as to exemption from deduction or withholding of any United States federal income taxes in accordance with Section 8.4. (c) Any Bank may at any time assign all or any portion of its rights under this Agreement and its Note to a Federal Reserve Bank. No such assignment shall release the transferor Bank from its obligations hereunder. -58- (d) No Assignee, Participant or other transferee of any Bank's rights (including, without limitation, any successor Applicable Lending Office) shall be entitled to receive any greater payment under Section 8.3 or 8.4 than such Bank would have been entitled to receive with respect to the rights transferred, unless such transfer is made with the Borrower's prior written consent or by reason of the provisions of Section 8.2, 8.3 or 8.4 requiring such Bank to designate a different Applicable Lending Office under certain circumstances or at a time when the circumstances giving rise to such greater payment did not exist. Section 10.7. Collateral. Each of the Banks represents to each Agent and each of the other Banks that it in good faith is not relying upon any "margin stock" (as defined in Regulation U) as collateral in the extension or maintenance of the credit provided for in this Agreement. Section 10.8. Governing Law; Submission to Jurisdiction. This Agreement and each Note shall be governed by and construed in accordance with the laws of the State of New York. Each Obligor hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State court sitting in New York City for purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby. Each Obligor irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. Section 10.9. Counterparts; Integration; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement constitutes the entire agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, oral or written, relating to the subject matter hereof. This Agreement shall become effective upon receipt by the Documentation Agent of counterparts hereof signed by each of the parties hereto (or, in the case of any party as to which an executed counterpart shall not have been received, receipt by the Documentation Agent in form satisfactory to it of telegraphic, telex, facsimile or other written confirmation from such party of execution of a counterpart hereof by such party). Section 10.10. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE AGENTS AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. -59- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. UNITED AUTO GROUP, INC. By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President Address: Facsimile: DIFEO PARTNERSHIP, INC. By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President DIFEO PARTNERSHIP RCT, INC. By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President DIFEO PARTNERSHIP RCM, INC. By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President DIFEO PARTNERSHIP HCT, INC. By /s/ Philip N. Smith,Jr. ----------------------------------- Title: Vice President DIFEO PARTNERSHIP SCT, INC. By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President DIFEO PARTNERSHIP VIII, INC. By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President DIFEO PARTNERSHIP IX, INC. By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President DIFEO PARTNERSHIP X, INC. By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President UAG NORTHEAST, INC. -60- By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President UAG NORTHEAST (NY), INC. By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President HUDSON TOYOTA, INC. By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President SOMERSET MOTORS, INC. By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President FAIR HYUNDAI PARTNERSHIP By DIFEO PARTNERSHIP, INC. a general partner By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President FAIR CHEVROLET-GEO PARTNERSHIP By DIFEO PARTNERSHIP, INC. a general partner By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President DANBURY AUTO PARTNERSHIP By DIFEO PARTNERSHIP, INC. a general partner By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President DANBURY CHRYSLER PLYMOUTH PARTNERSHIP By DIFEO PARTNERSHIP, INC. a general partner By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President HUDSON MOTORS PARTNERSHIP -61- By DIFEO PARTNERSHIP HCT, INC. a general partner By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President DIFEO HYUNDAI PARTNERSHIP By DIFEO PARTNERSHIP, INC. a general partner By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President J&F OLDMOBILE PARTNERSHIP By DIFEO PARTNERSHIP, INC. a general partner By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President DIFEO NISSAN PARTNERSHIP By DIFEO PARTNERSHIP, INC. a general partner By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President DIFEO CHEVROLET-GEO PARTNERSHIP By DIFEO PARTNERSHIP, INC. a general partner By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President DIFEO CHRYSLER PLYMOUTH JEEP EAGLE PARTNERSHIP By DIFEO PARTNERSHIP, INC. a general partner By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President OCT PARTNERSHIP -62- By DIFEO PARTNERSHIP VIII, INC. a general partner By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President OCM PARTNERSHIP By DIFEO PARTNERSHIP IX, INC. a general partner By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President SOMERSET MOTORS PARTNERSHIP By DIFEO PARTNERSHIP SCT, INC. a general partner By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President DIFEO BMW PARTNERSHIP By DIFEO PARTNERSHIP, INC. a general partner By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President COUNTY AUTO GROUP PARTNERSHIP By DIFEO PARTNERSHIP RCT, INC. a general partner By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President ROCKLAND MOTORS PARTNERSHIP By DIFEO PARTNERSHIP RCM, INC. a general partner By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President UAG WEST, INC. By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President -63- SA AUTOMOTIVE, LTD. By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President SL AUTOMOTIVE, LTD. By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President SPA AUTOMOTIVE, LTD. By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President LRP, LTD. By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President SUN BMW, LTD. By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President 672 5 DEALERSHIP, LTD. By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President 6725 AGENT PARTNERSHIP By SCOTTSDALE AUDI, LTD. a general partner By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President SCOTTSDALE MANAGEMENT GROUP, LTD. By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President SK MOTORS, LTD. By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President SCOTTSDALE AUDI, LTD. By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President -64- UNITED LANDERS, INC. By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President LANDERS AUTO SALES, INC. By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President LANDERS UNITED AUTO GROUP, INC. By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President LANDERS UNITED AUTO GROUP NO. 2, INC. By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President LANDERS UNITED AUTO GROUP NO. 3, INC. By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President UAG ATLANTA, INC. By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President ATLANTA TOYOTA, INC. By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President UAG ATLANTA II, INC. By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President UNITED NISSAN, INC., a Georgia corporation By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President UAG ATLANTA III, INC. By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President PEACHTREE NISSAN, INC. -65- By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President UAG ATLANTA IV, INC. By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President UAG ATLANTA IV MOTORS, INC. By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President UAG ATLANTA V, INC. By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President CONYERS NISSAN, INC. By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President UAG TENNESSEE, INC. By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President UNITED NISSAN, INC., a Tennessee corporation By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President UAG TEXAS, INC. By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President UAG TEXAS II, INC. By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President SHANNON AUTOMOTIVE, LTD. By UAG TEXAS II, INC. its general partner By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President -66- UAG EAST, INC. By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President UAG NEVADA, INC. By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President UNITED AUTOCARE, INC. By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President UNITED AUTOCARE PRODUCTS, INC. By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President UAG CAPITAL MANAGEMENT, INC. By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President DIFEO LEASING PARTNERSHIP By DIFEO PARTNERSHIP, INC. its general partner By /s/ Philip N. Smith, Jr. ----------------------------------- Title: Vice President THE BANK OF NOVA SCOTIA, as Administrative Agent By /s/ Brian S. Allen ----------------------------------- Title: Senior Relationship Officer Address: One Liberty Plaza Facsimile: 212-225-5090/91 -67- MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Documentation Agent By /s/ James E. Condon ----------------------------------- Title: Vice President Address: 60 Wall Street New York, NY 10260 Facsimile: (212) 648-5018 Commitments - ----------- $10,000,000 THE BANK OF NOVA SCOTIA By /s/ Brian S. Allen ----------------------------------- Title: Sr. Relationship Manager $10,000,000 MORGAN GUARANTY TRUST COMPANY OF NEW YORK By /s/ James E. Condon ----------------------------------- Title: Vice President $10,000,000 THE CHASE MANHATTAN BANK By /s/ Elizabeth Edmunds ----------------------------------- Title: Vice President $10,000,000 COMERICA, INC. By /s/ Joseph A. Moran ----------------------------------- Title: Senior Vice President $10,000,000 CREDIT LYONNAIS NEW YORK BRANCH By /s/ Attila Koc ----------------------------------- Title: Vice President - ----------------- Total Commitments $50,000,000 ================= -68- Exhibits -69- EXHIBIT A - Note NOTE New York, New York ___________ __, 199_ For value received, United Auto Group, Inc., a Delaware corporation (the "Borrower"), promises to pay to the order of ______________________ (the "Bank"), for the account of its Applicable Lending Office, the unpaid principal amount of each Loan made by the Bank to the Borrower pursuant to the Credit Agreement referred to below on the third anniversary of the Effective Date of the Credit Agreement. The Borrower promises to pay interest on the unpaid principal amount of each such Loan on the dates and at the rate or rates provided for in the Credit Agreement. All such payments of principal and interest shall be made in lawful money of the United States in Federal or other immediately available funds at the office of Morgan Guaranty Trust Company of New York, 60 Wall Street, New York, New York. All Loans made by the Bank, the respective Types thereof and all repayments of the principal thereof shall be recorded by the Bank and, if the Bank so elects in connection with any transfer or enforcement hereof, appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding may be endorsed by the Bank on the schedule attached hereto, or on a continuation of such schedule attached to and made a part hereof; provided that the failure of the Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Credit Agreement. This note is one of the Notes referred to in the Credit Agreement dated as of March 20, 1997 among United Auto Group, Inc., the Guarantors party thereto, the banks listed on the signature pages thereof, The Bank of Nova Scotia, as Administrative Agent, and Morgan Guaranty Trust Company of New York, as Documentation Agent (as the same may be amended from time to time, the "Credit Agreement"). Terms defined in the Credit Agreement are used herein with the same meanings. Reference is made to the Credit Agreement for provisions for the prepayment hereof and the acceleration of the maturity hereof. -1- The payment in full of the principal and interest on this note has, pursuant to the provisions of the Credit Agreement, been unconditionally guaranteed by certain Guarantors. UNITED AUTO GROUP, INC. By ---------------------------- Name: Title: -2- LOANS AND PAYMENTS OF PRINCIPAL - -------------------------------------------------------------------------------- Amount Type Amount of of of Principal Notation Date Loan Loan Repaid Made By - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- -3- EXHIBIT B-1 - Opinion of Counsel for the Borrower EXHIBIT C - Opinion of Special Counsel for the Agents OPINION OF DAVIS POLK & WARDWELL, SPECIAL COUNSEL FOR THE AGENTS -------------------------------------- ________________, 199_ To the Banks and the Agents Referred to Below c/o Morgan Guaranty Trust Company of New York, as Documentation Agent 60 Wall Street New York, New York 10260 Ladies and Gentlemen: We have participated in the preparation of the Credit Agreement (the "Credit Agreement") dated as of March 20, 1997 among United Auto Group, Inc., a Delaware corporation (the "Borrower"), the Guarantors party thereto, the banks listed on the signature pages thereof (the "Banks"), The Bank of Nova Scotia, as Administrative Agent and Morgan Guaranty Trust Company of New York, as Documentation Agent (collectively, the "Agents"), and have acted as special counsel for the Agents for the purpose of rendering this opinion pursuant to Section 3.1(a)(iii) of the Credit Agreement. Terms defined in the Credit Agreement are used herein as therein defined. We have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as we have deemed necessary or advisable for purposes of Upon the basis of the foregoing, we are of the opinion that: 1. The execution, delivery and performance by the Borrower of the Credit Agreement and the Notes are within the Borrower's corporate powers and have been duly authorized by all necessary corporate action. 2. The Credit Agreement constitutes a valid and binding agreement of the Borrower and each Note constitutes a valid and binding obligation of the Borrower, in each case enforceable in accordance with its terms except as the same may -2- be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and by general principles of equity. We are members of the Bar of the State of New York and the foregoing opinion is limited to the laws of the State of New York, the federal laws of the United States of America and the General Corporation Law of the State of Delaware. In giving the foregoing opinion, we express no opinion as to the effect (if any) of any law of any jurisdiction (except the State of New York) in which any Bank is located which limits the rate of interest that such Bank may charge or collect. This opinion is rendered solely to you in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other person without our prior written consent. Very truly yours, -3- EXHIBIT D - Assignment and Assumption Agreement ASSIGNMENT AND ASSUMPTION AGREEMENT AGREEMENT dated as of _________, 19__ among (NAME OF ASSIGNOR) (the "Assignor"), [ASSIGNEE] (the "Assignee"), UNITED AUTO GROUP, INC. (the "Borrower") and The Bank of Nova Scotia, as Administrative Agent. WHEREAS, this Assignment and Assumption Agreement (the "Agreement") relates to the Credit Agreement dated as of March 20, 1997 among the Borrower, the Guarantors party thereto, the Assignor and the other Banks party thereto, as Banks, The Bank of Nova Scotia, as Administrative Agent and Morgan Guaranty Trust Company of New York, as Documentation Agent (the "Credit Agreement"); WHEREAS, as provided under the Credit Agreement, the Assignor has a Commitment to make Loans to the Borrower in an aggregate principal amount at any time outstanding not to exceed $__________; WHEREAS, Loans made to the Borrower by the Assignor under the Credit Agreement in the aggregate principal amount of $__________ are outstanding at the date hereof; and WHEREAS, the Assignor proposes to assign to the Assignee all of the rights of the Assignor under the Credit Agreement in respect of a portion of its Commitment thereunder in an amount equal to $__________ (the "Assigned Amount"), together with a corresponding portion of its outstanding Loans, and the Assignee proposes to accept assignment of such rights and assume the corresponding obligations from the Assignor on such terms; NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows: SECTION 1. Definitions. All capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Credit Agreement. SECTION 2. Assignment. The Assignor hereby assigns and sells to the Assignee all of the rights of the Assignor under the Credit Agreement to the extent of the Assigned Amount, and the Assignee hereby accepts such assignment from the Assignor and assumes all of the obligations of the Assignor under the Credit Agreement to the extent of the Assigned Amount, including the purchase from the Assignor of the corresponding portion of the principal amount of the Loans made by the Assignor outstanding at the date hereof. Upon the execution and delivery hereof by the Assignor, the Assignee, [the Borrower and the Administrative Agent] and the payment of the amounts specified in Section 3 required to be paid on the date hereof (i) the Assignee shall, as of the date hereof, succeed to the rights and be obligated to perform the obligations of a Bank under the Credit Agreement with a Commitment in an amount equal to the Assigned Amount, and (ii) the Commitment of the Assignor shall, as of the date hereof, be reduced by a like amount and the Assignor released from its obligations under the Credit Agreement to the extent such obligations have been assumed by the Assignee. The assignment provided for herein shall be without recourse to the Assignor. SECTION 3. Payments. As consideration for the assignment and sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the date hereof in Federal funds the amount heretofore agreed between them.1 It is understood that commitment and/or facility fees accrued to the date hereof are for the account of the Assignor and such fees accruing from and including the date hereof are for the account of the Assignee. Each of the Assignor and the Assignee hereby agrees that if it receives any amount under the Credit Agreement which is for the account of the other party hereto, it shall receive the same for the account of such other party to the extent of such other party's interest therein and shall promptly pay the same to such other party. [SECTION 4. Consent of the Borrower and the Administrative Agent. This Agreement is conditioned upon the consent of the Borrower and the Administrative Agent pursuant to Section 10.6(c) of the Credit Agreement. The execution of this Agreement by the Borrower and the Administrative Agent is evidence of this consent. Pursuant to Section 10.6(c), the Borrower agrees to execute and deliver a Note payable to the order of the Assignee to evidence the assignment and assumption provided for herein.] SECTION 5. Non-Reliance on Assignor. The Assignor makes no representation or warranty in connection with, and shall have no responsibility with respect to, the solvency, financial condition, or statements of any Obligor, or the validity and enforceability of the obligations of any Obligor in respect of the Credit Agreement or any Note. The Assignee acknowledges that it has, independently and without reliance on the Assignor, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and will continue to be responsible for making its own independent appraisal of the business, affairs and financial condition of the Obligors. - -------------- 1 Amount should combine principal together with accrued interest and breakage compensation, if any, to be paid by the Assignee, net of any portion of any upfront fee to be paid by the Assignor to the Assignee. If may be preferable in an appropriate case to specify these amounts generically or by formula rather that as a fixed sum. -2- SECTION 6. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. SECTION 7. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. [ASSIGNOR] By --------------------------- Name: Title: [ASSIGNEE] By --------------------------- Name: Title: UNITED AUTO GROUP, INC. By --------------------------- Name: Title: THE BANK OF NOVA SCOTIA By --------------------------- Name: Title: -3- EXHIBIT E - Pledge Agreement PLEDGE AGREEMENT AGREEMENT dated as of March 20, 1997 among UNITED AUTO GROUP, INC., a Delaware corporation (together with its successors, the "Borrower"), UNITED LANDERS, INC., a Delaware corporation ("ULI") and DIFEO PARTNERSHIP, INC., a Delaware corporation ("DPI"), UAG WEST, INC., a Delaware corporation ("UAG West"), LANDERS AUTO SALES, INC., an Arkansas corporation ("LAS"), UAG ATLANTA, INC., a Delaware corporation ("UAG Atlanta"), UAG ATLANTA IV, INC., a Delaware corporation ("UAG Atlanta IV"), UAG NORTHEAST, INC., a Delaware corporation ("UAG Northeast"), DIFEO PARTNERSHIP HCT, INC., a Delaware corporation ("DPI HCT"), HUDSON TOYOTA, INC., a New Jersey corporation ("Hudson Toyota"), DIFEO PARTNERSHIP VIII, INC., a Delaware corporation ("DPI VIII"), DIFEO PARTNERSHIP IX, INC., a Delaware corporation ("DPI IX"), DIFEO PARTNERSHIP SCT, INC., a Delaware corporation ("DPI SCT"), SOMERSET MOTORS, INC., a New Jersey corporation ("Somerset Motors), DIFEO PARTNERSHIP RCT, INC., a Delaware corporation ("DPI RCT"), UAG NORTHEAST (NY), INC., a New York corporation ("UAG Northeast (NY)"), DIFEO PARTNERSHIP RCM, INC., a Delaware corporation ("DPI RCM"), SCOTTSDALE AUDI, LTD., an Arizona corporation ("SA"), SK MOTORS, LTD., an Arizona corporation ("SK Motors"), UAG Texas, Inc., a Delaware corporation ("UAG Texas"), UAG Texas II, Inc., a Delaware corporation ("UAG Texas II") (each together with its successors, a "Pledgor" and collectively the "Pledgors") and THE BANK OF NOVA SCOTIA, as Administrative Agent. WHEREAS, the Borrower, the Guarantors party thereto, certain banks, The Bank of Nova Scotia, as administrative agent for such banks and Morgan Guaranty Trust Company of New York, as documentation agent for such banks are parties to a Credit Agreement of even date herewith (as the same may be amended from time to time, the "Credit Agreement"); and WHEREAS, in order to induce said banks, The Bank of Nova Scotia, as administrative agent for such banks and Morgan Guaranty Trust Company of New York, as documentation agent for such banks, to enter into the Credit Agreement, the Pledgors have agreed to grant a continuing security interest in and to the Collateral (as hereafter defined) to secure their obligations under the Credit Agreement and the Notes issued pursuant thereto; NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. Definitions Terms defined in the Credit Agreement and not otherwise defined herein have, as used herein, the respective meanings provided for therein. The following additional terms, as used herein, have the following respective meanings: "Collateral" has the meaning assigned to such term in Section 3(A). "Issuer" means any of the companies identified on Schedule I as the issuers of the Pledged Stock. "Partnership" means any of the partnerships listed on Schedule II. "Partnership Interests" means, as to each Pledgor, the reference to the partnership interest in each Partnership listed opposite such Pledgor's name on Schedule II attached hereto. "Pledged Instruments" means, as to each Pledgor, (i) the Subsidiary Notes of such Pledgor and (ii) any instrument required to be pledged by such Pledgor to the Administrative Agent pursuant to Section 3(B). "Pledged Interest" means, as to each Pledgor, the Partnership Interests of such Pledgor and any other equity interest required to be pledged by such Pledgor. "Pledged Securities" means, as to each Pledgor, the Pledged Instruments, the Pledged Interests and the Pledged Stock of such Pledgor. "Pledged Stock" means, as to each Pledgor, (i) the Subsidiary Shares of such Pledgor and (ii) any other capital stock required to be pledged by such Pledgor to the Administrative Agent pursuant to Section 3(B). "Secured Obligations" means the obligations secured under this Agreement which include: (a) with respect to the Borrower, (i) all principal of and interest (including, without limitation, any interest which accrues after the commencement of any case, proceeding or other action relating to the bankruptcy, insolvency or reorganization of the Borrower, whether or not allowed or allowable as a claim in any such proceeding) on any loan under, or any note issued pursuant to, the Credit Agreement, (ii) all other amounts payable by the Borrower hereunder or under the Credit Agreement and (iii) any renewals, extensions or modifications of any of the foregoing; and (b) with respect to each other Pledgor, (i) all obligations of such Pledgor under the Credit Agreement (including without limitation Article 9 thereof) and (ii) any renewals, extensions or modifications of any of the foregoing. -2- "Security Interests" means, as to each Pledgor, the security interests in its Collateral granted hereunder securing its Secured Obligations. "Subsidiary Notes" means, as to each Pledgor, any debt of an Issuer owing to such Pledgor, whether now existing or hereafter arising, including without limitation the instruments evidencing obligations owed to such Pledgor listed on Schedule I hereto. "Subsidiary Shares" means, as to each Pledgor, the collective reference to the shares of capital stock of each Issuer listed opposite such Pledgor's name on Schedule I attached hereto, together with all shares, stocks, stock certificates, options or rights of any nature whatsoever that currently exist or which may be issued or granted in respect thereof (or in substitution for the same) by any Issuer while this Agreement is in effect. Unless otherwise defined herein, or unless the context otherwise requires, all terms used herein which are defined in the New York Uniform Commercial Code as in effect on the date hereof shall have the meanings therein stated. SECTION 2. Representations and Warranties Each Pledgor represents and warrants as follows: (A) Title to Pledged Securities. Such Pledgor owns all of the Pledged Securities listed on Schedule I and Schedule II across from its name, free and clear of any Liens other than the Security Interests. Except as set forth on Schedule I, the Pledged Stock includes all of the issued and outstanding capital stock of each Issuer. All of the Pledged Stock has been duly authorized and validly issued, and is fully paid and non-assessable, and is subject to no options to purchase or similar rights of any Person. Such Pledgor is not and will not become a party to or otherwise bound by any agreement, other than this Agreement or various franchise agreements between such Pledgor and automobile franchisors, which restricts in any manner the rights of any present or future holder of any of the Pledged Securities with respect thereto. (B) Validity, Perfection and Priority of Security Interests. Upon the delivery of its Pledged Instruments and certificates representing its Pledged Stock to the Administrative Agent in accordance with Section 4 hereof and assuming that the Administrative Agent will at no time relinquish possession of such Pledged Instruments and certificates, the Administrative Agent will have valid and perfected security interests in the Collateral pledged by such Pledgor hereunder (other than the Collateral described in the immediately succeeding sentence) subject to no prior Lien. When in addition appropriately completed UCC financing statements shall have been filed as -3- specified in Schedule III hereto, the Security Interests shall constitute perfected security interests in the Collateral pledged by such Pledgor hereunder consisting of all right, title and interest of such Pledgor in Debt of a Subsidiary owing to such Pledgor and not evidenced by an instrument and the Partnership Interests (and all proceeds thereof). Except for the filing of such UCC financing statements, no registration, recordation or filing with any governmental body, agency or official is required in connection with the execution or delivery of this Agreement or necessary for the validity or enforceability hereof or for the perfection or enforcement of the Security Interests. Neither such Pledgor nor any of its Subsidiaries has performed or will perform any acts which might prevent the Administrative Agent from enforcing any of the terms and conditions of this Agreement or which would limit the Administrative Agent in any such enforcement. On the date hereof, the Pledged Interests pledged by such Pledgor are not evidenced by any certificates. (C) UCC Filing Locations. The chief executive office of such Pledgor is located at its address set forth on the signature pages of the Credit Agreement. SECTION 3. The Security Interests In order to secure the full and punctual payment of the Secured Obligations in accordance with the terms thereof, and to secure the performance of all the obligations of each Pledgor hereunder: (A) Each Pledgor hereby assigns and pledges to and with the Administrative Agent for the benefit of the Banks and the Agents and grants to the Administrative Agent for the benefit of the Banks and the Agents a security interest in its Pledged Securities, and all of its rights and privileges with respect to its Pledged Securities, and all income and profits thereon, and all interest, dividends and other payments and distributions with respect thereto, all Debt of a Subsidiary owing to such Pledgor from time to time whether or not evidenced by a Pledged Instrument and all proceeds of the foregoing (the "Collateral"). Contemporaneously with the execution and delivery hereof, each Pledgor is delivering its Subsidiary Notes and certificates representing its Subsidiary Shares in pledge hereunder. (B) In the event that any Issuer at any time issues to any Pledgor any additional or substitute shares of capital stock of any class or any substitute note, or any Partnership issues to any Pledgor any additional or substitute equity interests of any class or issues certificates representing the Pledged Interests or any portion thereof, or owes any other Debt to any Pledgor, such Pledgor will immediately pledge and deposit with the Administrative Agent certificates (if any) representing all such shares and such note or any instrument evidencing such other Debt as additional security for such Pledgor's Secured Obligations. All such shares, notes, interests and instruments constitute -4- Pledged Securities and are subject to all provisions of this Agreement. (C) The Security Interests granted by each Pledgor are granted as security only and shall not subject either Agent or any Bank to, or transfer or in any way affect or modify, any obligation or liability of such Pledgor or any of its Subsidiaries with respect to any of the Collateral pledged by such Pledgor hereunder or any transaction in connection therewith. SECTION 4. Delivery of Pledged Securities All Pledged Instruments delivered to the Administrative Agent by any Pledgor pursuant hereto shall be endorsed to the order of the Administrative Agent, and accompanied by any required transfer tax stamps, all in form and substance satisfactory to the Administrative Agent. All certificates representing Pledged Stock or Pledged Interests (if any) delivered to the Administrative Agent by any Pledgor pursuant hereto shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed instruments of transfer or assignment in blank, with signatures appropriately guaranteed, and accompanied by any required transfer tax stamps, all in form and substance satisfactory to the Administrative Agent. SECTION 5. Further Assurances (A) Each Pledgor agrees that it will, at its expense and in such manner and form as the Administrative Agent may require, execute, deliver, file and record any financing statement, specific assignment or other paper and take any other action that may be necessary or desirable, or that the Administrative Agent may request, in order to create, preserve, perfect or validate any Security Interest or to enable the Administrative Agent to exercise and enforce its rights hereunder with respect to any of the Collateral. To the extent permitted by applicable law, each Pledgor hereby authorizes the Administrative Agent to execute and file, in the name of such Pledgor or otherwise, Uniform Commercial Code financing statements (which may be carbon, photographic, photostatic or other reproductions of this Agreement or of a financing statement relating to this Agreement) which the Administrative Agent in its sole discretion may deem necessary or appropriate to further perfect the Security Interests. (B) Each Pledgor agrees that it will not change (i) its name, identity or corporate structure in any manner or (ii) the location of its chief executive office unless it shall have given the Administrative Agent not less than 30 days' prior notice thereof. (C) The Borrower agrees that it will cause any Subsidiary which is owed (i) Debt evidenced by an instrument, -5- (ii) long-term Debt or (iii) Debt secured by a Lien by the Borrower or another Subsidiary to immediately assign and pledge to and with the Administrative Agent for the benefit of the Banks and the Agents and grant to the Administrative Agent for the benefit of the Banks and the Administrative Agent a security interest in such Debt and all proceeds of such Debt, in each case as security for such Subsidiary's obligations under the Credit Agreement. SECTION 6. Record Ownership of Pledged Stock and Pledged Interests. Subject to the provisions of the final paragraph of Section 10, the Administrative Agent may at any time or from time to time, in its sole discretion, cause any or all of (i) the Pledged Stock or (ii) the Pledged Interests to be transferred of record into the name of the Administrative Agent or its nominee. Each Pledgor will promptly give to the Administrative Agent copies of any notices or other communications received by it with respect to Pledged Stock or Pledged Interests registered in the name of such Pledgor and the Administrative Agent will promptly give to each Pledgor copies of any notices and communications received by the Administrative Agent with respect to its Pledged Stock registered in the name of the Administrative Agent or its nominee. SECTION 7. Right to Receive Distributions on Collateral. Unless an Event of Default shall have occurred and be continuing, each Pledgor shall have the right to receive all dividends, interest and other payments and distributions made upon or with respect to Collateral pledged by it hereunder. If an Event of Default shall have occurred and be continuing, the Administrative Agent shall have the right receive and to retain as Collateral hereunder all dividends, interest and other payments and distributions made upon or with respect to the Collateral and each Pledgor shall take all such action as the Administrative Agent may deem necessary or appropriate to give effect to such right. All such dividends, interest and other payments and distributions which are received by any Pledgor shall be received in trust for the benefit of the Agents and the Banks and, if the Administrative Agent so directs shall be segregated from other funds of such Pledgor and shall, forthwith upon demand by the Administrative Agent, be paid over to the Administrative Agent as Collateral in the same form as received (with any necessary endorsement). After all Events of Defaults have been cured, the Administrative Agent's right to retain dividends, interest and other payments and distributions under this Section 7 shall cease and the Administrative Agent shall pay over to each Pledgor any such Collateral pledged by such Pledgor hereunder retained by the Administrative Agent during the continuance of an Event of Default. -6- SECTION 8. Right to Vote Pledged Stock and Pledged Interests. Unless an Event of Default shall have occurred and be continuing, each Pledgor shall have the right, from time to time, to vote its Pledged Stock and Pledged Interests and to give consents, ratifications and waivers with respect to its Pledged Stock and Pledged Interests, and the Administrative Agent shall, upon receiving a written request from such Pledgor accompanied by a certificate signed by its principal financial officer stating that no Event of Default has occurred and is continuing, deliver to such Pledgor or as specified in such request such proxies, powers of attorney, consents, ratifications and waivers in respect of any of its Pledged Stock or Pledged Interests which is registered in the name of the Administrative Agent or its nominee as shall be specified in such request and be in form and substance satisfactory to the Administrative Agent. If an Event of Default shall have occurred and be continuing, the Administrative Agent shall have the right to the extent permitted by law and each Pledgor shall take all such action as may be necessary or appropriate to give effect to such right, to vote and to give consents, ratifications and waivers, and take any other action with respect to any or all of the Pledged Stock or Pledged Interests with the same force and effect as if the Administrative Agent were the absolute and sole owner thereof. SECTION 9. General Authority Each Pledgor hereby irrevocably appoints the Administrative Agent its true and lawful attorney, with full power of substitution, in the name of such Pledgor, the Agents, the Banks or otherwise, for the sole use and benefit of the Agents and Banks, but at the expense of such Pledgor, to the extent permitted by law to exercise, at any time and from time to time while an Event of Default has occurred and is continuing, all or any of the following powers with respect to all or any of the Collateral: (i) to demand, sue for, collect, receive and give acquittance for any and all monies due or to become due upon or by virtue thereof, (ii) to settle, compromise, compound, prosecute or defend any action or proceeding with respect thereto, (iii) to sell, transfer, assign or otherwise deal in or with the same or the proceeds or avails thereof, as fully and effectually as if the Administrative Agent were the absolute owner thereof, and -7- (iv) to extend the time of payment of any or all thereof and to make any allowance and other adjustments with reference thereto; provided that the Administrative Agent shall give each Pledgor not less than ten days' prior notice of the time and place of any sale or other intended disposition of any of the Collateral pledged by such Pledgor hereunder except any Collateral which threatens to decline speedily in value or is of a type customarily sold on a recognized market. The Administrative Agent and each Pledgor agree that such notice constitutes "reasonable notification" within the meaning of Section 9-504(3) of the Uniform Commercial Code. SECTION 10. Remedies upon Event of Default If any Event of Default shall have occurred and be continuing, the Administrative Agent may exercise on behalf of the Banks and the Agents all the rights of a secured party under the Uniform Commercial Code (whether or not in effect in the jurisdiction where such rights are exercised) and, in addition, the Administrative Agent may, without being required to give any notice, except as herein provided or as may be required by mandatory provisions of law, (i) apply the cash, if any, then held by it as Collateral as specified in Section 13 and (ii) if there shall be no such cash or if such cash shall be insufficient to pay all the Secured Obligations in full, sell the Collateral or any part thereof at public or private sale or at any broker's board or on any securities exchange, for cash, upon credit or for future delivery, and at such price or prices as the Administrative Agent may deem satisfactory. Any Bank or Agent may be the purchaser of any or all of the Collateral so sold at any public sale (or, if the Collateral is of a type customarily sold in a recognized market or is of a type which is the subject of widely distributed standard price quotations, at any private sale). The Administrative Agent is authorized, in connection with any such sale, if it deems it advisable so to do, (i) to restrict the prospective bidders on or purchasers of any of the Pledged Securities to a limited number of sophisticated investors who will represent and agree that they are purchasing for their own account for investment and not with a view to the distribution or sale of any of such Pledged Securities, (ii) to cause to be placed on certificates for any or all of the Pledged Securities or on any other securities pledged hereunder a legend to the effect that such security has not been registered under the Securities Act of 1933 and may not be disposed of in violation of the provision of said Act, and (iii) to impose such other limitations or conditions in connection with any such sale as the Administrative Agent deems necessary or advisable in order to comply with said Act or any other law. Each Pledgor will execute and deliver such documents and take such other action as the Administrative Agent deems necessary or advisable in order that any such sale may be made in compliance with law. Upon any such sale the Administrative Agent shall have the right to -8- deliver, assign and transfer to the purchaser thereof the Collateral so sold. Each purchaser at any such sale shall hold the Collateral so sold absolutely and free from any claim or right of whatsoever kind, including any equity or right of redemption of any Pledgor which may be waived, and each Pledgor, to the extent permitted by law, hereby specifically waives all rights of redemption, stay or appraisal which it has or may have under any law now existing or hereafter adopted. The notice (if any) of such sale required by Section 9 shall (1) in the case of a public sale, state the time and place fixed for such sale, (2) in the case of a sale at a broker's board or on a securities exchange, state the board or exchange at which such sale is to be made and the day on which the Collateral, or the portion thereof so being sold, will first be offered for sale at such board or exchange, and (3) in the case of a private sale, state the day after which such sale may be consummated. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as the Administrative Agent may fix in the notice of such sale. At any such sale the Collateral may be sold in one lot as an entirety or in separate parcels, as the Administrative Agent may determine. The Administrative Agent shall not be obligated to make any such sale pursuant to any such notice. The Administrative Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for the sale, and such sale may be made at any time or place to which the same may be so adjourned. In the case of any sale of all or any part of the Collateral on credit or for future delivery, the Collateral so sold may be retained by the Administrative Agent until the selling price is paid by the purchaser thereof, but the Administrative Agent shall not incur any liability in the case of the failure of such purchaser to take up and pay for the Collateral so sold and, in the case of any such failure, such Collateral may again be sold upon like notice. The Administrative Agent, instead of exercising the power of sale herein conferred upon it, may proceed by a suit or suits at law or in equity to foreclose the Security Interests and sell the Collateral, or any portion thereof, under a judgment or decree of a court or courts of competent jurisdiction. Notwithstanding any provision of this Agreement to the contrary, (i) enforcement of the security interest granted hereby in the Pledged Securities and the exercise of any right or remedy with respect to any of the shares of Pledged Securities and the grant of any pledge pursuant to Section 5(c) shall be subject to prior approval of the various automobile franchisors with whom the Pledgor or any of its Affiliates has franchise agreements pursuant to which such enforcement, or exercise of any remedy or right, or grant, without prior approval from such automobile franchisors may result in the termination of one or more of such franchise agreements and (ii) the enforcement of the security interest granted hereby in the shares of Atlantic Auto Finance Corporation pledged hereunder and the exercise of any right or remedy with respect thereto shall be subject to the prior consent -9- of the requisite financing parties with whom Atlantic Auto Finance Corporation has financing agreements set forth on Schedule IV hereto to the extent such enforcement or exercise of any remedy or right without prior approval from such financing parties may result in a default under one or more of such agreements. SECTION 11. Expenses Each Pledgor agrees that it will forthwith upon demand pay to the Administrative Agent: (i) the amount of any taxes which the Administrative Agent may have been required to pay by reason of the Security Interests or to free any of the Collateral of such Pledgor from any Lien thereon, and (ii) the amount of any and all out-of-pocket expenses, including the reasonable fees and disbursements of counsel and of any other experts, which the Administrative Agent may incur in connection with (w) the administration or enforcement of this Agreement, including such expenses as are incurred to preserve the value of the Collateral and the validity, perfection, rank and value of any Security Interest, (x) the collection, sale or other disposition of any of the Collateral, (y) the exercise by the Administrative Agent of any of the rights conferred upon it hereunder or (z) any Default or Event of Default. Any such amount not paid on demand shall bear interest at the rate applicable to Base Rate Loans plus 2% and shall be an additional Secured Obligation hereunder. SECTION 12. Limitation on Duty of Administrative Agent in Respect of Collateral. Beyond the exercise of reasonable care in the custody thereof, the Administrative Agent shall have no duty as to any Collateral in its possession or control or in the possession or control of any agent or bailee or any income thereon or as to the preservation of rights against prior parties or any other rights pertaining thereto. The Administrative Agent shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which it accords its own property, and shall not be liable or responsible for any loss or damage to any of the Collateral, or for any diminution in the value thereof, by reason of the act or omission of any agent or bailee selected by the Administrative Agent in good faith and with reasonable care. SECTION 13. Application of Proceeds -10- Upon the occurrence and during the continuance of an Event of Default, the proceeds of any sale of, or other realization upon, all or any part of the Collateral pledged by any Pledgor hereunder and any cash held shall be applied by the Administrative Agent in the following order of priorities: first, to payment of the expenses of such sale or other realization, including reasonable compensation to agents and counsel for the Administrative Agent, and all expenses, liabilities and advances incurred or made by the Administrative Agent in connection therewith, and any other unreimbursed expenses for which the Agents or any Bank is to be reimbursed by such Pledgor pursuant to Section 10.3 and Article 9 of the Credit Agreement or Section 11 hereof; second, to the ratable payment of unpaid principal of the Secured Obligations of such Pledgor; third, to the ratable payment of accrued but unpaid interest on the Secured Obligations of such Pledgor in accordance with the provisions of the Credit Agreement; fourth, to the ratable payment of all other Secured Obligations of such Pledgor, until all Secured Obligations of such Pledgor shall have been paid in full; and finally, to payment to such Pledgor, or as a court of competent jurisdiction may direct, of any surplus then remaining from such proceeds. The Administrative Agent may make distributions hereunder in cash or in kind or, on a ratable basis, in any combination thereof. SECTION 14. Concerning the Administrative Agent The provisions of Article VII of the Credit Agreement shall inure to the benefit of the Administrative Agent in respect of this Agreement and shall be binding upon the parties to the Credit Agreement in such respect. In furtherance and not in derogation of the rights, privileges and immunities of the Administrative Agent therein set forth: (A) The Administrative Agent is authorized to take all such action as is provided to be taken by it as Administrative Agent hereunder and all other action reasonably incidental thereto. As to any matters not expressly provided for herein (including, without limitation, the timing and methods of realization upon the Collateral) the Administrative Agent shall act or refrain from acting (i) in accordance with the request of the Required Banks or (ii) if the Loans have been declared due and payable by the Documentation Agent in accordance with Section 6.1 of the Credit Agreement, in accordance with written instructions from the Required Banks or, in the absence of such instructions, in accordance with its discretion. -11- (B) The Administrative Agent shall not be responsible for the existence, genuineness or value of any of the Collateral or for the validity, perfection, priority or enforceability of the Security Interests in any of the Collateral, whether impaired by operation of law or by reason of any action or omission to act on its part hereunder. The Administrative Agent shall have no duty to ascertain or inquire as to the performance or observance of any of the terms of this Agreement by any Pledgor. SECTION 15. Appointment of Co-Administrative Agents At any time or times, in order to comply with any legal requirement in any jurisdiction, the Administrative Agent may appoint another bank or trust company or one or more other persons, either to act as co-agent or co-agents, jointly with the Administrative Agent, or to act as separate agent or agents on behalf of the Agents and the Banks with such power and authority as may be necessary for the effectual operation of the provisions hereof and may be specified in the instrument of appointment (which may, in the discretion of the Administrative Agent, include provisions for the protection of such co-agent or separate agent similar to the provisions of Section 14). SECTION 16. Termination of Security Interests; Release of Collateral Upon the repayment in full of all Secured Obligations and the termination of the Commitments under the Credit Agreement, the Security Interests shall terminate and all rights to the Collateral pledged by each Pledgor hereunder shall revert to such Pledgor. At any time and from time to time prior to such termination of the Security Interests, the Administrative Agent may release any of the Collateral upon the terms set forth in Section 10.5 of the Credit Agreement. Upon any such termination of the Security Interests or release of Collateral, the Administrative Agent will, at the expense of the respective Pledgor, execute and deliver to such Pledgor such documents as such Pledgor shall reasonably request to evidence the termination of the Security Interests or the release of such Collateral, as the case may be. SECTION 17. Notices All notices hereunder shall be given in accordance with Section 10.1 of the Credit Agreement. SECTION 18. Waivers, Non-Exclusive Remedies No failure on the part of the Administrative Agent to exercise, and no delay in exercising and no course of dealing with respect to, any right under this Agreement shall operate as a waiver thereof; nor shall any single or partial exercise by the Administrative Agent of any right under the Credit Agreement or this Agreement preclude any other or further exercise thereof or -12- the exercise of any other right. The rights in this Agreement and the Credit Agreement are cumulative and are not exclusive of any other remedies provided by law. SECTION 19. Successors and Assigns This Agreement is for the benefit of the Agents and the Banks and their permitted successors and assigns, and in the event of an assignment of all or any of the Secured Obligations, the rights hereunder, to the extent applicable to the indebtedness so assigned, shall be transferred with such indebtedness. This Agreement shall be binding on each Pledgor and its successors and assigns. SECTION 20. Changes in Writing Neither this Agreement nor any provision hereof may be changed, waived, discharged or terminated orally, but only in writing signed by each Pledgor to be bound thereby and the Administrative Agent with the consent of the Required Banks. SECTION 21. New York Law This Agreement shall be construed in accordance with and governed by the laws of the State of New York, except as otherwise required by mandatory provisions of law and except to the extent that remedies provided by the laws of any jurisdiction other than New York are governed by the laws of such jurisdiction. SECTION 22. Severability If any provision hereof is invalid or unenforceable in any jurisdiction, then, to the fullest extent permitted by law, (i) the other provisions hereof shall remain in full force and effect in such jurisdiction and shall be construed in order to carry out the intentions of the parties hereto as nearly as may be possible; and (ii) the invalidity or unenforceability of any provision hereof in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction. SECTION 23. WAIVER OF JURY TRIAL. EACH PLEDGOR HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. -13- SECTION 24. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. UNITED AUTO GROUP, INC. By --------------------------------- Title: UNITED LANDERS, INC. By --------------------------------- Title: DIFEO PARTNERSHIP, INC. By --------------------------------- Title: UAG WEST, INC. By --------------------------------- Title: LANDERS AUTO SALES, INC. -14- By --------------------------------- Title: UAG ATLANTA, INC. By --------------------------------- Title: UAG ATLANTA IV, INC. By --------------------------------- Title: UAG NORTHEAST, INC. By --------------------------------- Title: DIFEO PARTNERSHIP HCT, INC. By --------------------------------- Title: HUDSON TOYOTA, INC. By --------------------------------- Title: DIFEO PARTNERSHIP VIII, INC. By --------------------------------- Title: DIFEO PARTNERSHIP IX, INC. -15- By --------------------------------- Title: DIFEO PARTNERSHIP SCT, INC. By --------------------------------- Title: SOMERSET MOTORS, INC. By --------------------------------- Title: DIFEO PARTNERSHIP RCT, INC. By --------------------------------- Title: UAG NORTHEAST (NY), INC. By --------------------------------- Title: DIFEO PARTNERSHIP RCM, INC. By --------------------------------- Title: -16- SCOTTSDALE AUDI, LTD. By --------------------------------- Title: SK MOTORS, LTD. By --------------------------------- Title: UAG TEXAS, INC. By --------------------------------- Title: UAG TEXAS II, INC. By --------------------------------- Title: THE BANK OF NOVA SCOTIA, as Administrative Agent By --------------------------------- Title: -17- Schedule I Pledged Stock Issuers Stock Pledged Hereunder Pledgor Issuer of Pledged Stock Class No. of Percentage - ------- ----------------------- ----- Shares of Shares ------ Issued ------ Borrower United Landers, Inc. Common Stock 100 100% Borrower Atlantic Auto Finance Common Stock 43,500 100% Corporation ULI Landers Auto Sales, Inc. Common Stock 10 100% DPI DiFeo Partnership HCT, Inc. Common Stock 100 100% DPI DiFeo Partnership RCT, Inc. Common Stock 100 100% DPI DiFeo Partnership RCM, Inc. Common Stock 100 100% DPI DiFeo Partnership SCT, Inc. Common Stock 100 100% DPI DiFeo Partnership VIII, Common Stock 100 100% Inc. DPI DiFeo Partnership IX, Common Stock 100 100% Inc. Borrower DiFeo Partnership X, Inc. Common Stock 100 100% Borrower UAG Northeast (NY), Inc. Common Stock 100 100% DPI Hudson Toyota, Inc. Common Stock 45 100% DPI Somerset Motors, Inc. Common Stock 100 100% Borrower UAG West, Inc. Common Stock 100 100% UAG West SA Automotive, Ltd. Common Stock 1,713,010 100% -18- Pledgor Issuer of Pledged Stock Class No. of Percentage - ------- ----------------------- ----- Shares of Shares ------ Issued ------ UAG West SL Automotive, Ltd. Common Stock 625,000 100% UAG West SPA Automotive, Ltd. Common Stock 547,125 100% UAG West LRP, Ltd. Common Stock 500,000 100% UAG West Sun BMW, Ltd. Common Stock 900,000 100% UAG West 6725 Dealership, Ltd. Common Stock 1,250 100% UAG West Scottsdale Management Common Stock 101,251 100% Group, Ltd. UAG West Scottsdale Audi, Ltd. Common Stock 100 100% LAS Landers United Auto Group, Common Stock 10 100% Inc. LAS Landers United Auto Group Common Stock 10 100% No. 2, Inc. LAS Landers United Auto Group Common Stock 10 100% No. 3, Inc. Borrower UAG Atlanta, Inc. Common Stock 100 100% UAG Atlanta Toyota, Inc. Common Stock 1,000 100% Atlanta Borrower UAG Atlanta IV, Inc. Common Stock 100 100% UAG UAG Atlanta IV Motors, Common Stock 1,001 100% Atlanta Inc. IV (fka Charles Evans BMW, Inc.) Borrower UAG Texas, Inc. Common Stock 100 100% Borrower UAG Texas II, Inc. Common Stock 100 100% Borrower United AutoCare, Inc. Common Stock 100 100% Borrower United AutoCare Products, Common Stock 100 100% Inc. Borrower UAG Capital Common Stock 100 100% -19- Pledgor Issuer of Pledged Stock Class No. of Percentage - ------- ----------------------- ----- Shares of Shares ------ Issued ------ Management, Inc. -20- Pledged Instruments - ------------------- Pledgor Issuer of Pledged Issue Date Original ------- Instrument ---------- Principal Amount ---------- ---------------- Borrower UAG Atlanta II, Inc. May 1, 1996 $11,450,000 Borrower UAG Atlanta III, Inc. July 12, 1996 $11,000,000 -21- Schedule II Pledged Interests Partnership Interest Pledged Pledgor Partnership Hereunder - ------- ----------- --------- DPI Fair Hyundai Partnership 70% UAG Northeast Fair Hyundai Partnership 30% DPI Fair Chevrolet-Geo Partnership 70% UAG Northeast Fair Chevrolet-Geo Partnership 30% DPI Danbury Auto Partnership 70% UAG Northeast Danbury Auto Partnership 30% DPI Danbury Chrysler Plymouth Partnership 70% UAG Northeast Danbury Chrysler Plymouth Partnership 30% DPI HCT Hudson Motors Partnership 70% Hudson Toyota Hudson Motors Partnership 30% DPI DiFeo Hyundai Partnership 70% UAG Northeast DiFeo Hyundai Partnership 30% DPI J&F Oldsmobile Partnership 70% UAG Northeast J&F Oldsmobile Partnership 30% DPI DiFeo Chevrolet-Geo Partnership 70% UAG Northeast DiFeo Chevrolet-Geo Partnership 30% DPI DiFeo Chrysler Plymouth Jeep Eagle 70% Partnership UAG Northeast DiFeo Chrysler Plymouth Jeep Eagle 30% Partnership DPI VIII OCT Partnership 70% -22- Partnership Interest Pledged Pledgor Partnership Hereunder - ------- ----------- --------- UAG Northeast OCT Partnership 30% DPI IX OCM Partnership 70% UAG Northeast OCM Partnership 30% DPI SCT Somerset Motors Partnership 70% Somerset Motors Somerset Motors Partnership 30% DPI DiFeo BMW Partnership 70% UAG Northeast DiFeo BMW Partnership 30% DPI RCT Country Auto Group Partnership 70% UAG Northeast (NY) Country Auto Group Partnership 30% DPI RCM Rockland Motors Partnership 70% UAG Northeast (NY) Rockland Motors Partnership 30% SA 6725 Agent Partnership 50% SK Motors 6725 Agent Partnership 50% UAG Texas Shannon Automotive, Ltd. 99% UAG Texas II Shannon Automotive, Ltd. 1% DPI DiFeo Leasing Partnership 70% UAG Northeast DiFeo Leasing Partnership 30% -23- Schedule III UCC Filing Locations - ------------------------------------------------------------------------------- DEBTOR FILING LOCATION(S) - ------------------------------------------------------------------------------- United Auto Group, Inc. New York Secretary of State New York City Register - ------------------------------------------------------------------------------- United Landers, Inc. New York Secretary of State New York City Register Arkansas Secretary of State Saline County Clerk Pulaski County Clerk Garland County Clerk - ------------------------------------------------------------------------------- DiFeo Partnership, Inc. New York Secretary of State New York City Register Rockland County Clerk New Jersey Secretary of State Hudson County Clerk Ocean County Clerk Somerset County Clerk Bergen County Clerk Connecticut Secretary of State Town of Danbury Clerk - ------------------------------------------------------------------------------- UAG West, Inc. New York Secretary of State New York City Register Arizona Secretary of State Maricopa County Clerk - ------------------------------------------------------------------------------- -24- - ------------------------------------------------------------------------------- DEBTOR FILING LOCATION(S) - ------------------------------------------------------------------------------- Landers Auto Sales, Inc. New York Secretary of State New York City Register Arkansas Secretary of State Saline County Clerk Pulaski County Clerk Garland County Clerk - ------------------------------------------------------------------------------- UAG Atlanta, Inc. New York Secretary of State New York City Register Gwinnett County Clerk - ------------------------------------------------------------------------------- UAG Atlanta IV, Inc. New York Secretary of State New York City Register Gwinnett County Clerk - ------------------------------------------------------------------------------- UAG Northeast, Inc. New York Secretary of State New York City Register Rockland County Clerk New Jersey Secretary of State Hudson County Clerk Ocean County Clerk Connecticut Secretary of State Town of Danbury Clerk - ------------------------------------------------------------------------------- DiFeo Partnership HCT, Inc. New York Secretary of State New York City Register New Jersey Secretary of State Hudson County Clerk - ------------------------------------------------------------------------------- -25- - ------------------------------------------------------------------------------- DEBTOR FILING LOCATION(S) - ------------------------------------------------------------------------------- Hudson Toyota, Inc. New York Secretary of State New York City Register New Jersey Secretary of State Hudson County Clerk - ------------------------------------------------------------------------------- DiFeo Partnership VIII, Inc. New York Secretary of State New York City Register New Jersey Secretary of State Hudson County Clerk Ocean County Clerk - ------------------------------------------------------------------------------- DiFeo Partnership IX, Inc. New York Secretary of State New York City Register New Jersey Secretary of State Hudson County Clerk Ocean County Clerk - ------------------------------------------------------------------------------- DiFeo Partnership SCT, Inc. New York Secretary of State New York City Register New Jersey Secretary of State Hudson County Clerk Somerset County Clerk - ------------------------------------------------------------------------------- DiFeo Partnership RCT, Inc. New York Secretary of State New York City Register Rockland County Clerk New Jersey Secretary of State Hudson County Clerk - ------------------------------------------------------------------------------- -26- - ------------------------------------------------------------------------------- DEBTOR FILING LOCATION(S) - ------------------------------------------------------------------------------- Somerset Motors, Inc. New York Secretary of State New York City Register New Jersey Secretary of State Hudson County Clerk Somerset County Clerk - ------------------------------------------------------------------------------- UAG Northeast (NY), Inc. New York Secretary of State New York City Register Rockland County Clerk - ------------------------------------------------------------------------------- DiFeo Partnership RCM, Inc. New York Secretary of State New York City Register Rockland County Clerk New Jersey Secretary of State Hudson County Clerk - ------------------------------------------------------------------------------- Scottsdale Audi, Ltd. Arizona Secretary of State Maricopa County Clerk - ------------------------------------------------------------------------------- SK Motors, Ltd. Arizona Secretary of State Maricopa County Clerk - ------------------------------------------------------------------------------- UAG Texas, Inc. New York Secretary of State New York City Register Texas Secretary of State Houston County Clerk - ------------------------------------------------------------------------------- UAG Texas II, Inc. New York Secretary of State New York City Register Texas Secretary of State Houston County Clerk - ------------------------------------------------------------------------------- -27- Schedule IV Atlantic Auto Financing Agreements ---------------------------------- 1. Support Agreement, dated as of June 28, 1995, between the Borrower and Atlantic Auto Funding Corporation. (This agreement may not be modified without the consent of Financial Security Assurance Inc.) 2. Support Agreement, dated as of June 14, 1996, between the Borrower and Atlantic Auto Second Funding Corporation. -28- EX-10.1.20 5 PLEDGE AGREEMENT EXECUTION COPY PLEDGE AGREEMENT AGREEMENT dated as of March 20, 1997 among UNITED AUTO GROUP, INC., a Delaware corporation (together with its successors, the "Borrower"), UNITED LANDERS, INC., a Delaware corporation ("ULI") and DIFEO PARTNERSHIP, INC., a Delaware corporation ("DPI"), UAG WEST, INC., a Delaware corporation ("UAG West"), LANDERS AUTO SALES, INC., an Arkansas corporation ("LAS"), UAG ATLANTA, INC., a Delaware corporation ("UAG Atlanta"), UAG ATLANTA IV, INC., a Delaware corporation ("UAG Atlanta IV"), UAG NORTHEAST, INC., a Delaware corporation ("UAG Northeast"), DIFEO PARTNERSHIP HCT, INC., a Delaware corporation ("DPI HCT"), HUDSON TOYOTA, INC., a New Jersey corporation ("Hudson Toyota"), DIFEO PARTNERSHIP VIII, INC., a Delaware corporation ("DPI VIII"), DIFEO PARTNERSHIP IX, INC., a Delaware corporation ("DPI IX"), DIFEO PARTNERSHIP SCT, INC., a Delaware corporation ("DPI SCT"), SOMERSET MOTORS, INC., a New Jersey corporation ("Somerset Motors), DIFEO PARTNERSHIP RCT, INC., a Delaware corporation ("DPI RCT"), UAG NORTHEAST (NY), INC., a New York corporation ("UAG Northeast (NY)"), DIFEO PARTNERSHIP RCM, INC., a Delaware corporation ("DPI RCM"), SCOTTSDALE AUDI, LTD., an Arizona corporation ("SA"), SK MOTORS, LTD., an Arizona corporation ("SK Motors"), UAG Texas, Inc., a Delaware corporation ("UAG Texas"), UAG Texas II, Inc., a Delaware corporation ("UAG Texas II") (each together with its successors, a "Pledgor" and collectively the "Pledgors") and THE BANK OF NOVA SCOTIA, as Administrative Agent. W I T N E S S E T H : WHEREAS, the Borrower, the Guarantors party thereto, certain banks, The Bank of Nova Scotia, as administrative agent for such banks and Morgan Guaranty Trust Company of New York, as documentation agent for such banks are parties to a Credit Agreement of even date herewith (as the same may be amended from time to time, the "Credit Agreement"); and WHEREAS, in order to induce said banks, The Bank of Nova Scotia, as administrative agent for such banks and Morgan Guaranty Trust Company of New York, as documentation agent for such banks, to enter into the Credit Agreement, the Pledgors have agreed to grant a continuing security interest in and to the Collateral (as hereafter defined) to secure their obligations under the Credit Agreement and the Notes issued pursuant thereto; NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. DEFINITIONS Terms defined in the Credit Agreement and not otherwise defined herein have, as used herein, the respective meanings provided for therein. The following additional terms, as used herein, have the following respective meanings: "Collateral" has the meaning assigned to such term in Section 3(A). "Issuer" means any of the companies identified on Schedule I as the issuers of the Pledged Stock. "Partnership" means any of the partnerships listed on Schedule II. "Partnership Interests" means, as to each Pledgor, the reference to the partnership interest in each Partnership listed opposite such Pledgor's name on Schedule II attached hereto. "Pledged Instruments" means, as to each Pledgor, (i) the Subsidiary Notes of such Pledgor and (ii) any instrument required to be pledged by such Pledgor to the Administrative Agent pursuant to Section 3(B). "Pledged Interest" means, as to each Pledgor, the Partnership Interests of such Pledgor and any other equity interest required to be pledged by such Pledgor. "Pledged Securities" means, as to each Pledgor, the Pledged Instruments, the Pledged Interests and the Pledged Stock of such Pledgor. "Pledged Stock" means, as to each Pledgor, (i) the Subsidiary Shares of such Pledgor and (ii) any other capital stock required to be pledged by such Pledgor to the Administrative Agent pursuant to Section 3(B). "Secured Obligations" means the obligations secured under this Agreement which include: (a) with respect to the Borrower, (i) all principal of and interest (including, without limitation, any interest which accrues after the commencement of any case, proceeding or other action relating to the bankruptcy, insolvency or reorganization of the Borrower, whether or not allowed or allowable as a claim in any such proceeding) on any loan under, or any note issued pursuant to, the Credit Agreement, (ii) all other amounts payable by the Borrower hereunder or under the Credit Agreement and (iii) any renewals, extensions or modifications of any of the foregoing; and (b) with respect to each other Pledgor, (i) all obligations of such Pledgor under the Credit Agreement (including without limitation Article 9 thereof) -2- and (ii) any renewals, extensions or modifications of any of the foregoing. "Security Interests" means, as to each Pledgor, the security interests in its Collateral granted hereunder securing its Secured Obligations. "Subsidiary Notes" means, as to each Pledgor, any debt of an Issuer owing to such Pledgor, whether now existing or hereafter arising, including without limitation the instruments evidencing obligations owed to such Pledgor listed on Schedule I hereto. "Subsidiary Shares" means, as to each Pledgor, the collective reference to the shares of capital stock of each Issuer listed opposite such Pledgor's name on Schedule I attached hereto, together with all shares, stocks, stock certificates, options or rights of any nature whatsoever that currently exist or which may be issued or granted in respect thereof (or in substitution for the same) by any Issuer while this Agreement is in effect. Unless otherwise defined herein, or unless the context otherwise requires, all terms used herein which are defined in the New York Uniform Commercial Code as in effect on the date hereof shall have the meanings therein stated. SECTION 2. REPRESENTATIONS AND WARRANTIES Each Pledgor represents and warrants as follows: (a) Title to Pledged Securities. Such Pledgor owns all of the Pledged Securities listed on Schedule I and Schedule II across from its name, free and clear of any Liens other than the Security Interests. Except as set forth on Schedule I, the Pledged Stock includes all of the issued and outstanding capital stock of each Issuer. All of the Pledged Stock has been duly authorized and validly issued, and is fully paid and non-assessable, and is subject to no options to purchase or similar rights of any Person. Such Pledgor is not and will not become a party to or otherwise bound by any agreement, other than this Agreement or various franchise agreements between such Pledgor and automobile franchisors, which restricts in any manner the rights of any present or future holder of any of the Pledged Securities with respect thereto. (b) Validity, Perfection and Priority of Security Interests. Upon the delivery of its Pledged Instruments and certificates representing its Pledged Stock to the Administrative Agent in accordance with Section 4 hereof and assuming that the Administrative Agent will at no time relinquish possession of such Pledged Instruments and certificates, the Administrative Agent will have valid and perfected security interests in the Collateral pledged by such Pledgor hereunder (other than the -3- Collateral described in the immediately succeeding sentence) subject to no prior Lien. When in addition appropriately completed UCC financing statements shall have been filed as specified in Schedule III hereto, the Security Interests shall constitute perfected security interests in the Collateral pledged by such Pledgor hereunder consisting of all right, title and interest of such Pledgor in Debt of a Subsidiary owing to such Pledgor and not evidenced by an instrument and the Partnership Interests (and all proceeds thereof). Except for the filing of such UCC financing statements, no registration, recordation or filing with any governmental body, agency or official is required in connection with the execution or delivery of this Agreement or necessary for the validity or enforceability hereof or for the perfection or enforcement of the Security Interests. Neither such Pledgor nor any of its Subsidiaries has performed or will perform any acts which might prevent the Administrative Agent from enforcing any of the terms and conditions of this Agreement or which would limit the Administrative Agent in any such enforcement. On the date hereof, the Pledged Interests pledged by such Pledgor are not evidenced by any certificates. (c) UCC Filing Locations. The chief executive office of such Pledgor is located at its address set forth on the signature pages of the Credit Agreement. SECTION 3. THE SECURITY INTERESTS In order to secure the full and punctual payment of the Secured Obligations in accordance with the terms thereof, and to secure the performance of all the obligations of each Pledgor hereunder: (a) Each Pledgor hereby assigns and pledges to and with the Administrative Agent for the benefit of the Banks and the Agents and grants to the Administrative Agent for the benefit of the Banks and the Agents a security interest in its Pledged Securities, and all of its rights and privileges with respect to its Pledged Securities, and all income and profits thereon, and all interest, dividends and other payments and distributions with respect thereto, all Debt of a Subsidiary owing to such Pledgor from time to time whether or not evidenced by a Pledged Instrument and all proceeds of the foregoing (the "Collateral"). Contemporaneously with the execution and delivery hereof, each Pledgor is delivering its Subsidiary Notes and certificates representing its Subsidiary Shares in pledge hereunder. (b) In the event that any Issuer at any time issues to any Pledgor any additional or substitute shares of capital stock of any class or any substitute note, or any Partnership issues to any Pledgor any additional or substitute equity interests of any class or issues certificates representing the Pledged Interests or any portion thereof, or owes any other Debt to any Pledgor, such Pledgor will immediately pledge and -4- deposit with the Administrative Agent certificates (if any) representing all such shares and such note or any instrument evidencing such other Debt as additional security for such Pledgor's Secured Obligations. All such shares, notes, interests and instruments constitute Pledged Securities and are subject to all provisions of this Agreement. (c) The Security Interests granted by each Pledgor are granted as security only and shall not subject either Agent or any Bank to, or transfer or in any way affect or modify, any obligation or liability of such Pledgor or any of its Subsidiaries with respect to any of the Collateral pledged by such Pledgor hereunder or any transaction in connection therewith. SECTION 4. DELIVERY OF PLEDGED SECURITIES All Pledged Instruments delivered to the Administrative Agent by any Pledgor pursuant hereto shall be endorsed to the order of the Administrative Agent, and accompanied by any required transfer tax stamps, all in form and substance satisfactory to the Administrative Agent. All certificates representing Pledged Stock or Pledged Interests (if any) delivered to the Administrative Agent by any Pledgor pursuant hereto shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed instruments of transfer or assignment in blank, with signatures appropriately guaranteed, and accompanied by any required transfer tax stamps, all in form and substance satisfactory to the Administrative Agent. SECTION 5. FURTHER ASSURANCES (a) Each Pledgor agrees that it will, at its expense and in such manner and form as the Administrative Agent may require, execute, deliver, file and record any financing statement, specific assignment or other paper and take any other action that may be necessary or desirable, or that the Administrative Agent may request, in order to create, preserve, perfect or validate any Security Interest or to enable the Administrative Agent to exercise and enforce its rights hereunder with respect to any of the Collateral. To the extent permitted by applicable law, each Pledgor hereby authorizes the Administrative Agent to execute and file, in the name of such Pledgor or otherwise, Uniform Commercial Code financing statements (which may be carbon, photographic, photostatic or other reproductions of this Agreement or of a financing statement relating to this Agreement) which the Administrative Agent in its sole discretion may deem necessary or appropriate to further perfect the Security Interests. (b) Each Pledgor agrees that it will not change (i) its name, identity or corporate structure in any manner or (ii) the location of its chief executive office unless it shall -5- have given the Administrative Agent not less than 30 days' prior notice thereof. (c) The Borrower agrees that it will cause any Subsidiary which is owed (i) Debt evidenced by an instrument, (ii) long-term Debt or (iii) Debt secured by a Lien by the Borrower or another Subsidiary to immediately assign and pledge to and with the Administrative Agent for the benefit of the Banks and the Agents and grant to the Administrative Agent for the benefit of the Banks and the Administrative Agent a security interest in such Debt and all proceeds of such Debt, in each case as security for such Subsidiary's obligations under the Credit Agreement. SECTION 6. RECORD OWNERSHIP OF PLEDGED STOCK AND PLEDGED INTERESTS. Subject to the provisions of the final paragraph of Section 10, the Administrative Agent may at any time or from time to time, in its sole discretion, cause any or all of (i) the Pledged Stock or (ii) the Pledged Interests to be transferred of record into the name of the Administrative Agent or its nominee. Each Pledgor will promptly give to the Administrative Agent copies of any notices or other communications received by it with respect to Pledged Stock or Pledged Interests registered in the name of such Pledgor and the Administrative Agent will promptly give to each Pledgor copies of any notices and communications received by the Administrative Agent with respect to its Pledged Stock registered in the name of the Administrative Agent or its nominee. SECTION 7. RIGHT TO RECEIVE DISTRIBUTIONS ON COLLATERAL. Unless an Event of Default shall have occurred and be continuing, each Pledgor shall have the right to receive all dividends, interest and other payments and distributions made upon or with respect to Collateral pledged by it hereunder. If an Event of Default shall have occurred and be continuing, the Administrative Agent shall have the right receive and to retain as Collateral hereunder all dividends, interest and other payments and distributions made upon or with respect to the Collateral and each Pledgor shall take all such action as the Administrative Agent may deem necessary or appropriate to give effect to such right. All such dividends, interest and other payments and distributions which are received by any Pledgor shall be received in trust for the benefit of the Agents and the Banks and, if the Administrative Agent so directs shall be segregated from other funds of such Pledgor and shall, forthwith upon demand by the Administrative Agent, be paid over to the Administrative Agent as Collateral in the same form as received (with any necessary endorsement). After all Events of Defaults have been cured, the Administrative Agent's right to retain -6- dividends, interest and other payments and distributions under this Section 7 shall cease and the Administrative Agent shall pay over to each Pledgor any such Collateral pledged by such Pledgor hereunder retained by the Administrative Agent during the continuance of an Event of Default. SECTION 8. RIGHT TO VOTE PLEDGED STOCK AND PLEDGED INTERESTS. Unless an Event of Default shall have occurred and be continuing, each Pledgor shall have the right, from time to time, to vote its Pledged Stock and Pledged Interests and to give consents, ratifications and waivers with respect to its Pledged Stock and Pledged Interests, and the Administrative Agent shall, upon receiving a written request from such Pledgor accompanied by a certificate signed by its principal financial officer stating that no Event of Default has occurred and is continuing, deliver to such Pledgor or as specified in such request such proxies, powers of attorney, consents, ratifications and waivers in respect of any of its Pledged Stock or Pledged Interests which is registered in the name of the Administrative Agent or its nominee as shall be specified in such request and be in form and substance satisfactory to the Administrative Agent. If an Event of Default shall have occurred and be continuing, the Administrative Agent shall have the right to the extent permitted by law and each Pledgor shall take all such action as may be necessary or appropriate to give effect to such right, to vote and to give consents, ratifications and waivers, and take any other action with respect to any or all of the Pledged Stock or Pledged Interests with the same force and effect as if the Administrative Agent were the absolute and sole owner thereof. SECTION 9. GENERAL AUTHORITY Each Pledgor hereby irrevocably appoints the Administrative Agent its true and lawful attorney, with full power of substitution, in the name of such Pledgor, the Agents, the Banks or otherwise, for the sole use and benefit of the Agents and Banks, but at the expense of such Pledgor, to the extent permitted by law to exercise, at any time and from time to time while an Event of Default has occurred and is continuing, all or any of the following powers with respect to all or any of the Collateral: (a) Each Pledgor agrees that it will not change (i) its name, identity or corporate structure in any manner or (ii) the location of its chief executive office unless it shall have given the Administrative Agent not less than 30 days' prior notice thereof. (i) to demand, sue for, collect, receive and give acquittance for any and all monies due or to become due upon or by virtue thereof, -7- (ii) to settle, compromise, compound, prosecute or defend any action or proceeding with respect thereto, (iii) to sell, transfer, assign or otherwise deal in or with the same or the proceeds or avails thereof, as fully and effectually as if the Administrative Agent were the absolute owner thereof, and (iv) to extend the time of payment of any or all thereof and to make any allowance and other adjustments with reference thereto; provided that the Administrative Agent shall give each Pledgor not less than ten days' prior notice of the time and place of any sale or other intended disposition of any of the Collateral pledged by such Pledgor hereunder except any Collateral which threatens to decline speedily in value or is of a type customarily sold on a recognized market. The Administrative Agent and each Pledgor agree that such notice constitutes "reasonable notification" within the meaning of Section 9-504(3) of the Uniform Commercial Code. SECTION 10. REMEDIES UPON EVENT OF DEFAULT If any Event of Default shall have occurred and be continuing, the Administrative Agent may exercise on behalf of the Banks and the Agents all the rights of a secured party under the Uniform Commercial Code (whether or not in effect in the jurisdiction where such rights are exercised) and, in addition, the Administrative Agent may, without being required to give any notice, except as herein provided or as may be required by mandatory provisions of law, (i) apply the cash, if any, then held by it as Collateral as specified in Section 13 and (ii) if there shall be no such cash or if such cash shall be insufficient to pay all the Secured Obligations in full, sell the Collateral or any part thereof at public or private sale or at any broker's board or on any securities exchange, for cash, upon credit or for future delivery, and at such price or prices as the Administrative Agent may deem satisfactory. Any Bank or Agent may be the purchaser of any or all of the Collateral so sold at any public sale (or, if the Collateral is of a type customarily sold in a recognized market or is of a type which is the subject of widely distributed standard price quotations, at any private sale). The Administrative Agent is authorized, in connection with any such sale, if it deems it advisable so to do, (i) to restrict the prospective bidders on or purchasers of any of the Pledged Securities to a limited number of sophisticated investors who will represent and agree that they are purchasing for their own account for investment and not with a view to the distribution or sale of any of such Pledged Securities, (ii) to cause to be placed on certificates for any or all of the Pledged Securities or on any other securities pledged hereunder a legend -8- to the effect that such security has not been registered under the Securities Act of 1933 and may not be disposed of in violation of the provision of said Act, and (iii) to impose such other limitations or conditions in connection with any such sale as the Administrative Agent deems necessary or advisable in order to comply with said Act or any other law. Each Pledgor will execute and deliver such documents and take such other action as the Administrative Agent deems necessary or advisable in order that any such sale may be made in compliance with law. Upon any such sale the Administrative Agent shall have the right to deliver, assign and transfer to the purchaser thereof the Collateral so sold. Each purchaser at any such sale shall hold the Collateral so sold absolutely and free from any claim or right of whatsoever kind, including any equity or right of redemption of any Pledgor which may be waived, and each Pledgor, to the extent permitted by law, hereby specifically waives all rights of redemption, stay or appraisal which it has or may have under any law now existing or hereafter adopted. The notice (if any) of such sale required by Section 9 shall (1) in the case of a public sale, state the time and place fixed for such sale, (2) in the case of a sale at a broker's board or on a securities exchange, state the board or exchange at which such sale is to be made and the day on which the Collateral, or the portion thereof so being sold, will first be offered for sale at such board or exchange, and (3) in the case of a private sale, state the day after which such sale may be consummated. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as the Administrative Agent may fix in the notice of such sale. At any such sale the Collateral may be sold in one lot as an entirety or in separate parcels, as the Administrative Agent may determine. The Administrative Agent shall not be obligated to make any such sale pursuant to any such notice. The Administrative Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for the sale, and such sale may be made at any time or place to which the same may be so adjourned. In the case of any sale of all or any part of the Collateral on credit or for future delivery, the Collateral so sold may be retained by the Administrative Agent until the selling price is paid by the purchaser thereof, but the Administrative Agent shall not incur any liability in the case of the failure of such purchaser to take up and pay for the Collateral so sold and, in the case of any such failure, such Collateral may again be sold upon like notice. The Administrative Agent, instead of exercising the power of sale herein conferred upon it, may proceed by a suit or suits at law or in equity to foreclose the Security Interests and sell the Collateral, or any portion thereof, under a judgment or decree of a court or courts of competent jurisdiction. Notwithstanding any provision of this Agreement to the contrary, (i) enforcement of the security interest granted hereby in the Pledged Securities and the exercise of any right or remedy with respect to any of the shares of Pledged Securities and the -9- grant of any pledge pursuant to Section 5(c) shall be subject to prior approval of the various automobile franchisors with whom the Pledgor or any of its Affiliates has franchise agreements pursuant to which such enforcement, or exercise of any remedy or right, or grant, without prior approval from such automobile franchisors may result in the termination of one or more of such franchise agreements and (ii) the enforcement of the security interest granted hereby in the shares of Atlantic Auto Finance Corporation pledged hereunder and the exercise of any right or remedy with respect thereto shall be subject to the prior consent of the requisite financing parties with whom Atlantic Auto Finance Corporation has financing agreements set forth on Schedule IV hereto to the extent such enforcement or exercise of any remedy or right without prior approval from such financing parties may result in a default under one or more of such agreements. SECTION 11. EXPENSES Each Pledgor agrees that it will forthwith upon demand pay to the Administrative Agent: (i) the amount of any taxes which the Administrative Agent may have been required to pay by reason of the Security Interests or to free any of the Collateral of such Pledgor from any Lien thereon, and (ii) the amount of any and all out-of-pocket expenses, including the reasonable fees and disbursements of counsel and of any other experts, which the Administrative Agent may incur in connection with (w) the administration or enforcement of this Agreement, including such expenses as are incurred to preserve the value of the Collateral and the validity, perfection, rank and value of any Security Interest, (x) the collection, sale or other disposition of any of the Collateral, (y) the exercise by the Administrative Agent of any of the rights conferred upon it hereunder or (z) any Default or Event of Default. Any such amount not paid on demand shall bear interest at the rate applicable to Base Rate Loans plus 2% and shall be an additional Secured Obligation hereunder. SECTION 12. LIMITATION ON DUTY OF ADMINISTRATIVE AGENT IN RESPECT OF COLLATERAL. Beyond the exercise of reasonable care in the custody thereof, the Administrative Agent shall have no duty as to any Collateral in its possession or control or in the possession or control of any agent or bailee or any income thereon or as to the preservation of rights against prior parties or any other rights -10- pertaining thereto. The Administrative Agent shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which it accords its own property, and shall not be liable or responsible for any loss or damage to any of the Collateral, or for any diminution in the value thereof, by reason of the act or omission of any agent or bailee selected by the Administrative Agent in good faith and with reasonable care. SECTION 13. APPLICATION OF PROCEEDS Upon the occurrence and during the continuance of an Event of Default, the proceeds of any sale of, or other realization upon, all or any part of the Collateral pledged by any Pledgor hereunder and any cash held shall be applied by the Administrative Agent in the following order of priorities: first, to payment of the expenses of such sale or other realization, including reasonable compensation to agents and counsel for the Administrative Agent, and all expenses, liabilities and advances incurred or made by the Administrative Agent in connection therewith, and any other unreimbursed expenses for which the Agents or any Bank is to be reimbursed by such Pledgor pursuant to Section 10.3 and Article 9 of the Credit Agreement or Section 11 hereof; second, to the ratable payment of unpaid principal of the Secured Obligations of such Pledgor; third, to the ratable payment of accrued but unpaid interest on the Secured Obligations of such Pledgor in accordance with the provisions of the Credit Agreement; fourth, to the ratable payment of all other Secured Obligations of such Pledgor, until all Secured Obligations of such Pledgor shall have been paid in full; and finally, to payment to such Pledgor, or as a court of competent jurisdiction may direct, of any surplus then remaining from such proceeds. The Administrative Agent may make distributions hereunder in cash or in kind or, on a ratable basis, in any combination thereof. SECTION 14. CONCERNING THE ADMINISTRATIVE AGENT The provisions of Article VII of the Credit Agreement shall inure to the benefit of the Administrative Agent in respect of this Agreement and shall be binding upon the parties to the Credit Agreement in such respect. In furtherance and not in derogation of the rights, privileges and immunities of the Administrative Agent therein set forth: -11- (a) The Administrative Agent is authorized to take all such action as is provided to be taken by it as Administrative Agent hereunder and all other action reasonably incidental thereto. As to any matters not expressly provided for herein (including, without limitation, the timing and methods of realization upon the Collateral) the Administrative Agent shall act or refrain from acting (i) in accordance with the request of the Required Banks or (ii) if the Loans have been declared due and payable by the Documentation Agent in accordance with Section 6.1 of the Credit Agreement, in accordance with written instructions from the Required Banks or, in the absence of such instructions, in accordance with its discretion. (b) The Administrative Agent shall not be responsible for the existence, genuineness or value of any of the Collateral or for the validity, perfection, priority or enforceability of the Security Interests in any of the Collateral, whether impaired by operation of law or by reason of any action or omission to act on its part hereunder. The Administrative Agent shall have no duty to ascertain or inquire as to the performance or observance of any of the terms of this Agreement by any Pledgor. SECTION 15. APPOINTMENT OF CO-ADMINISTRATIVE AGENTS At any time or times, in order to comply with any legal requirement in any jurisdiction, the Administrative Agent may appoint another bank or trust company or one or more other persons, either to act as co-agent or co-agents, jointly with the Administrative Agent, or to act as separate agent or agents on behalf of the Agents and the Banks with such power and authority as may be necessary for the effectual operation of the provisions hereof and may be specified in the instrument of appointment (which may, in the discretion of the Administrative Agent, include provisions for the protection of such co-agent or separate agent similar to the provisions of Section 14). SECTION 16. TERMINATION OF SECURITY INTERESTS; Release of Collateral Upon the repayment in full of all Secured Obligations and the termination of the Commitments under the Credit Agreement, the Security Interests shall terminate and all rights to the Collateral pledged by each Pledgor hereunder shall revert to such Pledgor. At any time and from time to time prior to such termination of the Security Interests, the Administrative Agent may release any of the Collateral upon the terms set forth in Section 10.5 of the Credit Agreement. Upon any such termination of the Security Interests or release of Collateral, the Administrative Agent will, at the expense of the respective Pledgor, execute and deliver to such Pledgor such documents as such Pledgor shall reasonably request to evidence the termination -12- of the Security Interests or the release of such Collateral, as the case may be. SECTION 17. NOTICES All notices hereunder shall be given in accordance with Section 10.1 of the Credit Agreement. SECTION 18. WAIVERS, NON-EXCLUSIVE REMEDIES No failure on the part of the Administrative Agent to exercise, and no delay in exercising and no course of dealing with respect to, any right under this Agreement shall operate as a waiver thereof; nor shall any single or partial exercise by the Administrative Agent of any right under the Credit Agreement or this Agreement preclude any other or further exercise thereof or the exercise of any other right. The rights in this Agreement and the Credit Agreement are cumulative and are not exclusive of any other remedies provided by law. SECTION 19. SUCCESSORS AND ASSIGNS This Agreement is for the benefit of the Agents and the Banks and their permitted successors and assigns, and in the event of an assignment of all or any of the Secured Obligations, the rights hereunder, to the extent applicable to the indebtedness so assigned, shall be transferred with such indebtedness. This Agreement shall be binding on each Pledgor and its successors and assigns. SECTION 20. CHANGES IN WRITING Neither this Agreement nor any provision hereof may be changed, waived, discharged or terminated orally, but only in writing signed by each Pledgor to be bound thereby and the Administrative Agent with the consent of the Required Banks. SECTION 21. NEW YORK LAW This Agreement shall be construed in accordance with and governed by the laws of the State of New York, except as otherwise required by mandatory provisions of law and except to the extent that remedies provided by the laws of any jurisdiction other than New York are governed by the laws of such jurisdiction. SECTION 22. SEVERABILITY If any provision hereof is invalid or unenforceable in any jurisdiction, then, to the fullest extent permitted by law, (i) the other provisions hereof shall remain in full force and effect in such jurisdiction and shall be construed in order to carry out the intentions of the parties hereto as nearly as may be possible; and (ii) the invalidity or unenforceability of any -13- provision hereof in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction. SECTION 23. WAIVER OF JURY TRIAL. EACH PLEDGOR HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. SECTION 24. COUNTERPARTS. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. -14- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. UNITED AUTO GROUP, INC. By: /s/ Philip N. Smith, Jr. ------------------------------- Title: Vice President UNITED LANDERS, INC. By: /s/ Philip N. Smith, Jr. ------------------------------- Title: Vice President DIFEO PARTNERSHIP, INC. By: /s/ Philip N. Smith, Jr. ------------------------------- Title: Vice President UAG WEST, INC. By: /s/ Philip N. Smith, Jr. ------------------------------- Title: Vice President LANDERS AUTO SALES, INC. By: /s/ Philip N. Smith, Jr. ------------------------------- Title: Vice President UAG ATLANTA, INC. By: /s/ Philip N. Smith, Jr. ------------------------------- Title: Vice President UAG ATLANTA IV, INC. By: /s/ Philip N. Smith, Jr. ------------------------------- Title: Vice President UAG NORTHEAST, INC. By: /s/ Philip N. Smith, Jr. ------------------------------- Title: Vice President DIFEO PARTNERSHIP HCT, INC. By: /s/ Philip N. Smith, Jr. ------------------------------- Title: Vice President HUDSON TOYOTA, INC. By: /s/ Philip N. Smith, Jr. ------------------------------- -15- Title: Vice President DIFEO PARTNERSHIP VIII, INC. By: /s/ Philip N. Smith, Jr. ------------------------------- Title: Vice President DIFEO PARTNERSHIP IX, INC. By: /s/ Philip N. Smith, Jr. ------------------------------- Title: Vice President DIFEO PARTNERSHIP SCT, INC. By: /s/ Philip N. Smith, Jr. ------------------------------- Title: Vice President SOMERSET MOTORS, INC. By: /s/ Philip N. Smith, Jr. ------------------------------- Title: Vice President DIFEO PARTNERSHIP RCT, INC. By: /s/ Philip N. Smith, Jr. ------------------------------- Title: Vice President UAG NORTHEAST (NY), INC. By: /s/ Philip N. Smith, Jr. ------------------------------- Title: Vice President DIFEO PARTNERSHIP RCM, INC. By: /s/ Philip N. Smith, Jr. ------------------------------- Title: Vice President SCOTTSDALE AUDI, LTD. By: /s/ Philip N. Smith, Jr. ------------------------------- Title: Vice President SK MOTORS, LTD. By: /s/ Philip N. Smith, Jr. ------------------------------- Title: Vice President UAG TEXAS, INC. By: /s/ Philip N. Smith, Jr. ------------------------------- Title: Vice President -16- UAG TEXAS II, INC. By: /s/ Philip N. Smith, Jr. ------------------------------- Title: Vice President THE BANK OF NOVA SCOTIA, as Administrative Agent By: /s/ Brian Allen ------------------------------- Title: Senior Relationship Manager -17- Schedule I Pledged Stock ------------- Issuers Stock Pledged Hereunder ------------------------------- Percentage Issuer of Pledged No. of of Shares Pledgor Stock Class Shares Issued - ------- ----- ----- ------ ------ Borrower United Landers, Inc. Common Stock 100 100% Borrower Atlantic Auto Finance Common Stock 43,500 100% Corporation ULI Landers Auto Sales, Inc. Common Stock 10 100% DPI DiFeo Partnership HCT, Common Stock 100 100% Inc. DPI DiFeo Partnership RCT, Common Stock 100 100% Inc. DPI DiFeo Partnership RCM, Common Stock 100 100% Inc. DPI DiFeo Partnership SCT, Common Stock 100 100% Inc. DPI DiFeo Partnership VIII, Common Stock 100 100% Inc. DPI DiFeo Partnership IX, Common Stock 100 100% Inc. Borrower DiFeo Partnership X, Inc. Common Stock 100 100% Borrower UAG Northeast (NY), Inc. Common Stock 100 100% DPI Hudson Toyota, Inc. Common Stock 45 100% DPI Somerset Motors, Inc. Common Stock 100 100% Borrower UAG West, Inc. Common Stock 100 100% UAG West SA Automotive, Ltd. Common Stock 1,713,010 100% UAG West SL Automotive, Ltd. Common Stock 625,000 100% UAG West SPA Automotive, Common Stock 547,125 100% Ltd. UAG West LRP, Ltd. Common Stock 500,000 100% UAG West Sun BMW, Ltd. Common Stock 900,000 100% UAG West 6725 Dealership, Ltd. Common Stock 1,250 100% UAG West Scottsdale Management Common Stock 101,251 100% Group, Ltd. UAG West Scottsdale Audi, Ltd. Common Stock 100 100% LAS Landers United Auto Common Stock 10 100% Group, Inc. LAS Landers United Auto Common Stock 10 100% Group No. 2, Inc. LAS Landers United Auto Common Stock 10 100% Group No. 3, Inc. Borrower UAG Atlanta, Inc. Common Stock 100 100% UAG Atlanta Toyota, Inc. Common Stock 1,000 100% Atlanta Borrower UAG Atlanta IV, Inc. Common Stock 100 100% UAG UAG Atlanta IV Motors, Common Stock 1,001 100% Atlanta Inc. IV (fka Charles Evans BMW, Inc.) Borrower UAG Texas, Inc. Common Stock 100 100% Borrower UAG Texas II, Inc. Common Stock 100 100% Borrower United AutoCare, Inc. Common Stock 100 100% Borrower United AutoCare Common Stock 100 100% Products, Inc. Borrower UAG Capital Common Stock 100 100% Management, Inc. Pledged Instruments ------------------- Original Issuer of Pledged Principal Pledgor Instrument Issue Date Amount - ------- ---------- ---------- ------ Borrower UAG Atlanta II, Inc. May 1, 1996 $11,450,000 Borrower UAG Atlanta III, Inc. July 12, 1996 $11,000,000 Schedule II Pledged Interests ----------------- Partnership Interest Pledged Pledgor Partnership Hereunder - ------- ----------- --------- DPI Fair Hyundai Partnership 70% UAG Northeast Fair Hyundai Partnership 30% DPI Fair Chevrolet-Geo Partnership 70% UAG Northeast Fair Chevrolet-Geo Partnership 30% DPI Danbury Auto Partnership 70% UAG Northeast Danbury Auto Partnership 30% DPI Danbury Chrysler Plymouth Partnership 70% UAG Northeast Danbury Chrysler Plymouth Partnership 30% DPI HCT Hudson Motors Partnership 70% Hudson Toyota Hudson Motors Partnership 30% DPI DiFeo Hyundai Partnership 70% UAG Northeast DiFeo Hyundai Partnership 30% DPI J&F Oldsmobile Partnership 70% UAG Northeast J&F Oldsmobile Partnership 30% DPI DiFeo Chevrolet-Geo Partnership 70% UAG Northeast DiFeo Chevrolet-Geo Partnership 30% DPI DiFeo Chrysler Plymouth Jeep Eagle 70% Partnership UAG Northeast DiFeo Chrysler Plymouth Jeep Eagle 30% Partnership DPI VIII OCT Partnership 70% UAG Northeast OCT Partnership 30% DPI IX OCM Partnership 70% UAG Northeast OCM Partnership 30% DPI SCT Somerset Motors Partnership 70% Somerset Motors Somerset Motors Partnership 30% DPI DiFeo BMW Partnership 70% UAG Northeast DiFeo BMW Partnership 30% DPI RCT Country Auto Group Partnership 70% UAG Northeast (NY) Country Auto Group Partnership 30% DPI RCM Rockland Motors Partnership 70% UAG Northeast (NY) Rockland Motors Partnership 30% SA 6725 Agent Partnership 50% SK Motors 6725 Agent Partnership 50% UAG Texas Shannon Automotive, Ltd. 99% UAG Texas II Shannon Automotive, Ltd. 1% DPI DiFeo Leasing Partnership 70% UAG Northeast DiFeo Leasing Partnership 30% Schedule III UCC Filing Locations -------------------- - ------------------------------------------------------------------------------- DEBTOR FILING LOCATION(S) - ------------------------------------------------------------------------------- United Auto Group, Inc. New York Secretary of State New York City Register - ------------------------------------------------------------------------------- United Landers, Inc. New York Secretary of State New York City Register Arkansas Secretary of State Saline County Clerk Pulaski County Clerk Garland County Clerk - ------------------------------------------------------------------------------- DiFeo Partnership, Inc. New York Secretary of State New York City Register Rockland County Clerk New Jersey Secretary of State Hudson County Clerk Ocean County Clerk Somerset County Clerk Bergen County Clerk Connecticut Secretary of State Town of Danbury Clerk - ------------------------------------------------------------------------------- UAG West, Inc. New York Secretary of State New York City Register Arizona Secretary of State Maricopa County Clerk - ------------------------------------------------------------------------------- Landers Auto Sales, Inc. New York Secretary of State New York City Register Arkansas Secretary of State Saline County Clerk Pulaski County Clerk Garland County Clerk - ------------------------------------------------------------------------------- UAG Atlanta, Inc. New York Secretary of State New York City Register Gwinnett County Clerk - ------------------------------------------------------------------------------- UAG Atlanta IV, Inc. New York Secretary of State New York City Register Gwinnett County Clerk - ------------------------------------------------------------------------------- UAG Northeast, Inc. New York Secretary of State New York City Register Rockland County Clerk New Jersey Secretary of State Hudson County Clerk Ocean County Clerk Connecticut Secretary of State Town of Danbury Clerk - ------------------------------------------------------------------------------- DiFeo Partnership HCT, Inc. New York Secretary of State New York City Register New Jersey Secretary of State Hudson County Clerk - ------------------------------------------------------------------------------- Hudson Toyota, Inc. New York Secretary of State New York City Register New Jersey Secretary of State Hudson County Clerk - ------------------------------------------------------------------------------- DiFeo Partnership VIII, Inc. New York Secretary of State New York City Register New Jersey Secretary of State Hudson County Clerk Ocean County Clerk - ------------------------------------------------------------------------------- DiFeo Partnership IX, Inc. New York Secretary of State New York City Register New Jersey Secretary of State Hudson County Clerk Ocean County Clerk - ------------------------------------------------------------------------------- DiFeo Partnership SCT, Inc. New York Secretary of State New York City Register New Jersey Secretary of State Hudson County Clerk Somerset County Clerk - ------------------------------------------------------------------------------- DiFeo Partnership RCT, Inc. New York Secretary of State New York City Register Rockland County Clerk New Jersey Secretary of State Hudson County Clerk - ------------------------------------------------------------------------------- Somerset Motors, Inc. New York Secretary of State New York City Register New Jersey Secretary of State Hudson County Clerk Somerset County Clerk - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- UAG Northeast (NY), Inc. New York Secretary of State New York City Register Rockland County Clerk - ------------------------------------------------------------------------------- DiFeo Partnership RCM, Inc. New York Secretary of State New York City Register Rockland County Clerk New Jersey Secretary of State Hudson County Clerk - ------------------------------------------------------------------------------- Scottsdale Audi, Ltd. Arizona Secretary of State Maricopa County Clerk - ------------------------------------------------------------------------------- SK Motors, Ltd. Arizona Secretary of State Maricopa County Clerk - ------------------------------------------------------------------------------- UAG Texas, Inc. New York Secretary of State New York City Register Texas Secretary of State Houston County Clerk - ------------------------------------------------------------------------------- UAG Texas II, Inc. New York Secretary of State New York City Register Texas Secretary of State Houston County Clerk - ------------------------------------------------------------------------------- Schedule IV Atlantic Auto Financing Agreements ---------------------------------- 1. Support Agreement, dated as of June 28, 1995, between the Borrower and Atlantic Auto Funding Corporation. (This agreement may not be modified without the consent of Financial Security Assurance Inc.) 2. Support Agreement, dated as of June 14, 1996, between the Borrower and Atlantic Auto Second Funding Corporation. EX-10.11.7 6 BANK OF AMERICA AGREEMENT BANK OF AMERICA AUTOMOBILE FLOORING AND SECURITY AGREEMENT ============================================================================== This Agreement dated as of March 6, 1997, is between Bank of America National Trust and Savings Association, successor by merger to Bank of America Arizona (the "Bank") and Shannon Automotive, Ltd. (the "Borrower"). 1. DEFINITIONS In addition to the terms which are defined elsewhere in this Agreement, the following terms have the meanings indicated for the purposes of this Agreement: "ADVANCE" means an advance made to the Borrower or on the Borrower's behalf under this Agreement. "BANKING DAY" means a day other than a Saturday or a Sunday on which the Bank is open for business in Arizona. All payments and disbursements which would be due on a day which is not a Banking Day will be due on the next Banking Day. All payments received on a day which is not a Banking Day will be applied to the credit on the next Banking Day. "COLLATERAL" means the collateral required by Article 4 of this Agreement. "COMMERCIAL VEHICLE" means a Vehicle of more than 1-1/2 ton rated capacity. "DEALER TRADE" means a New Vehicle obtained by the Borrower from another dealer in trade. "DEMO" means any New Vehicle which is designated by the Borrower with the consent of the Bank to be used as a demonstration unit. "FLEET SALE" means (a) an agreement by the Borrower to sell more than one Vehicle to the same purchaser, or (b) a series of sales by the Borrower of more than one Vehicle to the same purchaser, unless the amount due from the purchaser for each Vehicle is paid in full before the next Vehicle is sold. "FLEET SALE PURCHASE CONTRACT" means the contract or contracts between the Borrower and the purchaser under a Fleet Sale, including any delivery agreement, purchase order, or other document evidencing the Fleet Sale and its terms. "NEW VEHICLE" means a Vehicle which has never been owned except by a manufacturer, distributor or dealer, has never been registered; and has not been driven more than 400 miles. "NON-COMMERCIAL VEHICLE" means a Vehicle which is not a Commercial Vehicle. "PAYMENT COMMITMENT" means a commitment entered into between the Bank and a manufacturer or distributor, providing for payment of funds directly by the Bank to the manufacturer or distributor in payment for the purchase of a New Vehicle by the Borrower. "PROGRAM VEHICLE" means a Used Vehicle which is obtained directly from the manufacturer or distributor, which is from the current or prior model year, and which has mileage not in excess of 25,000 miles. "RENTAL VEHICLE" means a Vehicle which is held by the Borrower for short-term rentals, which short-term rentals shall not exceed two (2) weeks. "REFERENCE RATE" is the rate of interest publicly announced from time to time by Bank of America National Trust and Savings Association ("BofA California") as its "reference rate". The Reference Rate is set by BofA California based on various factors, including BofA California's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans. The Bank and BofA California may price loans to its customers at, above, or below the Reference Rate. Any change in the Reference Rate will take effect at the opening of business on the day specified in the public announcement of a change in BofA California's Reference Rate. "RECREATIONAL VEHICLE" ("RV") means a vehicular-type unit primarily designed as temporary living quarters for recreational, camping, travel, or seasonal use that either has its own motive power or is mounted on, or towed by, another vehicle. "RELATED PRINCIPAL PORTION" means, with respect to each Vehicle, the amount of principal advanced under this Agreement to finance that Vehicle. "USED VEHICLE" means a Vehicle other than a New Vehicle. "VEHICLE" means an automobile or truck which satisfies the following requirements: (a) The vehicle is owned by the Borrower free of any title defects or any liens or interests of others except the security interest in favor of the Bank and other liens to which the Bank consents in writing. (b) Unless the vehicle is a Demo or is in transit from the seller, it is permanently located at locations which the Borrower has disclosed to the Bank and which are acceptable to the Bank. If the vehicle is in transit from a seller, then upon receipt by the Borrower it will -2- be permanently located at such locations disclosed to the Bank. (c) The vehicle is held for sale in the ordinary course of the Borrower's business and is of good and merchantable quality. (d) The vehicle is otherwise acceptable to the Bank. 2. LINE OF CREDIT AMOUNT AND TERMS 2.1. COMMITMENT. During the availability period described below, upon the specific request of the Borrower or pursuant to a Payment Commitment, the Bank will make Advances to the Borrower to finance Vehicles. Each Advance must be used for one of the purposes described in this Agreement. The amount of the line of credit (the "Commitment") is Twenty Million and No/100 Dollars ($20,000,000.00). The Borrower agrees not to permit the outstanding principal balance of the line of credit to exceed the Commitment. 2.2. AVAILABILITY PERIOD. The line of credit is available between the date of this Agreement and April 30, 1998 (the "Expiration Date") unless the Borrower is in default. 2.3. PURPOSE OF ADVANCES. Advances may be made: (a) to finance the acquisition of New Vehicles and Program Vehicles directly from the manufacturer or distributor pursuant to a Payment Commitment; (b) to finance the acquisition of New Vehicles through Dealer Trades; (c) to finance other New Vehicles owned by the Borrower; or (d) to finance Used Vehicles owned or acquired by the Borrower. 2.4. ADVANCES FOR NEW NON-COMMERCIAL VEHICLES. (a) The principal amount of Advances made to finance New Non-Commercial Vehicles, (including Advances for Demos under Paragraph 2.6 below, and including Fleet Sales) shall not exceed Seventeen Million and No/100 Dollars ($17,000,000.00) outstanding at any one time. (b) The principal amount of Advances outstanding at any one time made to finance New Non-Commercial Vehicles (including Demos and including Fleet Sales) from the manufacturers or distributors listed below shall not exceed the dollar limits stated below. (Advances shall not be made with respect to New Non-Commercial Vehicles from manufacturers or distributors not listed below without the prior consent of the Bank.) Manufacturer/Distributor Dollar Amount Within Line Fleet Limit - ------------------------ ------------- ----------------------- Dodge $9,000,000.00 ($5,000,000.00) Chrysler/Plymouth/Jeep/Eagle $8,000,000.00 ($3,500,000.00) -3- (c) Each Advance to finance New Non-Commercial Vehicles shall not exceed an amount equal to one hundred percent (100%) of the amount of the invoice for the Vehicles. In the case of Dealer Trades, the Advance shall not exceed an amount equal to one hundred percent (100%) of the acquisition cost for the Dealer Trade. 2.5. ADVANCES FOR RENTAL VEHICLES. (a) The principal amount of Advances made to finance Rental Vehicles shall not exceed Five Hundred Thousand and No/100 Dollars ($500,000.00) outstanding at any one time. (b) The principal amount of Advances outstanding at any one time made to finance Rental Vehicles from the manufacturers or distributors listed below shall not exceed the following dollar limits (advances shall not be made with respect to Rental Vehicles from manufacturers or distributors not listed below without prior written consent of the Bank): Manufacturer Dollar Amount - ------------ ------------- Dodge/Chrysler/Plymouth/Jeep/Eagle $500,000.00 (c) Each Advance to finance New Rental Vehicles will be One Hundred percent (100%) of manufacturers invoice. (d) Each Advance to finance Used Rental Vehicles shall not exceed the lesser of One Hundred percent (100%) of acquisition cost or eighty percent (80%) of wholesale value as determined by the Bank. 2.6. ADVANCES FOR DEMOS. (a) The principal amount of Advances made to finance Demos shall not exceed Seven Hundred Thousand and No/100 Dollars ($700,000.00) outstanding at any one time. (b) Within the foregoing limit, the principal amount of Advances outstanding at any one time made to finance Demos from the manufacturers or distributors listed below shall not exceed the dollar limits stated below, and the Borrower shall have no more than the number of Demos indicated from that Manufacturer/Distributor at any one time. Manufacturer/Distributor Number of Demos Dollar Amount - ------------------------ --------------- ------------- Dodge 10 $200,000.00 Chrysler/Plymouth/Jeep/Eagle 25 $500,000.00 (c) The Borrower shall have no more than 35 Demos at any one time. -4- (d) Each Advance to finance a Demo shall be subject to the percent limitations stated in subparagraph 2.4(c) above. 2.7. ADVANCES FOR NEW COMMERCIAL VEHICLES. No New Commercial Vehicles may be financed under this Agreement. 2.8. ADVANCES FOR USED VEHICLES. (a) The principal amount of Advances made to finance Used Vehicles shall not exceed Five Hundred Thousand and No/100 Dollars ($500,000.00) outstanding at any one time. (b) Each Advance to finance Used Vehicles shall not exceed the lesser of eighty percent (80%) of wholesale value as determined by the Bank or 100% of acquisition cost. As a condition precedent for Used Vehicles to be eligible for financing by Bank, Used Vehicles must be: (i) listed in a current used car guide acceptable to the Bank; and (ii) aged less than five (5) years of current model year. 2.9. ADVANCES FOR PROGRAM VEHICLES. (a) The principal amount of Advances made to finance Program Vehicles shall not exceed the amount outstanding at any one time as indicated from that Manufacturer/Distributor listed below: Manufacturer/Distributor Amount - ------------------------ ------ Dodge $1,000,000.00 Chrysler/Plymouth/Jeep/Eagle $1,000,000.00 (b) Each Advance to finance Program Vehicles shall not exceed an amount equal to one hundred percent (100%) of the amount of invoice for the Program Vehicles. Notwithstanding the above paragraphs 2.4, 2.5, 2.6, 2.8 and 2.9, at the Bank's sole option, Bank may redistribute the above dollar limits referenced in paragraphs 2.4, 2.5, 2.6, 2.8 and 2.9. 2.10. ADVANCES FOR USED COMMERCIAL VEHICLES. No Used Vehicle which is Commercial Vehicle may be financed under this Agreement. 2.11. ADVANCES FOR FLEET SALES. In addition to the requirements set forth above, for Fleet Sales of Non-Commercial Vehicles with a total consideration of Five Hundred Thousand and No/100 Dollars ($500,000.00) or more, the Borrower shall provide to the Bank a copy of the Fleet Sale Purchase Contract and an executed Bank form Assignment of Proceeds covering the Fleet Sale immediately following consummation of the Fleet Sale Purchase Contract. Such Assignment of Proceeds may require special language acceptable to the Bank if the Borrower has executed a power of attorney allowing the fleet purchaser to order Vehicles directly from the manufacturer. -5- 2.12. ADVANCES IN EXCESS OF LIMITATIONS. The Bank shall have no obligation to make an Advance which would cause the principal amount outstanding under this Agreement to exceed the Commitment or any of the other limitations stated in this Agreement; including, without limitation, Advances made pursuant to a Payment Commitment or in response to a specific request by the Borrower. Notwithstanding the foregoing, the Borrower shall remain liable for any Advances in excess of such limitations. Upon demand by the Bank, the Borrower shall immediately pay to the Bank the amount of any excess over such limitations. 2.13. PAYMENT COMMITMENT. The Bank is authorized to make Advances on the Borrower's behalf directly to individual manufacturers or distributors of Vehicles listed above, in accordance with the terms and conditions of the Payment Commitment agreed to between the Bank and each manufacturer or distributor. The Bank may revise, terminate or suspend a Payment Commitment at any time by giving written notice to the manufacturer or distributor. The Borrower shall remain liable to the Bank for all payments made to a manufacturer or distributor pursuant to a Payment Commitment. 2.14. AUTHORIZATION. The Borrower authorizes and requests the Bank to furnish each manufacturer or distributor listed above information reflecting the flooring line of credit provided by this Agreement. The Bank is further instructed and authorized to advise said manufacturer or distributor of any change or termination which may occur with respect to said flooring line of credit. 2.15. DEMONSTRATION VEHICLES; USED VEHICLES. (a) The Borrower may designate certain Vehicles financed under this Agreement as Demos, in accordance with procedures and criteria established by the Bank. Unless otherwise stipulated by the Bank in writing, the Bank shall have the right to inspect each demo at least monthly. (b) For each Demo with mileage in excess of 6,000 miles, the Borrower shall repay the Related Principal Portion in monthly installments on the fifteenth (15th) day of each month following the date that the mileage on the applicable Demo reaches 6,000. Each installment shall be in an amount equal to three percent (3%) of the original amount of the Related Principal Portion of the applicable Demo. Notwithstanding what may otherwise be provided in this paragraph 2.15, any remaining unpaid amount(s) of the Related Principal Portion shall be repaid in full in accordance with the provisions of paragraph 2.16 below. (c) Demos shall be used only for demonstration purposes and shall at all times be under the direct control of the Borrower; provided, however, that the Borrower may allow -6- a prospective purchaser to use a Demo. The Borrower assumes full responsibility for the use, operation, maintenance and care of Demos, including all damage thereto, and assumes full responsibility of loss. (d) Except as modified in this paragraph, all other provisions of this Agreement shall apply to Demos. (e) The Borrower agrees that no Used Vehicle financed under this Agreement other than a Demo shall be driven more than 6,000 additional miles over the mileage at the time it is acquired by the Borrower. 2.16. PRINCIPAL PAYMENTS. The Borrower will repay in full all principal outstanding under this Agreement on the earlier of the Expiration Date or the date(s) determined as follows: (a) For Advances made to finance New Non-commercial Vehicles (except Fleet Sales): For each financed Vehicle, the Borrower shall pay the Bank the Related Principal Portion by the earlier of (i) three (3) Banking Days following receipt of proceeds from sale of the Vehicle, or (ii) ten (10) Banking Days following the date of the sale of the Vehicle. If the Vehicle is not earlier sold, a monthly principal reduction equal to ten percent (10%) of the Related Principal Portion will be paid by the Borrower on the fifteenth (15th) day of the next calendar month with respect to any New Vehicle with an unpaid balance at the end of three hundred sixty (360) calendar days from the original date of Advance for such Vehicle and continue for ninety (90) days until a seventy percent (70%) Loan to Original Value is achieved at which time no curtailments will be due for ninety (90) days at the end of such period the vehicle(s) must be paid off in full. (b) For Advances made to finance Used Non-commercial Vehicles, including Program Vehicles: For each financed Vehicle, the Borrower shall pay the Bank the Related Principal Portion by the earlier of (i) three (3) Banking Days following receipt of proceeds from sale of the Vehicle, or (ii) ten (10) Banking Days following the date of sale of the Vehicle. If the Vehicle is not earlier sold, a monthly principal reduction equal to ten percent (10%) of the Related Principal Portion will be paid by Borrower on the fifteenth day of the next month with respect to any Used or Program Vehicle with an unpaid balance at the end of ninety (90) calendar days from the original date of Advance for such Vehicle. If any Related Principal Portion remains after one hundred eighty (180) calendar days from the original date of Advance for any such Vehicle, the Borrower shall pay the Bank the remaining Related Principal Portion. -7- (c) For Fleet Sales: For each financed Vehicle sold, as part of a Fleet Sale, the Borrower shall pay the Bank the Related Principal Portion by the earliest of: (i) For Harris County, Texas only: (1) the next two (2) Banking Days following receipt of proceeds from sale of the Vehicle, (2) forty-five (45) calendar days following the date of sale of the Vehicle, or (3) the date specified for payment for the Vehicles by the purchaser in the Fleet Sale Purchase Contract. (ii) All other Fleet Sales: (1) the next two (2) Banking Days following receipt of proceeds from sale of the Vehicle, (2) thirty (30) calendar days following the date of sale of the Vehicle, or (3) the date specified for payment for the Vehicles by the purchaser in the Fleet Sale Purchase Contract. (d) For Advances made to finance Rental Vehicles: For each financed Vehicle which is a Rental Vehicle, the Borrower shall pay the Bank the Related Principal Portion as follows: (1) Three percent (3%) of the original amount of the Related Principal Portion shall be paid to the Bank on the fifteenth (15th) day of each calendar month, beginning on the fifteenth (15th) day of the first (1st) calendar month that the Vehicle became a Rental Vehicle; (2) The remaining unpaid Related Principal Balance for any Rental Vehicle shall be due and payable on the fifteenth (15th) day of the twenty fourth (24th) calendar month following the date that the Vehicle became a Rental Vehicle. (3) Upon sale of a Rental Vehicle, the entire unpaid Related Principal Portion shall be due and payable by the earlier of (i) three (3) Banking Days following receipt of proceeds from sale of the Vehicle, or (ii) ten (10) Banking Days following the date of the sale of the Vehicle. For the purposes of this paragraph, if the Borrower disposes of a Vehicle by a dealer trade or otherwise or if the Vehicle ceases to meet the criteria contained in the definition of Vehicle in this Agreement, such event will be considered to be a sale of the Vehicle. (e) Optional Payments: In addition to any payments otherwise required by this Agreement, the Borrower may reduce the principal balance outstanding under this Agreement subject to the following: -8- (i) At the Borrower's request, the Bank will establish for the Borrower a Dealer Cash Management (DCM) Account. The DCM Account is not a deposit account, and the Borrower shall have no right or interest in any balance in such account, except as provided by this sub-paragraph. The DCM Account is intended for the sole purpose of recording voluntary reductions in principal under this Agreement. Any voluntary reduction is available for new Advances under the simplified procedures of this sub-paragraph. (ii) The Borrower may, at its discretion, make payments to the DCM Account. (iii) The balance in the DCM Account will be applied to reduce the outstanding aggregate Related Principal Portion for New and/or Used Vehicles including Program Vehicles only for the purpose of computation of interest and any required net free collected balances, and shall in no way limit or modify the principal payment requirements set forth elsewhere in this Agreement. (iv) Any balance in the DCM Account may be reborrowed as a new Advance by submitting a written or telephonic request pursuant to procedures established by the Bank. Such Advance shall be subject to all the terms and conditions of this Agreement, except for the provisions in Paragraph 6.7, "Conditions to Each Advance." (v) Payment into and Advances from the DCM Account must be in amounts of at least $100,000, except the Borrower may obtain an Advance in the amount of the remaining balance in the DCM Account if such amount is less than $100,000. (vi) The total balance in the DCM Account may not exceed twenty percent (20%) of the aggregate outstanding Related Principal Portion for New Vehicles and/or Used Vehicles including Program Vehicles. (vii) The DCM Account shall bear interest per annum at 0.00 basis points less than the lowest effective rate of interest charged on the Revolving Line. Any change in the interest rate shall take effect on the same day as the interest rate change on the Revolving Line. All interest and fees, if any, will be computed on the basis of a 360-day year and the actual days elapsed. This will result in more interest or a higher fee than if a 365-day year were used. -9- (viii) Information regarding the DCM Account will be provided in the monthly statement described in Paragraph 2.20. (ix) The Bank may terminate the optional payments provided by this sub-paragraph at any time at the Bank's sole discretion by providing at least ten days written notice to the Borrower. In addition, the Bank may terminate this sub-paragraph without prior notice if the Borrower is in breach of any term or condition of this Agreement. (x) Notwithstanding any other provision in this subparagraph, any balance in the DCM Account may not be used to reduce any principal amount outstanding for purposes of determining any remaining availability under the Commitment or any of the other limitations stated in this Agreement. (xi) Subject to the provisions of this Agreement, upon the happening of an event of default as defined in Article 10 below (subject to any notice and right to cure periods provided therein), Bank may, at its option and without further demand or notice to the Borrower, retain all monies in the DCM Account apply the proceeds to the Revolving Line debt in such order and amounts as Bank elects in its sole and absolute discretion. 2.17. INTEREST RATE. (a) Unless the Borrower elects an optional interest rate as described below, the entire principal amount outstanding under this Agreement shall bear interest at the following rates per annum: (i) The Related Principal Portion of the principal amount outstanding under this Agreement for all New Vehicles shall bear interest at the Reference Rate; and (ii) The Related Principal Portion of the principal amount outstanding under this Agreement for all Program shall bear interest at the Reference Rate; and (iii) The Related Principal Portion of the principal amount outstanding under this Agreement for all Used Vehicles and Rental Vehicles shall bear interest at the Reference Rate plus 0.25 percentage points. -10- (b) The Borrower will pay interest for each month on the fifteenth (15th) day of the next month, but no later than the Expiration Date. (c) Except as otherwise stated in this Agreement, all interest and fees, if any, will be computed on the basis of a 360-day year and actual number of days elapsed. This results in more interest or a higher fee than if a 365-day year is used. 2.18. OPTIONAL INTEREST RATES. Instead of the interest rate based on the Reference Rate, the Borrower may elect to have all or portions of the line of credit for New, Used, Program, and Rental Vehicles (during the availability period) bear interest at the rate(s) described below during an interest period agreed to by the Bank and the Borrower. Each interest rate is a rate per year. Interest will be paid for each month on the fifteenth (15th) day of the next month. At the end of any interest period, the interest rate will revert to the rate based on the Reference Rate, unless the Borrower has designated another optional interest rate for the portion. 2.19. FIXED RATE. The Borrower may elect to have all or portions of the principal balance of the line of credit bear interest at the Fixed Rate, subject to the following requirements: (a) The "Fixed Rate" means the fixed interest rate the Bank and the Borrower agree will apply to the portion during the applicable interest period. (b) The interest period during which the Fixed Rate will be in effect will be one year or less. (c) Each Fixed Rate portion will be for an amount not less than the following: (i) for interest periods of 14 days or longer, Five Hundred Thousand Dollars ($500,000) (ii) for interest periods of 1 to 3 days, Five Million Dollars ($5,000,000) (iii) for interest periods of between 4 days and 13 days, an amount which, when multiplied by the number of days in the applicable interest period, is not less than fifteen million (15,000,000) dollar-days. (d) The Borrower may not elect a Fixed Rate with respect to any portion of the principal balance of the line of credit which is scheduled to be repaid before the last day of the applicable interest period. -11- (e) Any portion of the principal balance of the line of credit already bearing interest at the Fixed Rate will not be converted to a different rate during its interest period. (f) The Borrower may prepay the loan in full or in part at any time. The prepayment will be applied to the most remote installment of principal due under this Agreement. (g) Each prepayment of a Fixed Rate portion, whether voluntary, by reason of acceleration or otherwise, will be accompanied by the amount of accrued interest on the amount prepaid, and a prepayment fee equal to the amount (if any) by which: (i) the additional interest which would have been payable on the amount prepaid had it not been paid until the last day of the interest period, exceeds (ii) the interest which would have been recoverable by the Bank by placing the amount prepaid on deposit in the certificate of deposit market for a period starting on the date on which it was prepaid and ending on the last day of the interest period for such portion. 2.20. MONTHLY STATEMENTS. The monthly statements provided by the Bank shall be conclusively presumed to be correct and accurate, unless the Borrower delivers to the Bank a written objection specifying the errors the Borrower believes were made, within thirty (30) days after the Bank mails the statement. 2.21. INTEREST ON LATE PAYMENTS. At the Bank's sole option in each instance, any amount not paid when due under this Agreement (including interest) shall bear interest from the due date at the Reference Rate plus 0.50 percentage points. This may result in compounding of interest. 2.22. DEFAULT RATE. Upon the occurrence and during the continuation of any default under this Agreement, Advances under this Agreement will at the option of the Bank bear interest at a rate per annum which is 2.00 percentage point(s) higher than the rate of interest otherwise provided under this Agreement. This will not constitute a waiver of any default. 3. EXPENSES 3.1. EXPENSES. The Borrower agrees to immediately repay the Bank for expenses that include, but are not limited to, filing, recording and search fees, appraisal fees, title report fees, and documentation fees. -12- 3.2. REIMBURSEMENT COSTS. (a) The Borrower agrees to reimburse the Bank for any expenses it incurs in the preparation of this Agreement and any agreement or instrument required by this Agreement. Expenses include, but are not limited to, reasonable attorneys' fees, including any allocated costs of the Bank's in-house counsel. 4. COLLATERAL 4.1. PERSONAL PROPERTY. The Borrower's obligations to the Bank under this Agreement will be secured by and Bank is hereby granted a security interest in the following personal property: (a) all inventory now owned or hereafter acquired by Borrower; (b) all accounts, contract rights, chattel paper, deposit accounts, instruments and general intangibles now owned or hereafter acquired by Borrower; (c) all negotiable and non-negotiable documents of title now owned or hereafter acquired by Borrower; (d) all rights under contract of insurance now owned or hereafter acquired by Borrower covering any of the above-described properties; (e) all proceeds now owned or hereafter acquired by Borrower of any of the above-described properties; and (f) all books and records now owned or hereafter acquired by Borrower pertaining to any of the above-described property, including but not limited to any computer-readable memory and any computer hardware or software necessary to process such memory. In addition, all personal property Collateral securing this Agreement shall also secure all other present and future obligations of the Borrower to the Bank (excluding any consumer credit covered by the federal Truth in Lending law, unless the Borrower otherwise agreed in writing). All personal property collateral securing any other present or future obligations of the Borrower to the Bank shall also secure this Agreement. 5. DISBURSEMENTS, PAYMENTS AND COSTS 5.1. REQUESTS FOR CREDIT. Each request for an extension of credit will be made pursuant to a Payment Commitment; in writing in a format acceptable to the Bank; or by another means acceptable to the Bank. -13- 5.2. DISBURSEMENTS AND PAYMENTS. Each disbursement by the Bank and each payment by the Borrower will be: (a) made at Dealer Corporate Service #55030, 2727 South 48th Street, Tempe, Arizona 85282, or such other location as selected by the Bank from time to time; (b) made in immediately available funds, or such other type of funds as may be selected by the Bank. (c) evidenced by records kept by the Bank. In addition, the Bank may, at its discretion, require the Borrower to sign one or more promissory notes. 5.3. TELEPHONE AND TELEFAX AUTHORIZATION. (a) The Bank may honor telephone or telefax instructions for advances or repayments or for the designation of optional interest rates given by any one of the individual signer(s) of this Agreement or a person or persons authorized by any one of the signer(s) of this Agreement. (b) Advances will be deposited in and repayments will be withdrawn from the Borrower's accounts with the Bank or such other financial institution as designated in writing by the Borrower. (c) The Borrower indemnifies and excuses the Bank (including its officers, employees, and agents) from all liability, loss, and costs in connection with any act resulting from telephone or telefax instructions it reasonably believes are made by any individual authorized by the Borrower to give such instructions. This indemnity and excuse will survive this Agreement's termination. 5.4. DIRECT DEBIT. (a) The Borrower agrees that interest will be deducted automatically on the due date from Borrower's account, at such financial institutions as designated in writing by the Borrower (the "Designated Account"). In addition, principal payments may, at the discretion of the Bank, be deducted automatically on the due date from this checking account. Nothing in this paragraph shall relieve the Borrower of the obligation to pay an Advance from the proceeds of the sale of the Related Vehicle within the time limits specified under the "Principal Payments" section above. (b) The Bank will debit the account on the dates the payments become due. If a due date does not fall on a banking day, the Bank will debit the account on the first banking day following the due date. -14- (c) The Borrower will maintain sufficient funds in the account on the dates the Bank enters debits authorized by this Agreement. If there are insufficient funds in the account on the date the Bank enters any debit authorized by this Agreement, the debit will be reversed. 5.5. TAXES. The Borrower will not deduct any taxes from any payments it makes to the Bank. If any government authority imposes any taxes on any payments made by the Borrower, the Borrower will pay the taxes and will also pay to the Bank, at the time interest is paid, any additional amount which the Bank specifies as necessary to preserve the after-tax yield the Bank would have received if such taxes had not been imposed. Upon request by the Bank, the Borrower will confirm that it has paid the taxes by giving the Bank official tax receipts (or notarized copies) within 30 days after the due date. However, the Borrower will not pay the Bank's net income taxes. 5.6. ADDITIONAL COSTS. The Borrower will pay the Bank, on demand, for the Bank's costs or losses relating to Advances made hereunder, arising from any statute or regulation or any request or requirement of a regulatory agency. The costs and losses will be allocated to the Advances in a manner determined by the Bank, using any reasonable method. The costs include the following: (a) any reserve or deposit requirements; and (b) any capital requirements relating to the Bank's assets and commitments for credit. 6. CONDITIONS The Bank must receive the following items, in form and content acceptable to the Bank in its sole and absolute discretion, before it is required to extend any credit to the Borrower under this Agreement: 6.1. AUTHORIZATIONS. Evidence that the execution, delivery and performance by the Borrower and each guarantor and subordinating creditor of this Agreement and any instrument or agreement required under this Agreement have been duly authorized. 6.2. GOVERNING DOCUMENTS. A copy of the Borrower's partnership agreement. Borrower agrees to provide Bank with any amendments or modifications to the partnership agreement within 30 days of execution. 6.3. SECURITY AGREEMENTS. Signed original security agreements, assignments, financing statements and fixture filings (together with Collateral in which the Bank requires a possessory security interest), which the Bank requires. 6.4. EVIDENCE OF PRIORITY. Evidence that security interests and liens in favor of the Bank are valid, enforceable, and prior -15- to all others' rights and interests, except those the Bank consents to in writing. 6.5. INSURANCE. Evidence of insurance coverage, as required in the "Covenants" section of this Agreement. 6.6. ENVIRONMENTAL QUESTIONNAIRE. A completed Bank form Environmental Questionnaire and Disclosure Statement. 6.7. GUARANTIES. Guaranties signed by United Auto Group, Inc. ("UAG"), UAG Texas, Inc. ("UAGTX"), and UAG Texas II, Inc. ("UAGTXII") on the Bank's standard form in an amount as may be acceptable, from time to time, to the Bank. 6.8. CONDITIONS TO EACH ADVANCE. As a condition precedent to the making of any Advance hereunder, including the first, the Borrower shall deliver to the Bank the following: (a) For Advances made under a Payment Commitment: Manufacturer/Distributor invoice, cashdraft, electronic record, depository transfer check, sight draft, or such other documents as specified in the applicable Payment Commitment, identifying the Related Vehicles delivered or to be delivered to the Borrower. (b) For Advances made to finance Used Vehicles: Certificate of Ownership showing a release by the previous registered and legal owners for the Related Vehicles and, for Program Vehicles, the Manufacturer/Distributor invoice. (c) For Advances made to finance Dealer Trades: Copy of original invoice (or substitute acceptable to the Bank) and bill of sale duly executed by the parties to the transaction, evidencing the acquisition cost to the Borrower of such trades. (d) For Advances made to finance Fleet Sales: Copy of the Fleet Sale Purchase Contract(s) and the Assignment of Proceeds, if required under this Agreement, in form and content acceptable to the Bank. (e) For Advances made to finance any other New Vehicle (including Program Vehicles): Manufacturer/Distributor invoice or such other documents identifying a New Vehicle owned by the Borrower. (f) For Advances made to finance Rental Vehicles: Certificate of Title showing Bank as lienholder. 6.9. OTHER ITEMS. Any other items that the Bank reasonably requires. -16- 7. REPRESENTATIONS AND WARRANTIES When the Borrower signs this Agreement, and until the Bank is repaid in full, the Borrower makes the following representations and warranties. Each request for an extension of credit constitutes a renewed representation: 7.1. ORGANIZATION OF BORROWER. The Borrower is a partnership duly formed and existing under the laws of the state where organized. 7.2. AUTHORIZATION. This Agreement, and any instrument or agreement required hereunder, are within the powers of the Borrower and, as the case may be of each Guarantor or other party thereto, and have been duly authorized, and do not conflict with any of such party's organizational papers. 7.3. ENFORCEABLE AGREEMENT. This Agreement, and each other agreement or document executed by the Borrower, any Guarantor or any other party and delivered to the Bank in connection with this Agreement, is a legal, valid and binding agreement of such party enforceable against such party in accordance with its terms, and any instrument or agreement required hereunder, when executed and delivered, will be similarly legal, valid, binding and enforceable. 7.4. GOOD STANDING. In each state in which the Borrower does business, it is property licensed, in good standing, and, where required, in compliance with fictitious or assumed name statutes. 7.5. NO CONFLICTS. This Agreement does not conflict with any law, agreement, or obligation by which the Borrower is bound. 7.6. FINANCIAL INFORMATION. All financial and other information that has been or will be supplied to the Bank (including, but not limited to, the Borrower's Proforma Balance Sheet prepared January 21, 1997 showing the Shannon/UAG Buy-Out adjustments) is: (a) sufficiently complete to give the Bank accurate knowledge of the Borrower's and any guarantors historical and proforma financial condition. (b) in form and content required by the Bank. (c) in compliance with all government regulations that apply. Since the date of the financial statement and proforma specified above, there has been no material adverse change in the assets or the financial condition of the Borrower or any guarantor. 7.7. LAWSUITS. There is no lawsuit, tax claim or other dispute pending or threatened against the Borrower which, if lost, would impair the Borrower's financial condition or ability -17- to repay the loan, except as has been disclosed in writing to the Bank prior to the date of this Agreement. 7.8. COLLATERAL. All Collateral is owned by the grantor of the security interest free of any title defects or any liens or interests of others. 7.9. PERMITS, FRANCHISES. The Borrower possesses all permits, memberships, franchises, contracts and licenses required and all trademark rights, trade name rights, patent rights and fictitious or assumed name rights necessary to enable it to conduct the business in which it is now engaged. 7.10. OTHER OBLIGATIONS. The Borrower is not in default on any obligation for borrowed money, any purchase money obligation or any other material lease, commitment, contract, instrument or obligation. 7.11. INCOME TAX RETURNS. The Borrower has no knowledge of any pending assessments or adjustments of its income tax for any year. 7.12. NO EVENT OF DEFAULT. There is no event which is, or with notice or lapse of time or both would be, a default under this Agreement. 7.13. LOCATION OF BORROWER. The Borrower's place of business (or, if the Borrower has more than one place of business, its chief executive office) is located at the address listed under the Borrower's signature on this Agreement. 8. COVENANTS The Borrower agrees, so long as credit is available under this Agreement and until the Bank is repaid in full: 8.1. USE OF PROCEEDS. To use the proceeds of the credit only for financing Vehicles as contemplated by this Agreement. 8.2. LOCATION OF VEHICLES. To keep the Vehicles only at the Borrower's regular dealer locations as approved from time to time by the Bank, except (a) Demos may be moved to other locations and demonstrated in accordance with the terms and conditions established by the Bank; and (b) Vehicles subject to a Fleet Sale Purchase Contract approved by the Bank may be located as provided therein and (c) Rental Vehicles may be located as provided in the Rental Agreement. For purpose of this Agreement, "Rental Agreement' means any rental agreement used by Borrower, the form and substance of which has been approved by Bank in its sole and absolute discretion. 8.3. MAINTENANCE OF COLLATERAL. To maintain and care for the Collateral and keep the Collateral free from all liens and encumbrances, of any kind, except for the Bank's security interests. -18- 8.4. SALE OF COLLATERAL. Not to sell, contract for sale or otherwise dispose of any Collateral except in the ordinary course of business. 8.5. NOTICE REGARDING COLLATERAL. To notify Bank in writing of any event which effects the value of any Collateral, the ability of Borrower or Bank to dispose of any Collateral, or the rights and remedies of Bank in relation thereto, including, but not limited to, the levy of any legal process against any Collateral and the adoption of any marketing order, arrangement or procedure affecting the Collateral, whether governmental or otherwise. 8.6. DELIVERY OF CERTAIN DOCUMENTS. To immediately deliver to Bank any negotiable document of title including any warehouse receipt or bill of lading, if any Collateral is or becomes the subject of such document. 8.7. COLLECTIONS. Unless Bank exercises its rights to make collection, to diligently collect all Collateral. 8.8. ADDITIONAL REQUIREMENTS REGARDING COLLATERAL. At the option of the Bank, whether or not the Borrower is in default: (a) To segregate all collections and proceeds of Collateral so that they are capable of identification and deliver daily such collections and proceeds to Bank in kind; (b) To deliver to Bank (i) copies of or extracts from its books and records, and (ii) information on any contracts or other matters affecting the Collateral; and (c) To permit Bank to examine the Collateral, including the books and records, and make copies or extracts from the books and records, and for such purposes enter at any reasonable time upon the property where any Collateral or any books and records are located. 8.9. TAXES. To pay all federal, state & local taxes or assessments pertaining to the Borrower's business or the Vehicles. 8.10. FINANCIAL INFORMATION. To provide the following financial information and statements and such additional information as may be requested by the Bank from time to time: (a) Within 120 days of UAG's fiscal year end, UAG's annual financial statements. These financial statements must be audited by a Certified Public Accountant ("CPA") acceptable to the Bank. The statements shall be prepared on a consolidated and consolidating basis showing UAGTXII, UAGTX and/or Shannon Automotive, Ltd. as separate entities. Such consolidating statement may be -19- in the form of CPA supplementary schedule(s) or work papers. (b) Copies of each financial statement delivered to a manufacturer or distributor as required by the dealership franchise agreement with such manufacturer or distributor, within 30 days of such delivery. (c) Copies of the Borrower's annual projections by 90 days of each fiscal year end. (d) Copies of the Borrower's consolidated Form 10-K, Annual Report and Form l0-Q Quarterly Report within 30 days after the date of filing with the Securities and Exchange Commission. 8.11. CURRENT RATIO. To maintain a ratio of current assets to current liabilities of at least 1.15:1.0, measured quarterly. For the purposes of this paragraph, inventory asset values shall be based on actual cost. 8.12. WORKING CAPITAL. To maintain current assets in excess of current liabilities by at least Three Million Five Hundred Thousand and No/100 Dollars ($3,500,000.00), measured quarterly. For the purposes of this paragraph, inventory asset values shall be based on actual cost. 8.13. TANGIBLE NET WORTH. To maintain tangible net worth equal to at least Four Million Eight Hundred Thousand and No/100 Dollars ($4,800,000.00), measured quarterly. "Tangible net worth" means the gross book value of the Borrower's assets (excluding goodwill, patents, trademarks, trade names, organization expense, treasury stock, unamortized debt discount and expense, deferred research and development costs, deferred marketing expenses, other non-franchised assets, and other like intangibles, and monies due from affiliates, officers, directors or shareholders of the Borrower) less total liabilities, including but not limited to accrued and deferred income taxes, and any reserves against assets. For the purposes of this paragraph, inventory asset values shall be based on actual cost. 8.14. TOTAL LIABILITIES TO TANGIBLE NET WORTH. To maintain a ratio of Total Liabilities to Tangible Net Worth not exceeding 4.50:1.0, measured quarterly. "Total Liabilities" means the sum of current liabilities plus long term liabilities. 8.15. PROFITABILITY. To maintain a positive net income before taxes for each year end accounting period, of which 10% must be retained by the Borrower. -20- 8.16. OTHER DEBTS. Not to have outstanding or incur any direct or contingent debts or lease obligations (other than those to the Bank), or become liable for the debts of others without the Bank's written consent. This does not prohibit: (a) Acquiring goods, supplies, or merchandise on normal trade credit. (b) Endorsing negotiable instruments received in the usual course of business. (c) Obtaining surety bonds in the usual course of business. (d) Debts and lines of credit and leases in existence on the date of this Agreement disclosed in writing to the Bank. (e) Additional debts and lease obligations for the acquisition of fixed or capital assets and for business purposes which do not exceed a total principal amount of Two Hundred Thousand and No/100 Dollars ($200,000.00) outstanding at any one time. (f) Contingent liabilities ("Contingent Liabilities") of the Borrower shall be permitted up to a total of Fifty Million and No/100 Dollars ($50,000,000.00) at any one time; provided, however, that such Contingent Liabilities (1) shall be limited to guarantees of indebtedness of its parent corporation, UAG; (2) such guaranteed indebtedness also requires substantially similar guarantees (in form, substance and amount) from all other UAG operating dealership subsidiaries; and (3) Borrower shall provide (or cause UAG to provide) a copy of all loan documentation supporting the guarantee(s) including the Loan Agreement(s) and any amendment(s) to the Bank within 30 days of execution of such documentation. While any such Contingent Liabilities exist, UAG shall be hereinafter referred to as the "Supported Parent". 8.17. OTHER LIENS. Not to create, assume, or allow any security interest or lien (including judicial liens) on property the Borrower now or later owns, except: (a) Deeds of trust and security agreements in favor of the Bank. (b) Liens for taxes not yet due. (c) Liens outstanding on the date of this Agreement disclosed in writing to the Bank. (d) Additional purchase money security interests in property acquired after the date of this Agreement, if the total principal amount of debts secured by such liens does not -21- exceed Two Hundred Thousand and No/100 Dollars ($200,000.00) at any one time. 8.18. CAPITAL EXPENDITURES. Not to spend (including the total amount of any capital leases) for more than Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00) in any single fiscal year to acquire fixed or capital assets. 8.19. NOTICES TO BANK. To promptly notify the Bank in writing of: (a) any lawsuit over Two Hundred Fifty Thousand and no/100 Dollars ($250,000.00) against the Borrower or any guarantor. (b) any substantial dispute between the Borrower or any guarantor and any government authority. (c) any failure to comply with this Agreement. (d) any material adverse change in the Borrower's or any guarantor's financial condition or operations. (e) any change in the Borrower's name, legal structure, place of business, or chief executive office if the Borrower has more than one place of business. (f) any material change in the relationship between the Borrower and any Vehicle manufacturer or distributor including, without limitation, the loss or cancellation, or threatened loss or cancellation, of a franchise. (g) any event which affects the value of the Collateral or the ability of the Bank or the Borrower to dispose of the Collateral. (h) any default in any Contingent Liabilities. 8.20. BOOKS AND RECORDS. To maintain correct and accurate books and records, including, but not limited to, an itemization and description of the cost, price, kind, type, quality and quantity of the Vehicles. 8.21. AUDITS. To allow the Bank and its agents to inspect the Borrower's properties, including the Vehicles, and to examine, audit and make copies of books and records at any reasonable time. If any of the Borrower's properties, Vehicles, books or records are in the possession of a third party, the Borrower authorizes that third party to permit the Bank or its agents to have access to perform inspections or audits and to respond to the Bank's requests for information concerning such properties, Vehicles, books and records. -22- 8.22. COMPLIANCE WITH LAWS. To comply with the laws (including any fictitious or assumed name statute), regulations, and orders of any government body with authority over the Borrower's business. 8.23. PRESERVATION OF RIGHTS. To maintain and preserve all rights, privileges, and franchises, including dealer franchises, the Borrower now has. 8.24. MAINTENANCE OF PROPERTIES. To make any repairs, renewals, or replacements to keep the Borrower's properties in good working condition. 8.25. PERFECTION OF LIENS. To help the Bank perfect and protect its security interests and liens, and reimburse it for related costs it incurs to protect its security interests and liens. 8.26. COOPERATION. To take any action requested by the Bank to carry out the intent of this Agreement. 8.27. INSURANCE. (a) Insurance Covering Collateral. To maintain all risk property damage insurance policies covering the tangible property comprising the Collateral. Each insurance policy must be in an amount acceptable to the Bank. The insurance must be issued by an insurance company acceptable to the Bank and must include a lender's loss payable endorsement in favor of the Bank in a form acceptable to the Bank. (b) General Business Insurance. To maintain insurance satisfactory to the Bank as to amount, nature and carrier covering property damage (including loss of use and occupancy) to any of the Borrower's properties, public liability insurance including coverage for contractual liability, product liability and workers' compensation, and any other insurance which is usual for the Borrower's business. (c) Evidence of Insurance. Upon the request of the Bank, to deliver to the Bank a copy of each insurance policy or, if permitted by the Bank, a certificate of insurance listing all insurance in force. 8.28. ADDITIONAL NEGATIVE COVENANTS. Not to, without the Bank's written consent: (a) engage in any business activities substantially different from the Borrower's present business. (b) liquidate or dissolve the Borrower's business. -23- (c) enter into any consolidation, merger, pool, joint venture, syndicate, or other combination. (d) lease or dispose of all or a substantial part of the Borrower's business or the Borrower's assets. (e) acquire or purchase a business or its assets. (f) sell or otherwise dispose of any assets for less than fair market value or enter into any sale and leaseback agreement covering any of its fixed or capital assets. (g) voluntarily suspend its business. 9. HAZARDOUS WASTE INDEMNIFICATION The Borrower will indemnify and hold harmless the Bank from any loss or liability directly or indirectly arising out of the use, generation, manufacture, production, storage, release, threatened release, discharge, disposal or presence of a hazardous substance. This indemnity will apply whether the hazardous substance is on, under or about the Borrower's property or operations or property leased to the Borrower. The indemnity includes but is not limited to attorneys' fees (including the reasonable estimate of the allocated cost of in-house counsel and staff). The indemnity extends to the Bank, its parent, subsidiaries and all of their directors, officers, employees, agents, successors, attorneys and assigns. For these purposes, the term "hazardous substances" means any substance which is or becomes designated as "hazardous" or "toxic" under any federal, state or local law. This indemnity will survive repayment of the Borrower's obligations to the Bank. 10. DEFAULT If any of the following events occur, the Bank may do one or more of the following: declare the Borrower in default, stop making any additional credit available to the Borrower, and require the Borrower to repay its entire debt immediately and without prior notice. If an event of default occurs under the paragraph entitled "Bankruptcy" below with respect to the Borrower, the entire debt outstanding under this Agreement will automatically be due immediately. 10.1. FAILURE TO PAY. The Borrower fails to make a payment under this Agreement when due. 10.2. LIEN PRIORITY. The Bank fails to have an enforceable first lien (except for any prior liens to which the Bank has consented in writing) on or security interest in any property given as security for this loan. 10.3. OTHER LIENS. Any levies of attachment, executions, tax assessments or similar proceedings shall be brought against the Collateral. -24- 10.4. FALSE INFORMATION. The Borrower or any guarantor has given the Bank false or misleading information or representations. 10.5. BANKRUPTCY. The Borrower, any guarantor, any general partner of the Borrower, or the Supported Parent files a bankruptcy petition, a bankruptcy petition is filed against the Borrower, any guarantor, any general partner of the Borrower, or the Supported Parent, or the Borrower, any guarantor, any general partner of the Borrower, or the Supported Parent makes a general assignment for the benefit of creditors. 10.6. RECEIVERS. A receiver or similar official is appointed for the Borrower's or any guarantor's business, or the business is terminated. 10.7. LAWSUITS. Any lawsuit or lawsuits are filed on behalf of one or more trade creditors against the Borrower in an aggregate amount of Seven Hundred Fifty Thousand and No/100 Dollars ($750,000.00) or more in excess of any insurance coverage. 10.8. JUDGMENTS. Any judgments or arbitration awards are entered against the Borrower or any guarantor, or the Borrower or any guarantor enters into any settlement agreements with respect to any litigation or arbitration, in an aggregate amount of One Hundred Thousand and No/100 Dollars ($100,000.00) or more in excess of any insurance coverage. 10.9. GOVERNMENT ACTION. Any government authority takes action that the Bank believes materially adversely affects the Borrower's or any guarantors financial condition or ability to repay. 10.10. MATERIAL ADVERSE CHANGE. A material adverse change occurs in the Borrower's or any guarantor's financial condition, properties or prospects, or such parties ability to repay the extensions of credit under this Agreement and, as applicable, under any guaranty. 10.11. CROSS-DEFAULT. Any default occurs under any agreement in connection with any credit the Borrower or any guarantor has obtained from anyone else or which the Borrower or any guarantor has guaranteed. 10.12. DEFAULT UNDER RELATED DOCUMENTS. A breach or default has occurred under any guaranty, subordination agreement, security agreement, deed of trust, or other document required by this Agreement or such document (unless any such termination is consented to in writing by Bank) no longer in effect, or is revoked in whole or in part. 10.13. OTHER BANK AGREEMENTS. The Borrower or any guarantor fails to meet the conditions of, or fails to perform any obligation under any -25- other agreement the Borrower or any guarantor has with the Bank or any affiliate of the Bank. 10.14. OTHER BREACH UNDER AGREEMENT. The Borrower fails to meet the conditions of, or fails to perform any obligation under, any term of this Agreement not specifically referred to in this Article. 11. ADDITIONAL REMEDIES AFTER DEFAULT In the event of any default as described in Article 10 of this Agreement, in addition to the remedies set forth in such Article, Bank may do any one or more of the following: (a) Require Borrower to deliver to Bank any instruments or chattel paper. (b) Require Borrower to obtain Bank's prior written consent to any sale, lease, agreement to sell or lease, or other disposition of any inventory. (c) Notify any account debtors, any buyers of the Collateral, or any other persons of Bank's interest in the Collateral. (d) Require Borrower to direct all account debtors to forward all payments and proceeds of the Collateral to a post office box under Bank's exclusive control. (e) Demand and collect any payments and proceeds of the Collateral. In connection therewith Borrower irrevocably authorizes Bank to endorse or sign Borrower's name on all checks, drafts, collections, receipts and other documents, and to take possession of and open the mail addressed to Borrower and remove therefrom any payments and proceeds of the Collateral. (f) Enforce the security interest given hereunder pursuant to the Uniform Commercial Code and any other applicable law. (g) Enforce the security interest of Bank in any deposit account of Borrower maintained with Bank by applying such account to the indebtedness. (h) Require Borrower to assemble the Collateral, including the books and records, and make them available to Bank at a place designated by Bank. (i) Enter upon the property where any Collateral, including any books and records are located and take possession of such Collateral and such books and records, and use such property (including any buildings and facilities) and any of Borrower's equipment, if Bank deems such use necessary or advisable in order to take possession of, hold, preserve, process, assemble, prepare for sale or lease, -26- market for sale or lease, sell or lease, or otherwise dispose of, any Collateral. (j) Grant extensions and compromise or settle claims with respect to the Collateral for less than face value, all without prior notice to Borrower. (k) Use or transfer any of Borrower's rights and interest in any Intellectual Property now owned or hereafter acquired by Borrower, if Bank deems such use or transfer necessary or advisable in order to take possession of, hold, preserve, process, assemble, prepare for sale or lease, market for sale or lease, sell or lease, or otherwise dispose of, any Collateral. Borrower agrees that such use or transfer shall be without any additional consideration to Borrower. As used in this paragraph, "Intellectual Property" includes, but is not limited to, all trade secrets, computer software, service marks, trademarks, trade names, trade styles, copyrights, patents, applications for any of the foregoing, customer lists, working drawings, instructional manuals, and rights in processes for technical manufacturing, packaging and labeling in which Borrower has any right or interest, whether by ownership, license, contract or otherwise. (l) Have a receiver appointed by any court of competent jurisdiction to take possession of the Collateral. (m) Take such measures as Bank may deem necessary or advisable to take possession of, hold, preserve, process, assemble, insure, prepare for sale or lease, market for sale or lease, sell or lease, or otherwise dispose of, any Collateral, and Borrower hereby irrevocably constitutes and appoints Bank as Borrower's attorney-in-fact to perform all acts and execute all documents in connection therewith. 12. ENFORCING THIS AGREEMENT; MISCELLANEOUS 12.1. GAAP. Except as otherwise stated in this Agreement, all financial information provided to the Bank and all financial covenants will be made under generally accepted accounting principles, consistently applied. 12.2. ARIZONA LAW. THIS AGREEMENT IS GOVERNED BY ARIZONA LAW. 12.3. SUCCESSORS AND ASSIGNS. This Agreement is binding on the Borrower's and the Bank's successors and assignees. The Borrower agrees that it may not assign this Agreement without the Bank's prior consent. The Bank may sell participations in or assign this loan, and may exchange financial information about the Borrower with actual or potential participants or assignees. If -27- a participation is sold or the loan is assigned, the purchaser will have the right of set-off against the Borrower. 12.4. ARBITRATION. (a) This paragraph concerns the resolution of any controversies or claims between the Borrower and the Bank, including but not limited to those that arise from: (i) This Agreement (including any renewals, extensions or modifications of this Agreement); (ii) Any document, agreement or procedure related to or delivered in connection with this Agreement; (iii) Any violation of this Agreement; or (iv) Any claims for damages resulting from any business conducted between the Borrower and the Bank, including claims for injury to persons, property or business interests (torts). (b) At the request of the Borrower or the Bank, any such controversies or claims will be settled by arbitration in accordance with the United States Arbitration Act. THE UNITED STATES ARBITRATION ACT WILL APPLY EVEN THOUGH ITS AGREEMENT PROVIDES THAT IT IS GOVERNED BY ARIZONA LAW. (c) Arbitration proceedings will be administered by the American Arbitration Association and will be subject to its commercial rules of arbitration. (d) For purposes of the application of the statute of limitations, the filing of an arbitration pursuant to this paragraph is the equivalent of the filing of a lawsuit, and any claim or controversy which may be arbitrated under this paragraph is subject to any applicable statute of limitations. The arbitrators will have the authority to decide whether any such claim or controversy is barred by the statute of limitations and, if so, to dismiss the arbitration on that basis. (e) If there is a dispute as to whether an issue is arbitrable, the arbitrators will have the authority to resolve any such dispute. (f) The decision that results from an arbitration proceeding may be submitted to any authorized court of law to be confirmed and enforced. (g) This provision does not limit the right of the Borrower or the Bank to: (i) exercise self-help remedies such as setoff; -28- (ii) foreclose against or sell any real or personal property collateral; or (iii) act in a court of law, before, during or after the arbitration proceeding to obtain: (A) an interim remedy; and/or (B) additional or supplementary remedies. (h) The pursuit of or a successful action for interim, additional or supplementary remedies, or the filing of a court action, does not constitute a waiver of the right of the Borrower or the Bank, including the suing party, to submit the controversy or claim to arbitration if the other party contests the lawsuit. (i) If the Bank forecloses against any real property securing this Agreement, the Bank has the option to exercise the power of sale under the deed of trust or mortgage, or to proceed by judicial foreclosure. 12.5. SEVERABILITY; WAIVERS. If any part of this Agreement is not enforceable, the rest of the Agreement may be enforced. The Bank retains all rights, even if it makes a loan after default. If the Bank waives a default, it may enforce a later default. Any consent or waiver under this Agreement must be in writing. 12.6. ADMINISTRATION COSTS. The Borrower shall pay the Bank for all reasonable costs incurred by the Bank in connection with administering this Agreement. 12.7. ATTORNEYS' FEES. The Borrower shall reimburse the Bank for any reasonable costs and attorneys' fees incurred by the Bank in connection with the enforcement or preservation of any rights or remedies under this Agreement and any other documents executed in connection with this Agreement, and including any amendment, waiver, "workout" or restructuring under this Agreement. In the event of a lawsuit or arbitration proceeding, the prevailing party is entitled to recover costs and reasonable attorneys' fees incurred in connection with the lawsuit or arbitration proceeding, as determined by the court or arbitrator. As used in this paragraph, "attorneys' fees" includes the allocated costs of in-house counsel. 12.8. ONE AGREEMENT. This Agreement and any related security or other agreements required by this Agreement, collectively: (a) represent the sum of the understandings and agreements between the Bank and the Borrower concerning this credit; and (b) replace any prior oral or written agreements between the Bank and the Borrower concerning this credit; and -29- (c) are intended by the Bank and the Borrower as the final, complete and exclusive statement of the terms agreed to by them. In the event of any conflict between this Agreement and any other agreements required by this Agreement, this Agreement will prevail. 12.9. EXCHANGE OF INFORMATION. The Borrower agrees that the Bank may exchange financial information about the Borrower with BankAmerica Corporation affiliates and other related entities. 12.10. USURY LAWS. This paragraph covers the transactions described in this Agreement and any other agreements with the Bank or its affiliates executed in connection with this Agreement, to the extent they are subject to the Arizona usury laws (the "Transactions"). The Borrower understands and believes that the Transactions comply with the Arizona usury laws. However, if any interest or other charges paid or payable in connection with the Transactions are ever determined to exceed the maximum amount permitted by law, the Borrower agrees that: (a) the amount of interest or other charges payable by the Borrower pursuant to the Transactions shall be reduced to the maximum amount permitted by law; and (b) any excess amount previously collected from the Borrower in connection with the Transactions which exceeded the maximum amount permitted by law will be credited against the then outstanding principal balance. If the outstanding principal balance has been repaid in full, the excess amount paid will be refunded to the Borrower. All fees, charges, goods, things in action or any other sums or things of value, other than interest at the interest rate described in this Agreement, paid or payable by the Borrower (collectively the "Additional Sums"), that may be deemed to be interest with respect to the Transactions, shall, for the purpose of any laws of the State of Arizona that may limit the maximum amount of interest to be charged with respect to the Transactions, be payable by Borrower as, and shall be deemed to be, additional interest. For such purposes only, the agreed upon and "contracted for rate of interest" of the Transactions shall be deemed to be increased by the rate of interest resulting from the Additional Sums. 12.11. NOTICES. All notices required under this Agreement shall be personally delivered or sent by first class mail, postage prepaid, to the addresses on the signature page of this Agreement, or to such other addresses as the Bank and the Borrower may specify from time to time in writing. 12.12. REMEDIES. All rights and remedies herein provided are cumulative and not exclusive of any rights or remedies otherwise -30- provided by law. Any single or partial exercise of any right or remedy shall not preclude the further exercise thereof or the exercise of any other right or remedy. 12.13. OTHER DOCUMENTS. Borrower shall, at the request of Bank, execute such other agreements, documents, instruments, or financing statements in connection with this agreement as Bank may reasonably deem necessary. 12.14. HEADINGS. Article and paragraph headings are for reference only and shall not affect the interpretation or meaning of any provisions of this Agreement. 12.15. COUNTERPARTS. This Agreement may be executed in as many counterparts as necessary or convenient, and by the different parties on separate counterparts each of which, when so executed, shall be deemed an original but all such counterparts shall constitute but one and the same agreement. 12.16. PRIOR AGREEMENT SUPERSEDED. This Agreement supersedes the Automobile Flooring and Security Agreement entered into as of June 18, 1996, between the Bank and the Borrower, as such agreement may have been amended from time to time prior to the date hereof, and any credit outstanding thereunder shall be deemed to be outstanding under this Agreement. -31- This Agreement is executed as of the date stated at the top of the first page. BANK OF AMERICA NATIONAL TRUST SHANNON AUTOMOTIVE, LTD. AND SAVINGS ASSOCIATION BY: UAG TEXAS II, INC. General Partner By: /s/ M. Patricia Kay ------------------------------- M. Patricia Kay, Vice President By: /s/ K.J. Coffey ------------------------------- Kevin J. Coffey, President By: /s/ George G. Lowrance ------------------------------- Address where notices to the Bank George G. Lowrance, Vice are to be sent: President & Secretary Dealer Corporate Services #55030 BY: UAG TEXAS, INC. 2727 South 48th Street Limited Partner Tempe, Arizona 85282 By: /s/ K.J. Coffey ------------------------------- Kevin J. Coffey, President By: /s/ George G. Lowrance ------------------------------- George G. Lowrance, Vice President & Secretary Address where notices to the Borrower are to be sent: 16835 Katy Freeway Houston, Texas 77094 -32- BANK OF AMERICA AMENDMENT TO DOCUMENTS ============================================================================== FIRST AMENDMENT TO AUTOMOBILE FLOORING AND SECURITY AGREEMENT This First Amendment to Automobile Flooring and Security Agreement is entered into as of March 26, 1997, between Bank of America National Trust and Savings Association (the "Bank") and Shannon Automotive, Ltd. (the "Borrower"). RECITALS -------- A. WHEREAS, Bank and Borrower have entered into that certain Automobile Flooring and Security Agreement dated March 6, 1997, (the "Agreement"); and B. WHEREAS, Borrower and Bank desire to amend certain terms and provisions of said Agreement as more specifically hereinafter set forth. AGREED ------ NOW, THEREFORE, in consideration of the foregoing recitals, Bank and Borrower mutually agree to amend said Agreement as follows: 1. Paragraph 8.13 (Tangible Net Worth) of the Agreement is amended in its entirety to read as follows: 8.13 TANGIBLE NET WORTH. To maintain tangible net worth equal to the amounts indicated for each quarterly period specified below: Period Amounts - ------ ------- March 31, 1997 $4,600,000.00 June 30, 1997 and thereafter $4,800,000.00 "Tangible net worth" means the gross book value of the Borrower's assets (excluding goodwill, patents, trademarks, trade names, organization expense, treasury stock, unamortized debt discount and expense, deferred research and development costs, deferred marketing expenses, other non-franchise assets, and other like intangibles, and monies due from affiliates, officers, directors or shareholders of the Borrower) less total liabilities, including but not limited to accrued and deferred income taxes, and any reserves against assets. For the purposes of this paragraph, inventory asset values shall be based on actual cost. This Amendment will become effective as of March 26, 1997 (the "Effective Date"), provided that each of the following conditions precedent have been satisfied: The Bank has received from the Borrower a duly executed original of this Amendment, together with a duly executed Guarantor Acknowledgment and Consent in the form attached hereto (the "Consent"). Except as provided in this Amendment, all of the terms and provisions of the Agreement shall remain in full force and effect. This Amendment shall be effective between the parties as of the date hereof. The Agreement, as amended hereby, shall hereinafter constitute the Agreement between the parties. IN WITNESS WHEREOF, this Amendment has been executed by the parties hereto as of the date first written above. BANK OF AMERICA NATIONAL TRUST SHANNON AUTOMOTIVE, LTD. AND SAVINGS ASSOCIATION By: UAG TEXAS II, INC. General Partner /s/ M. Patricia Kay - ----------------------------- By: M. Patricia Kay, Vice President By: /s/ Kevin J. Coffey ---------------------------- Kevin J. Coffey, President By: ---------------------------- George G. Lowrance, Vice President & Secretary By: UAG TEXAS, INC., Limited Partner By: /s/ Kevin J. Coffey ---------------------------- Kevin J. Coffey, President By: ---------------------------- George G. Lowrance, Vice President & Secretary -2- shall hereinafter constitute the Agreement between the parties. IN WITNESS WHEREOF, this Amendment has been executed by the parties hereto as of the date first written above. BANK OF AMERICA NATIONAL TRUST SHANNON AUTOMOTIVE, LTD. AND SAVINGS ASSOCIATION By: UAG TEXAS II, INC. General Partner /s/ M. Patricia Kay - ----------------------------- By: M. Patricia Kay, Vice President By: ---------------------------- Kevin J. Coffey, President By: /s/ George G. Lowrance ---------------------------- George G. Lowrance, Vice President & Secretary By: UAG TEXAS, INC., Limited Partner By: ---------------------------- Kevin J. Coffey, President By: ---------------------------- George G. Lowrance, Vice President & Secretary -2- GUARANTOR ACKNOWLEDGMENT AND CONSENT ----------- The undersigned, each a guarantor or third party pledgor with respect to the Borrower's obligations to the Bank under the Agreement, each hereby (i) acknowledge and consent to the execution, delivery, and performance by Borrower of the foregoing First Amendment to Agreement (the "Amendment"), and (ii) reaffirm and agree that the respective guaranty, third party pledge or security agreement to which the undersigned is party and all other documents and agreements executed and delivered by the undersigned to the Bank in connection with the Agreement are in full force and effect, without defense, offset, or counterclaim. (Capitalized terms used herein have the meanings specified in the Amendment.) UAG TEXAS, INC Dated: April 9, 1997 X /s/ Kevin J. Coffey ------------- --------------------- By: Kevin J. Coffey, President Dated: X ------------- --------------------- By: George G. Lowrance, Vice President & Secretary -3- GUARANTOR ACKNOWLEDGMENT AND CONSENT ----------- The undersigned, each a guarantor or third party pledgor with respect to the Borrower's obligations to the Bank under the Agreement, each hereby (i) acknowledge and consent to the execution, delivery, and performance by Borrower of the foregoing First Amendment to Agreement (the "Amendment"), and (ii) reaffirm and agree that the respective guaranty, third party pledge or security agreement to which the undersigned is party and all other documents and agreements executed and delivered by the undersigned to the Bank in connection with the Agreement are in full force and effect, without defense, offset, or counterclaim. (Capitalized terms used herein have the meanings specified in the Amendment.) UAG TEXAS, INC Dated: X ------------- ------------------------ By: Kevin J. Coffey, President Dated: April 9, 1997 X /s/ George G. Lowrance ------------- ------------------------ By: George G. Lowrance, Vice President & Secretary -3- GUARANTOR ACKNOWLEDGMENT AND CONSENT ----------- The undersigned, each a guarantor or third party pledgor with respect to the Borrower's obligations to the Bank under the Agreement, each hereby (i) acknowledge and consent to the execution, delivery, and performance by Borrower of the foregoing First Amendment to Agreement (the "Amendment"), and (ii) reaffirm and agree that the respective guaranty, third party pledge or security agreement to which the undersigned is party and all other documents and agreements executed and delivered by the undersigned to the Bank in connection with the Agreement are in full force and effect, without defense, offset, or counterclaim. (Capitalized terms used herein have the meanings specified in the Amendment.) UAG TEXAS II, INC. Dated: April 9, 1997 X /s/ Kevin J. Coffey ------------- --------------------- By: Kevin J. Coffey, President Dated: X ------------- --------------------- By: George G. Lowrance, Vice President & Secretary -4- GUARANTOR ACKNOWLEDGMENT AND CONSENT ----------- The undersigned, each a guarantor or third party pledgor with respect to the Borrower's obligations to the Bank under the Agreement, each hereby (i) acknowledge and consent to the execution, delivery, and performance by Borrower of the foregoing First Amendment to Agreement (the "Amendment"), and (ii) reaffirm and agree that the respective guaranty, third party pledge or security agreement to which the undersigned is party and all other documents and agreements executed and delivered by the undersigned to the Bank in connection with the Agreement are in full force and effect, without defense, offset, or counterclaim. (Capitalized terms used herein have the meanings specified in the Amendment.) UAG TEXAS II, INC. Dated: X ------------- ------------------------ By: Kevin J. Coffey, President Dated: April 9, 1997 X /s/ George G. Lowrance ------------- ------------------------ By: George G. Lowrance, Vice President & Secretary -4- GUARANTOR ACKNOWLEDGMENT AND CONSENT ----------- The undersigned, each a guarantor or third party pledgor with respect to the Borrower's obligations to the Bank under the Agreement, each hereby (i) acknowledge and consent to the execution, delivery, and performance by Borrower of the foregoing First Amendment to Agreement (the "Amendment"), and (ii) reaffirm and agree that the respective guaranty, third party pledge or security agreement to which the undersigned is party and all other documents and agreements executed and delivered by the undersigned to the Bank in connection with the Agreement are in full force and effect, without defense, offset, or counterclaim. (Capitalized terms used herein have the meanings specified in the Amendment.) UNITED AUTO GROUP, INC., a Delaware corporation Dated: April 9, 1997 X /s/ George G. Lowrance ------------- ------------------------ By: George G. Lowrance, Executive Vice President -5- EX-10.11.8 7 BANK OF AMERICA BORROWERS BANK OF AMERICA Borrowers: Shannon Automotive, Ltd. Guarantors: United Auto Group, Inc. ============================================================================== (1) For valuable consideration, the undersigned ("Guarantors") jointly and severally unconditionally guarantee and promise to pay to Bank of America National Trust and Savings Association and any other subsidiary or affiliate of BankAmerica Corporation which has extended or may hereafter extend credit to Borrowers (each a "Bank"), or order, on demand, in lawful money of the United States, any and all indebtedness of Shannon Automotive, Ltd. ("Borrowers") to Bank. The word "indebtedness" is used herein in its most comprehensive sense and includes any and all advances, debts, obligations and liabilities of Borrowers or any one or more of them, heretofore, now, or hereafter made, incurred or created, whether voluntary or involuntary and however arising, whether direct or acquired by Bank by assignment or succession, whether due or not due, absolute or contingent, liquidated or unliquidated, determined or undetermined, and whether Borrowers may be liable individually or jointly with others, or whether recovery upon such indebtedness may be or hereafter become barred by any statute of limitations, or whether such indebtedness may be or hereafter become otherwise unenforceable. (2) The liability of Guarantors under this Guaranty (exclusive of liability under any other guaranties executed by Guarantors) shall not exceed at any one time the total of (a) Twenty Million and No/100 Dollars ($20,000,000.00), for the principal amount of the indebtedness and (b) all interest, fees, and other costs and expenses relating to or arising out of the indebtedness or such part of the indebtedness as shall not exceed the foregoing limitation. Bank may permit the indebtedness of Borrowers to exceed Guarantors' liability, and may apply any amounts received from any source, other than from Guarantors, to the unguaranteed portion of Borrowers' indebtedness. This is a Continuing Guaranty relating to any indebtedness, including that arising under successive transactions which shall either continue the indebtedness or from time to time renew it after it has been satisfied. Any payment by Guarantors shall not reduce their maximum obligation hereunder, unless written notice to that effect be actually received by Bank at or prior to the time of such payment. (3) The obligations hereunder are joint and several, and independent of the obligations of Borrowers, and a separate action or actions may be brought and prosecuted against Guarantors whether action is brought against Borrowers or whether Borrowers be joined in any such action or actions and regardless of whether a trustee's sale is held under any deed of trust securing the indebtedness or regardless of whether a judicial foreclosure sale is held if any deed of trust securing the indebtedness is judicially foreclosed as a mortgage. Guarantors waive the benefit of any statute of limitations affecting their liability hereunder. (4) Guarantors authorize Bank, without notice or demand and without affecting their liability hereunder, from time to time, either before or after revocation hereof, to (a) renew, compromise, extend, accelerate or otherwise change the time for payment of, or otherwise change the terms of the indebtedness or any part thereof, including increase or decrease of the rate of interest thereon; (b) receive and hold security for the payment of this Guaranty or the indebtedness guaranteed, and exchange, enforce, waive, release, fail to perfect, sell, or otherwise dispose of any such security; (c) apply such security and direct the order or manner of sale thereof as Bank in its discretion may determine, except to the extent specifically prohibited by law; and (d) release or substitute any one or more of the endorsers or guarantors. (5) Guarantors waive any right to require Bank to (a) proceed against Borrowers; (b) proceed against or exhaust any security held from Borrowers; or (c) pursue any other remedy in Bank's power whatsoever. Guarantors waive any defense arising by reason of any disability or other defense of Borrowers, or the cessation from any cause whatsoever of the liability of Borrowers, or any claim that Guarantors' obligations exceed or are more burdensome than those of Borrowers. Guarantors waive any benefit of the provisions of Arizona Revised Statutes Sections 12-1641 and 12-1642 et seq., and Rule 17(f) of the Arizona Rules of Civil Procedures, which set forth certain rights and obligations among guarantors, debtors and creditors, to the extent applicable. Guarantors waive any right of subrogation, reimbursement, indemnification, and contribution (contractual, statutory or otherwise), including without limitation, any claim or right of subrogation under the Bankruptcy Code (Title 11 of the U.S. Code) or any successor statute, arising from the existence or performance of this Guaranty and Guarantors waive any right to enforce any remedy which Bank now has or may hereafter have against Borrowers, and waive any benefit of, and any right to participate in, any security now or hereafter held by Bank. Bank may foreclose, either by judicial foreclosure or by exercise of power of sale, any deed of trust securing the indebtedness, and, even though the foreclosure may destroy or diminish Guarantors' rights against Borrowers, Guarantors shall be liable to Bank for any part of the indebtedness remaining unpaid after the foreclosure. Guarantors waive -2- any benefit of any statutory provision limiting the right of Bank to recover a deficiency judgment, or to otherwise proceed, against any person or entity obligated for payment of the indebtedness, after any judicial foreclosure sale or trustee's sale of any collateral securing the indebtedness including, without limitation, the benefits, if any, of Arizona Revised Statutes Section 33-814, except to the extent otherwise required by law. Guarantors waive any homestead or exemption rights. Guarantors waive all presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor, and notices of acceptance of this Guaranty and of the existence, creation, or incurring of new or additional indebtedness. (6) Guarantors acknowledge and agree that they shall have the sole responsibility for obtaining from Borrowers such information concerning Borrowers' financial conditions or business operations as Guarantors may require, and that Bank has no duty at any time to disclose to Guarantors any information relating to the business operations or financial conditions of Borrowers. (7) In addition to Bank's rights of setoff, to secure all of Guarantors' obligations hereunder, Guarantors assign and grant to Bank a security interest in all moneys, securities and other property of Guarantors now or hereafter in the possession of Bank, and all deposit accounts of Guarantors maintained with Bank, and all proceeds thereof. Upon default or breach of any of Guarantors' obligations to Bank, Bank may apply any deposit account to reduce the indebtedness, and may foreclose any collateral as provided in the Uniform Commercial Code and in any security agreements between Bank and Guarantors. (8) Any obligations of Borrowers to Guarantors, now or hereafter existing, including but not limited to any obligations to Guarantors as subrogees of Bank or resulting from Guarantors' performance under this Guaranty, are hereby subordinated to the indebtedness. Such obligations of Borrowers to Guarantors if Bank so requests shall be enforced and performance received by Guarantors as trustees for Bank and the proceeds thereof shall be paid over to Bank on account of the indebtedness of Borrowers to Bank, but without reducing or affecting in any manner the liability of Guarantors under the provisions of this Guaranty. (9) This Guaranty may be revoked at any time by Guarantors in respect to future transactions, unless there is a continuing consideration as to such transactions which Guarantors do not renounce. Such revocation shall be effective upon actual receipt by Bank at the address shown below of written notice of revocation. Revocation shall not affect any of Guarantors' obligations or Bank's rights with respect to -3- transactions which precede Bank's receipt of such notice, regardless of whether or not the indebtedness related to such transactions, before or after revocation, has been renewed, compromised, extended, accelerated, or otherwise changed as to any of its terms, including time for payment or increase or decrease of the rate of interest thereon, and regardless of any other act or omission of Bank authorized hereunder. Revocation by any one or more of Guarantors shall not affect any obligations of any nonrevoking Guarantors. If this Guaranty is revoked, returned, or canceled, and subsequently any payment or transfer of any interest in property by Borrowers to Bank is rescinded or must be returned by Bank to Borrowers, this Guaranty shall be reinstated with respect to any such payment or transfer, regardless of any such prior revocation, return, or cancellation. (10) Where any one or more of Borrowers are corporations or partnerships it is not necessary for Bank to inquire into the powers of Borrowers or of the officers, directors, partners or agents acting or purporting to act on their behalf, and any indebtedness made or created in reliance upon the professed exercise of such powers shall be guaranteed hereunder. (11) Bank may, without notice to Guarantors and without affecting Guarantors' obligations hereunder, assign the indebtedness and this Guaranty, in whole or in part. Guarantors agree that Bank may disclose to any prospective purchaser and any purchaser of all or part of the indebtedness any and all information in Bank's possession concerning Guarantors, this Guaranty and any security for this Guaranty. (12) Guarantors agree to pay all attorneys' fees, the allocated costs of Bank's in-house counsel, and all other costs and expenses which may be incurred by Bank in the enforcement of this Guaranty, including without limitation all costs and necessary disbursements in any legal action or arbitration proceeding. (13) Any married person who signs this Guaranty hereby expressly agrees that recourse may be had against such person's separate property and community property to the extent permitted by law for all obligations under this Guaranty. (14) Where there is but a single Borrower, or where a single Guarantor executes this Guaranty, then all words used herein in the plural shall be deemed to have been used in the singular where the context and construction so require; and when there is more than one Borrower named herein, or when this Guaranty is executed by more than one Guarantor, the words "Borrowers" and "Guarantors" respectively shall mean all and any one or more of them. -4- (15) This Guaranty shall be governed by and construed according to the laws of the State of Arizona, to the jurisdiction of which the parties hereto submit. (16) (a) Any controversy or claim between or among the parties, including but not limited to those arising out of or relating to this Guaranty or any agreements or instruments relating hereto or delivered in connection herewith and any claim based on or arising from an alleged tort, shall at the request of any party be determined by arbitration. The arbitration shall be conducted in accordance with the United States Arbitration Act (Title 9, U.S. Code), notwithstanding any choice of law provision in this Guaranty, and under the Commercial Rules of the American Arbitration Association ("AAA"). The arbitrator(s) shall give effect to statutes of limitation in determining any claim. Any controversy concerning whether an issue is arbitrable shall be determined by the arbitrator(s). Judgment upon the arbitration award may be entered in any court having jurisdiction. The institution and maintenance of an action for judicial relief or pursuit of a provisional or ancillary remedy shall not constitute a waiver of the right of any party, including the plaintiff, to submit the controversy or claim to arbitration if any other party contests such action for judicial relief. (b) No provision of this paragraph shall limit the right of any party to this Guaranty to exercise self-help remedies such as setoff, to foreclose against or sell any real or personal property collateral or security, or to obtain provisional or ancillary remedies from a court of competent jurisdiction before, after, or during the pendency of any arbitration or other proceeding. The exercise of a remedy does not waive the right of either party to resort to arbitration. At Bank's option, foreclosure under a deed of trust or mortgage may be accomplished either by exercise of power of sale under the deed of trust or mortgage or by judicial foreclosure. Executed this 6th day of March, 1997. UNITED AUTO GROUP, INC., a Delaware corporation By: /s/ George G. Lowrance ----------------------------------------------- George G. Lowrance, Executive Vice President 325 Park Avenue New York, NY 10152 Tax I.D. No.: 22-3086739 Address for notices to Bank: Bank of America National Trust and Savings Association Dealer Corporate Services #55030 2727 South 48th Street Tempe, Arizona 85282 EX-10.11.9 8 BANK OF AMERICA UAG TEXAS, INC. BANK OF AMERICA Borrowers: Shannon Automotive, Ltd. Guarantors: UAG Texas, Inc. ============================================================================== (1) For valuable consideration, the undersigned ("Guarantors") jointly and severally unconditionally guarantee and promise to pay to Bank of America National Trust and Savings Association and any other subsidiary or affiliate of BankAmerica Corporation which has extended or may hereafter extend credit to Borrowers (each a "Bank"), or order, on demand, in lawful money of the United States, any and all indebtedness of Shannon Automotive, Ltd. ("Borrowers") to Bank. The word "indebtedness" is used herein in its most comprehensive sense and includes any and all advances, debts, obligations and liabilities of Borrowers or any one or more of them, heretofore, now, or hereafter made, incurred or created, whether voluntary or involuntary and however arising, whether direct or acquired by Bank by assignment or succession, whether due or not due, absolute or contingent, liquidated or unliquidated, determined or undetermined, and whether Borrowers may be liable individually or jointly with others, or whether recovery upon such indebtedness may be or hereafter become barred by any statute of limitations, or whether such indebtedness may be or hereafter become otherwise unenforceable. (2) The liability of Guarantors under this Guaranty (exclusive of liability under any other guaranties executed by Guarantors) shall not exceed at any one time the total of (a) Twenty Million and No/100 Dollars ($20,000,000.00), for the principal amount of the indebtedness and (b) all interest, fees, and other costs and expenses relating to or arising out of the indebtedness or such part of the indebtedness as shall not exceed the foregoing limitation. Bank may permit the indebtedness of Borrowers to exceed Guarantors' liability, and may apply any amounts received from any source, other than from Guarantors, to the unguaranteed portion of Borrowers' indebtedness. This is a Continuing Guaranty relating to any indebtedness, including that arising under successive transactions which shall either continue the indebtedness or from time to time renew it after it has been satisfied. Any payment by Guarantors shall not reduce their maximum obligation hereunder, unless written notice to that effect be actually received by Bank at or prior to the time of such payment. (3) The obligations hereunder are joint and several, and independent of the obligations of Borrowers, and a separate action or actions may be brought and prosecuted against Guarantors whether action is brought against Borrowers or whether Borrowers be joined in any such action or actions and regardless of whether a trustee's sale is held under any deed of trust securing the indebtedness or regardless of whether a judicial foreclosure sale is held if any deed of trust securing the indebtedness is judicially foreclosed as a mortgage. Guarantors waive the benefit of any statute of limitations affecting their liability hereunder. (4) Guarantors authorize Bank, without notice or demand and without affecting their liability hereunder, from time to time, either before or after revocation hereof, to (a) renew, compromise, extend, accelerate or otherwise change the time for payment of, or otherwise change the terms of the indebtedness or any part thereof, including increase or decrease of the rate of interest thereon; (b) receive and hold security for the payment of this Guaranty or the indebtedness guaranteed, and exchange, enforce, waive, release, fail to perfect, sell, or otherwise dispose of any such security; (c) apply such security and direct the order or manner of sale thereof as Bank in its discretion may determine, except to the extent specifically prohibited by law; and (d) release or substitute any one or more of the endorsers or guarantors. (5) Guarantors waive any right to require Bank to (a) proceed against Borrowers; (b) proceed against or exhaust any security held from Borrowers; or (c) pursue any other remedy in Bank's power whatsoever. Guarantors waive any defense arising by reason of any disability or other defense of Borrowers, or the cessation from any cause whatsoever of the liability of Borrowers, or any claim that Guarantors' obligations exceed or are more burdensome than those of Borrowers. Guarantors waive any benefit of the provisions of Arizona Revised Statutes Sections 12-1641 and 12-1642 et seq., and Rule 17(f) of the Arizona Rules of Civil Procedures, which set forth certain rights and obligations among guarantors, debtors and creditors, to the extent applicable. Guarantors waive any right of subrogation, reimbursement, indemnification, and contribution (contractual, statutory or otherwise), including without limitation, any claim or right of subrogation under the Bankruptcy Code (Title 11 of the U.S. Code) or any successor statute, arising from the existence or performance of this Guaranty and Guarantors waive any right to enforce any remedy which Bank now has or may hereafter have against Borrowers, and waive any benefit of, and any right to participate in, any security now or hereafter held by Bank. Bank may foreclose, either by judicial foreclosure or by exercise of power of sale, any deed of trust securing the indebtedness, and, even though the foreclosure may destroy or diminish Guarantors' rights against Borrowers, Guarantors shall be liable to Bank for any part of the indebtedness remaining unpaid after the foreclosure. Guarantors waive any benefit of any statutory provision limiting the right of Bank to recover a deficiency judgment, or to otherwise proceed, against any person or entity obligated for payment -2- of the indebtedness, after any judicial foreclosure sale or trustee's sale of any collateral securing the indebtedness including, without limitation, the benefits, if any, of Arizona Revised Statutes Section 33-814, except to the extent otherwise required by law. Guarantors waive any homestead or exemption rights. Guarantors waive all presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor, and notices of acceptance of this Guaranty and of the existence, creation, or incurring of new or additional indebtedness. (6) Guarantors acknowledge and agree that they shall have the sole responsibility for obtaining from Borrowers such information concerning Borrowers' financial conditions or business operations as Guarantors may require, and that Bank has no duty at any time to disclose to Guarantors any information relating to the business operations or financial conditions of Borrowers. (7) In addition to Bank's rights of setoff, to secure all of Guarantors' obligations hereunder, Guarantors assign and grant to Bank a security interest in all moneys, securities and other property of Guarantors now or hereafter in the possession of Bank, and all deposit accounts of Guarantors maintained with Bank, and all proceeds thereof. Upon default or breach of any of Guarantors' obligations to Bank, Bank may apply any deposit account to reduce the indebtedness, and may foreclose any collateral as provided in the Uniform Commercial Code and in any security agreements between Bank and Guarantors. (8) Any obligations of Borrowers to Guarantors, now or hereafter existing, including but not limited to any obligations to Guarantors as subrogees of Bank or resulting from Guarantors' performance under this Guaranty, are hereby subordinated to the indebtedness. Such obligations of Borrowers to Guarantors if Bank so requests shall be enforced and performance received by Guarantors as trustees for Bank and the proceeds thereof shall be paid over to Bank on account of the indebtedness of Borrowers to Bank, but without reducing or affecting in any manner the liability of Guarantors under the provisions of this Guaranty. (9) This Guaranty may be revoked at any time by Guarantors in respect to future transactions, unless there is a continuing consideration as to such transactions which Guarantors do not renounce. Such revocation shall be effective upon actual receipt by Bank at the address shown below of written notice of revocation. Revocation shall not affect any of Guarantors' obligations or Bank's rights with respect to transactions which precede Bank's receipt of such notice, regardless of whether or not the indebtedness related to such transactions, before or after revocation, has been renewed, compromised, extended, accelerated, or otherwise -3- changed as to any of its terms, including time for payment or increase or decrease of the rate of interest thereon, and regardless of any other act or omission of Bank authorized hereunder. Revocation by any one or more of Guarantors shall not affect any obligations of any nonrevoking Guarantors. If this Guaranty is revoked, returned, or canceled, and subsequently any payment or transfer of any interest in property by Borrowers to Bank is rescinded or must be returned by Bank to Borrowers, this Guaranty shall be reinstated with respect to any such payment or transfer, regardless of any such prior revocation, return, or cancellation. (10) Where any one or more of Borrowers are corporations or partnerships it is not necessary for Bank to inquire into the powers of Borrowers or of the officers, directors, partners or agents acting or purporting to act on their behalf, and any indebtedness made or created in reliance upon the professed exercise of such powers shall be guaranteed hereunder. (11) Bank may, without notice to Guarantors and without affecting Guarantors' obligations hereunder, assign the indebtedness and this Guaranty, in whole or in part. Guarantors agree that Bank may disclose to any prospective purchaser and any purchaser of all or part of the indebtedness any and all information in Bank's possession concerning Guarantors, this Guaranty and any security for this Guaranty. (12) Guarantors agree to pay all attorneys' fees, the allocated costs of Bank's in-house counsel, and all other costs and expenses which may be incurred by Bank in the enforcement of this Guaranty, including without limitation all costs and necessary disbursements in any legal action or arbitration proceeding. (13) Any married person who signs this Guaranty hereby expressly agrees that recourse may be had against such person's separate property and community property to the extent permitted by law for all obligations under this Guaranty. (14) Where there is but a single Borrower, or where a single Guarantor executes this Guaranty, then all words used herein in the plural shall be deemed to have been used in the singular where the context and construction so require; and when there is more than one Borrower named herein, or when this Guaranty is executed by more than one Guarantor, the words "Borrowers" and "Guarantors" respectively shall mean all and any one or more of them. (15) This Guaranty shall be governed by and construed according to the laws of the State of Arizona, to the jurisdiction of which the parties hereto submit. -4- (16) (a) Any controversy or claim between or among the parties, including but not limited to those arising out of or relating to this Guaranty or any agreements or instruments relating hereto or delivered in connection herewith and any claim based on or arising from an alleged tort, shall at the request of any party be determined by arbitration. The arbitration shall be conducted in accordance with the United States Arbitration Act (Title 9, U.S. Code), notwithstanding any choice of law provision in this Guaranty, and under the Commercial Rules of the American Arbitration Association ("AAA"). The arbitrator(s) shall give effect to statutes of limitation in determining any claim. Any controversy concerning whether an issue is arbitrable shall be determined by the arbitrator(s). Judgment upon the arbitration award may be entered in any court having jurisdiction. The institution and maintenance of an action for judicial relief or pursuit of a provisional or ancillary remedy shall not constitute a waiver of the right of any party, including the plaintiff, to submit the controversy or claim to arbitration if any other party contests such action for judicial relief. (b) No provision of this paragraph shall limit the right of any party to this Guaranty to exercise self-help remedies such as setoff, to foreclose against or sell any real or personal property collateral or security, or to obtain provisional or ancillary remedies from a court of competent jurisdiction before, after, or during the pendency of any arbitration or other proceeding. The exercise of a remedy does not waive the right of either party to resort to arbitration. At Bank's option, foreclosure under a deed of trust or mortgage may be accomplished either by exercise of power of sale under the deed of trust or mortgage or by judicial foreclosure. Executed this 6th day of March 1997. ----- ------- UAG TEXAS, INC. By: /s/ Kevin J. Coffey ----------------------------------- Kevin J. Coffey, President BY: /s/ George G. Lowrance ----------------------------------- George G. Lowrance, Vice President & Secretary 325 Park Avenue New York, NY 10152 Tax I.D. No.:________ President & Secretary Address for notices to Bank: Bank of America National Trust and Savings Association Dealer Corporate Services #55030 2727 South 48th Street Tempe, Arizona 85282 EX-10.11.10 9 BANK OF AMERICA UAG TEXAS II, INC. BANK OF AMERICA Borrowers: Shannon Automotive, Ltd. Guarantors: UAG Texas II, Inc. ============================================================================== (1) For valuable consideration, the undersigned ("Guarantors") jointly and severally unconditionally guarantee and promise to pay to Bank of America National Trust and Savings Association and any other subsidiary or affiliate of BankAmerica Corporation which has extended or may hereafter extend credit to Borrowers (each a "Bank"), or order, on demand, in lawful money of the United States, any and all indebtedness of Shannon Automotive, Ltd. ("Borrowers") to Bank. The word "indebtedness" is used herein in its most comprehensive sense and includes any and all advances, debts, obligations and liabilities of Borrowers or any one or more of them, heretofore, now, or hereafter made, incurred or created, whether voluntary or involuntary and however arising, whether direct or acquired by Bank by assignment or succession, whether due or not due, absolute or contingent, liquidated or unliquidated, determined or undetermined, and whether Borrowers may be liable individually or jointly with others, or whether recovery upon such indebtedness may be or hereafter become barred by any statute of limitations, or whether such indebtedness may be or hereafter become otherwise unenforceable. (2) The liability of Guarantors under this Guaranty (exclusive of liability under any other guaranties executed by Guarantors) shall not exceed at any one time the total of (a) Twenty Million and No/100 Dollars ($20,000,000.00), for the principal amount of the indebtedness and (b) all interest, fees, and other costs and expenses relating to or arising out of the indebtedness or such part of the indebtedness as shall not exceed the foregoing limitation. Bank may permit the indebtedness of Borrowers to exceed Guarantors' liability, and may apply any amounts received from any source, other than from Guarantors, to the unguaranteed portion of Borrowers' indebtedness. This is a Continuing Guaranty relating to any indebtedness, including that arising under successive transactions which shall either continue the indebtedness or from time to time renew it after it has been satisfied. Any payment by Guarantors shall not reduce their maximum obligation hereunder, unless written notice to that effect be actually received by Bank at or prior to the time of such payment. (3) The obligations hereunder are joint and several, and independent of the obligations of Borrowers, and a separate action or actions may be brought and prosecuted against Guarantors whether action is brought against Borrowers or whether Borrowers be joined in any such action or actions and regardless of whether a trustee's sale is held under any deed of trust securing the indebtedness or regardless of whether a judicial foreclosure sale is held if any deed of trust securing the indebtedness is judicially foreclosed as a mortgage. Guarantors waive the benefit of any statute of limitations affecting their liability hereunder. (4) Guarantors authorize Bank, without notice or demand and without affecting their liability hereunder, from time to time, either before or after revocation hereof, to (a) renew, compromise, extend, accelerate or otherwise change the time for payment of, or otherwise change the terms of the indebtedness or any part thereof, including increase or decrease of the rate of interest thereon; (b) receive and hold security for the payment of this Guaranty or the indebtedness guaranteed, and exchange, enforce, waive, release, fail to perfect, sell, or otherwise dispose of any such security; (c) apply such security and direct the order or manner of sale thereof as Bank in its discretion may determine, except to the extent specifically prohibited by law; and (d) release or substitute any one or more of the endorsers or guarantors. (5) Guarantors waive any right to require Bank to (a) proceed against Borrowers; (b) proceed against or exhaust any security held from Borrowers; or (c) pursue any other remedy in Bank's power whatsoever. Guarantors waive any defense arising by reason of any disability or other defense of Borrowers, or the cessation from any cause whatsoever of the liability of Borrowers, or any claim that Guarantors' obligations exceed or are more burdensome than those of Borrowers. Guarantors waive any benefit of the provisions of Arizona Revised Statutes Sections 12-1641 and 12-1642 et seq., and Rule 17(f) of the Arizona Rules of Civil Procedures, which set forth certain rights and obligations among guarantors, debtors and creditors, to the extent applicable. Guarantors waive any right of subrogation, reimbursement, indemnification, and contribution (contractual, statutory or otherwise), including without limitation, any claim or right of subrogation under the Bankruptcy Code (Title 11 of the U.S. Code) or any successor statute, arising from the existence or performance of this Guaranty and Guarantors waive any right to enforce any remedy which Bank now has or may hereafter have against Borrowers, and waive any benefit of, and any right to participate in, any security now or hereafter held by Bank. Bank may foreclose, either by judicial foreclosure or by exercise of power of sale, any deed of trust securing the indebtedness, and, even though the foreclosure may destroy or diminish Guarantors' rights against Borrowers, Guarantors shall be liable to Bank for any part of the indebtedness remaining unpaid after the foreclosure. Guarantors waive any benefit of any statutory provision limiting the right of Bank to recover a deficiency judgment, or to otherwise -2- proceed, against any person or entity obligated for payment of the indebtedness, after any judicial foreclosure sale or trustee's sale of any collateral securing the indebtedness including, without limitation, the benefits, if any, of Arizona Revised Statutes Section 33-814, except to the extent otherwise required by law. Guarantors waive any homestead or exemption rights. Guarantors waive all presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor, and notices of acceptance of this Guaranty and of the existence, creation, or incurring of new or additional indebtedness. (6) Guarantors acknowledge and agree that they shall have the sole responsibility for obtaining from Borrowers such information concerning Borrowers' financial conditions or business operations as Guarantors may require, and that Bank has no duty at any time to disclose to Guarantors any information relating to the business operations or financial conditions of Borrowers. (7) In addition to Bank's rights of setoff, to secure all of Guarantors' obligations hereunder, Guarantors assign and grant to Bank a security interest in all moneys, securities and other property of Guarantors now or hereafter in the possession of Bank, and all deposit accounts of Guarantors maintained with Bank, and all proceeds thereof. Upon default or breach of any of Guarantors' obligations to Bank, Bank may apply any deposit account to reduce the indebtedness, and may foreclose any collateral as provided in the Uniform Commercial Code and in any security agreements between Bank and Guarantors. (8) Any obligations of Borrowers to Guarantors, now or hereafter existing, including but not limited to any obligations to Guarantors as subrogees of Bank or resulting from Guarantors' performance under this Guaranty, are hereby subordinated to the indebtedness. Such obligations of Borrowers to Guarantors if Bank so requests shall be enforced and performance received by Guarantors as trustees for Bank and the proceeds thereof shall be paid over to Bank on account of the indebtedness of Borrowers to Bank, but without reducing or affecting in any manner the liability of Guarantors under the provisions of this Guaranty. (9) This Guaranty may be revoked at any time by Guarantors in respect to future transactions, unless there is a continuing consideration as to such transactions which Guarantors do not renounce. Such revocation shall be effective upon actual receipt by Bank at the address shown below of written notice of revocation. Revocation shall not affect any of Guarantors' obligations or Bank's rights with respect to transactions which precede Bank's receipt of such notice, regardless of whether or not the indebtedness related to -3- such transactions, before or after revocation, has been renewed, compromised, extended, accelerated, or otherwise changed as to any of its terms, including time for payment or increase or decrease of the rate of interest thereon, and regardless of any other act or omission of Bank authorized hereunder. Revocation by any one or more of Guarantors shall not affect any obligations of any nonrevoking Guarantors. If this Guaranty is revoked, returned, or canceled, and subsequently any payment or transfer of any interest in property by Borrowers to Bank is rescinded or must be returned by Bank to Borrowers, this Guaranty shall be reinstated with respect to any such payment or transfer, regardless of any such prior revocation, return, or cancellation. (10) Where any one or more of Borrowers are corporations or partnerships it is not necessary for Bank to inquire into the powers of Borrowers or of the officers, directors, partners or agents acting or purporting to act on their behalf, and any indebtedness made or created in reliance upon the professed exercise of such powers shall be guaranteed hereunder. (11) Bank may, without notice to Guarantors and without affecting Guarantors' obligations hereunder, assign the indebtedness and this Guaranty, in whole or in part. Guarantors agree that Bank may disclose to any prospective purchaser and any purchaser of all or part of the indebtedness any and all information in Bank's possession concerning Guarantors, this Guaranty and any security for this Guaranty. (12) Guarantors agree to pay all attorneys' fees, the allocated costs of Bank's in-house counsel, and all other costs and expenses which may be incurred by Bank in the enforcement of this Guaranty, including without limitation all costs and necessary disbursements in any legal action or arbitration proceeding. (13) Any married person who signs this Guaranty hereby expressly agrees that recourse may be had against such person's separate property and community property to the extent permitted by law for all obligations under this Guaranty. (14) Where there is but a single Borrower, or where a single Guarantor executes this Guaranty, then all words used herein in the plural shall be deemed to have been used in the singular where the context and construction so require; and when there is more than one Borrower named herein, or when this Guaranty is executed by more than one Guarantor, the words "Borrowers" and "Guarantors" respectively shall mean all and any one or more of them. -4- (15) This Guaranty shall be governed by and construed according to the laws of the State of Arizona, to the jurisdiction of which the parties hereto submit. (16) (a) Any controversy or claim between or among the parties, including but not limited to those arising out of or relating to this Guaranty or any agreements or instruments relating hereto or delivered in connection herewith and any claim based on or arising from an alleged tort, shall at the request of any party be determined by arbitration. The arbitration shall be conducted in accordance with the United States Arbitration Act (Title 9, U.S. Code), notwithstanding any choice of law provision in this Guaranty, and under the Commercial Rules of the American Arbitration Association ("AAA"). The arbitrator(s) shall give effect to statutes of limitation in determining any claim. Any controversy concerning whether an issue is arbitrable shall be determined by the arbitrator(s). Judgment upon the arbitration award may be entered in any court having jurisdiction. The institution and maintenance of an action for judicial relief or pursuit of a provisional or ancillary remedy shall not constitute a waiver of the right of any party, including the plaintiff, to submit the controversy or claim to arbitration if any other party contests such action for judicial relief. -5- (b) No provision of this paragraph shall limit the right of any party to this Guaranty to exercise self-help remedies such as setoff, to foreclose against or sell any real or personal property collateral or security, or to obtain provisional or ancillary remedies from a court of competent jurisdiction before, after, or during the pendency of any arbitration or other proceeding. The exercise of a remedy does not waive the right of either party to resort to arbitration. At Bank's option, foreclosure under a deed of trust or mortgage may be accomplished either by exercise of power of sale under the deed of trust or mortgage or by judicial foreclosure. Executed this 6th day of March , 1997. ------- --------- UAG TEXAS II, INC. By: /s/ Kevin J. Coffey ------------------------------ Kevin J. Coffey, President By: /s/ George G. Lowrance ------------------------------ George G. Lowrance, Vice President & Secretary 325 Park Avenue New York, NY 10152 Tax I.D. No.: Address for notices to Bank: Bank of America National Trust and Savings Association Dealer Corporate Services #55030 2727 South 48th Street Tempe, Arizona 85282 -6- EX-10.13.1 10 STOCK PURCHASE AGREEMENT DATED FEBRUARY 19, 1997 STOCK PURCHASE AGREEMENT DATED FEBRUARY 19, 1997 AMONG UNITED AUTO GROUP, INC. UAG EAST, INC. AND AMITY AUTO PLAZA LTD., D/B/A AMITY TOYOTA SUPERSTORE MASSAPEQUA IMPORTS LTD., D/B/A LEXUS OF MASSAPEQUA WESTBURY NISSAN LTD., D/B/A WESTBURY NISSAN SUPERSTORE WESTBURY SUPERSTORE LTD., D/B/A WESTBURY TOYOTA J&S AUTO REFINISHING LTD., D/B/A PREMIER AUTO BODY FLORIDA CHRYSLER PLYMOUTH JEEP EAGLE INC. PALM AUTO PLAZA INC., D/B/A PALM BEACH TOYOTA WEST PALM INFINITI INC. WEST PALM NISSAN INC. NORTHLAKE AUTO FINISH INC., D/B/A TRAIL AUTO BODY AND JOHN A. STALUPPI JOHN A. STALUPPI, JR. TABLE OF CONTENTS Page ---- ARTICLE 1. PURCHASE AND SALE OF SHARES....................................2 1.1 Certain Definitions.......................................2 1.2 Purchase and Sale of the Shares...........................4 1.3 Net Worth Adjustment......................................7 1.4 New Facility..............................................9 1.5 Stock Price Adjustment....................................11 1.6 Escrow Deposit............................................11 1.7 Additional Purchase Price.................................12 1.8 Contingent Payment........................................12 1.9 Effective Date............................................12 ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANIES AND THE STOCKHOLDERS..........................13 2.1 Organization and Good Standing............................13 2.2 Subsidiaries..............................................13 2.3 Capitalization............................................13 2.4 Authority; Approvals and Consents.........................14 2.5 Financial Statements......................................15 2.6 Absence of Undisclosed Liabilities........................16 2.7 Absence of Material Adverse Effect; Conduct of Business...16 2.8 Taxes.....................................................18 2.9 Legal Matters.............................................19 2.10 Property..................................................20 2.11 Environmental Matters.....................................20 2.12 Inventories...............................................23 2.13 Accounts Receivable.......................................23 2.14 Insurance.................................................23 2.15 Contracts; etc............................................23 2.16 Labor Relations...........................................24 2.17 Employee Benefit Plans....................................25 2.18 Other Benefit and Compensation Plans or Arrangements......28 2.19 Transactions with Insiders................................29 2.20 Propriety of Past Payments................................30 2.21 Interest in Competitors...................................30 2.22 Brokers...................................................30 2.23 Accounts..................................................31 2.24 Disclosure................................................31 2.25 Net Worth.................................................31 ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS.............31 3.1 Ownership of Shares; Title................................31 3.2 Authority.................................................31 3.3 Real Property and Improvements............................32 3.4 Investment Intent.........................................33 3.5 Qualification of Stockholders.............................33 (i) ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF UAG..........................33 4.1 Organization and Good Standing............................34 4.2 Subsidiaries..............................................34 4.3 Capitalization............................................34 4.4 SEC Filings...............................................35 4.5 Authority; Approvals and Consents.........................35 4.6 Financial Statements......................................36 4.7 Taxes.....................................................37 4.8 Absence of Undisclosed Liabilities........................37 4.9 Legal Matters.............................................37 4.10 Disclosure................................................38 4.11 Absence of Material Adverse Effect; Conduct of Business...38 4.12 Insurance.................................................39 4.13 Labor Relations...........................................40 4.14 Contracts; Etc............................................41 4.15 Brokers...................................................41 4.16 Propriety of Past Payments................................41 4.17 Environmental Matters.....................................42 4.18 Employee Benefit Plans....................................42 ARTICLE 5. COVENANTS AND ADDITIONAL AGREEMENTS............................42 5.1 Access; Confidentiality...................................42 5.2 Furnishing Information; Announcements.....................43 5.3 Antitrust Improvements Act Compliance.....................43 5.4 Certain Changes and Conduct of Business of the Companies..44 5.5 No Intercompany Payables or Receivables...................48 5.6 Negotiations..............................................48 5.7 Consents; Cooperation.....................................48 5.8 Additional Agreements.....................................49 5.9 Interim Financial Statements..............................49 5.10 Notification of Certain Matters...........................49 5.11 Assurance by the Stockholders.............................50 5.12 Personal Guarantees.......................................50 5.13 Non-Interference..........................................50 5.14 Environmental Audits......................................51 5.15 Access to Records.........................................51 5.16 Nissan, Primus and World Omni Mortgages...................51 5.17 Certain Changes and Conduct of Business of UAG............52 5.18 1996 Financial Statements.................................53 ARTICLE 6. CONDITIONS TO THE OBLIGATIONS OF UAG AND SUB TO EFFECT THE CLOSING.................................................53 6.1 Representations and Warranties; Agreements; Covenants.....53 6.2 Authorization; Consents...................................54 6.3 Opinions of the Companies' and the Stockholders' Counsel..54 6.4 Absence of Litigation.....................................54 6.5 No Material Adverse Effect................................55 6.6 Net Worth.................................................55 (ii) 6.7 Completion of Due Diligence...............................55 6.8 Net Income................................................55 6.9 Leases....................................................55 6.10 Board Approval............................................55 6.11 Certificates..............................................55 6.12 Legal Matters.............................................56 6.13 Approval of Manufacturers and Distributors................56 6.14 Nondisturbance Agreements/Estoppel Certificates...........56 6.15 Title Insurance...........................................56 6.16 Schedules.................................................56 6.17 Lease Termination Agreements/Memoranda of Lease...........56 6.18 Resignation of the Companies' Directors...................57 6.19 Employment Agreement......................................57 ARTICLE 7. CONDITIONS TO THE OBLIGATIONS OF THE STOCKHOLDERS TO EFFECT THE CLOSING......................................57 7.1 Representations and Warranties; Agreements................57 7.2 Authorization of the Agreement, Consents..................57 7.3 Opinions of UAG's and Sub's Counsel.......................58 7.4 Absence of Litigation.....................................58 7.5 Certificates..............................................58 7.6 Legal Matters.............................................58 7.7 Registration Rights Agreement.............................59 7.8 Schedules.................................................59 7.9 Leases....................................................59 7.10 No Material Adverse Effect................................59 7.11 Employment Agreement......................................59 ARTICLE 8. TERMINATION....................................................59 8.1 Termination...............................................59 8.2 Effect of Termination.....................................60 ARTICLE 9. INDEMNIFICATION................................................60 9.1 Indemnification by the Stockholders.......................60 9.2 Indemnification by UAG....................................61 9.3 Procedures................................................62 9.4 Remedies..................................................63 9.5 Definitions...............................................63 9.6 Limitation on Indemnification.............................63 ARTICLE 10. MISCELLANEOUS.................................................65 10.1 Survival of Provisions....................................65 10.2 Fees and Expenses.........................................66 10.3 Headings..................................................66 10.4 Notices...................................................66 10.5 Assignment................................................68 10.6 Entire Agreement..........................................68 10.7 Waiver and Amendments.....................................68 10.8 Counterparts..............................................68 10.9 Accounting Terms..........................................69 10.10 Schedules.................................................69 10.11 Severability..............................................69 (iii) 10.12 Remedies..................................................69 10.13 Governing Law.............................................69 10.14 Time is of the Essence....................................69 (iv) STOCK PURCHASE AGREEMENT This STOCK PURCHASE AGREEMENT, dated February 19, 1997, is by and among United Auto Group, Inc., a Delaware corporation ("UAG"), UAG East, Inc., a Delaware corporation ("UAG East" or "Sub"), Amity Auto Plaza Ltd., d/b/a Amity Toyota Superstore, a New York corporation ("Amity Toyota"), Massapequa Imports Ltd., d/b/a Lexus of Massapequa, a New York corporation ("Massapequa Lexus"), Westbury Nissan Ltd., d/b/a Westbury Nissan Superstore, a New York corporation ("Westbury Nissan"), Westbury Superstore Ltd., d/b/a Westbury Toyota, a New York corporation ("Westbury Toyota"), J&S Auto Refinishing Ltd., d/b/a Premier Auto Body, a New York corporation ("Premier"), Florida Chrysler Plymouth Jeep Eagle Inc., a Florida corporation ("Florida CP"), Palm Auto Plaza Inc., d/b/a Palm Beach Toyota, a Florida corporation ("West Palm Toyota"), West Palm Infiniti Inc., a Florida corporation ("West Palm Infiniti"), West Palm Nissan Inc., a Florida corporation ("West Palm Nissan"), Northlake Auto Finish Inc., d/b/a Trail Auto Body, a Florida corporation ("Trail," and, together with Amity Toyota, Massapequa Lexus, Westbury Nissan, Westbury Toyota, Premier, Florida CP, West Palm Toyota, West Palm Infiniti and West Palm Nissan, the "Companies"), John A. Staluppi ("Mr. Staluppi") and John A. Staluppi, Jr. (together with Mr. Staluppi, the "Stockholders"). W I T N E S S E T H: WHEREAS, UAG East is a wholly-owned subsidiary of UAG; WHEREAS, the Companies operate franchise automobile dealerships and related businesses in West Palm Beach, Florida and Long Island, New York; WHEREAS, the Stockholders own all of the issued and outstanding shares of the capital stock of the Companies (the "Shares"); WHEREAS, UAG East desires to purchase the Shares from the Stockholders, and the Stockholders desire to sell the Shares to UAG East (in each case upon the terms and subject to the conditions set forth in this Agreement), such that immediately after giving effect to such purchase and sale, UAG East will own one hundred percent (100%) of the issued and outstanding shares of the capital stock of the Companies, on a fully diluted basis; NOW, THEREFORE, in consideration of the mutual terms, conditions and other agreements set forth herein, the parties hereto hereby agree as follows: ARTICLE 1. ARTICLE 2. PURCHASE AND SALE OF SHARES 1.1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms shall have the following meanings: (a) "Affiliate" of a specified Person shall mean a Person that directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, the Person specified, and in the case of a specified Person who is a natural person, his spouse, his issue, his parents, his estate and any trust entirely for the benefit of his spouse and/or issue. (b) "Business Day" shall mean any day excluding Saturday, Sunday and any day which is a legal holiday under Federal law. (c) "Closing Date" shall have the meaning ascribed to it in Section 1.2(b). (d) "Documents" shall mean the Post-Closing Escrow Agreement, the Escrow Agreement, the Piggyback Registration Rights Agreement and the Leases. (e) "Effective Date" shall have the meaning ascribed to it in Section 1.9 hereof. (f) "Environmental Laws" shall mean all applicable requirements of environmental, public or employee health and safety, public or community right-to-know, ecological or natural resource laws or regulations or controls, including all applicable requirements imposed by any law (including, without limitation, common law), rule, order, or regulations of any federal, state, or local executive, legislative, judicial, regulatory, or administrative agency, board, or authority, or any applicable private agreement (such as covenants, conditions and restrictions), which relate to, (i) noise, (ii) pollution or protection of the air, surface water, groundwater, or soil, (iii) solid, gaseous, or liquid waste generation, treatment, storage, disposal or transportation, (iv) exposure to Hazardous Materials (as defined below), or (v) regulation of the manufacture, processing, distribution and commerce, use, or storage of Hazardous Materials. (g) "Environmental Permits" shall mean all permits, licenses, approvals, authorizations, consents or registrations required under applicable Environmental Laws in connection with the ownership, use and/or operation of the Companies' businesses or the Real Property or Improvements. -2- (h) "Escrow Agent" shall mean Newman Tannenbaum Helpern Syracuse & Hirschtritt LLP. (i) "Escrow Deposit" shall have the meaning ascribed to it in Section 1.6. (j) "GAAP" shall mean generally accepted accounting principles which are in effect in the United States on the Closing Date. (k) "Hazardous Materials" shall mean, collectively, (i) those substances included within the definitions of or identified as "hazardous chemicals," "hazardous waste," "hazardous substances," "hazardous materials," "toxic substances" or similar terms in or pursuant to, without limitation, the Comprehensive Environmental Response Compensation and Liability Act of 1980 (42 U.S.C. 9601 et seq.) ("CERCLA"), as amended by Superfund Amendments and Reauthorization Act of 1986 (Pub. L. 99-499, 100 State, 1613), the Resource Conservation and Recovery Act of 1976 (42 U.S.C. ss. 6901 et seq.) ("RCRA"), the Occupational Safety and Health Act of 1970 (29 U.S.C. ss. 651 et seq.) ("OSHA"), and the Hazardous Materials Transportation Act, 49 U.S.C. ss. 1801 et seq. ("HMTA"), and in the regulations promulgated pursuant to such laws, all as amended, (ii) those substances listed in the United States Department of Transportation Table (49 CFR 172.101 and amendments thereto) or by the Environmental Protection Agency (or any successor agency) as hazardous substances (40 CFR part 302 and amendments thereto), (iii) any material, waste or substance which is or contains (A) petroleum, including crude oil or any fraction thereof, natural gas, or synthetic gas usable for fuel or any mixture thereof, (B) asbestos, (C) polychlorinated biphenyls, (D) designated as a "hazardous substance" pursuant to Section 311 of the Clean Water Act, 33 U.S.C. ss. 1251 et seq. (33 U.S.C. ss. 1321) or listed pursuant to Section 307 of the Clean Water Act (33 U.S.C. ss. 1317), (E) flammable explosives, (F) radioactive materials, and (iv) such other substances, materials and wastes which are or become regulated or classified as hazardous, toxic or as "special wastes" under any Environmental Laws. (l) "Knowledge" shall mean, with respect to the Stockholders, that either of the Stockholders knows of the particular matter referred to; with respect to the Companies, that any person responsible for overseeing the day to day operations of any of the Companies or any general manager, executive manager, service manager, office manager (or any person with similar such responsibilities regardless of title) knows of the particular matter referred to; and, with respect to UAG, that the President or any Vice-President of UAG knows of the particular matter referred to. (m) "Leases" shall have the meaning ascribed to it in Section 1.2(c)(v). -3- (n) "Liens" shall mean any mortgages, pledges, title defects or objections, liens, claims, security interests, conditional and installment sale agreements, encumbrances or similar charges. (o) "Material Adverse Effect" shall mean any change in, or effect on, any of the Companies (including the businesses thereof) which is, or might be, materially adverse to the business, operations, assets, condition (financial or otherwise) or prospects of such Company when taken as a whole. (p) "November 30 Balance Sheets" shall have the meaning ascribed to it in Section 2.5. (q) "Person" shall mean and include an individual, corporation, partnership, limited liability company, joint venture, association, trust, any other incorporated or unincorporated organization or entity and a governmental entity or any department or agency thereto. (r) "Remedial Action" shall mean any action required to (i) clean up, remove or treat Hazardous Materials, (ii) prevent a release or threat of release of any Hazardous Material, (iii) perform pre-remedial studies, investigations or post-remedial monitoring and care, (iv) cure a violation of Environmental Law or (v) take corrective action under sections 3004(u), 3004(v) or 3008(h) of RCRA or analogous state law. (s) "Piggyback Registration Rights Agreement" shall have the meaning ascribed to it in Section 1.2(c)(vi). (t) "Pre-Tax Earnings" shall mean net earnings (or losses), before taxes, computed in accordance with GAAP. (u) "UAG Common Stock" shall mean the shares of common stock, par value $.0001 per share of UAG. (v) "UAG Market Value" shall mean the arithmetic average of the daily closing price per share of UAG Common Stock, rounded to four decimal places, as reported on the New York Stock Exchange Composite Tape for each of the twenty (20) consecutive trading days ending (and including) the trading day that occurs one trading day prior to the date on which the UAG Market Value is to be determined. 1.2. PURCHASE AND SALE OF THE SHARES. (a) Purchase and Sale. Upon the terms and subject to the conditions set forth in this Agreement, the Stockholders shall sell to UAG East, and UAG East shall purchase from the Stockholders, the Shares for an aggregate purchase price (the "Purchase Price") equal to (i) Twenty-Five Million Dollars ($25,000,000) in cash less the amount of any distributions (the "Distributions") made by the Companies to the Stockholders from -4- November 30, 1996 until the Closing Date (other than distributions of net income attributable to periods after November 30, 1996 or distributions attributable to periods prior to November 30, 1996 which are reflected on the November 30 Balance Sheets) (the "Base Price"), which Base Price is subject to adjustment after Closing as provided in Sections 1.3, 1.7 and 1.8 below; (ii) promissory notes in substantially the form attached hereto as Exhibit A (the "Three Year Notes") issued by UAG in the aggregate principal amount of Twelve Million Five Hundred Thousand Dollars ($12,500,000) with interest only payable quarterly at the rate of six and one-half percent (6.5%) per annum, maturing on the third anniversary of the Closing Date; (iii) promissory notes in substantially the form attached hereto as Exhibit B (together with the Three Year Notes, the "Notes") issued by UAG in the aggregate principal amount of Twelve Million Five Hundred Thousand Dollars ($12,500,000) with interest only payable quarterly at the rate of six and one-half percent (6.5%) per annum, maturing on the sixth anniversary of the Closing Date; and (iv) One Hundred Twenty-Seven Thousand Six Hundred Sixty (127,660) shares of UAG Common Stock (the "UAG Shares") bearing the restrictive legend customarily placed on securities that have not been registered under applicable federal and state securities laws, which shares shall be deposited in escrow pursuant to Section 1.2(c) below. At the Closing referred to in Section 1.2(b) hereof: (i) the Stockholders shall sell, assign, transfer and deliver to Sub the Shares representing 100% of the issued and outstanding capital stock of the Companies and deliver the certificates representing such Shares accompanied by stock powers duly executed in blank; and (ii) Sub shall accept and purchase the Shares from the Stockholders and in payment therefor shall (A) deliver to the Stockholders immediately available funds in an aggregate amount equal to the Base Price (less the Escrow Deposit) by wire transfer to an account designated in writing by the Stockholders or by certified funds; (B) deliver to the Stockholders the Notes; and (C) deliver to the Escrow Agent certificates representing the UAG Shares bearing the restrictive legend customarily placed on securities that have not been registered under applicable federal or state securities laws. (b) Closing. Subject to the conditions set forth in this Agreement, the purchase and sale of the Shares pursuant to this Agreement (the "Closing") shall take place as soon as practicable following the date on which all conditions to the obligations of the parties hereunder (other than those requiring an exchange of certificates, opinions or other documents, or the taking of other action, at the Closing) have been satisfied or -5- waived but no later than April 30, 1997. The date on which the Closing occurs is herein referred to as the "Closing Date". (c) Deliveries at the Closing. Subject to the conditions set forth in this Agreement, at the Closing: (i) the Stockholders shall deliver to Sub certificates representing the Shares accompanied by stock powers as required by Section 1.2(a)(i) hereof, and any other documents that are necessary to transfer to Sub good title to all the Shares, and (B) all opinions, certificates and other instruments and documents required to be delivered by the Stockholders or the Companies at or prior to the Closing or otherwise required in connection herewith; (ii) the Sub shall (A) pay to the Stockholders funds as required by Section 1.2(a)(ii) hereof; (B) deliver to the Stockholders the Notes; and (C) deliver to the Stockholders all opinions, certificates and other instruments and documents required to be delivered by UAG or Sub at or prior to the Closing or otherwise required in connection herewith; (iii) UAG and Mr. Staluppi shall enter into the Post-Closing Escrow Agreement substantially in the form attached hereto as Exhibit C (the "Post Closing Escrow Agreement"), and UAG shall deliver to the Escrow Agent certificates representing the UAG Shares issued in the name of Mr. Staluppi which shares shall be held and distributed pursuant to the terms of the Post-Closing Escrow Agreement; (iv) The Companies (other than Westbury Toyota) and the owner of the property on which each such Company conducts its business (each a "Landlord" and collectively the "Landlords") shall enter into a lease for the real property on which such Company operates in a form mutually acceptable to the parties (each a "Lease" and collectively the "Leases"), such form to be agreed to by the parties within twenty (20) days of the date of this Agreement. Each Lease shall be for a twenty (20) year term and the lessee shall have the option to renew the lease for two additional five year terms. Each Lease shall be a triple net lease and the initial base monthly rent for each Lease shall be as set forth on Schedule 1.2. Each lease with Mr. Staluppi or any entity in which he has an ownership or control position shall contain a provision whereby at the applicable Company's option, exercisable within six (6) months after the Closing Date, the Company may have an appraisal of the real property conducted and if the appraisal reflects that the initial base monthly rent is greater than one-twelfth (1/12) of the -6- appraised fair market value of the property multiplied by a 10.75% capitalization rate ("Cap Rate") then no adjustments shall be made to the lease rate for the CPI Increase (as hereinafter defined) until from and after the initial lease rate is equal to or exceeds the fair market value lease rate (but in no event until three (3) years after the Closing Date); provided, however, the Landlord under the affected lease shall have the right to then obtain its own appraisal within two (2) months thereafter and if the parties cannot agree on the fair market value lease rate, the two appraisers shall select a third appraiser to determine the fair market lease rate within two (2) months after Landlord's appraisal. All appraisers must be independent and MAI certified with a minimum of ten (10) years' experience. Mr. Staluppi represents and warrants that the initial lease rates do not exceed the fair market lease rate for such property as determined by taking into account the property's fair market value and a lease rate of return not to exceed the Cap Rate. Subject to the foregoing, on the third anniversary of the Closing Date and every three years thereafter, the lease rate for each Lease shall increase to an amount equal to the rate then in effect plus an amount equal to a percentage of the rate then in effect, which percentage shall be equal to two hundred percent (200%) of the percentage increase in the Consumer Price Index published from time to time by the United States Department of Labor ("CPI") for the metropolitan area in which such Company operates from the time of the last adjustment; provided, however, that such increase shall not exceed eight and one-half percent (8.5%) for each three (3) year period ("CPI Increase"). UAG shall guarantee the payment under and performance of the lessees under the Leases; and (v) UAG and Mr. Staluppi shall enter into a registration rights agreement in the form attached hereto as Exhibit D (the "Piggyback Registration Rights Agreement"). 1.3. NET WORTH ADJUSTMENT. (a) On the Closing Date, or as soon as practicable after the Closing Date, the Stockholders shall deliver to UAG balance sheets of the Companies dated as of the Closing Date (such balance sheets so delivered are referred to herein as the "Closing Date Balance Sheets"). The Closing Date Balance Sheets shall be prepared in good faith on the same basis and in accordance with the accounting principles, methods and practices used in preparing the November 30 Balance Sheets (as defined in Section 2.5 hereof) (such accounting principles, methods and practices and such procedures, are referred to herein as the "Accounting Principles"). In connection with the preparation of -7- the Closing Date Balance Sheets, the Stockholders and the Companies shall permit the Reviewer (as defined below) and other representatives of UAG to conduct a physical inventory at each location where inventory is held by the Companies. (b) Within sixty (60) days after delivery of the Closing Date Balance Sheets, (i) Coopers & Lybrand or such other accounting firm (the "Reviewer") as may be selected by UAG shall audit or otherwise review the Closing Date Balance Sheets in such manner as UAG and the Reviewer deem appropriate, and (ii) UAG shall deliver such reviewed balance sheet (the "Reviewed Balance Sheets"), together with the Reviewer's report thereon, to the Stockholders. The Reviewed Balance Sheets (i) shall be prepared on the same basis and in accordance with the Accounting Principles and (ii) shall include a schedule showing the computation of the Final Net Worth (as defined in Section 1.3(g)(i) hereof), computed in accordance with the definition of Net Worth set forth in Section 1.3(g)(ii) hereof. UAG and the Reviewer shall have the opportunity to consult with the Stockholders, the Companies and each of the accountants and other representatives of the Stockholders and the Companies and to examine the work papers, schedules and other documents prepared by the Stockholders, the Companies and each of such accountants and other representatives during the preparation of the Closing Date Balance Sheets. The Stockholders and the Stockholders' independent public accountants shall have the opportunity to consult with the Reviewer and to examine the work papers, schedules and other documents prepared by the Reviewer during the preparation of the Reviewed Balance Sheets. (c) The Stockholders shall have a period of forty-five (45) days after delivery of the Reviewed Balance Sheets to present in writing to UAG all objections the Stockholders may have to any of the matters set forth or reflected therein, which objections shall be set forth in reasonable detail. If no objections are raised within such 45-day period, the Reviewed Balance Sheets shall be deemed accepted and approved by the Stockholders and a supplemental closing (the "Supplemental Closing") shall take place within five (5) Business Days following the expiration of such 45-day period, or on such other date as may be mutually agreed upon in writing by UAG and the Stockholders. (d) If the Stockholders shall raise any objection within such 45-day period, UAG and the Stockholders shall attempt to resolve the matter or matters in dispute and, if resolved, the Supplemental Closing shall take place within five (5) Business Days following such resolution. (e) If such dispute cannot be resolved by UAG and the Stockholders within sixty (60) days after the delivery of the Reviewed Balance Sheets, then the specific matters in dispute shall be submitted to a firm of independent public accountants mutually acceptable to UAG and the Stockholders, which firm shall -8- make a final and binding determination as to such matter or matters. Such accounting firm shall send its written determination to UAG and the Stockholders and the Supplemental Closing, if any, shall take place five (5) Business Days following the receipt of such determination by UAG and the Stockholders. The fees and expenses of the accounting firm referred to in this Section 1.3(e) shall be paid one-half by UAG and one-half by the Stockholders. (f) UAG and the Stockholders agree to cooperate with each other and each other's authorized representatives and with any accounting firm selected by UAG and the Stockholders pursuant to Section 1.3(e) hereof in order that any and all matters in dispute shall be resolved as soon as practicable. (g) (i) If the aggregate Net Worth as shown on the Reviewed Balance Sheets as finally determined through the operation of Sections 1.3 (a) through (e) hereof plus the amount of the Distributions (such amount being referred to herein as the "Final Net Worth") shall be less than the Net Worth of the Companies as set forth on the November 30 Balance Sheets (which balance sheets are attached hereto as Schedule 2.5) (the amount of any such deficiency being referred to herein as the "Net Worth Deficiency"), the Stockholders shall pay to UAG at the Supplemental Closing, by wire transfer of immediately available funds to an account designated in writing by UAG at least two (2) Business Days prior to the date of the Supplemental Closing, an amount equal to the Net Worth Deficiency. (ii) "Net Worth", computed in connection with the Closing Date Balance Sheets, the Company Balance Sheets and the Reviewed Balance Sheets, shall mean the amount by which the total assets (not including intangible assets) exceed the total liabilities reflected, in each case, on the balance sheets of Companies comprising the Closing Date Balance Sheets, the Company Balance Sheets or the Reviewed Balance Sheets, as the case may be. 1.4. NEW FACILITY. (a) Mr. Staluppi or an Affiliate is the owner of a parcel of land located on Military Trail, West Palm Beach (the "West Palm Parcel") and is in the process of developing a new facility on such land for use by West Palm Toyota (the "New Facility"). The New Facility is to be developed pursuant to plans and specifications to be agreed upon by the parties, which plans and specifications shall include a breakdown of all hard and soft costs together with the maximum total cost (the "Plans"). The construction contractor shall be chosen from among no less than three (3) bidders (one of whom UAG may designate) and the lowest bidder that is qualified to Toyota standards (including an ability to post a performance bond) shall be selected. The parties acknowledge that the New Facility will not -9- be completed on the Closing Date. Within nine (9) months after the Closing Date, Mr. Staluppi shall, at his sole cost and expense, complete the New Facility as set forth in the Plans. No change shall be made to the Plans without the prior written consent of UAG which shall not be unreasonably withheld. Upon completion of the New Facility and satisfaction of the New Facility Closing Conditions (as hereinafter defined) West Palm Toyota and Mr. Staluppi shall enter into a lease for the New Facility in a form mutually acceptable to the parties (the "New Facility Lease") (the date on which the New Facility Lease becomes effective is referred to herein as the "New Facility Lease Date"), such form to be agreed to by the parties within twenty (20) days after the date of this Agreement. The New Facility Lease shall be for a twenty (20) year term and the lessee shall have the option to renew the lease for two additional five year terms. The initial lease rate under the New Facility Lease shall be fixed at a dollar amount equal to 100% of all hard and soft costs provided for in the Plans and actually incurred by Mr. Staluppi for acquisition and construction of the facility multiplied by the Cap Rate. Mr. Staluppi represents and warrants that the acquisition cost of the property is no greater than fair market value. The initial lease rate shall be increased every third anniversary after the commencement of the lease as set forth in Section 1.2(c)(iv). For purposes of this Agreement, "New Facility Closing Conditions" shall mean (i) the completion of the New Facility substantially in accordance with the Plans including but not limited to substantially all material punch list items as certified by the architect for such New Facility; provided, however, that if UAG disputes such certificate it may retain its own architect to determine if such New Facility has been completed substantially in accordance with such Plans; (ii) the issuance of a permanent Certificate of Occupancy by the local governmental authorities with respect to such New Facility without condition; (iii) West Palm Toyota having received any necessary consents or approvals from Toyota to relocate its operations to the New Facility; (iv) delivery of an ALTA "as-built" survey of the New Facility and the property upon which it is located reflecting no encroachments on adjoining land or into set-back areas and that all utilities serve the New Facility through publicly dedicated rights-of-way and tie into public utilities, such survey to be certified to UAG, UAG East, West Palm Toyota and a title insurance company chosen by UAG; (v) UAG's obtaining a leasehold title insurance policy, without standard exceptions insuring West Palm Toyota's leasehold estate in the New Facility subject to no prior ground lease, mortgage, deed of trust or other security instrument or if so encumbered, Mr. Staluppi's obtaining a non-disturbance agreement from the holder thereof in favor of West Palm Toyota in form and substance reasonably satisfactory to UAG in recordable form and insured by such title company and otherwise subject to only those exceptions to title as are reasonably acceptable to UAG and providing such endorsements as UAG shall require including, but not limited to, coverage over mechanics and materialman's liens; (vi) UAG -10- confirming that the New Facility complies with all zoning requirements and the title company is prepared to issue a zoning endorsement; and (vii) UAG obtaining an updated Phase I environmental report reflecting that (x) there are no Hazardous Materials on or in the New Facility or the land upon which it is located other than any that may be disclosed in the initial Phase I conducted by UAG, (y) there are no violations of Environmental Laws at the New Facility or the land upon which it is located; and (z) there is no recommendation for further investigation or action with respect to the New Facility or such land, which report shall be for the benefit of UAG, UAG East and West Palm Toyota. In addition, Mr. Staluppi shall complete all remaining punch list items within sixty (60) days after the New Facility Lease Date and shall use his best efforts to obtain standard warranties for construction and equipment (including roofs) and to assign such warranties to UAG or West Palm Toyota. Mr. Staluppi also agrees that all equipment and fixtures necessary for a "turn-key" car dealership similar to the existing West Palm Toyota dealership shall be relocated from the existing West Palm Toyota Facility to the New Facility. In addition, from and after the Closing Date until the earlier of (i) the New Facility Lease Date, and (ii) nine (9) months after the Closing Date, West Palm Toyota shall pay to Mr. Staluppi his out of pocket costs attributable to (x) real property taxes, (y) ground lease payments and (z) interest on borrowed funds utilized to acquire and construct the New Facility land and improvements. 1.5. STOCK PRICE ADJUSTMENT. If the UAG Market Value on the Adjustment Date (as defined below) is less than Twenty-three and 50/100 Dollars ($23.50) (the amount of any such deficiency being referred to herein as the ("Stock Price Deficiency") then, no later than ten (10) Business Days after the Adjustment Date, UAG shall pay to Mr. Staluppi cash in an amount (the "Adjustment Amount") equal to the Stock Price Deficiency multiplied by the number of UAG Shares Mr. Staluppi received at the Closing. For purposes of this Agreement, the Adjustment Date shall mean the earlier of (i) the date on which the UAG Shares are registered pursuant to the Piggyback Registration Rights Agreement or (ii) the date on which Mr. Staluppi may sell the UAG Shares in reliance on Rule 144 promulgated by the Securities and Exchange Commission ("SEC") pursuant to the Securities Act of 1933, as amended ("Rule 144"). 1.6. ESCROW DEPOSIT. Within three (3) business days of the Effective Date of this Agreement, UAG will deposit into escrow funds in the amount of Two Hundred Fifty Thousand Dollars ($250,000) (the "Escrow Deposit") by delivering such funds to the Escrow Agent which Escrow Deposit shall be held and disbursed by the Escrow Agent pursuant to the terms of an escrow agreement in substantially the form attached hereto as Exhibit E. -11- 1.7. ADDITIONAL PURCHASE PRICE. If the Companies, on a combined basis, achieve annual Pre-Tax Earnings of at least Eleven Million Five Hundred Thousand Dollars ($11,500,000) in any of the three (3) successive twelve (12) month periods beginning on the first day of the calendar month immediately following the New Facility Lease Date (such twelve (12) month periods being referred to herein as "Year One," "Year Two," and "Year Three," respectively), then, in consideration for the sale of the Shares by the Stockholders to Sub, Sub will make an additional payment to the Stockholders with respect to each such year that such Pre-Tax Earnings shall be achieved in the aggregate amount of One Million Dollars ($1,000,000) (each such payment being referred to herein as an "Additional Payment"), which Additional Payments, if any, shall be allocated among the Stockholders as they so determine in their sole discretion. In the event that Sub is required to make an Additional Payment in either Year One, Year Two or Year Three, then Sub shall make the Additional Payment within sixty (60) days after the completion of the review by the Companies' certified public accountant of the Companies' financial statements covering the entire Year for which such Additional Payment is to be paid. For purposes of this Agreement, Pre-Tax Earnings shall not include any general overhead charges, management fees or other similar payments to UAG or its Affiliates. During Years One, Two and Three each Company shall deliver to Mr. Staluppi a copy of its monthly factory statement within five (5) days of its delivery to the factory which statement shall be treated as confidential by Mr. Staluppi. 1.8. CONTINGENT PAYMENT. If the total of the annual Pre-Tax Earnings for Year One, Year Two and Year Three (the "Total Pre-Tax Earnings") exceeds Thirty Four Million Five Hundred Thousand Dollars ($34,500,000), then, in consideration for the sale of the Shares by the Stockholders to Sub, Sub will make an additional payment to the Stockholders in the aggregate amount of One Million Dollars ($1,000,000) (such payment being referred to herein as the "Contingent Payment"), which Contingent Payment shall be allocated among the Stockholders as they so determine in their sole discretion. In the event that Sub is required to make a Contingent Payment, then Sub shall make the Contingent Payment within sixty (60) days after completion of the review by the Companies' certified public accounts of the Companies' financial statements covering Year Three. 1.9. EFFECTIVE DATE. The obligations of the parties hereunder shall not take effect until the parties have notified all of the manufacturer's whose consent is required (the "Effective Date"). -12- ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANIES AND THE STOCKHOLDERS Subject to the parties' agreement and acknowledgement that the Schedules referred to in this Article 2 are to be delivered by the Companies and the Stockholders no later than ten (10) Business Days after the Effective Date hereof, the Companies and the Stockholders hereby jointly and severally represent and warrant to UAG and Sub as follows: 2.1. ORGANIZATION AND GOOD STANDING. Each of the Companies is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has the corporate power and authority to own, lease and operate the properties used in its businesses and to carry on their businesses as now being conducted. The Companies are duly qualified to do business and are in good standing as a foreign corporation in each state and jurisdiction where qualification as a foreign corporation is required, except for such failures to be qualified and in good standing, if any, which when taken together with all other such failures of the Companies would not, or could not reasonably be expected to, in the aggregate have a Material Adverse Effect. Schedule 2.1 hereto lists (i) the states and other jurisdictions where the Companies are so qualified and (ii) the assumed names under which the Companies conduct business. Attached to Schedule 2.1(b) hereto are complete and correct copies of the Companies' Articles of Incorporation and Bylaws (including comparable governing instruments with different names), as amended and presently in effect. 2.2. SUBSIDIARIES. The Companies do not have any interest or investment in any Person. 2.3. CAPITALIZATION. The authorized stock of each of the Companies and the number of shares of capital stock which are issued and outstanding are set forth on Schedule 2.3 hereto. The shares listed on Schedule 2.3 hereto constitute all the issued and outstanding shares of capital stock of the Companies and have been validly authorized and issued, are fully paid and nonassessable, have not been issued in violation of any preemptive rights or of any federal or state securities law and no personal liability attaches to the ownership thereof. There is no security, option, warrant, right, call, subscription, agreement, commitment or understanding of any nature whatsoever, fixed or contingent, that directly or indirectly (i) calls for the issuance, sale, pledge or other disposition of any shares of capital stock of the Companies or any securities convertible into, or other rights to acquire, any shares of capital stock of the Companies, or (ii) obligates the Companies to grant, -13- offer or enter into any of the foregoing, or (iii) relates to the voting or control of such capital stock, securities or rights, except as set forth on Schedule 2.3 hereto. The Companies have not agreed to register any securities under the Securities Act of 1933, as amended (the "Securities Act"). 2.4. AUTHORITY; APPROVALS AND CONSENTS. The Companies have the corporate power and authority to enter into this Agreement and the documents referred to herein (the "Documents") to which they are a party and to perform their obligations hereunder and thereunder. The execution, delivery and performance of this Agreement and the Documents to which they are a party and the consummation of the transactions contemplated hereby and thereby have been duly authorized and approved by the Board of Directors of each of the Companies and no other corporate proceedings on the part of the Companies are necessary to authorize and approve this Agreement and the Documents and the transactions contemplated hereby and thereby. This Agreement has been, and on the Closing Date the Documents will be, duly executed and delivered by, and constitute valid and binding obligations of, each of the Companies, enforceable against the Companies in accordance with their respective terms. The execution, delivery and performance by each of the Companies and the Stockholders of this Agreement and the Documents to which it or they are a party and the consummation of the transactions contemplated hereby and thereby do not and will not: (i) contravene any provisions of the Articles of Incorporation or By-Laws (including any comparable governing instrument with a different name) of any of the Companies; (ii) (after notice or lapse of time or both) conflict with, result in a breach of any provision of, constitute a default under, result in the modification or cancellation of, or give rise to any right of termination or acceleration in respect of, any Company Agreement (as defined in Section 2.15 hereof) or, except as set forth on Schedule 2.4 hereto, require any consent or waiver of any party to any Company Agreement; (iii) result in the creation of any security interest upon, or any person obtaining any right to acquire, any properties, assets or rights of the Companies (other than the rights of Sub to acquire the Shares pursuant to this Agreement); (iv) violate or conflict with any Legal Requirements (as defined in Section 2.9 hereof) applicable to the Companies or any of their respective businesses or properties; or -14- (v) require any authorization, consent, order, permit or approval of, or notice to, or filing, registration or qualification with, any governmental, administrative or judicial authority, except in connection with or in compliance with the provisions of the H-S-R Act (as defined in Section 5.3 hereof). Except as set forth or referred to above, no authorization, consent, order, permit or approval of, or notice to, or filing, registration or qualification with, any governmental administrative or judicial authority is necessary to be obtained or made by the Companies to enable the Companies to continue to conduct their respective businesses and operations and use their respective properties after the Closing in a manner which is in all material respects consistent with that in which they are presently conducted. 2.5. FINANCIAL STATEMENTS. Except as otherwise indicated below, attached as Schedule 2.5 are true and complete copies of: (i) (A) the balance sheets of the Companies as of December 31, 1995, and the related consolidated statements of income, stockholders' equity and cash flow for the fiscal year ended December 31, 1995, together with the notes thereto and (B) the balance sheets of the Companies as of December 31, 1994, and the related consolidated statements of income, stockholders' equity and cash flow for the fiscal year ended December 31, 1994, together with the notes thereto, in each case examined by and accompanied by the report of independent certified public accountants (except where such examination and report are not available); (ii) the balance sheets of the Companies as of November 30, 1996 (the "November 30 Balance Sheets"); and (iii) the most recent monthly and year-to-date financial statements provided to each franchisor of the Companies (each, a "Company Factory Statement" and, collectively, the "Company Factory Statements"); (all the foregoing financial statements, including the notes thereto, being referred to herein collectively as the "Company Financial Statements"). The Company Financial Statements are consistent with and in accordance with the books and records of the Companies, fairly present the financial position, results of operations, stockholders' equity and changes in financial position of the Companies as of the dates and for the periods indicated, in the case of the financial statements referred to in clause (i) above in conformity with GAAP consistently applied (except as -15- otherwise indicated in such statements) during such periods, and the unaudited financial statements included in the Company Financial Statements indicate all adjustments, which consist of only normal recurring accruals, necessary for such fair presentations. The Company Financial Statements are consistent with the financial records maintained and the accounting methods applied by the Companies for tax purposes. The statements of income included in the Company Financial Statements do not contain any items of special or nonrecurring income except as expressly specified therein, and the balance sheets included in the Company Financial Statements do not reflect any write-up or revaluation increasing the book value of any assets. The books and accounts of the Companies are complete and correct in all material respects and fairly reflect all of the transactions, items of income and expense and all assets and liabilities of the businesses of the Companies. 2.6. ABSENCE OF UNDISCLOSED LIABILITIES. The Companies do not have any material liability of any nature whatsoever (whether known or unknown, due or to become due, accrued, absolute, contingent or otherwise), including, without limitation, any unfunded obligation under employee benefit plans or arrangements as described in Section 2.18 and 2.19 hereof or liabilities for Taxes (as defined in Section 2.8 hereof), except for (i) liabilities reflected or reserved against on the most recent Company Financial Statements, (ii) current liabilities incurred in the ordinary course of business and consistent with past practice after the date of the Company Balance Sheets which, individually and in the aggregate, do not have, and cannot reasonably be expected to have, a Material Adverse Effect, and (iii) liabilities disclosed on Schedule 2.6 hereto. The Companies are not parties to any Company Agreement, or subject to any charter or by-law provision, any other corporate limitation or any Legal Requirement, which has, or can reasonably be expected to have, a Material Adverse Effect. 2.7. ABSENCE OF MATERIAL ADVERSE EFFECT; CONDUCT OF BUSINESS. (a) Since November 30, 1996, the Companies have operated in the ordinary course of business consistent with past practice, except as set forth on Schedule 2.7(a) hereto, and there has not been: (i) any material adverse change in the assets, properties, business, operations, prospects, net income or financial condition of the Companies, and no factor, event, condition, circumstance or prospective development exists which threatens or may threaten to have a Material Adverse Effect; (ii) any material loss, damage, destruction or other casualty to the property or other assets of the Companies, whether or not covered by insurance; -16- (iii) any change in any method of accounting or accounting practice of the Companies; or (iv) any loss of the employment, services or benefits of any general manager, new car sales manager, used car sales manager, or any equivalent employee of any of the Companies. (b) Since November 30, 1996, except as set forth in Schedule 2.7(b) hereto, the Companies have not: (i) incurred any material obligation or liability (whether absolute, accrued, contingent or otherwise), except in the ordinary course of business consistent with past practice; (ii) failed to discharge or satisfy any lien or pay or satisfy any obligation or liability (whether absolute, accrued, contingent or otherwise), other than liabilities being contested in good faith and for which adequate reserves have been provided; (iii) mortgaged, pledged or subjected to any lien any of its property or other assets, except for mechanics liens and liens for taxes not yet due and payable; (iv) sold or transferred any assets or canceled any debts or claims or waived any rights, except in the ordinary course of business consistent with past practice; (v) defaulted on any material obligation; (vi) entered into any material transaction, except in the ordinary course of business consistent with past practice; (vii) written down the value of any inventory or written off as uncollectible any accounts receivable or any portion thereof not reflected in the Company Financial Statements except in the ordinary course of business consistent with past practices; (viii) granted any increase in the compensation or benefits of employees other than increases in accordance with past practice not exceeding 10% or entered into any employment or severance agreement or arrangement with any of them except in the ordinary course of business consistent with past practices; (ix) made any individual capital expenditure in excess of $100,000, or aggregate capital expenditures in excess of $300,000, or additions to -17- property, plant and equipment other than ordinary repairs and maintenance; (x) discontinued any franchise or the sale of any products or product line or program; (xi) incurred any obligation or liability for the payment of severance benefits; or (xii) entered into any agreement or made any commitment to do any of the foregoing. 2.8. TAXES. The Companies have each made a valid election pursuant to Section 1362(a) of the Internal Revenue Code, as amended (the "Code"), to be an "S Corporation" within the meaning of Section 1361(a)(1) of the Code and (with the exception of West Palm Nissan) have continued to qualify as such for all taxable years since their formation and will continue to so qualify through the Closing Date. The Companies and, for any period during all or part of which the tax liability of any other corporation was determined on a combined or consolidated basis with the Companies any such other corporation, have filed timely all federal, state, local and foreign tax returns, reports and declarations required to be filed (or have obtained or timely applied for an extension with respect to such filing) correctly reflecting the Taxes (as defined below) and all other information required to be reported thereon and have paid, or made adequate provision for the payment of, all Taxes which are due pursuant to such returns or pursuant to any assessment received by the Companies or any such other corporation. As used herein, "Taxes" shall mean all taxes, fees, levies or other assessments, including but not limited to income, excise, property, sales, franchise, withholding, social security and unemployment taxes imposed by the United States, any state, county, local or foreign government, or any subdivision or agency thereof or taxing authority therein, and any interest, penalties or additions to tax relating to such taxes, charges, fees, levies or other assessments. Copies of all tax returns for the fiscal years ended since December 31, 1992 have been furnished or made available to UAG or its representatives to the extent available and in the possession of the Companies and such copies are accurate and complete as of the date hereof. The Companies have also furnished to UAG correct and complete copies of all notices and correspondence sent or received since December 31, 1992 by the Companies to or from any federal, state or local tax authorities. The Companies have adequately reserved for the payment of all Taxes with respect to periods ended on or prior to the Closing Date for which tax returns have not yet been filed. In the ordinary course, the Companies make adequate provision on their books for the payment of all Taxes (including for the current fiscal period) owed by the Companies. Except to the extent reserves therefor are reflected on the Company Balance Sheets, the Companies are not liable, or will not become liable, for any Taxes for any period ending on or prior to the Closing -18- Date. Except as set forth on Schedule 2.8 hereto, the Companies have not been subject to a federal or state tax audit of any kind since December 31 1992, and no adjustment has been proposed by the Internal Revenue Service ("IRS") with respect to any return for any subsequent year. With respect to the audits referred to on Schedule 2.8 hereto and except as indicated thereon, no such audit has resulted in an adjustment in excess of $50,000. Neither the Companies nor any Stockholder knows of any basis for an assertion of a deficiency for Taxes against the Companies. The Stockholders will cooperate, and will cause their Affiliates to cooperate, with the Companies in the filing of any returns and in any audit or refund claim proceedings involving Taxes for which the Companies may be liable or with respect to which the Companies may be entitled to a refund. 2.9. LEGAL MATTERS. (a) Except as set forth on Schedule 2.9(a) hereto, (i) there is no claim, action, suit, litigation, investigation, inquiry, review or proceeding (collectively, "Claims") pending against, and, to the knowledge of the Companies or the Stockholders, there is no material claim threatened against or affecting, the Companies, any ERISA Plan (as defined in Section 2.18(a) hereof) or any of their respective properties or rights before or by any court, arbitrator, panel, agency or other governmental, administrative or judicial entity, domestic or foreign, nor is any basis known to the Stockholders or the Companies for any such Claims, and (ii) the Companies are not subject to any judgment, decree, writ, injunction, ruling or order (collectively, "Judgments") of any governmental, administrative or judicial authority, domestic or foreign. Schedule 2.9(a) hereto identifies each Claim and Judgment disclosed thereon which is fully covered by an insurance policy. (b) The businesses of the Companies are being conducted in compliance with all laws, ordinances, codes, rules, regulations, standards, judgments and other requirements of all governmental, administrative or judicial entities (collectively, "Legal Requirements") applicable to the Companies or any of their respective businesses or properties except where the failure to be in such compliance could not reasonably be expected to have a Material Adverse Effect. The Companies hold, and are in compliance with, all franchises, licenses, permits, registrations, certificates, consents, approvals or authorizations (collectively, "Permits") required by all applicable Legal Requirements. A list of all such permits is set forth on Schedule 2.9(b) hereof. (c) The Companies own or hold all Permits material to the conduct of their businesses. No event has occurred and is continuing which permits, or after notice or lapse of time or both would permit, any modification or termination of any Permit. -19- 2.10. PROPERTY. Set forth on Schedule 2.10(a) hereto is a list of all interests in real property owned by or leased to the Companies (including all real property owned or leased by the Stockholders (directly or indirectly) and used in the businesses of the Companies and of all options or other contracts to acquire any such interest (collectively, and together with the New Facility, the "Real Property"). With respect to any leased Real Property owned by Mr. Staluppi or any of his Affiliates, there are no defaults by either party under and no state of facts exist which with the giving of notice or the passage of time, or both, would constitute a default under such leases. With respect to any leased Real Property not owned by Mr. Staluppi or any of his Affiliates, neither the Companies nor the Stockholders have (i) received notice of any defaults by any parties under such leases (the "Third Party Leases") or (ii) any knowledge of any state of facts which with the giving of notice or the passage of time, or both, would constitute a default under such leases. True and correct copies of all leases relating to the leased Real Property, together with any amendments and modifications thereto, are attached as Schedule 2.10(b). All improvements to the Real Property ("Improvements") and all machinery, equipment and other tangible property owned or used by or leased to the Companies are fit for the particular purposes for which they are used by the Companies. Such tangible properties and all Improvements owned or leased by the Companies conform in all material respects with all applicable laws, ordinances, rules and regulations and other Legal Requirements and, to the knowledge of the Stockholders and the Companies, such Improvements do not encroach in any respect on property of others. To the knowledge of the Stockholders and the Companies, there are no latent defects with respect to the Improvements. The Real Property is currently zoned to permit the conduct of the respective businesses of the Companies as presently conducted. Certificates of Occupancy have been issued with respect to the Improvements without special conditions or restrictions. All utilities servicing the Real Property and the Improvements are provided by publicly-dedicated utility lines and are located within public rights-of-way and do not cross or encumber any private land. No written notice (and, to the knowledge of the Stockholders and the Companies, no oral notice) of any pending, threatened or contemplated action by any governmental authority or agency having the power of eminent domain has been given to the Companies or the Stockholders with respect to the Real Property. 2.11. ENVIRONMENTAL MATTERS. (a) Except as set forth on Schedule 2.11(a) hereto, (i) the Companies, the Real Property, the Improvements and any property formerly owned, occupied or leased by the Companies are in compliance with all Environmental Laws (provided, however, that as to the Real Property or Improvements, such representation is limited to the knowledge of the Stockholders and the Companies as it may relate to compliance for any period prior to the -20- Initial Date), (ii) the Companies have obtained all Environmental Permits (as defined below), (iii) such Environmental Permits are in full force and effect, and (iv) the Companies are in full compliance with all terms and conditions of such Environmental Permits. As used in this Agreement, Initial Date shall mean with respect to any portion of the Real Property or the Improvements, the earlier of (i) date the Stockholders or the Companies first acquired any ownership or leasehold interest in such property and (ii) the date on which the Companies first began conducting operations on such property. (b) The Companies and the Stockholders have not violated, done or suffered any act which could give rise to liability under, and, to the knowledge of the Stockholders and the Companies, are not otherwise exposed to liability under, any Environmental Law. After the Initial Date (and, to the knowledge of the Stockholders and the Companies, with respect to events prior to the Initial Date), no event has occurred with respect to the Real Property, the Improvements or any property formerly owned, occupied or leased by the Companies, which, with the passage of time or the giving of notice, or both, would constitute a violation of or non-compliance with any applicable Environmental Law. To the knowledge of the Stockholders and the Companies, the Companies have no contingent liability under any Environmental Law. There are no liens under any Environmental Law on the Real Property. (c) Except as set forth on Schedule 2.11(c) hereto, (i) after the Initial Date (and, to the knowledge of the Stockholders and the Companies, with respect to any use prior to the Initial Date) neither the Companies, the Real Property or any portion thereof, the Improvements or any property formerly owned, occupied or leased by the Companies, nor, to the knowledge of the Companies or the Stockholders, any property adjacent to the Real Property is being used or has been used for the treatment, generation, transportation, processing, handling, production or disposal of any Hazardous Materials or as a landfill or other waste disposal site and there has been no spill or release of any Hazardous Materials (provided, however, that certain petroleum products are stored and handled on the Real Property in the ordinary course of the Companies' businesses in full compliance with all Environmental Laws including the existing regulations of the United States Environmental Protection Agency requiring spill protection, overfill protection and corrosion protection by December 22, 1998 and all secondary containment requirements with respect to above ground storage tanks), (ii) after the Initial Date (and, to the knowledge of the Stockholders and the Companies, with respect to investigations prior to the Initial Date), none of the Real Property or any portion thereof, the Improvements or any property formerly owned, occupied or leased by the Companies has been subject to investigation by any governmental authority evaluating the need to investigate or undertake Remedial Action at such property, and (iii) to the knowledge of the Companies and the Stockholders, none of the Real -21- Property, the Improvements or any property formerly owned, occupied or leased by the Companies, or any site or location where the Companies sent waste of any kind, is identified on the current or proposed (A) National Priorities List under 40 C.F.R. 300 Appendix B, (B) Comprehensive Environmental Response Compensation and Liability Inventory System list, or (C) any list arising from any statute analogous to CERCLA. (d) Except as set forth on Schedule 2.11(d) hereto, after the Initial Date (and, to the knowledge of the Stockholders and the Companies, prior to the Initial Date), there have been and are no (i) aboveground or underground storage tanks, subsurface disposal systems, or wastes, drums or containers disposed of or buried on, in or under the ground or any surface waters, (ii) asbestos or asbestos containing materials or radon gas, (iii) polychlorinated biphenyls ("PCB") or PCB-containing equipment, including transformers, or (iv) wetlands (as defined under any Environmental Law) located within any portion of the Real Property, nor have any liens been placed upon any portion of the Real Property, the Improvements or any property formerly owned, occupied or leased by the Companies in connection with any actual or alleged liability under any Environmental Law. (e) Except as set forth on Schedule 2.11(e) hereto, (i) there is no pending or threatened claim, litigation, or administrative proceeding, or known prior claim, litigation or administrative proceeding, arising under any Environmental Law involving any of the Companies, the Real Property, the Improvements, any property formerly owned, leased or occupied by the Companies, any offsite contamination affecting the business of the Companies or any operations conducted at the Real Property, (ii) there are no ongoing negotiations with or agreements with any governmental authority relating to any Remedial Action or other environmentally related claim, (iii) the Companies have not submitted notice pursuant to Section 103 of CERCLA or analogous statute or notice under any other applicable Environmental Law reporting a release of a Hazardous Material into the environment, and (iv) the Companies have not received any notice, claim, demand, suit or request for information from any governmental or private entity with respect to any liability or alleged liability under any Environmental Law, nor to the knowledge of the Stockholders and the Companies, has any other entity whose liability therefor, in whole or in part, may be attributed to the Companies, received such notice, claim, demand, suit or request for information. (f) The Stockholders and the Companies have provided to UAG all environmental studies and reports obtained by them or known to them pertaining to the Real Property, the Improvements, the Companies and any property formerly owned, occupied or leased by the Companies, and have permitted (or will have permitted as of the Closing Date), the testing of the soil, groundwater, building components, tanks, containers and equipment on the Real Property, the Improvements, and any property formerly owned, -22- occupied or leased by the Companies, by UAG or UAG's agents or experts as they have or shall have deemed necessary or appropriate to confirm the condition of such properties. Any testing shall not be construed as a waiver of any rights which UAG or Sub have arising out of the representations and warranties contained herein. 2.12. INVENTORIES. The values at which inventories are carried on the Company Balance Sheets and Company Factory Statements reflect the normal inventory valuation policies of the Companies, and, in the case of the Company Balance Sheets, such values are in conformity with GAAP consistently applied. All inventories reflected on the Company Balance Sheets and Company Factory Statements or arising since the date thereof are currently marketable and can reasonably be anticipated to be sold at normal mark-ups within 120 days after the date hereof in the ordinary course of business, except for spare parts inventory which inventory is good and usable. 2.13. ACCOUNTS RECEIVABLE. All accounts receivable reflected on the Company Balance Sheets are, and all accounts receivable that will be or will have been reflected on the Closing Date Balance Sheets will be, good, and have been or will have been collected or are collectible, without resort to litigation, within 120 days of the Closing Date, and are subject to no defenses, setoffs or counterclaims other than normal cash discounts accrued in the ordinary course of business. 2.14. INSURANCE. All material properties and assets of the Companies which are of an insurable character are insured against loss or damage by fire and other risks to the extent and in the manner customary for companies engaged in similar businesses or owning similar assets. Set forth on Schedule 2.14 hereto is a list and brief description (including the name of the insurer, the type of coverage provided, the amount of the annual premium for the current policy period, the amount of remaining coverage and deductibles and the coverage period) of all policies for such insurance and the Companies have made or will make available to UAG true and complete copies of all such policies. All such policies are in full force and effect, are sufficient for all applicable requirements of law and will not in any way be affected by or terminated or lapsed by reason of the consummation of the transactions contemplated by this Agreement. No notice of cancellation or non-renewal with respect to, or disallowance of any claim under, any such policy has been received by the Companies. 2.15. CONTRACTS; ETC. As used in this Agreement, the term "Company Agreements" shall mean all mortgages, indenture notes, agreements, contracts, -23- leases, licenses, franchises, obligations, instruments or other commitments, arrangements or understandings of any kind, whether written or oral, binding or non-binding, (including all leases and other agreements referred to on Schedule 2.10 hereto) to which any of the Companies is a party or by which any of the Companies or any of their respective assets or properties (including the Real Property and the Improvements) may be bound or affected, including all amendments, modifications, extensions or renewals of any of the foregoing. Set forth on Schedule 2.15 hereto is a complete and accurate list of each Company Agreement which is material to the business, operations, assets, condition (financial or otherwise) or prospects of any of the Companies. True and complete copies of all written Company Agreements referred to on Schedule 2.15 and Schedule 2.10 hereto, exclusive of individual vehicle titles and/or manufacturer's certificates of origin and floor plan liens applicable to individual vehicles, have been delivered or made available to UAG, and the Companies have provided UAG with accurate and complete written summaries of all such Company Agreements which are unwritten. Except as set forth on Schedule 2.15, the Companies are not, nor, to the knowledge of the Companies and the Stockholders is, any other party thereto, in material breach of or default under any Company Agreement, and no event has occurred which (after notice or lapse of time or both) would become a material breach or default under, or would permit modification, cancellation, acceleration or termination of, any Company Agreement or result in the creation of any material Lien upon, or any Person obtaining any right to acquire, any properties, assets or rights of the Companies in any such case where such breach, default or other event would have, or could reasonably be expected to have, a Material Adverse Effect. There are no material unresolved disputes involving any of the Companies under any Company Agreement. 2.16. LABOR RELATIONS. (a) The Companies have paid or made provision for the payment of all salaries and accrued wages and have complied in all material respects with all applicable laws, rules and regulations relating to the employment of labor, including those relating to wages, hours, collective bargaining and the payment and withholding of taxes, and have withheld and paid to the appropriate governmental authority, or are holding for payment not yet due to such authority, all amounts required by law or agreement to be withheld from the wages or salaries of their employees. (b) Except as described in Section 6.13 and as set forth on Schedule 2.16(b) hereto, none of the Companies is a party to any (i) outstanding employment agreements or contracts with officers or employees that are not terminable at will, or that provide for payment of any bonus or commission, (ii) agreement, policy or practice that requires it to pay termination or severance pay to salaried, non-exempt or hourly employees (other than as required by law), (iii) collective bargaining agreement or other labor union contract applicable to persons -24- employed by the Companies, nor do the Stockholders or the Companies know of any activities or proceedings of any labor union to organize any such employees. The Companies have furnished to UAG complete and correct copies of all such agreements ("Employment and Labor Agreements"). The Companies have not breached or otherwise failed to comply with any provisions of any Employment or Labor Agreement. (c) Except as set forth in Schedule 2.16(c) hereto, (i) there is no unfair labor practice charge or complaint pending before the National Labor Relations Board ("NLRB"), (ii) there is no labor strike, material slowdown or material work stoppage or lockout actually pending or, to the Stockholders' or the Companies' knowledge, threatened, against or affecting the Companies, and the Companies have not experienced any strike, material slow down or material work stoppage, lockout or other collective labor action by or with respect to employees of the Companies, (iii) there is no representation claim or petition pending before the NLRB or any similar foreign agency and no question concerning representation exists relating to the employees of the Companies, (iv) there are no charges with respect to or relating to the Companies pending before the Equal Employment Opportunity Commission or any state, local or foreign agency responsible for the prevention of unlawful employment practices, (v) the Companies have not received formal notice from any federal, state, local or foreign agency responsible for the enforcement of labor or employment laws of an intention to conduct an investigation of the Companies and, to the knowledge of the Companies, no such investigation is in progress and (vi) the consents of the unions that are parties to any Employment and Labor Agreements are not required to complete the transactions contemplated by this Agreement and the Documents. (d) The Companies have never caused any "plant closing" or "mass layoff" as such actions are defined in the Worker Adjustment and Retraining Notification Act, as codified at 29 U.S.C. ss.ss. 2101-2109, and the regulations promulgated therein. 2.17. EMPLOYEE BENEFIT PLANS. (a) Set forth on Schedule 2.17(a) hereto is a true and complete list of: (i) each employee pension benefit plan, as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974 ("ERISA"), maintained by the Companies or to which the Companies are required to make contributions ("Pension Benefit Plan"); and (ii) each employee welfare benefit plan, as defined in Section 3(i) of ERISA, maintained by the Companies or to which the Companies are required to make contributions ("Welfare Benefit Plan"). -25- True and complete copies of all Pension Benefit Plans and Welfare Benefit Plans (collectively, "ERISA Plans") have been delivered to or made available to UAG together with, as applicable with respect to each such ERISA Plan, trust agreements, summary plan descriptions, all IRS determination letters or applications therefor with respect to any Pension Benefit Plan intended to be qualified pursuant to Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and valuation or actuarial reports, accountant's opinions, financial statements, IRS Form 5500s (or 5500-C or 5500-R) and summary annual reports for the last three years. (b) With respect to the ERISA Plans, except as set forth on Schedule 2.17(b): (i) there is no ERISA Plan which is a " multiemployer" plan as that term is defined in Section 3(37) of ERISA ("Multiemployer Plan"); (ii) no event has occurred or (to the knowledge of the Companies or the Stockholders) is threatened or about to occur which would constitute a prohibited transaction under Section 406 of ERISA or under Section 4975 of the Code; (iii) each ERISA Plan has operated since its inception in accordance with the reporting and disclosure requirements imposed under ERISA and the Code and has timely filed Form 5500e (or 5500-C or 5500-R) and predecessors thereof; and (iv) no ERISA Plan is liable for any federal, state, local or foreign Taxes. (c) Each Pension Benefit Plan intended to be qualified under Section 401(a) of the Code: (i) has been qualified, from its inception, under Section 401(a) of the Code, and the trust established thereunder has been exempt from taxation under Section 501(a) of the Code and is currently in compliance with applicable federal laws; (ii) has been operated, since its inception, in accordance with its terms and there exists no fact which would adversely affect its qualified status; and (iii) is not currently under investigation, audit or review by the IRS or (to the knowledge of the Companies and the Stockholders) no such action is contemplated or under consideration and the IRS has not asserted that any Pension Benefit Plan is not qualified under Section 401(a) of the Code or that any trust -26- established under a Pension Benefit Plan is not exempt under Section 501(a) of the Code. (d) With respect to each Pension Benefit Plan which is a defined benefit plan under Section 414(j) and, for the purpose solely of Section 2.17(d)(iv) hereof, each defined contribution plan under Section 414(i) of the Code: (i) no liability to the Pension Benefit Guaranty Corporation ("PBGC") under Sections 4062-4064 of ERISA has been incurred by the Companies since the effective date of ERISA and all premiums due and owing to the PBGC have been timely paid; (ii) the PBGC has not notified the Companies or any Pension Benefit Plan of the commencement of proceedings under Section 4042 of ERISA to terminate any such plan; (iii) no event has occurred since the inception of any Pension Benefit Plan or (to the knowledge of the Companies or the Stockholders) is threatened or about to occur which would constitute a reportable event within the meaning of Section 4043(b) of ERISA; (iv) no Pension Benefit Plan ever has incurred any "accumulated funding deficiency" (as defined in Section 302 of ERISA and Section 412 of the Code); and (v) if any of such Pension Benefit Plans were to be terminated on the Closing Date (A) no liability under Title IV of ERISA would be incurred by the Companies and (B) all benefits accrued to the day prior to the Closing Date (whether or not vested) would be fully funded in accordance with the actuarial assumptions and method utilized by such plan for valuation purposes. (e) With respect to each Pension Benefit Plan, Schedule 2.17(e) contains a list of all Pension Benefit Plans to which ERISA has applied which have been or are being terminated, or for which a termination is contemplated, and a description of the actions taken by the PBGC and the IRS with respect thereto. (f) The approximate aggregate of the amounts of contributions by the Companies to be paid or accrued under ERISA Plans for the current fiscal year is set forth on Schedule 2.17(f) (the "Aggregate ERISA Contributions"), and the Aggregate ERISA Contributions are not expected to exceed the total amount set forth on Schedule 2.17(f). To the extent required in accordance with GAAP, the Company Balance Sheets reflect in the aggregate an accrual of all amounts of employer contributions accrued but unpaid by the Companies under the ERISA Plans as of the date of the Company Balance Sheet. -27- (g) With respect to any Multiemployer Plan (1) the Companies have not, since their formation, made or suffered a "complete withdrawal" or "partial withdrawal" as such terms are respectively defined in Sections 4203 and 4205 of ERISA; (2) there is no withdrawal liability of the Companies under any Multiemployer Plan, computed as if a "complete withdrawal" by the Companies had occurred under each such Plan as of December 31, 1995; and (3) the Companies have not received notice to the effect that any Multiemployer Plan is either in reorganization (as defined in Section 4241 of ERISA) or insolvent (as defined in Section 4245 of ERISA). (h) With respect to the Welfare Benefit Plans: (i) There are no liabilities of the Companies under Welfare Benefit Plans with respect to any condition which relates to a claim filed on or before the Closing Date. (ii) No claims for benefits are in dispute or litigation. 2.18. OTHER BENEFIT AND COMPENSATION PLANS OR ARRANGEMENTS. (a) Set forth on Schedule 2.18(a) hereto is a true and complete list of: (i) each employee stock purchase, employee stock option, employee stock ownership, deferred compensation, performance, bonus, incentive, vacation pay, holiday pay, insurance, severance, retirement, excess benefit or other plan, trust or arrangement which is not an ERISA Plan whether written or oral, which the Companies maintain or are required to make contributions to; (ii) each other agreement, arrangement, commitment and understanding of any kind, whether written or oral, with any current or former officer, director or consultant of the Companies pursuant to which payments may be required to be made at any time following the date hereof (including, without limitation, any employment, deferred compensation, severance, supplemental pension, termination or consulting agreement or arrangement); and (iii) each employee of the Companies whose aggregate compensation for the fiscal year ended December 31, 1996 exceeded $75,000. True and complete copies of all of the written plans, arrangements and agreements referred to on Schedule 2.18(a) ("Compensation Commitments") have been provided to UAG together with, where prepared by or for the Companies, any valuation, actuarial or accountant's opinion or -28- other financial reports with respect to each Compensation Commitment for the last three years. An accurate and complete written summary has been provided to UAG with respect to any Compensation Commitment which is unwritten. (b) Each Compensation Commitment: (i) since its inception, has been operated in all material respects in accordance with its terms; (ii) is not currently under investigation, audit or review by the IRS or any other federal or state agency and (to the knowledge of the Companies or the Stockholders) no such action is contemplated or under consideration; (iii) has no liability for any federal, state, local or foreign Taxes; (iv) has no claims subject to dispute or litigation; (v) has met all applicable requirements, if any, of the Code; and (vi) has operated since its inception in material compliance with the reporting and disclosure requirements imposed under ERISA and the Code. 2.19. TRANSACTIONS WITH INSIDERS. Set forth on Schedule 2.19 hereto is a complete and accurate description of all material transactions between the Companies or any ERISA Plan, on the one hand, and any Insider, on the other hand, that have occurred since December 31, 1995. For purposes of this Agreement: (i) the term "Insider" shall mean the Stockholders, any director or officer of the Companies, and any Affiliate, Associate or Relative of any of the foregoing persons; (ii) the term "Associate" used to indicate a relationship with any person means (A) any corporation, partnership, joint venture or other entity of which such person is an officer or partner or is, directly or indirectly, through one or more intermediaries, the beneficial owner of 30% or more of (1) any class or type of equity securities or other profits interest or (2) the combined voting power of interests ordinarily entitled to vote for management or otherwise, and (B) any trust or other estate in which such -29- person has a substantial beneficial interest or as to which such person serves as trustee or in a similar fiduciary capacity; and (iii) a "Relative" of a person shall mean such person's spouse, such person's parents, sisters, brothers, children and the spouses of the foregoing, and any member of the immediate household of such person. 2.20. PROPRIETY OF PAST PAYMENTS. No funds or assets of the Companies have been used for illegal purposes; no unrecorded funds or assets of the Companies have been established for any purpose; no accumulation or use of the Companies' corporate funds or assets has been made without being properly accounted for in the respective books and records of the Companies; all payments by or on behalf of the Companies have been duly and properly recorded and accounted for in their respective books and records; no false or artificial entry has been made in the books and records of the Companies for any reason; no payment has been made by or on behalf of the Companies with the understanding that any part of such payment is to be used for any purpose other than that described in the documents supporting such payment; and the Companies have not made, directly or indirectly, any illegal contributions to any political party or candidate, either domestic or foreign. Neither the IRS nor any other federal, state, local or foreign government agency or entity has initiated or threatened any investigation of any payment made by the Companies of, or alleged to be of, the type described in this Section 2.20. 2.21. INTEREST IN COMPETITORS. Except as set forth on Schedule 2.21, neither the Companies nor the Stockholders, nor any of their Affiliates, have any interest, either by way of contract or by way of investment (other than as holder of not more than 2% of the outstanding capital stock of a publicly traded Person, so long as such holder has no other connection or relationship with such Person) or otherwise, directly or indirectly, in any Person other than the Companies that is engaged in the retail sale of automobiles or light duty trucks. 2.22. BROKERS. Neither the Companies, nor any director, officer or employee thereof, nor the Stockholders or any representative of the Stockholders, has employed any broker or finder or has incurred or will incur any broker's, finder's or similar fees, commissions or expenses, in each case in connection with the transactions contemplated by this Agreement or the Documents. -30- 2.23. ACCOUNTS. Schedule 2.23 hereof correctly identifies each bank account maintained by or on behalf or for the benefit of the Companies and the name of each person with any power or authority to act with respect thereto. 2.24. DISCLOSURE. Neither the Companies nor the Stockholders have made any material misrepresentation to UAG or the Sub relating to the Companies or the Shares or the Real Property or Improvements and neither the Companies nor the Stockholders to their knowledge have omitted to state to UAG any material fact relating to the Companies or the Shares or the Real Property or Improvements which is necessary in order to make the information given by or on behalf of the Companies or the Stockholders to UAG not misleading. To the knowledge of the Companies and the Stockholders, no fact, event, condition or contingency exists or has occurred which has, or in the future can reasonably be expected to have, a Material Adverse Effect, which has not been disclosed in the Company Financial Statements or the Schedules to this Agreement. 2.25. NET WORTH. On the Closing Date, the Net Worth of the Companies will be equal to or greater than the November 30, 1996 Net Worth less the amount of any Distributions. ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS Subject to the parties' agreement and acknowledgement that the Schedules referred to in this Article 3 are to be delivered by the Stockholders no later than ten (10) Business Days after the Effective Date hereof, the Stockholders hereby represent and warrant to UAG as follows: 3.1. OWNERSHIP OF SHARES; TITLE. Each Stockholder is the owner of record and beneficially of the Shares as set forth on Schedule 3.1 hereof and has, and shall transfer to Sub at the Closing, good and marketable title to the Shares owned by him, free and clear of any and all security interests, pledge agreements, Liens, encumbrances, proxies and voting or other agreements except restrictions on transfer imposed by applicable federal and state securities laws. 3.2. AUTHORITY. The Stockholders have all requisite power and authority and have full legal capacity and are competent to execute, deliver and perform this Agreement and the Documents to which they are a -31- party and to consummate the transactions contemplated hereby and thereby (including the disposition of the Shares to Sub as contemplated by this Agreement). This Agreement has been duly executed and delivered by the Stockholders and constitutes, and the Documents to which each Stockholder is a party when executed and delivered by such Stockholder will constitute, a valid and binding obligation of such Stockholder, enforceable against him in accordance with its terms. Except as set forth on Schedule 3.2, the execution, delivery and performance of this Agreement and the Documents by the Stockholders and the consummation of the transactions contemplated hereby and thereby do not and will not: (i) (after notice or lapse of time or both) conflict with, result in a breach of any provision of, constitute a default under, result in the modification or cancellation of, or give rise to any right of termination or acceleration in respect of, any material contract, agreement, commitment, understanding, arrangement or restriction to which any of the Stockholders is a party or to which any of the Stockholders or any of their property is subject; (ii) violate or conflict with any Legal Requirements applicable to the Stockholders or any of Stockholders' businesses or properties; or (iii) require any authorization, consent, order, permit or approval of, or notice to, or filing, registration or qualification with, any governmental, administrative or judicial authority, except in connection with or in compliance with the provisions of the H-S-R Act. 3.3. REAL PROPERTY AND IMPROVEMENTS. The Real Property and Improvements owned by Mr. Staluppi or his Affiliates are owned in fee simple, free and clear of all Liens, claims and encumbrances, except those disclosed in Schedule 3.3(a), none of which currently or, to the knowledge of Mr. Staluppi or his Affiliates, in the future will materially affect the use of such Real Property or such Improvements for the conduct of the respective businesses of the Companies as presently conducted or, as to the New Facility, as proposed to be conducted. No assessments have been made against any portion of the Real Property which are unpaid (except ad valorem taxes for the current year that are not yet due and payable), whether or not they have become Liens. There are no disputes concerning the location of the lines and corners of the Real Property. No one has been granted any right to purchase or lease such Real Property or Improvements other than the existing leases in favor of the Companies, which are to be terminated at the Closing by agreement between the parties and pursuant to which the owners shall acknowledge that there are no defaults under any such leases and that the Companies have no liability arising out of or relating to such leases. Attached as -32- Schedule 3.3 are all surveys, title binders, title policies and copies of any exceptions to title relating to such Real Property or Improvements. 3.4. INVESTMENT INTENT. Mr. Staluppi has no present plan, intention or arrangement to dispose of any of the UAG Common Stock received by him pursuant to the terms of this Agreement. 3.5. QUALIFICATION OF STOCKHOLDERS. Mr. Staluppi (i) is an "accredited investor" within the meaning of Regulation D of the Securities Act of 1933, as amended (the "Securities Act"), and is acquiring the UAG Common Stock to be issued pursuant to the terms of this Agreement for his own account and not with a view to, or for resale in connection with, any distribution thereof; (ii) understands and acknowledges that such UAG Common Stock has not been registered under the Securities Act or any state securities laws by reason of certain exemptions from the registration provisions thereof which depend upon, among other things, the bona fide nature of Mr. Staluppi's investment intent as expressed herein; (iii) is able to bear the economic risk of investment in such UAG Common Stock and has such knowledge and experience in financial and business matters that he is capable of evaluating the risks and merits of such UAG Common Stock; (iv) acknowledges that the UAG shares were not offered to him by means of publicly disseminated advertisements or sales literature, or as part of a general solicitation; (v) acknowledges that in deciding to proceed with the transaction set forth herein he has relied solely on his own independent investigation of UAG and upon the representations of UAG set forth herein; and (vi) understands and acknowledges that such UAG Common Stock will be "restricted securities" as that term is defined in Rule 144 under the Securities Act and that the certificates representing such UAG Common Stock will bear a legend restricting transfer unless (A) the transfer is exempt from the registration requirements under the Securities Act and any applicable state securities law and an opinion of counsel reasonably satisfactory to UAG that such transfer is exempt therefrom is delivered to UAG or (B) the transfer is made pursuant to an effective registration statement under the Securities Act and any applicable state securities law. ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF UAG Subject to the parties' agreement and acknowledgement that the Schedules referred to in this Article 4 are to be delivered by the Stockholders no later than ten (10) Business Days after the Effective Date hereof, UAG and UAG East hereby represent and warrant to the Companies and the Stockholders as follows: -33- 4.1. ORGANIZATION AND GOOD STANDING. UAG is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the corporate power and authority to own, lease and operate the properties used in its business and to carry on its business as now being conducted. UAG is duly qualified to do business and is in good standing as a foreign corporation in each state and jurisdiction where qualification as a foreign corporation is required, except for such failures to be qualified and in good standing, if any, which when taken together with all other such failures of UAG and the UAG Subsidiaries (as defined below) would not, or could not reasonably be expected to, in the aggregate have a Material Adverse Effect on UAG and the UAG Subsidiaries, taken as a whole. UAG has made available to the Stockholders complete and correct copies of its charter and by-laws, as amended and presently in effect. 4.2. SUBSIDIARIES. Each of the UAG Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own, lease and operate the properties and assets used in its business and to carry on its business as now being conducted, and is duly qualified to do business and in good standing as a foreign corporation in each jurisdiction where qualification as a foreign corporation is required, except for such failures to be qualified and in good standing, if any, which when taken together with all other such failures of UAG and the UAG Subsidiaries would not, or could not reasonably be expected to, in the aggregate have a Material Adverse Effect on UAG and the UAG Subsidiaries, taken as a whole. All of the outstanding shares of capital stock of the UAG Subsidiaries have been validly authorized and issued, are fully paid and non-assessable, have not been issued in violation of any preemptive rights or of any federal or state securities law. "UAG Subsidiary" shall mean any corporation or other entity in which UAG, directly or indirectly, owns beneficially securities representing 50% or more of (i) the aggregate equity or profit interests or (ii) the combined voting power of voting interests ordinarily entitled to vote for management or otherwise. 4.3. CAPITALIZATION. The authorized stock of UAG and the number of shares of capital stock which are issued and outstanding are set forth on Schedule 4.3 hereto. The shares listed on Schedule 4.3 hereto constitute all the issued and outstanding shares of capital stock of UAG and have been validly authorized and issued, are fully paid and nonassessable, have not been issued in violation of any preemptive rights or of any federal or state securities law and no personal liability attaches to the ownership thereof. -34- 4.4. SEC FILINGS. UAG has heretofore made available to Mr. Staluppi UAG's Registration Statement on Form S-1 as declared effective by the SEC on October 23, 1996 and UAG's Quarterly Report on Form 10-Q for the period ending September 30, 1996 (the "SEC Filings"). As of their respective dates, the SEC filings did not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. 4.5. AUTHORITY; APPROVALS AND CONSENTS. UAG has the corporate power and authority to enter into this Agreement and the Documents to which it is a party and to perform its obligations hereunder and thereunder. At the time of the Closing, the execution, delivery and performance of this Agreement and the Documents to which it is a party and the consummation of the transactions contemplated hereby and thereby will have been duly authorized and approved by the Board of Directors of UAG and no other corporate proceedings on the part of UAG will be necessary to authorize and approve this Agreement and the Documents and the transactions contemplated hereby and thereby. This Agreement has been, and on the Closing Date the Documents will be, duly executed and delivered by, and constitute a valid and binding obligation of, UAG, enforceable against UAG in accordance with their respective terms. Except as set forth on Schedule 4.5 hereto, the execution, delivery and performance by UAG of this Agreement and the Documents to which it is a party and the consummation of the transactions contemplated hereby and thereby do not and will not: (i) contravene any provisions of the Certificate of Incorporation or By-Laws of UAG; (ii) (after notice or lapse of time or both) conflict with, result in a breach of any provision of, constitute a default under, result in the modification or cancellation of, or give rise to any right of termination or acceleration in respect of, any UAG Agreement (as defined below) or require any consent or waiver of any party to any UAG Agreement; (iii) result in the creation of any security interest upon, or any person obtaining any right to acquire, any properties, assets or rights of UAG; (iv) violate or conflict with any Legal Requirements applicable to UAG or its respective businesses or properties that would or could reasonably be expected to have a Material Adverse Effect on UAG and the UAG Subsidiaries, taken as a whole; or -35- (v) require any authorization, consent, order, permit or approval of, or notice to, or filing, registration or qualification with, any governmental, administrative or judicial authority, except in connection with or in compliance with the provisions of the H-S-R Act. Except as set forth or referred to above, no authorization, consent, order, permit or approval of, or notice to, or filing, registration or qualification with, any governmental administrative or judicial authority is necessary to be obtained or made by UAG to enable UAG to continue to conduct its business and operations and use its properties after the Closing in a manner which is in all material respects consistent with that in which they are presently conducted. 4.6. FINANCIAL STATEMENTS. Attached as Schedule 4.6 are true and complete copies of: (a) the consolidated balance sheet of UAG and its consolidated UAG Subsidiaries as of December 31 in each of the years 1994 and 1995, and the related consolidated statements of income, stockholders' equity and cash flows for the fiscal years ended on such dates, together with the notes thereto, in each case examined by and accompanied by the report of Coopers & Lybrand, independent certified public accountants; and (b) the unaudited consolidated balance sheet of UAG and its consolidated UAG Subsidiaries as of September 30, 1996 (the "UAG Balance Sheet"), and the unaudited consolidated statements of income, stockholders' equity and cash flows for the month periods ended on such dates, together with the notes thereto; (all the foregoing financial statements, including the notes thereto, being referred to herein collectively as the "UAG Financial Statements"). The UAG Financial Statements are in accordance with the books and records of UAG and the UAG Subsidiaries, fairly present the consolidated financial position, results of operations, stockholders' equity and changes in financial position of UAG and the UAG Subsidiaries as of the dates and for the periods indicated, in each case in conformity with GAAP consistently applied (except as otherwise indicated in such statements) during such periods, and can be legitimately reconciled with the financial statements and the financial records maintained and the accounting methods applied by UAG and the UAG Subsidiaries for federal income tax purposes, and the unaudited financial statements included in the UAG Financial Statements indicate all adjustments, which consist of only normal recurring accruals, necessary for such fair presentations. The statements of income included in the UAG Financial Statements do not contain any items of special or nonrecurring income except as expressly specified -36- therein, and the balance sheets included in the UAG Financial Statements do not reflect any write-up or revaluation increasing the book value of any assets. The books and accounts of UAG and the UAG Subsidiaries are complete and correct in all material respects and fairly reflect all of the transactions, items of income and expense and all assets and liabilities of the businesses of UAG and the UAG Subsidiaries consistent with prior practices of UAG and the UAG Subsidiaries. 4.7. TAXES. UAG, each UAG Subsidiary and, for any period during all or part of which the tax liability of any other corporation was determined on a combined or consolidated basis with UAG or any UAG Subsidiary, any such other corporation, have filed timely all federal, state, local and foreign tax returns, reports and declarations required to be filed (or have obtained or timely applied for an extension with respect to such filing) correctly reflecting the Taxes and all other information required to be reported thereon and have paid, or made adequate provision for the payment of, all Taxes which are due pursuant to such returns or pursuant to any assessment received by UAG or any UAG Subsidiary or any such other corporation. In the ordinary course, UAG makes adequate provision on its books for the payment of all Taxes (including for the current fiscal period) owed by UAG and the UAG Subsidiaries. Neither UAG nor any UAG Subsidiary has been subject to a federal or state tax audit of any kind, and no adjustment has been proposed by the IRS with respect to any return for any subsequent year. UAG knows of no basis for an assertion of a deficiency for Taxes against UAG or any UAG Subsidiary. 4.8. ABSENCE OF UNDISCLOSED LIABILITIES. Neither UAG nor any UAG Subsidiary has any material liability of any nature whatsoever (whether known or unknown, due or to become due, accrued, absolute, contingent or otherwise), including, without limitation, liabilities for Taxes (as defined in Section 4.8), except for (i) liabilities reflected or reserved against the most recent UAG Financial Statement, (ii) liabilities disclosed in the SEC filings, (iii) current liabilities incurred in the ordinary course of business and consistent with past practice after the date of the UAG Balance Sheet which, individually and in the aggregate, do not have, and cannot reasonably be expected to have, a material adverse effect on UAG and the UAG Subsidiaries, taken as a whole, and (iv) liabilities disclosed on Schedule 4.8 hereto. 4.9. LEGAL MATTERS. (a) Except as set forth on Schedule 4.9(a) hereto, (i) there are no material Claims pending against, or, to the knowledge of UAG or any UAG Subsidiary, threatened against or affecting, UAG, any UAG Subsidiary, any of their respective officers, directors, employees, agents or Affiliates involving, -37- affecting or relating to any assets, properties or operations of UAG or any UAG Subsidiary, or any of their respective properties or rights before or by any court, arbitrator, panel, agency or other governmental, administrative or judicial entity, domestic or foreign, nor is any basis known to UAG, any UAG Subsidiary or any of their directors, officers, employees or agents for any such Claims, and (ii) neither UAG nor any UAG Subsidiary is subject to any material Judgments of any governmental, administrative or judicial authority, domestic or foreign. (b) The businesses of UAG and the UAG Subsidiaries are being conducted in compliance with all Legal Requirements applicable to UAG or any UAG Subsidiary or any of their respective businesses or properties, except where the failure to be in such compliance could not reasonably be expected to have a material adverse effect on UAG and the UAG Subsidiaries, taken as a whole. Except as set forth on Schedule 4.9(b) hereto, UAG and the UAG Subsidiaries hold, and are in compliance with, all Permits required by all applicable Legal Requirements except where the failure to hold or be in compliance with such Permits could not reasonably be expected to have a material adverse effect on UAG and the UAG Subsidiaries, taken as a whole. (c) UAG and each UAG Subsidiary owns or holds all Permits material to the conduct of its business. No event has occurred and is continuing which permits, or after notice or lapse of time or both would permit, any modification or termination of any Permit. 4.10. DISCLOSURE. Neither UAG nor any UAG Subsidiary has made any material misrepresentation to the Companies or the Stockholders relating to this Agreement and neither UAG nor any UAG Subsidiary has omitted to state to the Companies or the Stockholders any material fact relating to this Agreement which is necessary in order to make the information given by or on behalf of UAG or any UAG Subsidiary to the Companies or the Stockholders or their representatives at or prior to Closing not misleading. No fact, event, condition or contingency exists or has occurred which has, or in the future can reasonably be expected to have, a material adverse effect on UAG and the UAG Subsidiaries, taken as a whole, which has not been disclosed in the SEC Filings or the Schedules to this Agreement. 4.11. ABSENCE OF MATERIAL ADVERSE EFFECT; CONDUCT OF BUSINESS. (a) Since October 28, 1996, UAG and the UAG Subsidiaries have operated in the ordinary course of business consistent with past practice, except as set forth on Schedule 4.11(a) hereto, and there has not been: (i) any material adverse change in the assets, properties, business, operations, prospects, -38- net income or financial condition of UAG and the UAG Subsidiaries, taken as a whole, and no factor, event, condition, circumstance or prospective development exists which threatens or may threaten to have a material adverse effect on UAG and the UAG Subsidiaries, taken as a whole. (ii) any material loss, damage, destruction or other casualty to the property or other assets of UAG or any UAG Subsidiary, whether or not covered by insurance; (iii) any change in any method of accounting or accounting practice of UAG or any UAG Subsidiary; or (b) Since October 28, 1996, except as set forth in Schedule 4.11(b) hereto, neither UAG nor the UAG Subsidiaries have: (i) incurred any material obligation or liability (whether absolute, accrued, contingent or otherwise), except in the ordinary course of business consistent with past practice and except in connection with the acquisition of additional dealerships; (ii) failed to discharge or satisfy any lien or pay or satisfy any obligation or liability (whether absolute, accrued, contingent or otherwise), other than liabilities being contested in good faith and for which adequate reserves have been provided; (iii) sold or transferred any assets or canceled any debts or claims or waived any rights, except in the ordinary course of business consistent with past practice; (iv) defaulted on any material obligation; (v) written down the value of any inventory or written off as uncollectible any accounts receivable or any portion thereof not reflected in the UAG Financial Statements; or (vi) entered into any agreement or made any commitment to do any of the foregoing that has not been terminated. 4.12. INSURANCE. All properties and assets of UAG and the UAG Subsidiaries which are of an insurable character are insured against loss or damage by fire and other risks to the extent and in the manner reasonable in light of the risks attendant to the businesses and activities in which UAG and the UAG Subsidiaries are -39- or have been engaged and customary for companies engaged in similar businesses or owning similar assets. 4.13. LABOR RELATIONS. (a) UAG and each of the UAG Subsidiaries has paid or made provision for the payment of all salaries and accrued wages and has complied in all material respects with all applicable laws, rules and regulations relating to the employment of labor, including those relating to wages, hours, collective bargaining and the payment and withholding of taxes, and has withheld and paid to the appropriate governmental authority, or is holding for payment not yet due to such authority, all amounts required by law or agreement to be withheld from the wages or salaries of its employees. (b) Except as set forth in Schedule 4.13(b) hereto, (i) there is no unfair labor practice charge or complaint pending before the NLRB, (ii) there is no labor strike, material slowdown or material work stoppage or lockout actually pending or, to UAG's or any of the UAG Subsidiaries' knowledge, threatened, against or affecting UAG or any UAG Subsidiary, and neither UAG nor any UAG Subsidiary has experienced any strike, material slow down or material work stoppage, lockout or other collective labor action by or with respect to employees of UAG or any UAG Subsidiary, (iii) there is no representation claim or petition pending before the NLRB or any similar foreign agency and no question concerning representation exists relating to the employees of UAG or any UAG Subsidiary, (iv) there are no charges with respect to or relating to UAG or any UAG Subsidiary pending before the Equal Employment Opportunity Commission or any state, local or foreign agency responsible for the prevention of unlawful employment practices, (v) neither UAG nor any UAG Subsidiary has received formal notice from any federal, state, local or foreign agency responsible for the enforcement of labor or employment laws of an intention to conduct an investigation of UAG or any UAG Subsidiary and no such investigation is in progress and (vi) the consents of the unions that are parties to any UAG Employment and Labor Agreements (as defined below) are not required to complete the transactions contemplated by this Agreement and the Documents. As used in this agreement, the term "UAG Employment and Labor Agreements" shall mean all (i) outstanding employment agreements or contracts with officers or employees that are not terminable at will, or that provide for the payment of any bonus or commission, (ii) agreements, policies or practices that require UAG or any UAG Subsidiary to pay termination or severance pay to salaried, non-exempt or hourly employees (other than as required by law), (iii) collective bargaining agreements or other labor union contracts applicable to persons employed by UAG or any UAG Subsidiary. (c) Neither UAG nor any UAG Subsidiary has ever caused any "plant closing" or "mass layoff" as such actions are defined in the Worker Adjustment and Retraining Notification Act, -40- as codified at 29 U.S.C. ss.ss. 2101-2109, and the regulations promulgated therein. 4.14. CONTRACTS; ETC. As used in this Agreement, the term "UAG Agreements" shall mean all mortgages, indenture notes, agreements, contracts, leases, licenses, franchises, obligations, instruments or other commitments, arrangements or understandings of any kind, whether written or oral, binding or non-binding, to which UAG or any UAG Subsidiary is a party or by which UAG or any UAG Subsidiary or any of their respective properties may be bound or affected, including all amendments, modifications, extensions or renewals of any of the foregoing which are material to the businesses, operations, assets, condition (financial or otherwise) or prospects of UAG and the UAG Subsidiaries. Neither UAG nor any UAG Subsidiary nor, to the knowledge of UAG and each UAG Subsidiary, any other party thereto, is in breach of or default under any UAG Agreement, and no event has occurred which (after notice or lapse of time or both) would become a breach or default under, or would permit modification, cancellation, acceleration or termination of, any UAG Agreement or result in the creation of any security interest upon, or any person obtaining any right to acquire, any properties, assets or rights of UAG or any UAG Subsidiary in any such case where such breach, default or other event would have, or could reasonably be expected to have, a material adverse effect on UAG and the UAG Subsidiaries, taken as a whole. 4.15. BROKERS. Neither UAG nor any UAG Subsidiary, nor any director, officer or employee thereof, has employed any broker or finder or has incurred or will incur any broker's, finder's or similar fees, commissions or expenses, in each case in connection with the transactions contemplated by this Agreement or the Documents. 4.16. PROPRIETY OF PAST PAYMENTS. No funds or assets of UAG or any UAG Subsidiary have been used for illegal purposes; no unrecorded funds or assets of UAG or any UAG Subsidiary have been established for any purpose; no accumulation or use of UAG's or any UAG Subsidiary's corporate funds or assets has been made without being properly accounted for in the respective books and records of UAG or any UAG Subsidiary; all payments by or on behalf of UAG and the UAG Subsidiaries have been duly and properly recorded and accounted for in their respective books and records; no false or artificial entry has been made in the books and records of UAG or any UAG Subsidiary for any reason; no payment has been made by or on behalf of UAG or any UAG Subsidiary with the understanding that any part of such payment is to be used for any purpose other than that described in the documents supporting such payment; and neither UAG nor any UAG Subsidiary has made, directly or indirectly, any illegal contributions to any political party or candidate, either domestic -41- or foreign. Neither the IRS nor any other federal, state, local or foreign government agency or entity has initiated or threatened any investigation of any payment made by UAG or any UAG Subsidiary of, or alleged to be of, the type described in this Section 4.16. 4.17. ENVIRONMENTAL MATTERS. UAG and the UAG Subsidiaries have not violated, done or suffered any act which could give rise to liability under and, to the knowledge of UAG, are not otherwise exposed to liability under, any Environmental Law which could reasonably be expected to have a material adverse effect on the financing condition of UAG and the UAG Subsidiaries taken as a whole. 4.18. EMPLOYEE BENEFIT PLANS. UAG and the UAG Subsidiaries are not subject to any liability under any employee pension benefit plans or employee welfare benefit plans (as defined in ERISA) maintained by UAG or any UAG Subsidiary which could reasonably be expected to have a material adverse effect on the financial condition of UAG and the UAG Subsidiaries, taken as a whole. ARTICLE 5. COVENANTS AND ADDITIONAL AGREEMENTS 5.1. ACCESS; CONFIDENTIALITY. Between the date hereof and the Closing Date, the Stockholders and the Companies will (i) provide to the officers and other authorized representatives of UAG and Sub full access, during normal business hours, to any and all premises, properties, files, books, records, documents, and other information of the Companies and will cause their officers to furnish to UAG and Sub and their authorized representatives any and all financial, technical and operating data and other information pertaining to the businesses and properties of the Companies, and (ii) make available for inspection and copying by UAG and Sub true and complete copies of any documents relating to the foregoing. UAG and Sub will hold in confidence (unless and to the extent compelled to disclose by judicial or administrative process or, in the opinion of its counsel, by other requirements of law) all Confidential Information (as defined below) and will not disclose the same to any third party except in connection with obtaining financing and otherwise as may reasonably be necessary to carry out this Agreement and the transactions contemplated hereby, including any due diligence review by or on behalf of UAG and Sub. If this Agreement is terminated, UAG and Sub will promptly return to the Companies, upon the reasonable request of the Companies, all Confidential Information furnished by the Companies and held by UAG and Sub, including all copies and summaries thereof. As used herein, "Confidential Information" shall mean all information concerning the Companies obtained by UAG or Sub from the Companies in connection with the transactions contemplated by this Agreement, -42- except information (x) ascertainable or obtained from public information, (y) received from a third party not employed by or otherwise affiliated with the Companies unless such information is received from a third party in violation of a duty such third party owes to the Companies not to disclose such information, or (z) which is or becomes known to the public, other than through a breach by UAG of this Agreement. The Stockholders will hold in confidence (unless and to the extent compelled to disclose by judicial or administrative process, or, in the opinion of their counsel, by other requirements of law) all UAG Confidential Information (as defined below) and will not disclose the same to any third party except as may reasonably be necessary to carry out this Agreement and the transactions contemplated hereby, including any due diligence review by or on behalf of the Stockholders. If this Agreement is terminated, the Stockholders will promptly return to UAG, upon the reasonable request of UAG, all UAG Confidential Information furnished by UAG and held by the Stockholders, including all copies and summaries thereof. As used herein, "UAG Confidential Information" shall mean all information concerning UAG obtained by the Stockholders in connection with the transactions contemplated by this Agreement, except information (x) ascertained or obtained from public information, (y) received from a third party not employed or otherwise affiliated with UAG unless such information is received from a third party in violation of a duty such third party owes to UAG not to disclose such information, or (z) which is or becomes known to the public, other than a breach by the Stockholders of this Agreement. 5.2. FURNISHING INFORMATION; ANNOUNCEMENTS. The Stockholders and the Companies, on the one hand, and UAG and Sub, on the other hand, will, as soon as practicable after reasonable request therefor, furnish to the other all the information concerning the Stockholders and the Companies or UAG and Sub, respectively, required for inclusion in any statement or application made by UAG or the Companies to any governmental or regulatory body or in connection with obtaining any third party consent in connection with the transactions contemplated by this Agreement. Neither the Stockholders nor the Companies, on the one hand, nor UAG nor Sub, on the other hand, or any representative thereof, shall issue any press releases or otherwise make any public statement with respect to the transactions contemplated hereby without the prior consent of the other, except as may be required by law (including federal or state securities laws) as determined by such parties' counsel. 5.3. ANTITRUST IMPROVEMENTS ACT COMPLIANCE. UAG and Sub and the Stockholders and the Companies, as applicable, shall each file or cause to be filed with the Federal Trade Commission and the United States Department of Justice any notifications required to be filed by the respective "ultimate parent" entities under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "H-S-R Act"), and the rules and -43- regulations promulgated thereunder, with respect to the transactions contemplated herein. The parties shall use their best efforts to make such filings promptly, to respond to any requests for additional information made by either of such agencies, to cause the waiting periods under the H-S-R Act to terminate or expire at the earliest possible date and to resist vigorously, at their respective cost and expense (including, without limitation, the institution or defense of legal proceedings), any assertion that the transactions contemplated herein constitute a violation of the antitrust laws, all to the end of expediting consummation of the transactions contemplated herein; provided, however, that if UAG or the Stockholders shall determine after issuance of any preliminary injunction that continuing such resistance is not in its or their best interests, UAG or the Stockholders, as the case may be, may, by written notice to the other party, terminate this Agreement with the effect set forth in Section 8.2 hereof. 5.4. CERTAIN CHANGES AND CONDUCT OF BUSINESS OF THE COMPANIES. (a) From and after the date of this Agreement and until the Closing Date, the Companies shall, and the Stockholders shall cause the Companies to, conduct their respective businesses solely in the ordinary course consistent with past practices and, without the prior written consent of UAG, neither the Stockholders nor the Companies will, except as required or permitted pursuant to the terms hereof, permit the Companies to: (i) make any material change in the conduct of their respective businesses and operations or enter into any transaction other than in the ordinary course of business consistent with past practices; (ii) make any change in their Articles of Incorporation or By-laws, issue any additional shares of capital stock or equity securities or grant any option, warrant or right to acquire any capital stock or equity securities or issue any security convertible into or exchangeable for their capital stock or alter any term of any of their outstanding securities or make any change in their outstanding shares of capital stock or other ownership interests or its capitalization, whether by reason of a reclassification, recapitalization, stock split or combination, exchange or readjustment of shares, stock dividend or otherwise; (iii) (A) incur, assume or guarantee any indebtedness for borrowed money, issue any notes, bonds, debentures or other corporate securities or grant any option, warrant or right to purchase any thereof, except pursuant to transactions in the ordinary course of business consistent with past practices, (B) issue any securities convertible or exchangeable for debt securities of the Companies, or -44- (C) issue any options or other rights to acquire from the Companies, directly or indirectly, debt securities of the Companies or any security convertible into or exchangeable for such debt securities; (iv) make any sale, assignment, transfer, abandonment or other conveyance of any of their assets or any part thereof, except transactions pursuant to existing contracts set forth in Schedule 2.15 hereto and dispositions of inventory or of worn-out or obsolete equipment for fair or reasonable value in the ordinary course of business consistent with past practices; (v) subject any of their assets, or any part thereof, to any Lien or suffer such to be imposed other than such Liens as may arise in the ordinary course of business consistent with past practices by operation of law which will not have, or cannot reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; (vi) declare, set aside or pay any dividends or other distributions (whether in cash, stock, property or any combination thereof) in respect of any shares of their capital stock (other than distributions of net income attributable to periods after November 30, 1996 or distributions of existing cash as of November 30, 1996 as long as such distributions could not reasonably be expected to adversely effect the business or operation of the Companies) or redeem, retire, purchase or otherwise acquire, directly or indirectly, any shares of its capital stock; (vii) acquire any assets, raw materials or properties, or enter into any other transaction, other than in the ordinary course of business consistent with past practices; (viii) enter into any new (or amend any existing) employee benefit plan, program or arrangement or any new (or amend any existing) employment, severance or consulting agreement, grant any general increase in the compensation of officers or employees (including any such increase pursuant to any bonus, pension, profit-sharing or other plan or commitment) or grant any increase in the compensation payable or to become payable to any employee, except in accordance with pre-existing contractual provisions or consistent with past practices; (ix) make or commit to make any individual material capital expenditure in excess of $100,000, or aggregate capital expenditures in excess of $300,000; -45- (x) pay, loan or advance any amount to, or sell, transfer or lease any properties or assets to, or enter into any agreement or arrangement with, any of their Affiliates; (xi) guarantee any indebtedness for borrowed money or any other obligation of any other person, other than in the ordinary course of business consistent with past practice; (xii) fail to keep in full force and effect insurance comparable in amount and scope to coverage maintained by the Companies (or on behalf of the Companies) on the date hereof; (xiii) make any loan, advance or capital contribution to or investment in any Person; (xiv) make any change in any method of accounting or accounting principle, method, estimate or practice except for any such change required by reason of a concurrent change in GAAP or write-down the value of any inventory or write-off as uncollectible any accounts receivable except in the ordinary course of business consistent with past practices; (xv) settle, release or forgive any material claim or litigation or waive any material right; (xvi) make, enter into, modify, amend in any material respect or terminate any material commitment, bid or expenditure, other than in the ordinary course of business consistent with past practice; (xvii) take any other action that would cause any of the representations and warranties made by the Companies in this Agreement not to remain true and correct; or (xviii) commit itself to do any of the foregoing. (b) From and after the date hereof and until the Closing Date, the Stockholders and the Companies will cause the Companies to use their reasonable best efforts to: (i) continue to maintain, in all material respects, their properties in accordance with present practices in a condition suitable for their current use; (ii) comply with all applicable Environmental Laws, and, in the event the Companies shall receive notice that there exists a violation of any -46- Environmental Law with respect to their operations or any Real Property, promptly (and in any event within the time period permitted by the applicable governmental authority) remove or remedy such violation in accordance with all applicable Environmental Laws except where the noticed violation is contested in good faith and by appropriate proceedings diligently conducted; provided, however, that any remediation or removal shall be subject to the prior approval of UAG; (iii) file, when due or required, federal, state, foreign and other tax returns and other reports required to be filed and pay when due all taxes, assessments, fees and other charges lawfully levied or assessed against the Companies unless the validity thereof is contested in good faith and by appropriate proceedings diligently conducted; (iv) keep its books of account, records and files in the ordinary course and in accordance with existing practices; (v) preserve its business organization intact and continue to maintain existing business relationships with suppliers, customers and others with whom business relationships exist other than relationships that are, at the same time, not economically beneficial to it; and (vi) continue to conduct their business in the ordinary course consistent with past practices. (c) From and after the date of this Agreement and until the Closing Date, the Stockholders shall not, except with the prior written consent of UAG and except as required or permitted pursuant to the terms hereof: (i) make any material change to the Real Property or the Improvements; (ii) subject the Real Property or the Improvements, or any part thereof, to any new Lien or suffer such to be imposed other than non-material Liens in the ordinary course of business consistent with past practice; (iii) take any other action that would cause any of the representations or warranties made by the Stockholders in this Agreement not to remain true and correct in all material respects; or (iv) commit themselves to do any of the foregoing. -47- 5.5. NO INTERCOMPANY PAYABLES OR RECEIVABLES. Except as disclosed on Schedule 5.5 hereto, at the Closing there will be no intercompany payables or intercompany receivables due and/or owing between the Stockholders and their Affiliates (other than the Companies) on the one hand, and the Companies, on the other hand, other than those incurred in the ordinary course of business and disclosed in the Notes to the Company Financial Statements. 5.6. NEGOTIATIONS. Until the earlier of 180 days from the date hereof and the termination of this Agreement pursuant to clause (ii) of Section 8.1 hereof, no Stockholder, nor the Companies, nor their officers, directors, employees, advisors, agents, representatives, Affiliates or anyone acting on behalf of the Stockholders, the Companies or such persons, shall, directly or indirectly, encourage, solicit, initiate or engage in discussions or negotiations with, or provide any information to, any person (other than UAG or its representatives) concerning any merger, sale of assets (other than in the ordinary course of business), purchase or sale of shares of capital stock or similar transaction involving the Companies or purchase or sale of any of the Real Property or Improvements. The Stockholders shall promptly communicate to UAG any inquiries or communications concerning any such transaction (including the identity of any person making such inquiry or communication) which any Stockholder may receive or of which any of the Stockholders may become aware. 5.7. CONSENTS; COOPERATION. Subject to the terms and conditions hereof, the Stockholders and the Companies and UAG will use their respective best efforts at their own expense: (i) to obtain prior to the earlier of the date required (if so required) or the Closing Date, all waivers, permits, licenses, approvals, authorizations, qualifications, orders and consents of all third parties and governmental authorities, and make all filings and registrations with governmental authorities which are required on their respective parts for (A) the consummation of the transactions contemplated by this Agreement, (B) the ownership or leasing and operating after the Closing by the Companies of all their material properties and (C) the conduct after the Closing by the Companies of their respective businesses as conducted by them on the date hereof; (ii) to defend, consistent with applicable principles and requirements of law, any lawsuit or other legal proceedings, whether judicial or administrative, whether brought derivatively or on -48- behalf of third persons (including governmental authorities) challenging this Agreement or the transactions contemplated hereby and thereby; and (iii) to furnish each other such information and assistance as may reasonably be requested in connection with the foregoing. 5.8. ADDITIONAL AGREEMENTS. Subject to the terms and conditions of this Agreement, each of the parties hereto agrees to use its best efforts at its own expense to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement. Each of the parties agrees to execute and deliver any and all documents that the respective manufacturers typically require a selling dealer or an acquiring dealer to execute in connection with the transfer of a dealership. In case at any time after the Closing any further action is necessary or desirable to carry out the purposes of this Agreement, each of the parties and the proper officers of the Companies shall take all such necessary action. 5.9. INTERIM FINANCIAL STATEMENTS. Within thirty (30) days after the end of each calendar month after the date of this Agreement, the Companies will deliver to UAG the most recent monthly and year-to-date financial statements provided to each franchisor of the Companies. All such statements shall fairly present the financial position, results of operations and cash flow of the Companies and UAG, as applicable, as at the date or for the periods indicated and shall be prepared on a basis consistent with the Company Factory Statements attached hereto as Schedule 2.5. 5.10. NOTIFICATION OF CERTAIN MATTERS. Between the date hereof and the Closing, each party to this Agreement will give prompt notice in writing to the other party hereto of: (i) any information that indicates that any representation and warranty of such party contained herein was not true and correct as of the date hereof or will not be true and correct as of the Closing, (ii) the occurrence of any event which could result in the failure to satisfy a condition specified in Article 6 or Article 7 hereof, as applicable, (iii) any notice or other communication from any third person alleging that the consent of such third person is or may be required in connection with the transactions contemplated by this Agreement, and (iv) in the case of the Stockholders and the Companies, any notice of, or other communication relating to, any default or event which, with notice or lapse of time or both, would become a default under any Company Agreement. The Stockholders shall (x) promptly advise UAG of any event that has, or could in the future have, a Material Adverse -49- Effect (y) confer on a regular basis with one or more designated representatives of UAG to report operational matters and to report the general status of ongoing operations, and (z) notify UAG of any emergency or other change in the normal course of business or in the operation of the properties of the Companies and of any governmental complaints, investigations or hearings (or communications indicating that the same may be contemplated) or adjudicatory proceedings involving the Companies or any of their assets or operations, and will keep UAG fully informed of such events and permit UAG's representatives access to all materials prepared in connection therewith. The Stockholders shall give prompt notice to UAG of any notice or other communication from any third person asserting any right, title or interest in any of the Shares held by the Stockholders (including, without limitation, any threat to commence, or notice of the commencement of any action or other proceeding with respect to any of the Shares) or the occurrence of any other event of which any Stockholder has knowledge which could result in any failure to consummate the sale of the Shares as contemplated hereby. 5.11. ASSURANCE BY THE STOCKHOLDERS. The Stockholders shall cause each of the Companies to comply with their respective covenants set forth in this Agreement. 5.12. PERSONAL GUARANTEES. UAG will use reasonable efforts to cause the Stockholders to be released from any and all personal guarantees of any loans, leases or other indebtedness of the Companies set forth on the Company Financial Statements (the "Personal Guarantees"). In the event that any of the Personal Guarantees are not released by the Closing, UAG will indemnify and hold the Stockholders harmless from any loss with respect to the Personal Guarantees which arises after the Closing. Notwithstanding anything in this Section to the contrary, UAG shall not be required to cause the Stockholders to be released from or indemnify the Stockholders for any loss with respect to any Personal Guarantees for any loans or other indebtedness relating to the Real Property owned by the Stockholders or their Affiliates. 5.13. NON-INTERFERENCE. After the Closing Date and for a period of five (5) years thereafter, the Stockholders and their Affiliates shall not knowingly interfere with or disrupt, or attempt to interfere with or disrupt, the relationship, contractual or otherwise, between the Companies or any supplier, manufacturer, distributor, consultant, independent contractor or employee of the Companies and agree not to solicit or hire any employee of the Companies unless such employee has already terminated his employment with the Companies. -50- 5.14. ENVIRONMENTAL AUDITS. Prior to the Closing, UAG will pay THE costs for a Phase I environmental audit. If, after obtaining the results of the Phase I environmental audit, UAG determines that a Phase II environmental audit is required, then the expenses of performing the Phase II environmental audit shall be paid one-half by UAG and one-half by the Stockholders; provided, however, that the Stockholders may elect not to pay any costs of the Phase II audit but, if the Stockholders elect not to pay one-half of the costs of the Phase II audit and the results of the Phase II audit conclude that remediation is required, the Stockholders shall pay the entire costs of the Phase II audit. If the Phase II audit indicates that any remedial action is required under any Environmental Laws and UAG reasonably determines that such remedial action is required in order for (i) the applicable company to continue to operate its business as conducted at the time of discovery of the need for remedial action; or (ii) the applicable company not to incur any liability to any Person as a result of the presence of the material which prompts the recommendation for such remedial action, then the Stockholders shall pay the costs of such remedial action; provided, however, that the Stockholders shall only be required to pay the costs of the minimum remedial action required to comply with applicable Environmental Laws to the extent provided above and provided, further, that the Stockholder shall not be required to pay any remedial costs that exceed $500,000 in the aggregate. If the Phase II report concludes that remedial action is required in an amount that exceeds $500,000 in the aggregate and the Stockholders decide not to pay the costs of such remediation then UAG may, at its option, terminate this Agreement pursuant to Section 8.1 (iv). The Stockholders shall have the right to obtain a second opinion with respect to the necessity of such remedial action within thirty (30) days after the Phase II audit and if the two (2) environmental firms cannot agree, they shall chose a third environmental company to make such determination within sixty (60) days after the first Phase II audit. Such third environmental company shall be independent of the parties and generally accepted by major institutional lenders. 5.15. ACCESS TO RECORDS. After Closing, UAG shall provide the Stockholders with reasonable access to the books and records of the Companies to the extent necessary for the Stockholders to comply with applicable tax laws. UAG will cooperate, and will cause its Affiliates to cooperate, with the Stockholders in the filing of any returns and in any audit or refund claims proceeding involving Taxes for which the Stockholders may be liable or with respect to which the Stockholders may be entitled to a refund. 5.16. NISSAN, PRIMUS AND WORLD OMNI MORTGAGES. (a) If UAG does not accept floor plan financing from Nissan, Primus or World Omni for each of the Companies that -51- currently have floor plan financing through Nissan, Primus and World Omni (on terms comparable to such existing terms) and the failure to accept such financing causes an event of default under the Stockholders' existing mortgages with Nissan, Primus and World Omni which default Nissan, Primus or World Omni (as the case may be) refuses to waive, then UAG shall secure alternative financing for the amount of such mortgages on commercially reasonable terms. (b) If Primus, Nissan or World Omni do not offer floor plan financing to UAG for each of the Companies that currently have floor plan financing through Nissan, Primus and World Omni (on terms comparable to such existing terms) and, as a result, there is an event of default under the Stockholders' existing mortgages with Nissan, Primus or World Omni (as the case may be) which default is not waived, then UAG and the Stockholders will cooperate to secure alternative financing for the amount of such mortgages on commercially reasonable terms. If alternative financing is not available, either party may terminate this Agreement pursuant to Section 8.1 hereof. 5.17. CERTAIN CHANGES AND CONDUCT OF BUSINESS OF UAG. From and after the date hereof and until the Closing Date, UAG and the UAG Subsidiaries will use their reasonable best efforts to: (i) continue to maintain, in all material respects, their properties in accordance with present practices in a condition suitable for their current use except where to do so would not be economically beneficial to UAG or the UAG Subsidiaries; (ii) comply with all applicable Environmental Laws, and, in the event UAG or the UAG Subsidiaries receive notice that there exists a violation of any Environmental Law with respect to their operations or any Real Property, promptly (and in any event within the time period permitted by the applicable governmental authority) remove or remedy such violation in accordance with all applicable Environmental Laws, except where the notice of violation is contested in good faith and by appropriate proceedings diligently conducted; (iii) file, when due or required, federal, state, foreign and other tax returns and other reports required to be filed and pay when due all taxes, assessments, fees and other charges lawfully levied or assessed against UAG or any UAG Subsidiaries unless the validity thereof is contested in good faith and by appropriate proceedings diligently conducted; -52- (iv) keep their books of account, records and files in the ordinary course and in accordance with existing practices; (v) preserve their business organization intact and continue to maintain existing business relationships with suppliers, customers and others with whom business relationships exist other than relationships that are, at the same time, not economically beneficial to it; and (vi) not take any other action that would cause any of the representations or warranties made by UAG in this Agreement not to remain true and correct in all material respects. 5.18. 1996 FINANCIAL STATEMENTS. Prior to the Closing, the Stockholders shall deliver to UAG audited balance sheets of the Companies as of December 31, 1996 (the "Company Balance Sheets") and the related consolidated statements of income, stockholders' equity and cash flows for the fiscal year ended December 31, 1996, together with the notes thereto which statements shall be examined and accompanied by the report of the Companies' independent certified public accountants and, upon delivery, such statements shall be included within the definition of Company Financial Statements. Notwithstanding the preceding sentence, the income statement and cash flow statement for Westbury Nissan will not be audited statements. UAG and the Stockholders shall each pay one-half of the cost of such audit. ARTICLE 6. CONDITIONS TO THE OBLIGATIONS OF UAG AND SUB TO EFFECT THE CLOSING The obligations of UAG and Sub required to be performed by them at the Closing shall be subject to the satisfaction, at or prior to the Closing, of each of the following conditions, each of which may be waived by UAG or Sub as provided herein except as otherwise required by applicable law: 6.1. REPRESENTATIONS AND WARRANTIES; AGREEMENTS; COVENANTS. Each of the representations and warranties of the Companies and the Stockholders contained in this Agreement shall be true and correct as of the date hereof and (having been deemed to have been made again at and as of the Closing) shall be true and correct in all material respects as of the Closing. Each of the obligations of the Companies and the Stockholder required by this Agreement to be performed by them at or prior to the Closing shall have been duly performed and complied with in all material respects as of the Closing. At the Closing, UAG shall have received a certificate, dated the Closing Date and duly executed by the -53- Stockholders, to the effect that the conditions set forth in the two preceding sentences have been satisfied. 6.2. AUTHORIZATION; CONSENTS. (a) All corporate action necessary to authorize the execution, delivery and performance of this Agreement and the Documents, and the consummation of the transactions contemplated hereby and thereby shall have been duly and validly taken by the Companies. All filings required to be made under the H-S-R Act in connection with the transactions contemplated hereby shall have been made and all applicable waiting periods with respect to each such filing, including any extensions thereof, shall have expired or been terminated. (b) All notices to, and declarations, filings and registrations with, and consents, authorizations, approvals and waivers from, governmental and regulatory bodies and third persons (including, but not limited to, all automobile manufacturers with whom the Companies have entered into a franchise agreement (or comparable instrument, mortgages, floor plan lenders and other lenders)) required to consummate the transactions contemplated hereby and all consents or waivers shall have been made or obtained. 6.3. OPINIONS OF THE COMPANIES' AND THE STOCKHOLDERS' COUNSEL. UAG and Sub shall have been furnished with the opinion of counsel for the Companies and the Stockholders, dated the Closing Date, in form and substance reasonably satisfactory to UAG and its counsel, which opinion shall have been rendered with respect to those matters contained in Sections 2.1, 2.3, 2.4, 2.9, 3.1 and 3.2 hereof. In rendering the foregoing opinion, such counsel may rely as to factual matters upon certificates or other documents furnished by officers and directors of the Companies and by government officials and upon such other documents and data as such counsel deem appropriate as a basis for their opinions. Such counsel may specify the state or states in which they are admitted to practice, that they are not admitted to the Bar in any other state or experts in the law of any other state and that such opinions are limited to New York, Florida and federal laws. 6.4. ABSENCE OF LITIGATION. No order, stay, injunction or decree of any court of competent jurisdiction in the Untied States shall be in effect (i) that prevents or delays the consummation of any of the transactions contemplated hereby or (ii) would impose any limitation on the ability of UAG or Sub effectively to exercise full rights of ownership of the Shares. No action, suit or proceeding before any court or any governmental or regulatory entity shall be pending (or threatened by any governmental or regulatory entity), and no investigation by any governmental or regulatory entity shall have -54- been commenced (and be pending), seeking to restrain or prohibit (or questioning the validity or legality of) the consummation of the transactions contemplated by this Agreement or seeking damages in connection therewith which UAG or Sub, in good faith and with the advice of counsel, believes makes it undesirable to proceed with the consummation of the transactions contemplated hereby. 6.5. NO MATERIAL ADVERSE EFFECT. During the period from December 31, 1995 to the Closing Date, there shall not have been any material adverse change in the assets, properties, business, operations, prospects, net income or financial condition of the Companies. 6.6. NET WORTH. On the Closing Date, the Stockholder shall deliver to UAG a balance sheet of the Companies in accordance with Section 1.3. 6.7. COMPLETION OF DUE DILIGENCE. UAG and Sub shall have completed their due diligence examination of the Companies, the Real Property and the Improvements and the results of such examination, including any Phase I or Phase II environmental audits of the Companies, shall be satisfactory to UAG and Sub. 6.8. NET INCOME. Coopers & Lybrand or such other accounting firm as UAG may select shall have confirmed to UAG that the 1996 Earnings of the Companies for the year ending December 31, 1996 are no less than Eleven Million Dollars ($11,000,000). For purposes of this Section 6.8, 1996 Earnings shall be determined using the same methodology as the earnings set forth on Schedule 6.8 hereto. 6.9. LEASES. The Companies and the Landlords shall have entered into the Leases and shall have agreed to the form of the New Facility Lease. 6.10. BOARD APPROVAL. The Board of Directors of UAG and Sub shall have approved the consummation of all of the transactions contemplated by this Agreement. 6.11. CERTIFICATES. The Stockholders and the Companies shall have furnished UAG and Sub with a certificate, dated as of the Closing Date, executed by the Stockholders certifying to the fulfillment of the -55- conditions set forth in Sections 6.5 and 6.6 hereof and shall have furnished UAG and Sub with such any other certificates of its officers and others as UAG and Sub may reasonably request to evidence compliance with the conditions set forth in this Article 6. 6.12. LEGAL MATTERS. All certificates, instruments, opinions and other documents required to be executed or delivered by or on behalf of the Stockholders and the Companies under the provisions of this Agreement, and all other actions and proceedings required to be taken by or on behalf of the Stockholders and the Companies in furtherance of the transactions contemplated hereby, shall be reasonably satisfactory in form and substance to counsel for UAG and Sub. 6.13. APPROVAL OF MANUFACTURERS AND DISTRIBUTORS. The Stockholders and the Companies shall have obtained the consent, authorization and approval of each of the Companies' respective manufacturers for the transfer of the Companies to UAG or UAG East on terms no less favorable to those granted to the Stockholders and the Companies immediately prior to the execution of this Agreement. 6.14. NONDISTURBANCE AGREEMENTS/ESTOPPEL CERTIFICATES. UAG shall have been provided with nondisturbance agreements and estoppel certificates in form and substance satisfactory to UAG with respect to the properties that are the subject of the Leases and the Third Party Leases. 6.15. TITLE INSURANCE. UAG shall have obtained title insurance on behalf of the Companies with respect to the leasehold estates arising out of the Leases and the Third Party Leases in form and substance satisfactory to UAG. 6.16. SCHEDULES. The Companies and the Stockholders shall have delivered to UAG and Sub all Schedules referred to herein and such Schedules shall be acceptable in form and substance to UAG and Sub. 6.17. LEASE TERMINATION AGREEMENTS/MEMORANDA OF LEASE. The appropriate parties shall have executed lease termination agreements and memoranda of lease in form and substance satisfactory to UAG. -56- 6.18. RESIGNATION OF THE COMPANIES' DIRECTORS. Each of the persons who is a director of the Companies on the Closing Date shall have tendered to Sub in writing his or her resignation as such in form and substance satisfactory to UAG. 6.19. EMPLOYMENT AGREEMENT. UAG and John A. Staluppi, Jr. shall have entered into an employment agreement on terms mutually agreeable to such parties. ARTICLE 7. CONDITIONS TO THE OBLIGATIONS OF THE STOCKHOLDERS TO EFFECT THE CLOSING The obligations of the Stockholders and the Companies required to be performed by them at the Closing shall be subject to the satisfaction, at or prior to the Closing, of each of the following conditions, each of which may be waived by the Companies and the Stockholders as provided herein except as otherwise required by applicable law: 7.1. REPRESENTATIONS AND WARRANTIES; AGREEMENTS. Each of the representations and warranties of UAG and Sub contained in this Agreement shall be true and correct on the date made and shall be true and correct in all material respects as of the Closing. Each of the obligations of UAG and Sub required by this Agreement to be performed by them at or prior to the Closing shall have been duly performed and complied with in all material respects as of the Closing. At the Closing, the Stockholders shall have received a certificate, dated the Closing Date and duly executed by UAG and Sub to the effect that the conditions set forth in the preceding two sentences have been satisfied. 7.2. AUTHORIZATION OF THE AGREEMENT, CONSENTS. (a) All corporate action necessary to authorize the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby shall have been duly and validly taken by UAG and Sub. All filings required to be made under the H-S-R Act in connection with the transactions contemplated hereby shall have been made and all applicable waiting periods with respect to each such filing, including extensions thereof, shall have expired or been terminated. (b) All notices to, and declarations, filings and registrations with, and consents, authorizations, approvals and waivers from, governmental and regulatory bodies and third persons (including, but not limited to, all automobile manufacturers with whom the Companies have entered into a franchise agreement (or comparable instrument, mortgages, floor plan lenders and other lenders)) required to consummate the -57- transactions contemplated hereby and all consents or waivers shall have been made or obtained. 7.3. OPINIONS OF UAG'S AND SUB'S COUNSEL. The Stockholders shall have been furnished with the opinion of Rogers & Hardin, counsel to UAG and Sub, dated the Closing Date, in form and substance reasonably satisfactory to the Stockholders and their counsel, which opinions, when taken together, shall have been rendered with respect to those matters contained in Sections 4.1 and 4.2 hereof. In rendering the foregoing opinions, such counsel may rely as to factual matters upon certificates or other documents furnished by officers and directors of UAG and the Subs and by government officials, and upon such other documents and data as such counsel deems appropriate as a basis for its opinion. Such opinions may be limited to federal laws and the General Corporation Law of the State of Delaware. 7.4. ABSENCE OF LITIGATION. No order, stay, injunction or decree of any court of competent jurisdiction in the Untied States shall be in effect (i) that prevents or delays the consummation of any of the transactions contemplated hereby or (ii) would impose any limitation on the ability of the Stockholders to transfer the Shares. No action, suit or proceeding before any court or any governmental or regulatory entity shall be pending (or threatened by any governmental or regulatory entity), and no investigation by any governmental or regulatory entity shall have been commenced (and be pending), seeking to restrain or prohibit (or questioning the validity or legality of) the consummation of the transactions contemplated by this Agreement or seeking damages in connection therewith which the Stockholders, in good faith and with the advice of counsel, believes makes it undesirable to proceed with the consummation of the transactions contemplated hereby. 7.5. CERTIFICATES. UAG and Sub shall have furnished the Stockholders with such certificates of its officers and others to evidence compliance with the conditions set forth in this Article 7 as may be reasonably requested by the Stockholders. 7.6. LEGAL MATTERS. All certificates, instruments, opinions and other documents required to be executed or delivered by or on behalf of UAG or Sub under the provisions of this Agreement, and all other actions and proceedings required to be taken by or on behalf of UAG or Sub in furtherance of the transactions contemplated hereby, shall be reasonably satisfactory in form and substance to counsel for the Stockholders. -58- 7.7. REGISTRATION RIGHTS AGREEMENT. UAG shall have entered into the Piggyback Registration Rights Agreement. 7.8. SCHEDULES. UAG shall have delivered to the Stockholders all Schedules referred to in Article 4 and such Schedules shall be acceptable in form and substance to the Stockholders. 7.9. LEASES. The Companies and the Landlords shall have entered into the Leases and shall have agreed to the form of the New Facility Lease. 7.10. NO MATERIAL ADVERSE EFFECT. During the period from October 28, 1996 to the Closing Date, there shall not have been any material adverse change in the assets, properties, business, prospects, net income or financial condition of UAG. 7.11. EMPLOYMENT AGREEMENT. UAG and John A. Staluppi, Jr. shall have entered into an employment agreement on terms mutually agreeable to such parties. ARTICLE 8. TERMINATION 8.1. TERMINATION. This Agreement may be terminated at any time prior to Closing: (i) by mutual consent of UAG and the Stockholders; (ii) by either UAG or the Stockholders if the Closing shall not have taken place on or prior to April 30, 1997, or such later date as shall have been approved by UAG and the Stockholders (provided that the terminating party is not otherwise in material breach of its representations, warranties, covenants or agreements under this Agreement); (iii) by UAG or the Stockholders if any court of competent jurisdiction in the United States or other United States governmental body shall have issued an order, decree or ruling or taken any other action restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement, and such -59- order, decree, ruling or other action shall have become final and non-appealable; (iv) by UAG or Sub if any of the conditions specified in Article 6 hereof have not been met or waived by UAG and Sub at such time as such condition is no longer capable of satisfaction (provided UAG and Sub are not otherwise in material breach of its representations, warranties, covenants or agreements under this Agreement); (v) by the Stockholders if any of the conditions specified in Article 7 hereof have not been met or waived by the Stockholders at such time as such condition is no longer capable of satisfaction (provided that neither the Stockholders nor the Companies is otherwise in material breach of their or its representations, warranties covenants or agreements under this Agreement); or (vi) by either UAG or the Stockholders if there has been a material breach on the part of the other of any representation, warranty, covenant or agreement set forth in this Agreement, which breach (if capable of being cured) has not been cured within ten (10) Business Days following receipt by the breaching party of written notice of such breach. If UAG or the Stockholders shall terminate this Agreement pursuant to the provisions hereof, such termination shall be effected by notice to the other party specifying the provision hereof pursuant to which such termination is made. 8.2. EFFECT OF TERMINATION. Except (i) for any willful breach of this Agreement prior to its termination, (ii) for the obligations contained in Sections 5.1 and 10.2 hereof and (iii) as set forth in Sections 9.1 and 9.2 hereof, upon the termination of this Agreement pursuant to Section 8.1 hereof, this Agreement shall forthwith become null and void and none of the parties hereto or any of their respective officers, directors, employees, agents, Affiliates, consultants, stockholders or principals shall have any liability or obligation hereunder or with respect hereto. ARTICLE 9. INDEMNIFICATION 9.1. INDEMNIFICATION BY THE STOCKHOLDERS. Notwithstanding the Closing or the delivery of the Shares, the Stockholders, jointly and severally, indemnify and agree to fully defend, save and hold harmless on an after-tax basis UAG, Sub, the Companies (after Closing), and any of their -60- respective officers, directors, employees, stockholders, advisors, representatives, agents and Affiliates (each a "UAG Indemnified Party"), if a UAG Indemnified Party (including the Companies after the Closing Date) shall at any time or from time to time suffer any Costs (as defined in Section 9.6 below) arising, directly or indirectly, out of or resulting from, or shall pay or become obligated to pay any sum on account of, (i) any and all Events of Breach (as defined below) or (ii) any Claim before or by any court, arbitrator, panel, agency or other governmental, administrative or judicial entity, which Claim involves, affects or relates to any assets, properties or operations of the Companies or the conduct of the business of the Companies prior to the Closing Date (a "Stockholder Third Party Claim"). As used herein, "Event of Breach" shall be and mean any one or more of the following: (i) any untruth or inaccuracy in any representation of the Stockholders or the Companies or the breach of any warranty of the Stockholders or the Companies contained in this Agreement, including, without limitation, any misrepresentation in, or omission from, any statement, certificate, schedule, exhibit, annex or other document furnished pursuant to this Agreement by the Stockholders or the Companies (or any representative of the Stockholders or the Companies) to UAG (or any representative of UAG) and any misrepresentation in or omission from any document furnished to UAG in connection with the Closing, and (ii) any failure of the Stockholders or the Companies duly to perform or observe any term, provision, covenant, agreement or condition on the part of the Stockholders or the Companies to be performed or observed. 9.2. INDEMNIFICATION BY UAG. Notwithstanding the Closing, UAG indemnifies and agrees to fully defend, save and hold harmless on an after-tax basis the Stockholders, the Companies (prior to Closing), and any of their respective officers, directors, employees, stockholders, advisors, representatives, agents and Affiliates (each a "Stockholder Indemnified Party"), if a Stockholder Indemnified Party shall at any time or from time to time suffer any Costs arising, directly or indirectly, out of or resulting from, or shall pay or become obligated to pay any sum on account of, (i) any and all UAG Events of Breach (as defined below) or (ii) any Claim before or by any court, arbitrator, panel, agency or other governmental, administrative or judicial entity, which Claim involves, affects or relates to any assets, properties or operations of UAG or the conduct of the business of UAG prior to the Closing Date (a "UAG Third Party Claim"). As used herein, "UAG Event of Breach" shall be and mean any one or more of the following: (i) any untruth or inaccuracy in any representation of UAG or Sub or the breach of any warranty of UAG or Sub contained in this Agreement, including, without limitation, any misrepresentation in, or omission from, any statement, certificate, schedule, exhibit, annex or other document furnished pursuant to this Agreement by UAG (or any representative of UAG) to the Stockholders (or any representative of the Stockholder) and any misrepresentation in or omission from any document furnished to the Stockholders in connection with the -61- Closing, and (ii) any failure of UAG duly to perform or observe any term, provision, covenant, agreement or condition on the part of UAG to be performed or observed. 9.3. PROCEDURES. If (i) any Event of Breach occurs or is alleged and a UAG Indemnified Party asserts that the Stockholders have become obligated to a UAG Indemnified Party pursuant to Section 9.1, or if any Stockholder Third Party Claim is begun, made or instituted as a result of which the Stockholders may become obligated to a UAG Indemnified Party hereunder, or (ii) a UAG Event of Breach occurs or is alleged and a Stockholder Indemnified Party asserts that UAG has become obligated to a Stockholder Indemnified Party pursuant to Section 9.2, or if any UAG Third Party Claim is begun, made or instituted as a result of which UAG may become obligated to a Stockholder Indemnified Party hereunder (for purposes of this Article 2, any UAG Indemnified Party and any Stockholder Indemnified Party is sometimes referred to as an "Indemnified Party" and UAG and the Stockholders are sometimes referred to as an "Indemnifying Party," and any UAG Third Party Claim and any Stockholder Third Party Claim is sometimes referred to as a "Third Party Claim," in each case as the context so requires), such Indemnified Party shall give written notice to the Indemnifying Party of its or his obligation to provide indemnification hereunder, provided that any failure to so notify the Indemnifying Party shall not relieve them from any liability that it or he may have to the Indemnified Party under this Article 9. If such notice relates to a Third Party Claim, each Indemnifying Party, jointly and severally, agrees to defend, contest or otherwise protect such Indemnified Party against any such Third Party Claim at his or its sole cost and expense. Such Indemnified Party shall have the right, but not the obligation, to participate at its own expense in the defense thereof by counsel of such Indemnified Party's choice and shall in any event cooperate with and assist the Indemnifying Party to the extent reasonably possible. If the Indemnifying Party fails timely to defend, contest or otherwise protect against such Third Party Claim, such Indemnified Party shall have the right to do so, including, without limitation, the right to make any compromise or settlement thereof, and such Indemnified Party shall be entitled to recover the entire Cost thereof from the Indemnifying Party, including, without limitation, attorneys' fees, disbursements and amounts paid (or of which such Indemnified Party has become obligated to pay) as the result of such Third Party Claim. Failure by the Indemnifying Party to notify such Indemnified Party of its or their election to defend any such Third Party Claim within fifteen (15) days after notice thereof shall have been given to the Indemnifying Party shall be deemed a waiver by the Indemnifying Party of its or their right to defend such Third Party Claim. If the Indemnifying Party assumes the defense of the particular Third Party Claim, the Indemnifying Party shall not, in the defense of such Third Party Claim, consent to entry of any judgment or enter into any settlement, except with the written consent of such Indemnified Party. In addition, the Indemnifying -62- Party shall not enter into any settlement of any Third Party Claim except with the written consent of such Indemnified Party) which does not include as an unconditional term thereof the giving by the claimant or the plaintiff to such Indemnified Party a full release from all liability in respect of such Third Party Claim. Notwithstanding the foregoing, the Indemnifying Party shall not be entitled to control (but shall be entitled to participate at their own expense in the defense of), and the Indemnified Party shall be entitled to have sole control over, the defense or settlement of any Third Party Claim to the extent the Third Party Claim seeks an order, injunction or other equitable relief against the Indemnified Party which, if successful, could materially interfere with the business, operations, assets, condition (financial or otherwise) or prospects of the Indemnified Party. 9.4. REMEDIES. The rights of an Indemnified Party under this Article 9 are in addition to such other rights and remedies which such Indemnified Party may have under this Agreement, applicable law or otherwise. 9.5. DEFINITIONS. For purposes of this Article 9 "Costs" shall mean all liabilities, losses, reasonable costs, damages (not including consequential damages), expenses, claims, reasonable attorneys' fees, experts' fees, consultants' fees, and disbursements of any kind or of any nature whatsoever. For purposes of application of the indemnity provisions of this Article 9, the amount of any Cost arising from the breach of any representation, warranty, covenant or agreement shall be the entire amount of any Cost suffered, paid or required to be paid by the respective Indemnified Party as a result of such breach. 9.6. LIMITATION ON INDEMNIFICATION. (a) Indemnification by the Stockholders. (i) A UAG Indemnified Party shall be entitled to indemnification in connection with an Event of Breach or a Stockholder Third Party Claim only to the extent the aggregate Costs incurred or sustained by all UAG Indemnified Parties exceed Two Hundred Fifty Thousand Dollars ($250,000) with respect to a breach of any provision herein other than Section 2.11 or exceed a separate $250,000 amount with respect to a breach under Section 2.11; provided, however, that notwithstanding the preceding limitation, a UAG Indemnified Party shall be entitled to indemnification for all Costs incurred or sustained by such UAG Indemnified Party as a result of any untruth or inaccuracy in, or breach of, a representation, warranty or covenant (or failure to perform or observe any term, -63- agreement or condition) contained in Article 1 or Sections 2.3, 2.8, 3.1, 5.6 and 5.14 (to the extent specified therein) hereof. (ii) A UAG Indemnified Party shall be entitled to indemnification in connection with an Event of Breach arising out of a breach of any of the representations or warranties set forth in Articles 2 or 3 hereof or in connection with a Stockholder Third Party Claim for a period terminating on the later of (i) the date two years after the Closing Date, or (ii) with respect to any claim asserted with respect to any breach of such representation or warranty pursuant to Section 9.3 hereof before the expiration of such two year period, on the date such claim is finally liquidated or otherwise resolved; provided, however, that a UAG Indemnified Party shall be entitled to indemnification in connection with an Event of Breach arising out of the representations and warranties in Sections 2.3, 2.8, 2.11, 2.20, and 3.1 hereof until such claim is otherwise barred by the applicable statute of limitations. (iii) The aggregate Costs for which the Stockholders shall be obligated to indemnify the UAG Indemnified Parties shall not exceed Twenty-Five Million Dollars ($25,000,000) in the case of Costs incurred or sustained by all UAG Indemnified Parties in connection with an Event of Breach; provided, however, that a UAG Indemnified Party shall be entitled to indemnification for all Costs incurred or sustained by such UAG Indemnified Party as a result of any untruth or inaccuracy in, or breach of, a representation, warranty or covenant (or failure to perform or observe any term, agreement or condition) contained in Article 1 or Sections 2.3, 2.8, 2.11, 2.20 and 3.1 hereof. (b) Indemnification by UAG. (i) A Stockholder Indemnified Party shall be entitled to indemnification in connection with a UAG Event of Breach or a UAG Third Party Claim only to the extent the aggregate Costs incurred or sustained by all Stockholder Indemnified Parties exceed Two Hundred Fifty Thousand Dollars ($250,000); provided, however, that, notwithstanding the preceding limitation, a Stockholder Indemnified Party shall be entitled to indemnification for all Costs incurred or sustained by such Stockholder Indemnified Party as a result of any untruth or inaccuracy in, or breach of, a representation, warranty or covenant (or failure to perform or observe any term, agreement or condition) contained in Article 1 hereof. -64- (ii) A Stockholder Indemnified Party shall be entitled to indemnification in connection with an UAG Event of Breach arising out of a breach of any of the representations or warranties set forth in Article 4 hereof or in connection with a UAG Third Party Claim for a period terminating on the later of (i) the date two years after the Closing Date, and (ii) with respect to any claim asserted with respect to any breach of such representation or warranty pursuant to Section 9.3 hereof before the expiration of such representation or warranty, on the date such claim is finally liquidated or otherwise resolved; provided, however, that a Stockholder Indemnified Party shall be entitled to indemnification in connection with an UAG Event of Breach arising out of the representations and warranties in Sections 4.7, 4.9(b) and 4.16 hereof until such claim is otherwise barred by the applicable statute of limitations. (iii) The aggregate Costs for which UAG shall be obligated to indemnify the Stockholder Indemnified Parties shall not exceed Twenty-Five Million Dollars ($25,000,000) in the case of Costs incurred or sustained by all Stockholder Indemnified Parties in connection with a UAG Event of Breach; provided, however, that a Stockholder Indemnified Party shall be entitled to indemnification for all Costs incurred or sustained by such Stockholder Indemnified Party as a result of untruth or inaccuracy in, or breach of, a representation, warranty or covenant (or failure to perform or observe any term, agreement or condition) contained in Article 1 or Sections 4.7, 4.9(b) and 4.16 hereof. ARTICLE 10. MISCELLANEOUS 10.1. SURVIVAL OF PROVISIONS. (a) The respective representations, warranties, covenants and agreements of each of the parties to this Agreement (except covenants and agreements which are expressly required to be performed and are performed in full on or before the Closing Date) shall survive the Closing Date and the consummation of the transactions contemplated by this Agreement, subject to Section 10.1(b) below. In the event of a breach of any such representations, warranties or covenants, the party to whom such representations, warranties or covenants have been made shall have all rights and remedies for such breach available to it under the provisions of this Agreement or otherwise, whether at law or in equity, regardless of any disclosure to, or investigation made by or on behalf of, such party on or before the Closing Date. -65- (b) Each of the representations and warranties set forth in Article 2, Article 3 and Article 4 hereof and in any certificate delivered pursuant to Article 6 or Article 7 hereof shall survive, and not be affected in any respect by, the Closing for a period terminating on the later of (i) the date two years after the Closing Date, and (ii) with respect to any claim asserted with respect to any breach of such representation or warranty pursuant to Section 9.3 hereof before the expiration of such representation or warranty, on the date such claim is finally liquidated or otherwise resolved, except with respect to the representations and warranties in Sections 2.3, 2.8, 2.11, 2.20, 3.1, 4.7, 4.9(b) and 4.16 hereof. 10.2. FEES AND EXPENSES. If the Closing does not occur and Section 5.6 hereof is materially breached, then the Stockholders or the Companies shall pay to UAG, within five (5) Business Days after receipt of a request therefor, an amount equal to all of the reasonable legal and other fees, costs and expenses incurred by UAG in connection with this Agreement and the transactions contemplated hereby. 10.3. HEADINGS. The section headings herein are for convenience of reference only, do not constitute part of this Agreement and shall not be deemed to limit or otherwise affect any of the provisions hereof. 10.4. NOTICES. All notices or other communications required or permitted hereunder shall be given in writing and shall be deemed sufficient if delivered by hand, recognized overnight delivery service for next business day delivery or facsimile transmission (with original to follow by mail) or mailed by registered or certified mail, postage prepaid (return receipt requested), as follows: If to the Companies before the Closing Date: c/o Mr. John A. Staluppi 474 South Beach Road Hobe Sound, Florida 33455 with a copy to: Newman Tannenbaum Helpern Syracuse & Hirschtritt, LLP 900 Third Avenue New York, New York 10022 Attn: Stuart B. Newman, Esq. -66- If to the Companies after the Closing Date (in addition to the foregoing addresses): United Auto Group, Inc. 375 Park Avenue New York, New York 10022 Attn: George G. Lowrance Executive Vice President with a copy to: Rogers & Hardin 2700 International Tower 229 Peachtree Street, N.E. Atlanta, Georgia 30303 Attn: Michael Rosenzweig, Esq. If to the Stockholders: c/o Mr. John A. Staluppi 474 South Beach Road Hobe Sound, Florida 33455 with a copy to: Newman Tannenbaum Helpern Syracuse & Hirschtritt, LLP 900 Third Avenue New York, New York 10022 Attn: Stuart B. Newman, Esq. If to UAG or Sub: United Auto Group, Inc. 375 Park Avenue New York, New York 10022 Attn: George G. Lowrance Executive Vice President with a copy to: Rogers & Hardin 2700 International Tower 229 Peachtree Street, N.E. Atlanta, Georgia 30303 Attn: Michael Rosenzweig, Esq. or such other address as shall be furnished in writing by such party, and any such notice or communication shall be effective and be deemed to have been given as of the date so delivered or three (3) days after the date so mailed; provided, however, that any notice or communication changing any of the addresses set forth above shall be effective and deemed given only upon its receipt. -67- 10.5. ASSIGNMENT. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto (and with respect to the Stockholders, the personal representatives and heirs of the Stockholders) and their respective successors and permitted assigns, and the provisions of Article 9 hereof shall inure to the benefit of the Indemnified Parties referred to therein; provided, however, that neither this Agreement nor any of the rights, interests, or obligations hereunder may be assigned by any of the parties hereto without the prior written consent of the other parties. Notwithstanding the foregoing, UAG shall have the unrestricted right to assign this Agreement and to delegate all or any part of its obligations hereunder to any Affiliate of UAG, but in such event UAG shall remain fully liable for the performance of all of such obligations in the manner prescribed in this Agreement. 10.6. ENTIRE AGREEMENT. This Agreement (including the Schedules hereto) and the Documents embody the entire agreement and understanding of the parties with respect to the transactions contemplated hereby and supersede all prior written or oral commitments, arrangements or understandings between the parties with respect thereto and all prior drafts of this Agreement. There are no restrictions, agreements, promises, warranties, covenants or undertakings with respect to the transactions contemplated hereby other than those expressly set forth herein or in the Documents. Prior drafts of this Agreement shall not be used as a basis for interpreting this Agreement. 10.7. WAIVER AND AMENDMENTS. Each of the Stockholders and the Companies as one party, and UAG and Sub as the other party may by written notice to the other parties (i) extend the time for the performance of any of the obligations or other actions of the other parties, (ii) waive any inaccuracies in the representations or warranties of the other parties contained in this Agreement, (iii) waive compliance with any of the covenants of the other parties contained in this Agreement, (iv) waive performance of any of the obligations of the other parties created under this Agreement, or (v) waive fulfillment of any of the conditions to its own obligations under this Agreement. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach, whether or not similar. This Agreement may be amended, modified or supplemented only by a written instrument executed by the parties hereto. 10.8. COUNTERPARTS. This Agreement may be executed by facsimile signature(s) and in any number of counterparts, all of which shall be considered -68- one and the same agreement and each of which shall be deemed an original. 10.9. ACCOUNTING TERMS. All accounting terms used herein which are not expressly defined or modified in this Agreement shall have the respective meanings given to them in accordance with GAAP. 10.10. SCHEDULES. Disclosure of any matter in any Schedule hereto or in the Financial Statements shall not be considered as disclosure pursuant to any other provision, subprovision, section or subsection of this Agreement or Schedule to this Agreement and shall not be deemed to limit any representations or warranties made herein. 10.11. SEVERABILITY. If any one or more of the provisions of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected thereby. To the extent permitted by applicable law, each party waives any provision of law which renders any provision of this Agreement invalid, illegal or unenforceable in any respect. 10.12. REMEDIES. None of the remedies provided for in this Agreement, including termination of this Agreement as set forth in Article 8, indemnification as set forth in Article 9, or the payment of certain fees, costs and expenses as set forth in Section 10.2, shall be the exclusive remedy of either party for a breach of this Agreement. The parties hereto shall have the right to seek any other remedy in law or equity in lieu of or in addition to any remedies provided in this Agreement, including an action for damages for breach of contract. 10.13. GOVERNING LAW. This Agreement shall be governed by and construed in accordance the laws of the State of New York without giving effect to any choice or conflict of law provision or rule that would cause the laws of any other jurisdiction to apply. 10.14. TIME IS OF THE ESSENCE. Time is of the essence for purposes of this Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. -69- UNITED AUTO GROUP, INC. By: /s/ George Lowrance -------------------------------------- Its: Executive Vice President [Signatures continued on following pages] -70- UAG EAST, INC. By: /s/ George Lowrance -------------------------------------- Its: AMITY AUTO PLAZA LTD., D/B/A AMITY TOYOTA SUPERSTORE By: /s/ John A. Staluppi -------------------------------------- Its: President MASSAPEQUA IMPORTS LTD., D/B/A LEXUS OF MASSAPEQUA By: /s/ John A. Staluppi -------------------------------------- Its: President WESTBURY NISSAN LTD., D/B/A WESTBURY NISSAN SUPERSTORE By: /s/ John A. Staluppi -------------------------------------- Its: President WESTBURY SUPERSTORE LTD., D/B/A WESTBURY TOYOTA By: /s/ John A. Staluppi -------------------------------------- Its: President J&S AUTO REFINISHING LTD., D/B/A PREMIER AUTO BODY By: /s/ John A. Staluppi -------------------------------------- Its: President [Signatures continued on following page] -71- FLORIDA CHRYSLER PLYMOUTH JEEP EAGLE INC. By: /s/ John A. Staluppi -------------------------------------- Its: President PALM AUTO PLAZA INC., D/B/A PALM BEACH TOYOTA By: /s/ John A. Staluppi -------------------------------------- Its: President WEST PALM INFINITI INC. By: /s/ John A. Staluppi -------------------------------------- Its: President WEST PALM NISSAN INC. By: /s/ John A. Staluppi -------------------------------------- Its: President NORTHLAKE AUTO FINISH INC., D/B/A TRAIL AUTO BODY By: /s/ John A. Staluppi -------------------------------------- Its: President /s/ John A. Staluppi ----------------------------------------- JOHN A. STALUPPI /s/ John A. Staluppi, Jr. ----------------------------------------- JOHN A. STALUPPI, JR. -72- EX-10.14.1 11 DATED AS OF MARCH 5, 1997 STOCK PURCHASE AGREEMENT DATED AS OF MARCH 5, 1997 AMONG UNITED AUTO GROUP, INC. MARSHAL MIZE FORD, INC., WADE FORD, INC., WADE FORD BUFORD, INC. D/B/A WADE FORD MERCURY, MARSHAL D. MIZE, ALAN K. ARNOLD, LEWIS J. DYER AND GARY R. BILLINGS TABLE OF CONTENTS ----------------- Page STOCK PURCHASE AGREEMENT This STOCK PURCHASE AGREEMENT, dated March 5, 1997, is by and among United Auto Group, Inc., a Delaware corporation ("UAG"), Marshal Mize Ford, Inc., a Delaware corporation ("Mize Ford"), Wade Ford Buford, Inc. d/b/a Wade Ford Mercury, a Georgia Corporation ("Buford Ford"), Wade Ford, Inc., a Georgia corporation ("Wade Ford" and, together with Mize Ford and Buford Ford, the "Companies"), Alan K. Arnold, an individual resident of the State of Georgia ("Arnold"), Marshal D. Mize, an individual resident of the State of Tennessee ("Mize"), Lewis J. Dyer, an individual resident of the State of Tennessee ("Dyer"), and Gary R. Billings, an individual resident of the State of Georgia ("Billings" and, together with Arnold, Mize and Dyer, the "Stockholders"). W I T N E S S E T H: WHEREAS, Mize Ford operates a franchise automobile dealership and related businesses in Chattanooga, Tennessee; WHEREAS, Wade Ford operates a franchise automobile dealership and related businesses in the metropolitan Atlanta, Georgia area; WHEREAS, Buford Ford operates a franchise automobile dealership and related businesses in the metropolitan Atlanta, Georgia area; WHEREAS, Arnold owns eighty percent (80%) and Billings owns twenty percent (20%) of all of the issued and outstanding shares of the capital stock of Buford Ford (the "Buford Ford Shares"); WHEREAS, Mize owns eighty percent (80%) and Dyer owns twenty percent (20%) of all of the issued and outstanding shares of the capital stock of Mize Ford (the "Mize Ford Shares"); WHEREAS, Arnold and his Affiliates own all of the issued and outstanding shares of the capital stock of Wade Ford (the "Wade Ford Shares" and, together with the Mize Ford Shares and the Buford Ford Shares, the "Shares"); WHEREAS, UAG desires to purchase all of the Shares from the Stockholders, and the Stockholders desire to sell the Shares to UAG (in each case upon the terms and subject to the conditions set forth in this Agreement), such that immediately after giving effect to such purchase and sale, UAG will own one hundred percent (100%) of the issued and outstanding shares of the capital stock of the Companies, on a fully diluted basis; NOW, THEREFORE, in consideration of the mutual terms, conditions and other agreements set forth herein, the parties hereto hereby agree as follows: ARTICLE 1. PURCHASE AND SALE OF SHARES 1.1. CERTAIN DEFINITIONS As used in this Agreement, the following terms shall have the following meanings: (a) "Affiliate" of a specified Person shall mean a Person that directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, the Person specified, and in the case of a specified Person who is a natural person, his or her spouse, issue, parents, estate and any trust for the benefit of his or her spouse and/or issue. (b) "Business Day" shall mean any day excluding Saturday, Sunday and any day which is a legal holiday under Federal law. (c) "Closing Date" shall have the meaning ascribed to it in Section 1.2(b). (d) "Company Accounting Principles" shall mean (i) with respect to Mize Ford, income tax basis of accounting principles and (ii) with respect to Wade Ford and Buford Ford, GAAP (except with respect to depreciation which is computed on the income tax basis of accounting), and, in each case, shall include such significant accounting principles as are set forth on Schedule 1.1 hereof. (e) "GAAP" shall mean generally accepted accounting principles which are in effect in the United States on the Closing Date. (f) "Knowledge" means, with respect to the Stockholders, that the Stockholders knew, or in the exercise of reasonable diligence, would or should have known of the particular matter referred to; with respect to the Companies, that the general manager knew, or in the exercise of reasonable diligence, would or should have known, of the particular matter referred to; and, with respect to UAG, that the President of UAG knew or, in the exercise of reasonable diligence, would or should have known, of the particular matter referred to. (g) "Leases" shall have the meaning ascribed to it in Section 1.2(c)(iii). (h) "Liens" shall mean any mortgages, pledges, title defects or objections, liens, claims, security interests, prior -2- assignments, conditional and installment sale agreements, encumbrances or charges of any kind. (i) "Material Adverse Effect" shall mean any change in, or effect on, either of the Companies (including the business thereof) which is, or might be, materially adverse to the business, operations, assets or condition (financial or otherwise) of such Company. (j) "Person" shall mean and include an individual, corporation, partnership, limited liability company, joint venture, association, trust, any other incorporated or unincorporated organization or entity and a governmental entity or any department or agency thereto. (k) "Pre-Tax Earnings" shall mean net earnings (or losses), before taxes, computed in accordance with the Company Accounting Principles together with such adjustments as have been agreed upon by the parties. (l) "UAG Common Stock" shall mean the shares of common stock, par value $.0001 per share of UAG. (m) "UAG Market Value" shall mean the arithmetic average of the daily closing price per share of UAG Common Stock, rounded to four decimal places, as reported on the New York Stock Exchange Composite Tape for each of the thirty (30) consecutive trading days ending (and including) the trading day that occurs one trading day prior to the date on which the UAG Market Value is to be determined. 1.2. PURCHASE AND SALE OF THE SHARES (a) Purchase and Sale. Upon the terms and subject to the conditions set forth in this Agreement, the Stockholders shall sell to UAG, and UAG shall purchase from the Stockholders, the Shares for an aggregate purchase price (the "Purchase Price") equal to (i) Eighteen Million Seven Hundred Fifty Thousand Dollars ($18,750,000) in cash (the "Base Price"), which Base Price is subject to adjustment at the Closing as provided in Section 1.3 below and after Closing as provided in Section 1.4 below; (ii) shares of UAG Common Stock (the "UAG Shares") having an aggregate UAG Market Value on the Closing Date equal to Four Million Dollars ($4,000,000); and (iii) the Additional Payments (if any) made pursuant to Section 1.6 below. The aggregate consideration shall be allocated among the Stockholders as set forth on Schedule 1.2(a) hereof. At the Closing referred to in Section 1.2(b) hereof: (i) the Stockholders shall sell, assign, transfer and deliver to UAG the Shares representing 100% of the issued and outstanding capital stock of the Companies and deliver the certificates representing such Shares accompanied by stock powers duly executed in blank; and -3- (ii) UAG shall accept and purchase the Shares from the Stockholders and in payment therefor shall (A) deliver to the Stockholders immediately available funds in an aggregate amount equal to the Base Price by wire transfer to an account designated in writing by the Stockholders or by certified funds; and (B) deliver to the Stockholders the certificates representing the UAG Shares. (b) Closing. Subject to the conditions set forth in this Agreement, the purchase and sale of the Shares pursuant to this Agreement (the "Closing") shall take place as soon as practicable following the date on which all conditions to the obligations of the parties hereunder (other than those requiring an exchange of certificates, opinions or other documents, or the taking of other action, at the Closing) have been satisfied or waived, but no later than May 15, 1997. The date on which the Closing occurs is herein referred to as the "Closing Date". (c) Deliveries at the Closing. Subject to the conditions set forth in this Agreement, at the Closing: (i) the Stockholders shall deliver to UAG certificates representing the Shares bearing the restrictive legend customarily placed on securities that have not been registered under applicable federal and state securities laws and accompanied by stock powers as required by Section 1.2(a)(i) hereof, and any other documents that are necessary to transfer to UAG good title to all the Shares, and (B) all opinions, certificates and other instruments and documents required to be delivered by the Companies or the Stockholders at or prior to the Closing or otherwise required in connection herewith; (ii) UAG shall (A) pay to the Stockholders funds and deliver the certificates representing the UAG Shares as required by Section 1.2(a)(ii) hereof; and (B) deliver to the Stockholders all opinions, certificates and other instruments and documents required to be delivered by UAG at or prior to the Closing or otherwise required in connection herewith; and (iii) (a) Buford Ford and Arnold shall enter into a lease for the real property on which Buford Ford operates in a form mutually acceptable to the parties (the "Buford Lease"). The Buford Lease shall be for a twenty (20) year term and the lessee shall have the option to renew the lease for two additional five year terms. The initial monthly lease rate shall be an amount agreed to by the parties not to exceed the fair market lease rate and shall be subject to periodic adjustments to be agreed to by the parties. (b) Wade Ford and Arnold shall enter into a lease for the parcel of land owned by Arnold on which Wade Ford operates a portion of its business in a form to be mutually -4- acceptable to the parties (the "Wade/Arnold Lease"). The initial lease rate shall be $10,000 per month and shall be subject to periodic adjustments to be agreed to by the parties. The terms of the Wade/Arnold Lease and the Buford Lease shall be agreed to within twenty (20) Business Days. (c) Except as set forth in Sections 1.2(c)(iii)(a) and 1.2(c)(iii)(b), the Companies' leases on Real Property shall continue in full force and effect after the Closing Date. 1.3. EARNINGS ADJUSTMENT.TMENT If the Companies, on a combined basis, have Pre-Tax Earnings of more or less than $4,450,000 for the year ending December 31, 1996 ("1996 Earnings"), then the Purchase Price shall be increased or decreased (as appropriate) by an amount equal to $[(4,450,000 - 1996 Earnings) x 5]. 1.4. NET WORTH ADJUSTMENT.TMENT (a) On the Closing Date, or as soon as practicable (but no later than thirty (30) days) after the Closing Date, the Stockholders shall deliver to UAG balance sheets of the Companies dated as of the Closing Date (such balance sheets so delivered are referred to herein as the "Closing Date Balance Sheets"). The Closing Date Balance Sheets shall be prepared in good faith on the same basis and in accordance with the Company Accounting Principles, as applicable (such accounting principles, methods and practices and such procedures, are referred to herein as the "Accounting Principles"). In connection with the preparation of the Closing Date Balance Sheets, the Stockholders and the Companies shall permit the Reviewer (as defined below) and other representatives of UAG to conduct a physical inventory at each location where inventory is held by the Companies. (b) Within sixty (60) days after delivery of the Closing Date Balance Sheets, (i) Coopers & Lybrand or such other accounting firm (the "Reviewer") selected by UAG shall audit or otherwise review the Closing Date Balance Sheets in such manner as UAG and the Reviewer deem appropriate, and (ii) UAG shall deliver such reviewed balance sheet (the "Reviewed Balance Sheets"), together with the Reviewer's report thereon, to the Stockholders. The Reviewed Balance Sheets (i) shall be prepared on the same basis and in accordance with the Accounting Principles and (ii) shall include a schedule showing the computation of the Final Net Worth (as defined in Section 1.4(g)(i) hereof), computed in accordance with the definition of Net Worth set forth in Section 1.4(g)(iii) hereof. UAG and the Reviewer shall have the opportunity to consult with the Stockholders, the Companies and each of the accountants and other representatives of the Stockholders and the Companies and examine the work papers, schedules and other documents prepared by the Stockholders, the Companies and each of such accountants and -5- other representatives during the preparation of the Closing Date Balance Sheets. The Stockholders and the Stockholders' independent public accountants shall have the opportunity to consult with the Reviewer and examine the work papers and schedules prepared by the Reviewer during the preparation of the Reviewed Balance Sheets. (c) The Stockholders shall have a period of forty-five (45) days after delivery of the Reviewed Balance Sheets to present in writing to UAG all objections the Stockholders may have to any of the matters set forth or reflected therein, which objections shall be set forth in reasonable detail. If no objections are raised within such 45-day period, the Reviewed Balance Sheets shall be deemed accepted and approved by the Stockholders and a supplemental closing (the "Supplemental Closing") shall take place within five (5) Business Days following the expiration of such 45-day period, or on such other date as may be mutually agreed upon in writing by UAG and the Stockholders. (d) If the Stockholders shall raise any objection within the 45-day period, UAG and the Stockholders shall attempt to resolve the matter or matters in dispute and, if resolved, the Supplemental Closing shall take place within five (5) Business Days following such resolution. (e) If such dispute cannot be resolved by UAG and the Stockholders within ninety (90) days after the delivery of the Reviewed Balance Sheets, then the specific matters in dispute shall be submitted to a firm of independent public accountants mutually acceptable to UAG and the Stockholders, which firm shall make a final and binding determination as to such matter or matters. Such accounting firm shall send its written determination to UAG and the Stockholders and the Supplemental Closing, if any, shall take place five (5) Business Days following the receipt of such determination by UAG and the Stockholders. The fees and expenses of the accounting firm referred to in this Section 1.4(e) shall be paid one half by UAG and one-half by the Stockholders. (f) UAG and the Stockholders agree to cooperate with each other and each other's authorized representatives and with any accounting firm selected by UAG and the Stockholders pursuant to Section 1.4(e) hereof in order that any and all matters in dispute shall be resolved as soon as practicable. (g)(i) If the aggregate Net Worth as shown on the Reviewed Balance Sheets as finally determined through the operation of Sections 1.4 (a) through (e) hereof (such amount being referred to herein as the "Final Net Worth") shall be less than Five Million Dollars ($5,000,000) (the amount of any such deficiency being referred to herein as the "Net Worth Deficiency"), the Stockholders shall pay to UAG at the Supplemental Closing, by wire transfer of immediately available -6- funds to an account designated in writing by UAG within two (2) Business Days of the date of the Supplemental Closing, an amount equal to the Net Worth Deficiency, together with interest on such amount from the Closing Date to the date of the Supplemental Closing at the prime rate or its equivalent (as announced from time to time by Citibank, N.A.). (ii) If the Net Worth as shown on the Closing Date Balance Sheets is equal to or greater than Five Million Dollars ($5,000,000) and the Net Worth as shown on the Reviewed Balance Sheets as finally determined through the operation of Sections 1.4(a) through (e) hereof shall be greater than the Net Worth as shown on the Closing Date Balance Sheets (the amount of any such excess being referred to as the "Net Worth Excess"), UAG shall pay to the Stockholders, by wire transfer of immediately available funds to an account designated in writing within two (2) Business Days of the Supplemental Closing, an amount equal to the Net Worth Excess, together with interest on such amount from the Closing Date to the date of the Supplemental Closing at the prime rate or its equivalent (as announced from time to time by Citibank, N.A.). (iii) "Net Worth" shall mean the amount by which the total assets plus LIFO reserves (in each case using the Company Accounting Principles) (excluding good will) exceed the total liabilities reflected, in each case, on the balance sheets of Companies comprising the Closing Date Balance Sheets or the Reviewed Balance Sheets, as the case may be. 1.5. STOCK PRICE ADJUSTMENT If the UAG Market Value on the Adjustment Date (as defined below), is less than the UAG Market Value on the Closing Date (the amount of any such deficiency being referred to herein as the "Stock Price Deficiency") then, no later than thirty (30) days after the Adjustment Date, UAG shall pay to each Stockholder cash in an amount (the "Adjustment Amount") equal to the Stock Price Deficiency multiplied by the number of UAG Shares that such Stockholder is permitted to sell on the Adjustment Date. For purposes of this Agreement, the Adjustment Date shall mean the earlier of (i) the date on which the Stockholders may sell the UAG Shares in reliance on Rule 144 promulgated by the Securities and Exchange Commission ("SEC") pursuant to the Securities Act of 1933, as amended ("Rule 144") and (ii) the date on which the UAG Shares are registered pursuant to the provisions of a piggyback registration rights agreement or otherwise. If any Stockholder is not permitted to sell all of his UAG Shares on the Adjustment Date as a result of any volume restrictions set forth in Rule 144 or market cutbacks in connection with a piggyback registration and the UAG Market Value ninety days after the Adjustment Date is less than the UAG Market Value on the -7- Closing Date (the amount of any such deficiency being referred to herein as the ("Remaining Stock Price Deficiency") then, no later than one hundred and fifty (150) days after the Adjustment Date, UAG shall pay to such Stockholder cash in an amount equal to the Remaining Stock Price Deficiency multiplied by the number of UAG Shares that such Stockholder was not permitted to sell on the Adjustment Date. 1.6. ADDITIONAL PURCHASE PRICE.PRICE If the Companies (except for Buford Ford), on a combined basis, achieve annual Pre-Tax Earnings of at least Three Million Eight Hundred Thousand Dollars ($3,800,000) in either of the two (2) successive twelve (12) month periods beginning on the first day of the calendar month immediately following the Closing then, in consideration for the sale of the Shares by the Stockholders to UAG, UAG will make an additional one-time cash payment to the Stockholders (or their designees) in the aggregate amount of Eight Hundred Fifty Thousand Dollars ($850,000) (the "Additional Payment"). In the event that UAG is required to make the Additional Payment, then UAG shall make the Additional Payment within sixty (60) days after the completion of the review by the Companies' certified public accountant of the Companies' financial statements covering the entire 12-month period for which such Additional Payment is to be paid (but in no event shall such Additional Payment be paid later than 120 days after the end of such 12-month period). 1.7. EFFECTIVE DATE The obligations of the parties hereunder shall not take effect until the date on which any of the parties notify Ford Motor Company of the execution of the Agreement (the "Effective Date"). 1.8. SCHEDULES The parties acknowledge and agree that the Schedules referred to in this Article 1 shall be delivered no later than twenty (20) Business Days after the Effective Date. ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANIES AND THE STOCKHOLDERS Subject to the parties acknowledgement and agreement that the Schedules referred to in this Article 2 are to be delivered by the Companies and the Stockholders no later than twenty (20) Business Days after the Effective Date hereof, the Companies and the Stockholders hereby represent and warrant to UAG as follows, each such representation and warranty referring (a) in the case of Mize and Mize Ford only to Mize and Mize Ford; (b) in the case of Dyer, only to Dyer and Mize Ford; (c) in the case of Arnold, Wade Ford and Buford Ford only to Arnold, Wade -8- Ford and Buford Ford; (d) in the case of Buford Ford to Buford Ford; and (e) in the case of Billings only to Billings and Buford Ford. 2.1. ORGANIZATION AND GOOD STANDING Each of the Companies is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has the corporate power and authority to own, lease and operate the properties used in its businesses and to carry on its businesses as now being conducted. The Companies are duly qualified to do business and are in good standing as a foreign corporation in each state and jurisdiction where qualification as a foreign corporation is required. Schedule 2.1 hereto lists (i) the states and other jurisdictions where the Companies are so qualified and (ii) the assumed names under which the Companies conduct business. Attached to Schedule 2.1(b) hereto are complete and correct copies of the Companies' Articles of Incorporation and Bylaws (including comparable governing instruments with different names), as amended and presently in effect. 2.2. SUBSIDIARIES Except as set forth on Schedule 2.2 hereof, the Companies do not have any interest or investment in any Person. 2.3. CAPITALIZATION The authorized stock of each of the Companies and the number of shares of capital stock which are issued and outstanding are set forth on Schedule 2.3 hereto. The shares listed on Schedule 2.3 hereto constitute all the issued and outstanding shares of capital stock of the Companies and have been validly authorized and issued, are fully paid and nonassessable, have not been issued in violation of any preemptive rights or of any federal or state securities law and no personal liability attaches to the ownership thereof. There is no security, option, warrant, right, call, subscription, agreement, commitment or understanding of any nature whatsoever, fixed or contingent, that directly or indirectly (i) calls for the issuance, sale, pledge or other disposition of any shares of capital stock of the Companies or any securities convertible into, or other rights to acquire, any shares of capital stock of the Companies, or (ii) obligates the Companies to grant, offer or enter into any of the foregoing, or (iii) relates to the voting or control of such capital stock, securities or rights, except as set forth on Schedule 2.3 hereto. The Companies have not agreed to register any securities under the Securities Act of 1933, as amended (the "Securities Act"). -9- 2.4. AUTHORITY; APPROVALS AND CONSENTS (a) The Companies have the corporate power and authority to enter into this Agreement and the documents referred to herein (the "Documents") to which they are a party and to perform their obligations hereunder and thereunder. The execution, delivery and performance of this Agreement and the Documents to which they are a party and the consummation of the transactions contemplated hereby and thereby have been duly authorized and approved by the Board of Directors of each of the Companies and no other corporate proceedings on the part of the Companies are necessary to authorize and approve this Agreement and the Documents and the transactions contemplated hereby and thereby. This Agreement has been, and on the Closing Date the Documents will be, duly executed and delivered by, and constitute valid and binding obligations of, each of the Companies, enforceable against the Companies in accordance with their respective terms. (b) The execution, delivery and performance by each of the Companies and the Stockholders of this Agreement and the Documents to which it or they are a party and the consummation of the transactions contemplated hereby and thereby do not and will not: (i) contravene any provisions of the Articles of Incorporation or By-Laws (including any comparable governing instrument with a different name) of either of the Companies; (ii) (after notice or lapse of time or both) conflict with, result in a breach of any provision of, constitute a default under, result in the modification or cancellation of, or give rise to any right of termination or acceleration in respect of, any Company Agreement (as defined in Section 2.15 hereof) or, except as set forth on Schedule 2.4 hereto, require any consent or waiver of any party to any Company Agreement; (iii) result in the creation of any security interest upon, or any person obtaining any right to acquire, any properties, assets or rights of the Companies (other than the rights of UAG to acquire the Shares pursuant to this Agreement); (iv) violate or conflict with any Legal Requirements (as defined in Section 2.9 hereof) applicable to the Companies or any of their respective businesses or properties; or (v) require any authorization, consent, order, permit or approval of, or notice to, or filing, registration or qualification with, any governmental, administrative or judicial authority, except in connection with or in comp- -10- liance with the provisions of the H-S-R Act (as defined in Section 5.3 hereof). Except as set forth or referred to above, no authorization, consent, order, permit or approval of, or notice to, or filing, registration or qualification with, any governmental administrative or judicial authority is necessary to be obtained or made by the Companies to enable the Companies to continue to conduct their respective businesses and operations and use their respective properties after the Closing in a manner which is in all material respects consistent with that in which they are presently conducted. 2.5. FINANCIAL STATEMENTS Except as otherwise indicated below, attached as Schedule 2.5 are true and complete copies of: (i) (A) the audited balance sheets of Wade Ford and Buford Ford as of December 31, 1996 (the "Wade Ford and Buford Ford Company Balance Sheets"), and the related consolidated statements of income, stockholders' equity and cash flow for the fiscal year ended December 31, 1996, together with the notes thereto and (B) the reviewed balance sheets of Wade Ford and Buford Ford as of December 31, 1995, and the related consolidated statements of income, stockholders' equity and cash flow for the fiscal year ended December 31, 1995, together with the notes thereto, in each case examined or reviewed by (as the case may be) and accompanied by the report of independent certified public accountants; and (ii) (A) the reviewed balance sheets of Mize Ford as of December 31, 1996 (the "Mize Ford Company Balance Sheet" and, together with the Wade Ford and Buford Ford Company Balance Sheets, the "Company Balance Sheets"), and the related consolidated statements of income and stockholders' equity for the fiscal year ended December 31, 1995, together with the notes thereto, in each case reviewed by and accompanied by the report of independent certified public accountants; and (iii) the most recent monthly and year-to-date financial statements provided to Ford Motor Company by each of the Companies (each, a "Company Factory Statement" and, collectively, the "Company Factory Statements"); (all the foregoing financial statements, including the notes thereto, being referred to herein collectively as the "Company Financial Statements"). The Company Financial Statements are in accordance with the books and records of the Companies, fairly present the financial position, results of operations, stockholders' equity as of the dates and for the periods indicated, in the case of the financial statements referred to in -11- clause (i) and (ii) above in conformity with the Company Accounting Principles consistently applied during such periods (except as expressly stated otherwise therein), and can be legitimately reconciled with the financial statements and the financial records maintained and the accounting methods applied by the Companies for federal income tax purposes, and the unaudited financial statements included in the Company Financial Statements indicate all adjustments, which consist of only normal recurring accruals, necessary for such fair presentations. The statements of income included in the Company Financial Statements do not contain any items of special or nonrecurring income except as expressly specified therein, and the balance sheets included in the Company Financial Statements do not reflect any write-up or revaluation increasing the book value of any assets. The books and accounts of the Companies are complete and correct in all material respects and fairly reflect all of the transactions, items of income and expense and all assets and liabilities of the businesses of the Companies. 2.6. ABSENCE OF UNDISCLOSED LIABILITIES The Companies do not have any liability of any nature whatsoever (whether known or unknown, due or to become due, accrued, absolute, contingent or otherwise), including, without limitation, any unfunded obligation under employee benefit plans or arrangements as described in Section 2.17 and 2.18 hereof or liabilities for Taxes (as defined in Section 2.8 hereof), except for (i) liabilities reflected or reserved against on the most recent Company Financial Statements, (ii) current liabilities incurred in the ordinary course of business and consistent with past practice after the date of the Company Balance Sheets which, individually and in the aggregate, do not have, and cannot reasonably be expected to have, a Material Adverse Effect, (iii) liabilities disclosed on Schedule 2.6 hereto, and (iv) liabilities that do not, in the aggregate, exceed $10,000. The Companies are not parties to any Company Agreement, or subject to any charter or by-law provision, any other corporate limitation or any Legal Requirement, which has, or can reasonably be expected to have, a Material Adverse Effect. 2.7. ABSENCE OF MATERIAL ADVERSE EFFECT; CONDUCT OF BUSINESS (a) Since December 31, 1996, the Companies have operated in the ordinary course of business consistent with past practice, except as set forth on Schedule 2.7(a) hereto, and there has not been: (i) any material adverse change in the assets, properties, business, operations, net income or financial condition of the Companies, and no factor, event, condition or circumstance exists which threatens or may threaten to have a Material Adverse Effect; -12- (ii) any material loss, damage, destruction or other casualty to the property or other assets of the Companies, whether or not covered by insurance; (iii) any change in any method of accounting or accounting practice of the Companies; or (iv) any loss of the employment, services or benefits of any manager of either of the Companies. (b) Since December 31, 1996, except as set forth in Schedule 2.7(b) hereto, the Companies have not: (i) incurred any material obligation or liability (whether absolute, accrued, contingent or otherwise), except in the ordinary course of business consistent with past practice; (ii) failed to discharge or satisfy any lien or pay or satisfy any obligation or liability (whether absolute, accrued, contingent or otherwise), other than liabilities being contested in good faith and for which adequate reserves have been provided; (iii) mortgaged, pledged or subjected to any lien any of its property or other assets, except for mechanics liens and liens for taxes not yet due and payable; (iv) sold or transferred any assets or cancelled any debts or claims or waived any rights, except in the ordinary course of business consistent with past practice; (v) defaulted on any material obligation; (vi) entered into any material transaction, except in the ordinary course of business consistent with past practice; (vii) written down the value of any inventory or written off as uncollectible any accounts receivable or any portion thereof not reflected in the Company Financial Statements; (viii) granted any increase in the compensation or benefits of employees other than increases in accordance with past practice not exceeding 10% or entered into any employment or severance agreement or arrangement with any of them; (ix) made any individual capital expenditure in excess of $75,000, or aggregate capital expenditures in excess of $200,000, or additions to property, plant and equipment other than ordinary repairs and maintenance; -13- (x) discontinued any franchise or the sale of any products or product line or program; (xi) incurred any obligation or liability for the payment of severance benefits; or (xii) entered into any agreement or made any commitment to do any of the foregoing. 2.8. TAXES The Companies have each made a valid election pursuant to Section 1362(a) of the Internal Revenue Code, as amended (the "Code"), to be an "S Corporation" within the meaning of Section 1361(a)(1) of the Code and have continued to qualify as such for all taxable years since at least 1986 and will continue to so qualify through the Closing Date. The Companies and, for any period during all or part of which the tax liability of any other corporation was determined on a combined or consolidated basis with the Companies, any such other corporation have filed timely all federal, state, local and foreign tax returns, reports and declarations required to be filed (or have obtained or timely applied for an extension with respect to such filing) correctly reflecting the Taxes (as defined below) and all other information required to be reported thereon and have paid, or made adequate provision for the payment of, all Taxes which are due pursuant to such returns or pursuant to any assessment received by the Companies or any such other corporation. As used herein, "Taxes" shall mean all taxes, fees, levies or other assessments, including but not limited to income, excise, property, sales, franchise, withholding, social security and unemployment taxes imposed by the United States, any state, county, local or foreign government, or any subdivision or agency thereof or taxing authority therein, and any interest, penalties or additions to tax relating to such taxes, charges, fees, levies or other assessments. Copies of all tax returns for the fiscal years ended since December 31, 1992 have been furnished to UAG or its representatives and such copies are accurate and complete as of the date hereof. The Companies have also furnished to UAG correct and complete copies of all notices and correspondence sent or received since December 31, 1992 by the Companies to or from any federal, state or local tax authorities. The Companies have adequately reserved for the payment of all Taxes with respect to periods ended on, prior to or through the Closing Date for which tax returns have not yet been filed. In the ordinary course, the Companies make adequate provision on their books for the payment of all Taxes (including for the current fiscal period) owed by the Companies on an annual basis. Except to the extent reserves therefor are reflected on the Company Balance Sheets, the Companies are not liable, or will not become liable, for any Taxes for any period ending on, prior to or through the Closing Date. Except as set forth on Schedule 2.8 hereto, since January 1, 1990 the Companies have not been subject to a federal or state tax audit of any kind, and no adjustment has been -14- proposed by the Internal Revenue Service ("IRS") with respect to any return for any subsequent year. With respect to the audits referred to on Schedule 2.8 hereto, no such audit has resulted in an adjustment in excess of $50,000. Neither the Companies nor any Stockholder knows of any basis for an assertion of a deficiency for Taxes against the Companies. The Stockholders will cooperate, and will cause their Affiliates to cooperate, with the Companies in the filing of any returns and in any audit or refund claim proceedings involving Taxes for which the Companies may be liable or with respect to which the Companies may be entitled to a refund. 2.9. LEGAL MATTERS (a) Except as set forth on Schedule 2.9(a) hereto, (i) there is no claim, action, suit, litigation, investigation, inquiry, review or proceeding (collectively, "Claims") pending against, or, to the knowledge of the Companies or the Stockholders, threatened against or affecting, the Companies, any ERISA Plan (as defined in Section 2.18(a) hereof) or any of their respective properties or rights before or by any court, arbitrator, panel, agency or other governmental, administrative or judicial entity, domestic or foreign, nor is any basis known to the Stockholders or the Companies for any such Claims, and (ii) the Companies are not subject to any judgment, decree, writ, injunction, ruling or order (collectively, "Judgments") of any governmental, administrative or judicial authority, domestic or foreign. Schedule 2.9(a) hereto identifies each Claim and Judgment disclosed thereon which is fully covered by an insurance policy. (b) The businesses of the Companies are being conducted in compliance with all laws, ordinances, codes, rules, regulations, standards, judgments and other requirements of all governmental, administrative or judicial entities (collectively, "Legal Requirements") applicable to the Companies or any of their respective businesses or properties. The Companies hold, and are in compliance with, all franchises, licenses, permits, registrations, certificates, consents, approvals or authorizations (collectively, "Permits") required by all applicable Legal Requirements. A list of all such permits is set forth on Schedule 2.9(b) hereof. (c) The Companies own or hold all Permits material to the conduct of their businesses. No event has occurred and is continuing which permits, or after notice or lapse of time or both would permit, any modification or termination of any Permit. 2.10. PROPERTY The properties and assets, real and personal, owned by or leased to the Companies are adequate for the conduct of the respective businesses of the Companies as presently conducted. Set forth on Schedule 2.10(a) hereto is a list of all interests -15- in real property owned by or leased to the Companies (including all real property owned or leased by the Stockholders (directly or indirectly) and used in the businesses of the Companies and of all options or other contracts to acquire any such interest (collectively, the "Real Property"). With respect to any leased Real Property there are no defaults by either party under and no state of facts exist which with the giving of notice or the passage of time, or both, would constitute a default under such leases and true and correct copies of such leases are attached as Schedule 2.10(b). All properties leased by the Companies are leased at rates which do not exceed the fair market lease rate for such property. All improvements to the Real Property ("Improvements") and all machinery, equipment and other tangible property owned or used by or leased to the Companies are in good operating condition and in good repair, subject only to ordinary wear and tear. Such tangible properties and all Improvements owned or leased by the Companies conform in all material respects with all applicable laws, ordinances, rules and regulations and other Legal Requirements and such Improvements do not encroach in any respect on property of others. To the knowledge of the Stockholders, there are no latent defects with respect to the Improvements. The Real Property is currently zoned to permit the conduct of the respective businesses of the Companies as presently conducted. To the extent required by law, Certificates of Occupancy have been issued with respect to the Improvements without special conditions or restrictions. No notice of any pending, threatened or contemplated action by any governmental authority or agency having the power of eminent domain has been given to the Companies or the Stockholders with respect to the Real Property. 2.11. ENVIRONMENTAL MATTERS (a) Except as set forth on Schedule 2.11(a) hereto, (i) the Companies, the Real Property, the Improvements and any property formerly owned, occupied or leased by the Companies are in full compliance with all Environmental Laws (as defined below), (ii) the Companies have obtained all Environmental Permits (as defined below), (iii) such Environmental Permits are in full force and effect, and (iv) the Companies are in full compliance with all terms and conditions of such Environmental Permits. As used herein, "Environmental Laws" shall mean all applicable requirements of environmental, public or employee health and safety, public or community right-to-know, ecological or natural resource laws or regulations or controls, including all applicable requirements imposed by any law (including without limitation common law), rule, order, or regulations of any federal, state, or local executive, legislative, judicial, regulatory, or administrative agency, board, or authority, or any applicable private agreement (such as covenants, conditions and restrictions), which relate to, (i) noise, (ii) pollution or protection of the air, surface water, groundwater, or soil, (iii) solid, gaseous, or liquid waste generation, treatment, storage, disposal or transportation, (iv) exposure to Hazardous Materials -16- (as defined below), or (v) regulation of the manufacture, processing, distribution and commerce, use, or storage of Hazardous Materials. As used herein, "Environmental Permits" shall mean all permits, licenses, approvals, authorizations, consents or registrations required under applicable Environmental Law in connection with the ownership, use and/or operation of the Companies' businesses or the Real Property or Improvements. As used in this Section 2.11, "Hazardous Materials" shall mean, collectively, (i) those substances included within the definitions of or identified as "hazardous chemicals," "hazardous waste," "hazardous substances," "hazardous materials," "toxic substances" or similar terms in or pursuant to, without limitation, the Comprehensive Environmental Response Compensation and Liability Act of 1980 (42 U.S.C. 9601 et seq.) ("CERCLA"), as amended by Superfund Amendments and Reauthorization Act of 1986 (Pub. L. 99-499, 100 State, 1613), the Resource Conservation and Recovery Act of 1976 (42 U.S.C. ss. 6901 et seq.) ("RCRA"), the Occupational Safety and Health Act of 1970 (29 U.S.C. ss. 651 et seq.) ("OSHA"), and the Hazardous Materials Transportation Act, 49 U.S.C. ss. 1801 et seq. ("HMTA"), and in the regulations promulgated pursuant to such laws, all as amended, (ii) those substances listed in the United States Department of Transportation Table (49 CFR 172.101 and amendments thereto) or by the Environmental Protection Agency (or any successor agency) as hazardous substances (40 CFR part 302 and amendments thereto), (iii) any material, waste or substance which is or contains (A) petroleum, including crude oil or any fraction thereof, natural gas, or synthetic gas usable for fuel or any mixture thereof, (B) asbestos, (C) polychlorinated biphenyls, (D) designated as a "hazardous substance" pursuant to Section 311 of the Clean Water Act, 33 U.S.C. ss. 1251 et seq. (33 U.S.C. ss. 1321) or listed pursuant to Section 307 of the Clean Water Act (33 U.S.C. ss. 1317), (E) flammable explosives, (F) radioactive materials, and (iv) such other substances, materials and wastes which are or become regulated or classified as hazardous, toxic or as "special wastes" under any Environmental Laws. (b) The Companies and the Stockholders have not violated, done or suffered any act which could give rise to liability under, and are not otherwise exposed to liability under, any Environmental Law. No event has occurred with respect to the Real Property, the Improvements or any property formerly owned, occupied or leased by the Companies, which, with the passage of time or the giving of notice, or both, would constitute a violation of or non-compliance with any applicable Environmental Law. The Companies have no contingent liability under any Environmental Law. There are no liens under any Environmental Law on the Real Property. (c) Except as set forth on Schedule 2.11(c) hereto, (i) neither the Companies, the Real Property or any portion thereof, the Improvements or any property formerly owned, occupied or leased by the Companies, nor, to the knowledge of the -17- Companies or the Stockholders, any property adjacent to the Real Property is being used or has been used for the treatment, generation, transportation, processing, handling, production or disposal of any Hazardous Materials or as a landfill or other waste disposal site and there has been no spill or release of any Hazardous Materials (provided, however, that certain petroleum products are stored and handled on the Real Property in the ordinary course of the Companies' businesses in full compliance with all Environmental Laws including the existing regulations of the United States Environmental Protection Agency requiring spill protection, overfill protection and corrosion protection by December 22, 1998 and all secondary containment requirements with respect to above ground storage tanks), (ii) none of the Real Property or portion thereof, the Improvements or any property formerly owned, occupied or leased by the Companies has been subject to investigation by any governmental authority evaluating the need to investigate or undertake Remedial Action (as defined below) at such property, and (iii) none of the Real Property, the Improvements or any property formerly owned, occupied or leased by the Companies, or, to the knowledge of the Companies or the Stockholders, any site or location where the Companies sent waste of any kind, is identified on the current or proposed (A) National Priorities List under 40 C.F.R. 300 Appendix B, (B) Comprehensive Environmental Response Compensation and Liability Inventory System list, or (C) any list arising from any statute analogous to CERCLA. As used herein, "Remedial Action" shall mean any action required to (i) clean up, remove or treat Hazardous Materials, (ii) prevent a release or threat of release of any Hazardous Material, (iii) perform pre-remedial studies, investigations or post-remedial monitoring and care, (iv) cure a violation of Environmental Law or (v) take corrective action under sections 3004(u), 3004(v) or 3008(h) of RCRA or analogous state law. (d) Except as set forth on Schedule 2.11(d) hereto, there have been and are no (i) aboveground or underground storage tanks, subsurface disposal systems, or wastes, drums or containers disposed of or buried on, in or under the ground or any surface waters, (ii) asbestos or asbestos containing materials or radon gas, (iii) polychlorinated biphenyls ("PCB") or PCB-containing equipment, including transformers, or (iv) wetlands (as defined under any Environmental Law) located within any portion of the Real Property, nor have any liens been placed upon any portion of the Real Property, the Improvements or any property formerly owned, occupied or leased by the Companies in connection with any actual or alleged liability under any Environmental Law. (e) Except as set forth on Schedule 2.11(e) hereto, (i) there is no pending or threatened claim, litigation, or administrative proceeding, or known prior claim, litigation or administrative proceeding, arising under any Environmental Law involving either of the Companies, the Real Property, the Improvements, any property formerly owned, leased or occupied by -18- the Companies, any offsite contamination affecting the business of the Companies or any operations conducted at the Real Property, (ii) there are no ongoing negotiations with or agreements with any governmental authority relating to any Remedial Action or other environmentally related claim, (iii) the Companies have not submitted notice pursuant to Section 103 of CERCLA or analogous statute or notice under any other applicable Environmental Law reporting a release of a Hazardous Material into the environment, and (iv) the Companies have not received any notice, claim, demand, suit or request for information from any governmental or private entity with respect to any liability or alleged liability under any Environmental Law, nor to the knowledge of the Stockholders and the Companies, has any other entity whose liability therefor, in whole or in part, may be attributed to the Companies, received such notice, claim, demand, suit or request for information. (f) The Stockholders and the Companies have provided to UAG all environmental studies and reports obtained by them or known to them pertaining to the Real Property, the Improvements, the Companies and any property formerly owned, occupied or leased by the Companies, and have permitted (or will have permitted as of the Closing Date), the testing of the soil, groundwater, building components, tanks, containers and equipment on the Real Property, the Improvements, and any property formerly owned, occupied or leased by the Companies, by UAG or UAG's agents or experts as they have or shall have deemed necessary or appropriate to confirm the condition of such properties. Any testing shall not be construed as a waiver of any rights which UAG or Sub have arising out of the representations and warranties contained herein. 2.12. INVENTORIES The values at which inventories are carried on the Company Balance Sheets and Company Factory Statements reflect the normal inventory valuation policies of the Companies, and such values are in conformity with the Company Accounting Principles. All inventories (other than new car inventories) reflected on the Company Balance Sheets and Company Factory Statements or arising since the date thereof are currently marketable and can reasonably be anticipated to be sold at normal mark-ups within 90 days after the date hereof in the ordinary course of business, except for spare parts inventory which inventory is good and usable. All new car inventories reflected on the Company Balance Sheets and Company Factory Statements or arising since the date thereof and prior to Closing are currently marketable and can reasonably be anticipated to be sold in the ordinary course of business within 90 days. 2.13. ACCOUNTS RECEIVABLE All accounts receivable reflected on the Company Balance Sheets are, and all accounts receivable that will be or -19- will have been reflected on the Closing Date Balance Sheets will have arisen from bona fide transactions in the ordinary course of business and are subject to no defenses, setoffs or counterclaims other than normal cash discounts accrued in the ordinary course of business. 2.14. INSURANCE All material properties and assets of the Companies which are of an insurable character are insured against loss or damage by fire and other risks to the extent and in the manner reasonable in light of the risks attendant to the businesses and activities in which the Companies are engaged and customary for companies engaged in similar businesses or owning similar assets. Set forth on Schedule 2.14 hereto is a list and brief description (including the name of the insurer, the type of coverage provided, the amount of the annual premium for the current policy period, the amount of remaining coverage and deductibles and the coverage period) of all policies for such insurance and the Companies have made or will make available to UAG true and complete copies of all such policies. All such policies are in full force and effect and will not in any way be affected by or terminated or lapsed by reason of the consummation of the transactions contemplated by this Agreement. No notice of cancellation or non-renewal with respect to, or disallowance of any claim under, any such policy has been received by the Companies. 2.15. CONTRACTS; ETC. As used in this Agreement, the term "Company Agreements" shall mean all mortgages, indenture notes, agreements, contracts, leases, licenses, franchises, obligations, instruments or other commitments, arrangements or understandings of any kind, whether written or oral, binding or non-binding, (including all leases and other agreements referred to on Schedule 2.10 hereto) to which either of the Companies is a party or by which either of the Companies or any of their respective assets or properties (including the Real Property and the Improvements) may be bound or affected, including all amendments, modifications, extensions or renewals of any of the foregoing. Set forth on Schedule 2.15 hereto is a complete and accurate list of each Company Agreement which is material to the business, operations, assets, condition (financial or otherwise) or prospects of either of the Companies. True and complete copies of all written Company Agreements referred to on Schedule 2.15 and Schedule 2.10 hereto, exclusive of individual vehicle titles and/or manufacturer's certificates of origin and floor plan liens applicable to individual vehicles, have been delivered to UAG, and the Companies have provided UAG with accurate and complete written summaries of all such Company Agreements which are unwritten. Except as set forth on Schedule 2.15, the Companies are not, nor, to the knowledge of the Companies and the Stockholders is, any other party thereto, in breach of or default under any Company Agreement, and no event -20- has occurred which (after notice or lapse of time or both) would become a breach or default under, or would permit modification, cancellation, acceleration or termination of, any Company Agreement or result in the creation of any Lien upon, or any Person obtaining any right to acquire, any properties, assets or rights of the Companies. There are no material unresolved disputes involving either of the Companies under any Company Agreement. For purposes of this Section 2.15, material shall mean any Company Agreement that requires payments or expenditures in excess of $100,000 in any 12-month period. 2.16. LABOR RELATIONS (a) The Companies have paid or made provision for the payment of all salaries and accrued wages and have complied in all material respects with all applicable laws, rules and regulations relating to the employment of labor, including those relating to wages, hours, collective bargaining and the payment and withholding of taxes, and have withheld and paid to the appropriate governmental authority, or are holding for payment not yet due to such authority, all amounts required by law or agreement to be withheld from the wages or salaries of their employees. (b) Except as set forth on Schedule 2.16(b) hereto, none of the Companies is a party to any (i) outstanding employment agreements or contracts with officers or employees that are not terminable at will, or that provide for payment of any bonus or commission, (ii) agreement, policy or practice that requires it to pay termination or severance pay to salaried, non-exempt or hourly employees (other than as required by law), (iii) collective bargaining agreement or other labor union contract applicable to persons employed by the Companies, nor do the Stockholders or the Companies know of any activities or proceedings of any labor union to organize any such employees. The Companies have furnished to UAG complete and correct copies of all such agreements ("Employment and Labor Agreements"). The Companies have not breached or otherwise failed to comply with any provisions of any Employment or Labor Agreement. (c) Except as set forth in Schedule 2.16(c) hereto, (i) there is no unfair labor practice charge or complaint pending before the National Labor Relations Board ("NLRB"), (ii) there is no labor strike, material slowdown or material work stoppage or lockout actually pending or, to the Stockholders' or the Companies' knowledge, threatened, against or affecting the Companies, and the Companies have not experienced any strike, material slow down or material work stoppage, lockout or other collective labor action by or with respect to employees of the Companies, (iii) there is no representation claim or petition pending before the NLRB or any similar foreign agency and no question concerning representation exists relating to the employees of the Companies, (iv) there are no charges with respect to or relating to the Companies pending before the Equal -21- Employment Opportunity Commission or any state, local or foreign agency responsible for the prevention of unlawful employment practices, (v) the Companies have not received formal notice from any federal, state, local or foreign agency responsible for the enforcement of labor or employment laws of an intention to conduct an investigation of the Companies and, to the knowledge of the Companies, no such investigation is in progress and (vi) the consents of the unions that are parties to any Employment and Labor Agreements are not required to complete the transactions contemplated by this Agreement and the Documents. (d) The Companies have never caused any "plant closing" or "mass layoff" as such actions are defined in the Worker Adjustment and Retraining Notification Act, as codified at 29 U.S.C. ss.ss. 2101-2109, and the regulations promulgated therein. 2.17. EMPLOYEE BENEFIT PLANS (a) Set forth on Schedule 2.17(a) hereto is a true and complete list of: (i) each employee pension benefit plan, as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974 ("ERISA"), maintained by the Companies or to which the Companies are required to make contributions ("Pension Benefit Plan"); and (ii) each employee welfare benefit plan, as defined in Section 3(i) of ERISA, maintained by the Companies or to which the Companies are required to make contributions ("Welfare Benefit Plan"). True and complete copies of all Pension Benefit Plans and Welfare Benefit Plans (collectively, "ERISA Plans") have been delivered to or made available to UAG together with, as applicable with respect to each such ERISA Plan, trust agreements, summary plan descriptions, all IRS determination letters or applications therefor with respect to any Pension Benefit Plan intended to be qualified pursuant to Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and valuation or actuarial reports, accountant's opinions, financial statements, IRS Form 5500s (or 5500-C or 5500-R) and summary annual reports for the last three years. (b) With respect to the ERISA Plans, except as set forth on Schedule 2.17(b): (i) there is no ERISA Plan which is a " multiemployer" plan as that term is defined in Section 3(37) of ERISA ("Multiemployer Plan"); (ii) no event has occurred or (to the knowledge of the Companies or the Stockholders) is threatened or about to -22- occur which would constitute a prohibited transaction under Section 406 of ERISA or under Section 4975 of the Code; (iii) each ERISA Plan has operated since its inception in accordance with the reporting and disclosure requirements imposed under ERISA and the Code and has timely filed Form 5500e (or 5500-C or 5500-R) and predecessors thereof; and (iv) no ERISA Plan is liable for any federal, state, local or foreign Taxes. (c) Each Pension Benefit Plan intended to be qualified under Section 401(a) of the Code: (i) has been qualified, from its inception, under Section 401(a) of the Code, and the trust established thereunder has been exempt from taxation under Section 501(a) of the Code and is currently in compliance with applicable federal laws; (ii) has been operated, since its inception, in accordance with its terms and there exists no fact which would adversely affect its qualified status; and (iii) is not currently under investigation, audit or review by the IRS or (to the knowledge of the Companies and the Stockholders) no such action is contemplated or under consideration and the IRS has not asserted that any Pension Benefit Plan is not qualified under Section 401(a) of the Code or that any trust established under a Pension Benefit Plan is not exempt under Section 501(a) of the Code. (d) With respect to each Pension Benefit Plan which is a defined benefit plan under Section 414(j) and, for the purpose solely of Section 2.17(d)(iv) hereof, each defined contribution plan under Section 414(i) of the Code: (i) no liability to the Pension Benefit Guaranty Corporation ("PBGC") under Sections 4062-4064 of ERISA has been incurred by the Companies since the effective date of ERISA and all premiums due and owing to the PBGC have been timely paid; (ii) the PBGC has not notified the Companies or any Pension Benefit Plan of the commencement of proceedings under Section 4042 of ERISA to terminate any such plan; (iii) no event has occurred since the inception of any Pension Benefit Plan or (to the knowledge of the Companies or the Stockholders) is threatened or about to occur which would constitute a reportable event within the meaning of Section 4043(b) of ERISA; -23- (iv) no Pension Benefit Plan ever has incurred any "accumulated funding deficiency" (as defined in Section 302 of ERISA and Section 412 of the Code); and (v) if any of such Pension Benefit Plans were to be terminated on the Closing Date (A) no liability under Title IV of ERISA would be incurred by the Companies and (B) all benefits accrued to the day prior to the Closing Date (whether or not vested) would be fully funded in accordance with the actuarial assumptions and method utilized by such plan for valuation purposes. (e) With respect to each Pension Benefit Plan, Schedule 2.17(e) contains a list of all Pension Benefit Plans to which ERISA has applied which have been or are being terminated, or for which a termination is contemplated, and a description of the actions taken by the PBGC and the IRS with respect thereto. (f) The approximate aggregate of the amounts of contributions by the Companies to be paid or accrued under ERISA Plans for the current fiscal year is set forth on Schedule 2.17(f) (the "Aggregate ERISA Contributions"), and the Aggregate ERISA Contributions are not expected to exceed the total amount set forth on Schedule 2.17(f). To the extent required in accordance with Company Accounting Principles, the Company Balance Sheets reflect in the aggregate an accrual of all amounts of employer contributions accrued but unpaid by the Companies under the ERISA Plans as of the date of the Company Balance Sheet. (g) With respect to any Multiemployer Plan (1) the Companies have not, since their formation, made or suffered a "complete withdrawal" or "partial withdrawal" as such terms are respectively defined in Sections 4203 and 4205 of ERISA; (2) there is no withdrawal liability of the Companies under any Multiemployer Plan, computed as if a "complete withdrawal" by the Companies had occurred under each such Plan as of December 31, 1995; and (3) the Companies have not received notice to the effect that any Multiemployer Plan is either in reorganization (as defined in Section 4241 of ERISA) or insolvent (as defined in Section 4245 of ERISA). (h) With respect to the Welfare Benefit Plans: (i) There are no liabilities of the Companies under Welfare Benefit Plans with respect to any condition which relates to a claim filed on or before the Closing Date. (ii) No claims for benefits are in dispute or litigation. -24- 2.18. OTHER BENEFIT AND COMPENSATION PLANS OR ARRANGEMENTS (a) Set forth on Schedule 2.18(a) hereto is a true and complete list of: (i) each employee stock purchase, employee stock option, employee stock ownership, deferred compensation, performance, bonus, incentive, vacation pay, holiday pay, insurance, severance, retirement, excess benefit or other plan, trust or arrangement which is not an ERISA Plan whether written or oral, which the Companies maintain or are required to make contributions to; (ii) each other agreement, arrangement, commitment and understanding of any kind which require payments that exceed $50,000 in any 12-month period, whether written or oral, with any current or former officer, director or consultant of the Companies pursuant to which payments may be required to be made at any time following the date hereof (including, without limitation, any employment, deferred compensation, severance, supplemental pension, termination or consulting agreement or arrangement); and (iii) each employee of the Companies whose aggregate compensation for the fiscal year ended December 31, 1996 exceeded $50,000. True and complete copies of all of the written plans, arrangements and agreements referred to on Schedule 2.18(a) ("Compensation Commitments") have been provided to UAG together with, where prepared by or for the Companies, any valuation, actuarial or accountant's opinion or other financial reports with respect to each Compensation Commitment for the last three years. An accurate and complete written summary has been provided to UAG with respect to any Compensation Commitment which is unwritten. (b) Each Compensation Commitment: (i) since its inception, has been operated in all material respects in accordance with its terms; (ii) is not currently under investigation, audit or review by the IRS or any other federal or state agency and (to the knowledge of the Companies or the Stockholders) no such action is contemplated or under consideration; (iii) has no liability for any federal, state, local or foreign Taxes; (iv) has no claims subject to dispute or litigation; (v) has met all applicable requirements, if any, of the Code; and -25- (vi) has operated since its inception in material compliance with the reporting and disclosure requirements imposed under ERISA and the Code. 2.19. TRANSACTIONS WITH INSIDERS Set forth on Schedule 2.19 hereto is a complete and accurate description of all material transactions between the Companies or any ERISA Plan, on the one hand, and any Insider, on the other hand, that have occurred since January 1, 1996. For purposes of this Agreement: the term "Insider" shall mean the Stockholders, any director or officer of the Companies, and any Affiliate, Associate or Relative of any of the foregoing persons; the term "Associate" used to indicate a relationship with any person means (A) any corporation, partnership, joint venture or other entity of which such person is an officer or partner or is, directly or indirectly, through one or more intermediaries, the beneficial owner of 30% or more of (1) any class or type of equity securities or other profits interest or (2) the combined voting power of interests ordinarily entitled to vote for management or otherwise, and (B) any trust or other estate in which such person has a substantial beneficial interest or as to which such person serves as trustee or in a similar fiduciary capacity; and a "Relative" of a person shall mean such person's spouse, such person's parents, sisters, brothers, children and the spouses of the foregoing, and any member of the immediate household of such person. 2.20. PROPRIETY OF PAST PAYMENTS No funds or assets of the Companies have been used for illegal purposes; no unrecorded funds or assets of the Companies have been established for any purpose; no accumulation or use of the Companies' corporate funds or assets has been made without being properly accounted for in the respective books and records of the Companies; all payments by or on behalf of the Companies have been duly and properly recorded and accounted for in their respective books and records; no false or artificial entry has been made in the books and records of the Companies for any reason; no payment has been made by or on behalf of the Companies with the understanding that any part of such payment is to be used for any purpose other than that described in the documents supporting such payment; and the Companies have not made, directly or indirectly, any illegal contributions to any political party or candidate, either domestic or foreign. Neither the IRS nor any other federal, state, local or foreign government agency or entity has initiated or threatened any investigation of any payment made by the Companies of, or alleged to be of, the type described in this Section 2.20. -26- 2.21. INTEREST IN COMPETITORS Except as set forth on Schedule 2.21, neither the Companies nor the Stockholders, nor any of their Affiliates, have any interest, either by way of contract or by way of investment (other than as holder of not more than 2% of the outstanding capital stock of a publicly traded Person, so long as such holder has no other connection or relationship with such Person) or otherwise, directly or indirectly, in any Person (other than the Companies) that is engaged in the retail sale of automobiles or light duty trucks. 2.22. BROKERS Neither the Companies, nor any director, officer or employee thereof, nor the Stockholders or any representative of the Stockholders, has employed any broker or finder or has incurred or will incur any broker's, finder's or similar fees, commissions or expenses, in each case in connection with the transactions contemplated by this Agreement or the Documents. 2.23. ACCOUNTS Schedule 2.23 hereof correctly identifies each bank account maintained by or on behalf or for the benefit of the Companies and the name of each person with any power or authority to act with respect thereto. 2.24. DISCLOSURE Neither the Companies nor the Stockholders have made any material misrepresentation to UAG relating to the Companies or the Shares or the Real Property or Improvements and neither the Companies nor the Stockholders have omitted to state to UAG any material fact relating to the Companies or the Shares or the Real Property or Improvements which is necessary in order to make the information given by or on behalf of the Companies or the Stockholders to UAG not misleading or which if disclosed would reasonably affect the decision of a person considering an acquisition of the Shares. To the knowledge of the Stockholders, no fact, event, condition or contingency exists or has occurred which has, or in the future can reasonably be expected to have, a Material Adverse Effect, which has not been disclosed in the Company Financial Statements or the Schedules to this Agreement. 2.25. WORKING CAPITAL On the Closing Date, the Net Worth of the Companies shall include adequate working capital for each of the Companies sufficient to continue operating in the normal course of business. -27- ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS Subject to the parties' agreement and acknowledgement that the Schedules referred to in this Article 3 are to be delivered by the Stockholders no later than twenty (20) Business Days after the Effective Date hereof, each Stockholder (with respect only to himself) hereby represents and warrants to UAG as follows: 3.1. OWNERSHIP OF SHARES; TITLE Each Stockholder is the owner of record and beneficially of the Shares as set forth on Schedule 3.1 hereof and has, and shall transfer to UAG at the Closing, good and marketable title to the Shares owned by him, free and clear of any and all security interests, pledge agreements, Liens, encumbrances, proxies and voting or other agreements except restrictions on transfer imposed by applicable federal and state securities laws. 3.2. AUTHORITY The Stockholders have all requisite power and authority and have full legal capacity and are competent to execute, deliver and perform this Agreement and the Documents to which they are a party and to consummate the transactions contemplated hereby and thereby (including the disposition of the Shares to UAG as contemplated by this Agreement). This Agreement has been duly executed and delivered by the Stockholders and constitutes, and the Documents to which each Stockholder is a party when executed and delivered by such Stockholder will constitute, a valid and binding obligation of such Stockholder, enforceable against him in accordance with its terms. The execution, delivery and performance of this Agreement and the Documents by the Stockholders and the consummation of the transactions contemplated hereby and thereby do not and will not: (i) (after notice or lapse of time or both) conflict with, result in a breach of any provision of, constitute a default under, result in the modification or cancellation of, or give rise to any right of termination or acceleration in respect of, any material contract, agreement, commitment, understanding, arrangement or restriction to which any of the Stockholders is a party or to which any of the Stockholders or any of their property is subject; (ii) violate or conflict with any Legal Requirements applicable to the Stockholders or any of Stockholders' businesses or properties; or -28- (iii) require any authorization, consent, order, permit or approval of, or notice to, or filing, registration or qualification with, any governmental, administrative or judicial authority, except in connection with or in compliance with the provisions of the H-S-R Act. 3.3. REAL PROPERTY AND IMPROVEMENTS The Real Property and Improvements owned by the Stockholders are owned in fee simple, free and clear of all Liens, claims and encumbrances, except those disclosed in Schedule 3.3, none of which currently or, to their knowledge, in the future will affect the use of the Real Property or the Improvements for the conduct of the respective businesses of the Companies as presently conducted. No assessments have been made against any portion of the Real Property which are unpaid (except ad valorem taxes for the current year that are not yet due and payable), whether or not they have become Liens. There are no disputes concerning the location of the lines and corners of the Real Property. No one has been granted any right to purchase or lease the Real Property or Improvements other than the existing leases in favor of the Companies, and pursuant to which the Stockholders shall acknowledge there are no defaults under any such leases and no liability of either of the Companies results from such leases. The Stockholders shall make available to UAG all surveys, title binders, title policies and copies of any exceptions to title in their possession or control. 3.4. INVESTMENT INTENT No Stockholder has a present plan, intention or arrangement to dispose of any of the UAG Common Stock received by him pursuant to the terms of this Agreement. 3.5. QUALIFICATION OF STOCKHOLDERS Each Stockholder (i) is an "accredited investor" within the meaning of Regulation D of the Securities Act, and is acquiring the UAG Common Stock to be issued pursuant to the terms of this Agreement for his own account and not with a view to, or for resale in connection with, any distribution thereof; (ii) understands and acknowledges that such UAG Common Stock has not been registered under the Securities Act or any state securities laws by reason of certain exemptions from the registration provisions thereof which depend upon, among other things, the bona fide nature of his investment intent as expressed herein; (iii) is able to bear the economic risk of investment in such UAG Common Stock and has such knowledge and experience in financial and business matters that he is capable of evaluating the risks and merits of such UAG Common Stock; and (iv) understands and acknowledges that such UAG Common Stock will be "restricted securities" as that term is defined in Rule 144 under the Securities Act and that the certificates representing such UAG Common Stock will bear a legend restricting transfer unless (A) -29- the transfer is exempt from the registration requirements under the Securities Act and any applicable state securities law and an opinion of counsel reasonably satisfactory to UAG that such transfer is exempt therefrom is delivered to UAG or (B) the transfer is made pursuant to an effective registration statement under the Securities Act and any applicable state securities law. ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF UAG Subject to the parties' agreement and acknowledgement that the Schedules referred to in this Article 4 are to be delivered by UAG no later than twenty (20) Business Days after the Effective Date hereof, UAG hereby represents and warrants to the Companies and the Stockholders as follows: 4.1. ORGANIZATION AND GOOD STANDING UAG is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the corporate power and authority to own, lease and operate the properties used in its business and to carry on its business as now being conducted. UAG is duly qualified to do business and is in good standing as a foreign corporation in each state and jurisdiction where qualification as a foreign corporation is required, except for such failures to be qualified and in good standing, if any, which when taken together with all other such failures of UAG and the UAG Subsidiaries (as defined below) would not, or could not reasonably be expected to, in the aggregate have a material adverse effect on UAG and the UAG Subsidiaries, taken as a whole. UAG has made available to the Stockholders complete and correct copies of its charter and bylaws, as amended and presently in effect. 4.2. SUBSIDIARIES Each of the UAG Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own, lease and operate the properties and assets used in its business and to carry on its business as now being conducted, and is duly qualified to do business and in good standing as a foreign corporation in each jurisdiction where qualification as a foreign corporation is required, except for such failures to be qualified and in good standing, if any, which when taken together with all other such failures of UAG and the UAG Subsidiaries would not, or could not reasonably be expected to, in the aggregate have a Material Adverse Effect on UAG and the UAG Subsidiaries, taken as a whole. All of the outstanding shares of capital stock of the UAG Subsidiaries have been validly authorized and issued, are fully paid and non-assessable, have not been issued in violation of any preemptive rights or of any federal or state securities law. "UAG Subsidiary" shall mean any corporation or other entity in which UAG, directly or indirectly, -30- owns beneficially securities representing 50% or more of (i) the aggregate equity or profit interests or (ii) the combined voting power of voting interests ordinarily entitled to vote for management or otherwise. 4.3. CAPITALIZATION The authorized stock of UAG and the number of shares of capital stock which are issued and outstanding are set forth on Schedule 4.3 hereto. The shares listed on Schedule 4.3 hereto constitute all the issued and outstanding shares of capital stock of UAG and have been validly authorized and issued, are fully paid and nonassessable, have not been issued in violation of any preemptive rights or of any federal or state securities law and no personal liability attaches to the ownership thereof. 4.4. SEC FILINGS UAG has heretofore made available to the Stockholders UAG's Registration Statement on Form S-1 as declared effective by the SEC on October 23, 1996 and UAG's Quarterly Report on Form 10-Q for the period ending September 30, 1996 (the "SEC Filings"). As of their respective dates, the SEC filings did not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. UAG shall provide to Mize and Arnold any Quarterly Reports or Annual Reports filed with the SEC between the date hereof and Closing, promptly after such reports are filed. 4.5. AUTHORITY; APPROVALS AND CONSENTS UAG has the corporate power and authority to enter into this Agreement and the Documents to which it is a party and to perform its obligations hereunder and thereunder. At the time of the Closing, the execution, delivery and performance of this Agreement and the Documents to which it is a party and the consummation of the transactions contemplated hereby and thereby will have been duly authorized and approved by the Board of Directors of UAG and no other corporate proceedings on the part of UAG will be necessary to authorize and approve this Agreement and the Documents and the transactions contemplated hereby and thereby. This Agreement has been, and on the Closing Date the Documents will be, duly executed and delivered by, and constitute a valid and binding obligation of, UAG, enforceable against UAG in accordance with their respective terms. Except as set forth on Schedule 4.5 hereto, the execution, delivery and performance by UAG of this Agreement and the Documents to which it is a party and the consummation of the transactions contemplated hereby and thereby do not and will not: (i) contravene any provisions of the Certificate of Incorporation or ByLaws of UAG; -31- (ii) (after notice or lapse of time or both) conflict with, result in a breach of any provision of, constitute a default under, result in the modification or cancellation of, or give rise to any right of termination or acceleration in respect of, any UAG Agreement (as defined below) or require any consent or waiver of any party to any UAG Agreement; (iii) result in the creation of any security interest upon, or any person obtaining any right to acquire, any properties, assets or rights of UAG; (iv) violate or conflict with any Legal Requirements applicable to UAG or its respective businesses or properties that would or could reasonably be expected to have a Material Adverse Effect on UAG and the UAG Subsidiaries, taken as a whole; or (v) require any authorization, consent, order, permit or approval of, or notice to, or filing, registration or qualification with, any governmental, administrative or judicial authority, except in connection with or in compliance with the provisions of the H-S-R Act. Except as set forth or referred to above, no authorization, consent, order, permit or approval of, or notice to, or filing, registration or qualification with, any governmental administrative or judicial authority is necessary to be obtained or made by UAG to enable UAG to continue to conduct its business and operations and use its properties after the Closing in a manner which is in all material respects consistent with that in which they are presently conducted. 4.6. FINANCIAL STATEMENTS Attached as Schedule 4.6 are true and complete copies of: (a) the consolidated balance sheet of UAG and its consolidated UAG Subsidiaries as of December 31 in each of the years 1994 and 1995, and the related consolidated statements of income, stockholders' equity and cash flows for the fiscal years ended on such dates, together with the notes thereto, in each case examined by and accompanied by the report of Coopers & Lybrand, independent certified public accountants; and (b) the unaudited consolidated balance sheet of UAG and its consolidated UAG Subsidiaries as of September 30, 1996 (the "UAG Balance Sheet"), and the unaudited consolidated statements of income, stockholders' equity and cash flows for the month periods ended on such dates, together with the notes thereto; -32- (all the foregoing financial statements, including the notes thereto, being referred to herein collectively as the "UAG Financial Statements"). The UAG Financial Statements are in accordance with the books and records of UAG and the UAG Subsidiaries, fairly present the consolidated financial position, results of operations, stockholders' equity and changes in financial position of UAG and the UAG Subsidiaries as of the dates and for the periods indicated, in each case in conformity with GAAP consistently applied (except as otherwise indicated in such statements) during such periods, and can be legitimately reconciled with the financial statements and the financial records maintained and the accounting methods applied by UAG and the UAG Subsidiaries for federal income tax purposes, and the unaudited financial statements included in the UAG Financial Statements indicate all adjustments, which consist of only normal recurring accruals, necessary for such fair presentations. The statements of income included in the UAG Financial Statements do not contain any items of special or nonrecurring income except as expressly specified therein, and the balance sheets included in the UAG Financial Statements do not reflect any write-up or revaluation increasing the book value of any assets. The books and accounts of UAG and the UAG Subsidiaries are complete and correct in all material respects and fairly reflect all of the transactions, items of income and expense and all assets and liabilities of the businesses of UAG and the UAG Subsidiaries consistent with prior practices of UAG and the UAG Subsidiaries. 4.7. TAXES UAG, each UAG Subsidiary and, for any period during all or part of which the tax liability of any other corporation was determined on a combined or consolidated basis with UAG or any UAG Subsidiary, any such other corporation, have filed timely all federal, state, local and foreign tax returns, reports and declarations required to be filed (or have obtained or timely applied for an extension with respect to such filing) correctly reflecting the Taxes and all other information required to be reported thereon and have paid, or made adequate provision for the payment of, all Taxes which are due pursuant to such returns or pursuant to any assessment received by UAG or any UAG Subsidiary or any such other corporation. In the ordinary course, UAG makes adequate provision on its books for the payment of all Taxes (including for the current fiscal period) owed by UAG and the UAG Subsidiaries. Neither UAG nor any UAG Subsidiary has been subject to a federal or state tax audit of any kind, and no adjustment has been proposed by the IRS with respect to any return for any subsequent year. UAG knows of no basis for an assertion of a deficiency for Taxes against UAG or any UAG Subsidiary. 4.8. DISCLOSURE Neither UAG nor any UAG Subsidiary has made any material misrepresentation to the Companies or the Stockholders -33- relating to this Agreement and neither UAG nor any UAG Subsidiary has omitted to state to the Companies or the Stockholders any material fact relating to this Agreement which is necessary in order to make the information given by or on behalf of UAG or any UAG Subsidiary to the Companies or the Stockholders or their representatives at or prior to Closing not misleading. To the knowledge of UAG, no fact, event, condition or contingency exists or has occurred which has, or in the future can reasonably be expected to have, a material adverse effect on UAG and the UAG Subsidiaries, taken as a whole, which has not been disclosed in the SEC Filings or the Schedules to this Agreement. 4.9. BROKERS Neither UAG nor any of their directors, officers or employees has employed any broker or finder or has incurred or will incur any broker's, finder's or similar fees, commissions or expenses, in each case in connection with the transactions contemplated by this Agreement. ARTICLE 5. COVENANTS AND ADDITIONAL AGREEMENTS 5.1. ACCESS; CONFIDENTIALITY Between the date that is two (2) Business Days after the Effective Date and the Closing Date, the Stockholders and the Companies will (i) provide to the officers and other authorized representatives of UAG full access, during normal business hours, to any and all premises, properties, files, books, records, documents, and other information of the Companies and will cause their officers to furnish to UAG and their authorized representatives any and all financial, technical and operating data and other information pertaining to the businesses and properties of the Companies, and (ii) make available for inspection and copying by UAG true and complete copies of any documents relating to the foregoing. UAG will hold in confidence (unless and to the extent compelled to disclose by judicial or administrative process or, in the opinion of its counsel, by other requirements of law) all Confidential Information (as defined below) and will not use the same to the detriment of the Companies or the Stockholders and will not disclose the same to any third party except in connection with obtaining financing and otherwise as may reasonably be necessary to carry out this Agreement and the transactions contemplated hereby. If this Agreement is terminated, UAG will promptly return to the Companies, all information furnished by the Companies and held by UAG, including all copies and summaries thereof. In connection with the foregoing, UAG shall coordinate with the Stockholders or their designees and, without the consent of the Stockholders, shall not have more than three (3) representatives at any of the Companies at any one time. As used herein, "Confidential Information" shall mean all information concerning the Companies obtained by UAG from the Companies in connection with the transactions -34- contemplated by this Agreement, except information (x) ascertainable or obtained from public information, (y) received from a third party not employed by or otherwise affiliated with the Companies or (z) which is or becomes known to the public, other than through a breach by UAG of this Agreement. The Stockholders will hold in confidence (unless and to the extent compelled to disclose by judicial or administrative process, or, in the opinion of their counsel, by other requirements of law) all UAG Confidential Information (as defined below) and will not disclose the same to any third party except as may reasonably be necessary to carry out this Agreement and the transactions contemplated hereby, including any due diligence review by or on behalf of the Stockholders. If this Agreement is terminated, the Stockholders will promptly return to UAG, upon the reasonable request of UAG, all UAG Confidential Information furnished by UAG and held by the Stockholders, including all copies and summaries thereof. As used herein, "UAG Confidential Information" shall mean all information concerning UAG obtained by the Stockholders in connection with the transactions contemplated by this Agreement, except information (x) ascertained or obtained from public information, (y) received from a third party not employed or otherwise affiliated with UAG or (z) which is or becomes known to the public, other than a breach by the Stockholders of this Agreement. 5.2. FURNISHING INFORMATION; ANNOUNCEMENTS The Stockholders and the Companies, on the one hand, and UAG, on the other hand, will, as soon as practicable after reasonable request therefor, furnish to the other all the information concerning the Stockholders and the Companies or UAG, respectively, required for inclusion in any statement or application made by UAG or the Companies to any governmental or regulatory body or in connection with obtaining any third party consent in connection with the transactions contemplated by this Agreement. Neither the Stockholders nor the Companies, on the one hand, nor UAG, on the other hand, or any representative thereof, shall issue any press releases or otherwise make any public statement with respect to the transactions contemplated hereby without the prior consent of the other, except as may be required by law (including Federal or state securities laws) as determined by such parties' counsel. UAG shall not file this agreement as an Exhibit to any SEC filing unless such filing is required to be filed by applicable law, as determined by UAG's counsel in its sole discretion. 5.3. ANTITRUST IMPROVEMENTS ACT COMPLIANCE UAG and the Stockholders and the Companies, as applicable, shall each file or cause to be filed with the Federal Trade Commission and the United States Department of Justice any notifications required to be filed by the respective "ultimate parent" entities under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "H-S-R Act"), and the rules -35- and regulations promulgated thereunder, with respect to the transactions contemplated herein. The parties shall use their best efforts to make such filings promptly, to respond to any requests for additional information made by either of such agencies, to cause the waiting periods under the H-S-R Act to terminate or expire at the earliest possible date and to resist vigorously, at their respective cost and expense (including, without limitation, the institution or defense of legal proceedings), any assertion that the transactions contemplated herein constitute a violation of the antitrust laws, all to the end of expediting consummation of the transactions contemplated herein; provided, however, that if UAG or the Stockholders shall determine after issuance of any preliminary injunction that continuing such resistance is not in its or their best interests, UAG or the Stockholders, as the case may be, may, by written notice to the other party, terminate this Agreement with the effect set forth in Section 8.2 hereof. 5.4. CERTAIN CHANGES AND CONDUCT OF BUSINESS (a) From and after the date of this Agreement and until the Closing Date, the Companies shall, and the Stockholders shall cause the Companies to, conduct their respective businesses solely in the ordinary course consistent with past practices and, without the prior written consent of UAG, neither the Stockholders nor the Companies will, except as required or permitted pursuant to the terms hereof, permit the Companies to: (i) make any material change in the conduct of their respective businesses and operations or enter into any transaction other than in the ordinary course of business consistent with past practices; (ii) make any change in their Articles of Incorporation or Bylaws, issue any additional shares of capital stock or equity securities or grant any option, warrant or right to acquire any capital stock or equity securities or issue any security convertible into or exchangeable for their capital stock or alter any term of any of their outstanding securities or make any change in their outstanding shares of capital stock or other ownership interests or its capitalization, whether by reason of a reclassification, recapitalization, stock split or combination, exchange or readjustment of shares, stock dividend or otherwise; (iii) (A) incur, assume or guarantee any indebtedness for borrowed money, issue any notes, bonds, debentures or other corporate securities or grant any option, warrant or right to purchase any thereof, except pursuant to transactions in the ordinary course of business consistent with past practices, (B) issue any securities convertible or exchangeable for debt securities of the Companies, or (C) issue any options or other rights to acquire from the -36- Companies, directly or indirectly, debt securities of the Companies or any security convertible into or exchangeable for such debt securities; (iv) make any sale, assignment, transfer, abandonment or other conveyance of any of their assets or any part thereof, except transactions pursuant to contracts set forth in Schedule 2.15 hereto and dispositions of inventory or of worn-out or obsolete equipment for fair or reasonable value in the ordinary course of business consistent with past practices; (v) subject any of their assets, or any part thereof, to any Lien or suffer such to be imposed other than such Liens as may arise in the ordinary course of business consistent with past practices by operation of law which will not have, or cannot reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; (vi) declare, set aside or pay any dividends or other distributions (whether in cash, stock, property or any combination thereof) in respect of any shares of their capital stock (other than distributions or other payments that do not reduce the Net Worth of the Companies below $5,000,000) or redeem, retire, purchase or otherwise acquire, directly or indirectly, any shares of its capital stock; (vii) acquire any assets, raw materials or properties, or enter into any other transaction, other than in the ordinary course of business consistent with past practices; (viii) enter into any new (or amend any existing) employee benefit plan, program or arrangement or any new (or amend any existing) employment, severance or consulting agreement, grant any general increase in the compensation of officers or employees (including any such increase pursuant to any bonus, pension, profit-sharing or other plan or commitment) or grant any increase in the compensation payable or to become payable to any employee, except in accordance with pre-existing contractual provisions or consistent with past practices; (ix) make or commit to make any individual material capital expenditure in excess of $60,000, or aggregate capital expenditures in excess of $150,000 (excepting rental vehicles); (x) pay, loan or advance any amount to, or sell, transfer or lease any properties or assets to, or enter into any agreement or arrangement with, any of their Affiliates except for transactions pursuant to contracts set forth on Schedule 2.15; -37- (xi) guarantee any indebtedness for borrowed money or any other obligation of any other person, other than in the ordinary course of business consistent with past practice; (xii) fail to keep in full force and effect insurance comparable in amount and scope to coverage maintained by the Companies (or on behalf of the Companies) on the date hereof; (xiii) make any loan, advance or capital contribution to or investment in any Person; (xiv) make any change in any method of accounting or accounting principle, method, estimate or practice except for any such change required by reason of a concurrent change in GAAP or write-down the value of any inventory or write-off as uncollectible any accounts receivable except in the ordinary course of business consistent with past practices; (xv) settle, release or forgive any claim or litigation or waive any material right above $25,000; (xvi) make, enter into, modify, amend in any material respect or terminate any material commitment, bid or expenditure, other than in the ordinary course of business consistent with past practice; (xvii) take any other action that would cause any of the representations and warranties made by the Companies in this Agreement not to remain true and correct; or (xviii) commit itself to do any of the foregoing. (b) From and after the date hereof and until the Closing Date, the Stockholders and the Companies will cause the Companies to use their reasonable best efforts to: (i) continue to maintain, in all material respects, their properties in accordance with present practices in a condition suitable for their current use; (ii) comply with all applicable Environmental Laws, and, in the event the Companies shall receive notice that there exists a violation of any Environmental Law with respect to their operations or any Real Property, promptly (and in any event within the time period permitted by the applicable governmental authority) remove or remedy such violation in accordance with all applicable Environmental Laws; provided, however, that any remediation or removal shall be subject to the prior approval of UAG; (iii) file, when due or required, federal, state, foreign and other tax returns and other reports required to -38- be filed and pay when due all taxes, assessments, fees and other charges lawfully levied or assessed against the Companies unless the validity thereof is contested in good faith and by appropriate proceedings diligently conducted; (iv) keep its books of account, records and files in the ordinary course and in accordance with existing practices; (v) preserve its business organization intact and continue to maintain existing business relationships with suppliers, customers and others with whom business relationships exist other than relationships that are, at the same time, not economically beneficial to it; and (vi) continue to conduct their business in the ordinary course consistent with past practices. 5.5. NO INTERCOMPANY PAYABLES OR RECEIVABLES Except as disclosed on Schedule 5.5 hereto, at the Closing there will be no intercompany payables or intercompany receivables due and/or owing between the Stockholders and their Affiliates (other than the Companies) on the one hand, and the Companies, on the other hand, other than those incurred in the ordinary course of business and disclosed in the Notes to the Company Financial Statements. 5.6. NEGOTIATIONS From the date hereof and until the termination of this Agreement pursuant to the provisions hereof, no Stockholder, nor the Companies, nor their officers, directors, employees, advisors, agents, representatives, Affiliates or anyone acting on behalf of the Stockholders, the Companies or such persons, shall, directly or indirectly, encourage, solicit, initiate or engage in discussions or negotiations with, or provide any information to, any person (other than UAG or its representatives) concerning any merger, sale of assets (other than in the ordinary course of business), purchase or sale of shares of capital stock or similar transaction involving the Companies or purchase or sale of any of the Real Property. 5.7. CONSENTS; COOPERATION Subject to the terms and conditions hereof, the Stockholders and the Companies and UAG will use their respective best efforts at their own expense: (i) to obtain prior to the earlier of the date required (if so required) or the Closing Date, all waivers, permits, licenses, approvals, authorizations, qualifications, orders and consents of all third parties and governmental authorities, and make all filings and registrations -39- with governmental authorities which are required on their respective parts for (A) the consummation of the transactions contemplated by this Agreement, (B) the ownership or leasing and operating after the Closing by the Companies of all their material properties and (C) the conduct after the Closing by the Companies of their respective businesses as conducted by them on the date hereof; (ii) to defend, consistent with applicable principles and requirements of law, any lawsuit or other legal proceedings, whether judicial or administrative, whether brought derivatively or on behalf of third persons (including governmental authorities) challenging this Agreement or the transactions contemplated hereby and thereby; and (iii) to furnish each other such information and assistance as may reasonably be requested in connection with the foregoing. 5.8. ADDITIONAL AGREEMENTS Subject to the terms and conditions of this Agreement, each of the parties hereto agrees to use its best efforts at its own expense to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement. The Stockholders agree to execute and deliver any and all documents that Ford Motor Company typically requires a selling dealer to execute in connection with the transfer of a dealership. In case at any time after the Closing any further action is necessary or desirable to carry out the purposes of this Agreement, the Stockholders and the proper officers of the Companies and UAG and its proper officers, as the case may be, shall take all such necessary action. 5.9. INTERIM FINANCIAL STATEMENTS Within thirty (30) days after the end of each calendar month after the date of this Agreement, the Companies will deliver to UAG the most recent monthly and year-to-date financial statements delivered to Ford Motor Company. All such financial statements shall fairly present the financial position, results of operations of the Companies as of the date or for the periods indicated. All financial statements delivered pursuant to this Section 5.9 shall be prepared on a basis consistent with the Company Factory Statements. 5.10. NOTIFICATION OF CERTAIN MATTERS Between the date hereof and the Closing, each party to this Agreement will give prompt notice in writing to the other party hereto of: (i) any information that indicates that any -40- representation and warranty of such party contained herein was not true and correct as of the date hereof or will not be true and correct as of the Closing, (ii) the occurrence of any event which could result in the failure to satisfy a condition specified in Article 6 or Article 7 hereof, as applicable, (iii) any notice or other communication from any third person alleging that the consent of such third person is or may be required in connection with the transactions contemplated by this Agreement, and (iv) in the case of the Stockholders and the Companies, any notice of, or other communication relating to, any default or event which, with notice or lapse of time or both, would become a default under any Company Agreement. The Stockholders shall (x) promptly advise UAG of any event that has, or could in the future have, a Material Adverse Effect (y) confer on a regular basis with one or more designated representatives of UAG to report operational matters and to report the general status of ongoing operations, and (z) notify UAG of any emergency or other change in the normal course of business or in the operation of the properties of the Companies and of any governmental complaints, investigations or hearings (or communications indicating that the same may be contemplated) or adjudicatory proceedings involving the Companies or any of their assets or operations, and will keep UAG fully informed of such events and permit UAG's representatives access to all materials prepared in connection therewith. The Stockholders shall give prompt notice to UAG of any notice or other communication from any third person asserting any right, title or interest in any of the Shares held by the Stockholders (including, without limitation, any threat to commence, or notice of the commencement of any action or other proceeding with respect to any of the Shares) or the occurrence of any other event of which any Stockholder has knowledge which could result in any failure to consummate the sale of the Shares as contemplated hereby. 5.11. ASSURANCE BY THE STOCKHOLDERS The Stockholders shall cause each of the Companies to comply with their respective covenants set forth in this Agreement. 5.12. SECTION 338(H)(10) ELECTION The Stockholders agree to join with UAG, if UAG so requests, in making a timely election to treat the purchase and sale of the Shares pursuant to this Agreement as a sale of all of the Companies' assets under Section 338(h)(10) of the Internal Revenue Code of 1986, as amended (the "Code"), as permitted pursuant to Section 1.338(h)(10)-1(a) of the Treasury Regulations promulgated thereunder. In the event of such an election, UAG agrees to promptly pay to the Stockholders the amount of any additional federal or state income tax (including any penalties and interest thereon) that is imposed on the Stockholders solely by reason of the making of such election. Thus, in the event that the federal and/or state income tax imposed on the -41- Stockholders by reason of the stock sale exceeds the income tax that would have been imposed if no such election had been made, UAG will be responsible for such excess, along with any penalties and interest thereon. The parties agree that, to the extent the payment required pursuant to this Section 5.12 relates to LIFO reserves, the amount of any payment to the Stockholders pursuant to this Section 5.12 shall be computed based on the LIFO reserve amounts as currently reflected in the Companies' tax returns and records without taking into account any adjustment to such LIFO reserve amounts upon audit of any taxable year up through the date of the Closing. UAG further agrees to "gross up" any payment to the Stockholder pursuant to this Section 5.12 to take into account that any such payment would itself be subject to income tax. 5.13. NON-INTERFERENCE After the Closing Date, the Stockholders and their Affiliates shall not interfere with or disrupt, or attempt to interfere with or disrupt, the relationship, contractual or otherwise, between the Company and any customer, client, supplier, manufacturer, distributor, consultant, independent contractor or employee of the Companies and agree not to solicit or hire any employee of the Companies unless such employee has already terminated his employment with the Companies. 5.14. INSURANCE UAG shall either keep in place existing insurance policies relating to workers' compensation, property damage and personal injury or, if UAG chooses to replace such policies, UAG shall indemnify the Stockholders for any Costs suffered by the Stockholders in connection with any workers' compensation, property damage or personal injury claims made after the Closing; provided, however, that such indemnification shall be limited to Costs, if any, that would have been covered by the Companies' insurance policies in effect (as of the Closing Date) had such policies remained in full force and effect. 5.15. PIGGYBACK REGISTRATION RIGHTS AGREEMENT UAG and the Stockholders shall enter into a piggyback registration rights agreement on terms mutually agreeable to the parties, which agreement shall include customary terms and which agreement shall be subject to any existing contractual rights of UAG. 5.16. REIMBURSEMENT BY UAG FOR TAX BENEFITS In the event that the parties do not make an election pursuant to Section 338(h)(10) of the Code pursuant to Section 5.12 hereof and any taxing authority (including, without limitation, the Internal Revenue Service or similar state revenue department) shall increase the taxable income of any of the -42- Companies in any taxable year up to the date of Closing, UAG shall pay to the Stockholder or Stockholders (including any prior stockholders of the Company) who pay the tax relating to such increase the lesser of (i) the Net Tax Benefit (as defined in the following sentence) and (ii) the additional tax (excluding any interest of penalties) paid by such Stockholder or Stockholders with respect to such additional taxable income as reduced (on a gross and not a present value basis) by any subsequent tax savings to such Stockholder or Stockholders caused by the recognition of such additional taxable income, including (without limitation) any amount of tax saved upon the sale of the Shares pursuant to this Agreement. For this purpose, "Net Tax Benefit" is defined as the present value (using a discount rate equal to UAG's average cost of capital at the time of calculation) of the tax savings to be realized, or which reasonably can be expected to be realized by UAG, as a result of the recognition by such Stockholder (determined on an individual Stockholder-by-Stockholder basis) of such additional taxable income. By way of example and not by way of limitation, if the 1992 taxable income of Wade Ford, Inc. were to be increased by $1,000,000 due to a change in its LIFO reserve amount, the Net Tax Benefit, assuming UAG's average cost of capital is 7% and the future tax benefit of the elimination of the LIFO reserve will be realized, or reasonably can be expected to be realized, ratably (on an annual basis) over approximately 7 years and assuming that UAG's combined federal and state income tax rate is 40% during the 7-year period that the tax benefit is to be realized, the Net Tax Benefit would be approximately $307,000. Any payment pursuant to this Section 5.16 shall be made to the Stockholder or Stockholders within sixty (60) days after written notice from such Stockholder certifying to UAG that the Stockholder has paid the taxes relating to the increased taxable income. The parties agree to cooperate in good faith to agree upon the assumptions, if any, required in order to calculate the amount of any payment to be made pursuant to this Section 5.16. ARTICLE 6. CONDITIONS TO THE OBLIGATIONS OF UAG TO EFFECT THE CLOSING The obligations of UAG required to be performed by them at the Closing shall be subject to the satisfaction, at or prior to the Closing, of each of the following conditions, each of which may be waived by UAG as provided herein except as otherwise required by applicable law: 6.1. REPRESENTATIONS AND WARRANTIES; AGREEMENTS; COVENANTS Each of the representations and warranties of the Companies and the Stockholders contained in this Agreement shall be true and correct in all material respects as of the date hereof and (having been deemed to have been made again at and as of the Closing) shall be true and correct in all material respects as of the Closings. Each of the obligations of the -43- Companies and the Stockholders required by this Agreement to be performed by them at or prior to the Closing shall have been duly performed and complied with in all material respects as of the Closing. At the Closing, UAG shall have received a certificate, dated the Closing Date and duly executed by the Stockholders, to the effect that the conditions set forth in the two preceding sentences have been satisfied. 6.2. AUTHORIZATION; CONSENTS (a) All corporate action necessary to authorize the execution, delivery and performance of this Agreement and the Documents, and the consummation of the transactions contemplated hereby and thereby shall have been duly and validly taken by the Companies. All filings required to be made under the H-S-R Act in connection with the transactions contemplated hereby shall have been made and all applicable waiting periods with respect to each such filing, including any extensions thereof, shall have expired or been terminated. (b) All notices to, and declarations, filings and registrations with, and consents, authorizations, approvals and waivers from, governmental and regulatory bodies and third persons (including, but not limited to, Ford Motor Company required to consummate the transactions contemplated hereby and all consents or waivers shall have been made or obtained. 6.3. OPINIONS OF THE COMPANIES' AND THE STOCKHOLDER' COUNSEL UAG shall have been furnished with the opinion of counsel for the Companies and the Stockholders, dated the Closing Date, in form and substance satisfactory to UAG and its counsel, which opinions shall have been rendered with respect to those matters generally contained in Sections 2.1, 2.2, 2.3, 2.4, 2.9, 3.1 and 3.2 hereof and which opinions shall be appropriately qualified. In rendering the foregoing opinion, such counsel may rely as to factual matters upon certificates or other documents furnished by officers and directors of the Companies and by government officials and upon such other documents and data as such counsel deem appropriate as a basis for their opinions. Such counsel may specify the state or states in which they are admitted to practice, that they are not admitted to the Bar in any other state or experts in the law of any other state and that such opinions are limited to Georgia, Tennessee and Federal laws, as the case may be. 6.4. ABSENCE OF LITIGATION No order, stay, injunction or decree of any court of competent jurisdiction in the Untied States shall be in effect (i) that prevents or delays the consummation of any of the transactions contemplated hereby or (ii) would impose any limitation on the ability of UAG effectively to exercise full rights of ownership of the Shares. No action, suit or proceeding -44- before any court or any governmental or regulatory entity shall be pending (or threatened by any governmental or regulatory entity), and no investigation by any governmental or regulatory entity shall have been commenced (and be pending), seeking to restrain or prohibit (or questioning the validity or legality of) the consummation of the transactions contemplated by this Agreement or seeking damages in connection therewith which UAG, in good faith and with the advice of counsel, believes makes it undesirable to proceed with the consummation of the transactions contemplated hereby. 6.5. NO MATERIAL ADVERSE EFFECT During the period from December 31, 1996 to the Closing Date, there shall not have been any Material Adverse Effect. 6.6. NET WORTH On the Closing Date, the Stockholders (at UAG's expense) shall deliver to UAG a balance sheet of the Companies dated as of the most recent practicable date preceding the Closing Date, prepared in accordance with the Accounting Principles (the "Estimated Closing Date Balance Sheets"). The Estimated Closing Date Balance Sheet shall show as of the date thereof, after taking into account the payment of any of the fees, costs and expenses by the Companies incurred in connection with this Agreement, a Net Worth not less than Five Million Dollars ($5,000,000). 6.7. COMPLETION OF DUE DILIGENCE UAG shall have completed their due diligence examination of the Companies, the Real Property and the Improvements and the results of such examination, including any Phase I or Phase II environmental audits of the Companies, shall be satisfactory to UAG. UAG will pay the costs for a Phase I environmental audit. If, after obtaining the results of the Phase I environmental audit, UAG determines that a Phase II environmental audit is required, then the expenses of performing the Phase II environmental audit shall be paid one-half by UAG and one-half by the Stockholders; provided, however, that the Stockholders may elect not to pay any costs of the Phase II audit but, if the Stockholders elect not to pay one-half of the costs of the Phase II audit and the results of the Phase II audit conclude that remediation is recommended, the Stockholders shall pay the entire costs of the Phase II audit. 6.8. NET INCOME Coopers & Lybrand shall have confirmed to UAG that the Pre-Tax Earnings of the Companies for the year ending December 31, 1996 is no less than Four Million Five Hundred Fifty Thousand Dollars ($4,550,000). -45- 6.9. LEASES The Companies and the Stockholders shall have entered into the Leases. 6.10. BOARD APPROVAL The Board of Directors of UAG shall have approved the consummation of all of the transactions contemplated by this Agreement provided, however, that this condition shall be deemed waived after April 30, 1997. 6.11. CERTIFICATES The Stockholders and the Companies shall have furnished UAG with a certificate, dated as of the Closing Date, executed by the Stockholders certifying to the fulfillment of the conditions set forth in Sections 6.5 and 6.6 hereof and shall have furnished UAG with such other certificates of its officers and others as UAG may reasonably request to evidence compliance with the conditions set forth in this Article 6. 6.12. LEGAL MATTERS All certificates, instruments, opinions and other documents required to be executed or delivered by or on behalf of the Stockholders and the Companies under the provisions of this Agreement, and all other actions and proceedings required to be taken by or on behalf of the Stockholders and the Companies in furtherance of the transactions contemplated hereby, shall be reasonably satisfactory in form and substance to counsel for UAG. 6.13. APPROVAL OF MANUFACTURERS AND DISTRIBUTORS The Stockholders and the Companies shall have obtained the consent, authorization and approval of Ford Motor Company for the transfer of the Companies to UAG on customary terms no less favorable than those currently granted by Ford Motor Company to other dealers. 6.14. NONDISTURBANCE AGREEMENTS/ESTOPPEL CERTIFICATES UAG shall have been provided with nondisturbance agreements and estoppel certificates in form and substance satisfactory to UAG with respect to the properties that are the subject of the Leases. 6.15. TITLE INSURANCE UAG shall have obtained title insurance (at its sole expense) on behalf of the Companies with respect to the leasehold estates arising out of the Leases in form and substance satisfactory to UAG. -46- 6.16. SCHEDULES The Companies and the Stockholders shall have delivered to UAG all Schedules referred to herein and such Schedules shall be acceptable in form and substance to UAG. UAG shall have fifteen (15) Business Days from receipt of the complete set of Schedules to reject the Schedules, or this condition shall be deemed satisfied; provided, however, that nothing in this Section shall be construed as limiting UAG's right to conduct due diligence pursuant to Section 6.7 hereof with respect to any and all matters disclosed on such Schedules. 6.17. LEASE TERMINATION AGREEMENTS/MEMORANDA OF LEASE The appropriate parties shall have executed lease termination agreements and memoranda of lease in form and substance satisfactory to UAG. 6.18. RESIGNATION OF THE COMPANIES DIRECTORS. Each of the persons who is a director of the Companies on the Closing Date shall have tendered to UAG in writing his or her resignation as such in form and substance satisfactory to UAG. 6.19. EMPLOYMENT OR CONSULTING AGREEMENTS. UAG and Mize shall have entered into an employment or consulting agreement on terms mutually agreeable to UAG and Mize. UAG and Arnold shall have entered into an employment or consulting agreement on terms mutually agreeable to UAG and Arnold. ARTICLE 7. CONDITIONS TO THE OBLIGATIONS OF THE STOCKHOLDERS TO EFFECT THE CLOSING The obligations of the Stockholders and the Companies required to be performed by them at the Closing shall be subject to the satisfaction, at or prior to the Closing, of each of the following conditions, each of which may be waived by the Companies and the Stockholders as provided herein except as otherwise required by applicable law: 7.1. REPRESENTATIONS AND WARRANTIES; AGREEMENTS Each of the representations and warranties of UAG contained in this Agreement shall be true and correct on the date made and shall be true and correct in all material respects as of the Closing. Each of the obligations of UAG required by this Agreement to be performed by them at or prior to the Closing shall have been duly performed and complied with in all material respects as of the Closing. At the Closing, the Stockholders shall have received a certificate, dated the Closing Date and -47- duly executed by UAG to the effect that the conditions set forth in the preceding two sentences have been satisfied. 7.2. AUTHORIZATION OF THE AGREEMENT, CONSENTS (a) All corporate action necessary to authorize the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby shall have been duly and validly taken by UAG. All filings required to be made under the H-S-R Act in connection with the transactions contemplated hereby shall have been made and all applicable waiting periods with respect to each such filing, including extensions thereof, shall have expired or been terminated. (b) All notices to, and declarations, filings and registrations with, and consents, authorizations, approvals and waivers from, governmental and regulatory bodies and third persons (including, but not limited to, Ford Motor Company) required to consummate the transactions contemplated hereby and all consents or waivers shall have been made or obtained. 7.3. OPINIONS OF UAG'S COUNSEL The Stockholders shall have been furnished with the opinion of Rogers & Hardin, counsel to UAG, dated the Closing Date, in form and substance reasonably satisfactory to the Stockholders and their counsel, which opinions, when taken together, shall have been rendered with respect to those matters generally contained in Sections 4.1, 4.2 and 4.3 hereof and which opinions shall be appropriately qualified. In rendering the foregoing opinions, such counsel may rely as to factual matters upon certificates or other documents furnished by officers and directors of UAG and by government officials, and upon such other documents and data as such counsel deems appropriate as a basis for its opinion. Such opinions may be limited to federal laws and the General Corporation Law of the State of Delaware. 7.4. ABSENCE OF LITIGATION No order, stay, judgment or decree shall have been issued by any court and be in effect restraining or prohibiting the consummation of the transactions contemplated hereby. 7.5. CERTIFICATES UAG shall have furnished the Stockholders with such certificates of its officers and others to evidence compliance with the conditions set forth in this Article 7 as may be reasonably requested by the Stockholders. 7.6. LEGAL MATTERS All certificates, instruments, opinions and other documents required to be executed or delivered by or on behalf of UAG -48- under the provisions of this Agreement, and all other actions and proceedings required to be taken by or on behalf of UAG in furtherance of the transactions contemplated hereby, shall be reasonably satisfactory in form and substance to counsel for the Stockholders. 7.7. EMPLOYMENT OR CONSULTING AGREEMENT. UAG and Mize shall have entered into an employment or consulting agreement on terms mutually agreeable to UAG and Mize. UAG and Arnold shall have entered into an employment or consulting agreement on terms mutually agreeable to UAG and Arnold. 7.8. SCHEDULES. The Stockholders shall have ten (10) Business Days from receipt of the complete set of Schedules to reject the Schedules, or this condition shall be deemed satisfied; provided, however, that nothing in this Section shall be construed as limiting the Stockholders' right to conduct due diligence pursuant to Section 7.9 hereof. 7.9. DUE DILIGENCE. The Stockholders shall have completed their financial due diligence of UAG and the results of such examination shall be satisfactory to the Stockholders. 7.10. APPROVAL OF MANUFACTURERS AND DISTRIBUTORS The Stockholders and the Companies shall have obtained the consent, authorization and approval of Ford Motor Company for the transfer of the Companies to UAG on customary terms no less favorable than those currently granted by Ford Motor Company to other dealers. ARTICLE 8. TERMINATION 8.1. TERMINATION This Agreement may be terminated at any time prior to Closing: (i) by mutual consent of UAG and the Stockholders; (ii) by either UAG or the Stockholders if the Closing shall not have taken place on or prior to May 15, 1997, or such later date as shall have been approved by UAG and the Stockholders (provided that the terminating party is not otherwise in material breach of its representations, warranties, covenants or agreements under this Agreement); -49- (iii) by UAG or the Stockholders if any court of competent jurisdiction in the United States or other United States governmental body shall have issued an order, decree or ruling or taken any other action restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement, and such order, decree, ruling or other action shall have become final and non-appealable; (iv) by UAG if any of the conditions specified in Article 6 hereof have not been met or waived by UAG at such time as such condition is no longer capable of satisfaction (provided UAG is not otherwise in material breach of its representations, warranties, covenants or agreements under this Agreement); (v) by the Stockholders if any of the conditions specified in Article 7 hereof have not been met or waived by the Stockholders at such time as such condition is no longer capable of satisfaction (provided that neither the Stockholders nor the Companies is otherwise in material breach of their or its representations, warranties covenants or agreements under this Agreement); or (vi) by either UAG or the Stockholders if there has been a material breach on the part of the other of any representation, warranty, covenant or agreement set forth in this Agreement, which breach has not been cured (if curable) within ten (10) Business Days following receipt by the breaching party of written notice of such breach. If UAG or the Stockholders shall terminate this Agreement pursuant to the provisions hereof, such termination shall be effected by notice to the other party specifying the provision hereof pursuant to which such termination is made. 8.2. EFFECT OF TERMINATION Except (i) for any breach of this Agreement prior to its termination, (ii) for the obligations contained in Sections 5.1 and 10.2 hereof and (iii) as set forth in Sections 9.1 and 9.2 hereof, upon the termination of this Agreement pursuant to Section 8.1 hereof, this Agreement shall forthwith become null and void and none of the parties hereto or any of their respective officers, directors, employees, agents, Affiliates, consultants, stockholders or principals shall have any liability or obligation hereunder or with respect hereto. In the event that this Agreement is terminated prior to Closing, no party shall be liable to any other party for any amount in excess of Fifty Thousand Dollars ($50,000). -50- ARTICLE 9. INDEMNIFICATION 9.1. INDEMNIFICATION BY THE STOCKHOLDERS (a) Notwithstanding the Closing or the delivery of the Shares, Mize and Dyer, jointly and severally, indemnify and agree to fully defend, save and hold harmless on an after-tax basis UAG, the Companies (after Closing), and any of their respective officers, directors, employees, stockholders, advisors, representatives, agents and Affiliates (each a "UAG Indemnified Party"), if a UAG Indemnified Party (including the Companies after the Closing Date) shall at any time or from time to time suffer any Costs (as defined in Section 9.6 below) arising, directly or indirectly, out of or resulting from, or shall pay or become obligated to pay any sum on account of, (i) any and all Mize Events of Breach (as defined below) or (ii) any Claim before or by any court, arbitrator, panel, agency or other governmental, administrative or judicial entity, which Claim involves, affects or relates to any assets, properties or operations of Mize Ford or the conduct of the business of Mize Ford prior to the Closing Date (a "Stockholder Third Party Claim"). As used herein, "Mize Event of Breach" shall be and mean any one or more of the following: (i) any untruth or inaccuracy in any representation of Mize, Dyer or Mize Ford or the breach of any warranty of Mize, Dyer or Mize Ford contained in this Agreement, including, without limitation, any misrepresentation in, or omission from, any statement, certificate, schedule, exhibit, annex or other document furnished pursuant to this Agreement by Mize, Dyer or Mize Ford (or any of their representatives) to UAG (or any representative of UAG) and any misrepresentation in or omission from any document furnished to UAG in connection with the Closing, and (ii) any failure of Mize, Dyer or Mize Ford duly to perform or observe any term, provision, covenant, agreement or condition on the part of Mize, Dyer or Mize Ford to be performed or observed. (b) Notwithstanding the Closing or the delivery of the Shares, Arnold and Billings, jointly and severally, indemnify and agree to fully defend, save and hold harmless on an after-tax basis, the UAG Indemnified Parties, if a UAG Indemnified Party (including the Companies after the Closing) shall at any time or from time to time suffer any Costs arising, directly or indirectly, out of or resulting from, or shall pay or become obligated to pay any sum on account of, (i) any and all Wade Events of Breach (as defined below) or (ii) any Claim before or by any court, arbitrator, panel, agency or other governmental, administrative or judicial entity, which Claim involves, affects or relates to any assets, properties or operations of Wade Ford or Buford Ford or the conduct of the business of Wade Ford or Buford Ford prior to the Closing Date (a "Wade Stockholder Third Party Claim"). As used herein, "Wade Event of Breach" shall be and mean any one or more of the following: (i) any untruth or inaccuracy in any representation of Arnold, Billings, Wade Ford -51- or Buford Ford or the breach of any warranty of Arnold, Billings, Wade Ford or Buford Ford contained in this Agreement, including, without limitation, any misrepresentation in, or omission from, any statement, certificate, schedule, exhibit, annex or other document furnished pursuant to this Agreement by Arnold, Billings, Wade Ford or Buford Ford (or any of their representatives) to UAG (or any representative of UAG) and any misrepresentation in or omission from any document furnished to UAG in connection with the Closing, and (ii) any failure of Arnold, Billings, Wade Ford or Buford Ford duly to perform or observe any term, provision, covenant, agreement or condition on the part of Arnold, Billings, Wade Ford and Buford Ford to be performed or observed. 9.2. INDEMNIFICATION BY UAG Notwithstanding the Closing, UAG indemnifies and agrees to fully defend, save and hold harmless on an after-tax basis the Stockholders, the Companies (prior to Closing), and any of their respective officers, directors, employees, stockholders, advisors, representatives, agents and Affiliates (each a "Stockholder Indemnified Party"), if a Stockholder Indemnified Party shall at any time or from time to time suffer any Costs arising, directly or indirectly, out of or resulting from, or shall pay or become obligated to pay any sum on account of, (i) any and all UAG Events of Breach (as defined below) or (ii) any Claim before or by any court, arbitrator, panel, agency or other governmental, administrative or judicial entity, which Claim involves, affects or relates to any assets, properties or operations of UAG or the conduct of the business of UAG prior to the Closing Date (a "UAG Third Party Claim"). As used herein, "UAG Event of Breach" shall be and mean any one or more of the following: (i) any untruth or inaccuracy in any representation of UAG or the breach of any warranty of UAG contained in this Agreement, including, without limitation, any misrepresentation in, or omission from, any statement, certificate, schedule, exhibit, annex or other document furnished pursuant to this Agreement by UAG (or any representative of UAG) to the Stockholders (or any representative of the Stockholder) and any misrepresentation in or omission from any document furnished to the Stockholders in connection with the Closing, and (ii) any failure of UAG duly to perform or observe any term, provision, covenant, agreement or condition on the part of UAG to be performed or observed. 9.3. PROCEDURES If (i) any Mize Event of Breach or Wade Event of Breach occurs or is alleged and a UAG Indemnified Party asserts that any of the Stockholders have become obligated to a UAG Indemnified Party pursuant to Section 9.1, or if any Mize Third Party Claim or Wade Third Party Claim is begun, made or instituted as a result of which the Stockholders may become obligated to a UAG Indemnified Party hereunder, or (ii) a UAG Event of Breach occurs or is alleged and a Stockholder Indemnified Party asserts that -52- UAG has become obligated to a Stockholder Indemnified Party pursuant to Section 9.2, or if any UAG Third Party Claim is begun, made or instituted as a result of which UAG may become obligated to a Stockholder Indemnified Party hereunder (for purposes of this Article 2, any UAG Indemnified Party and any Stockholder Indemnified Party is sometimes referred to as an "Indemnified Party" and UAG and the Stockholders are sometimes referred to as an "Indemnifying Party," and any UAG Third Party Claim and any Mize Third Party Claim and any Wade Third Party Claim is sometimes referred to as a "Third Party Claim," in each case as the context so requires), such Indemnified Party shall give written notice to the Indemnifying Party of its or his obligation to provide indemnification hereunder, provided that any failure to so notify the Indemnifying Party shall not relieve them from any liability that it or he may have to the Indemnified Party under this Article 9. If such notice relates to a Third Party Claim, each Indemnifying Party, jointly and severally, agrees to defend, contest or otherwise protect such Indemnified Party against any such Third Party Claim at his or its sole cost and expense. Such Indemnified Party shall have the right, but not the obligation, to participate at its own expense in the defense thereof by counsel of such Indemnified Party's choice and shall in any event cooperate with and assist the Indemnifying Party to the extent reasonably possible. If the Indemnifying Party fails timely to defend, contest or otherwise protect against such Third Party Claim, such Indemnified Party shall have the right to do so, including, without limitation, the right to make any compromise or settlement thereof, and such Indemnified Party shall be entitled to recover the entire Cost thereof from the Indemnifying Party, including, without limitation, attorneys' fees, disbursements and amounts paid (or of which such Indemnified Party has become obligated to pay) as the result of such Third Party Claim. Failure by the Indemnifying Party to notify such Indemnified Party of its or their election to defend any such Third Party Claim within fifteen (15) days after notice thereof shall have been given to the Indemnifying Party shall be deemed a waiver by the Indemnifying Party of its or their right to defend such Third Party Claim. If the Indemnifying Party assumes the defense of the particular Third Party Claim, the Indemnifying Party shall not, in the defense of such Third Party Claim, consent to entry of any judgment or enter into any settlement, except with the written consent of such Indemnified Party. In addition, the Indemnifying Party shall not enter into any settlement of any Third Party Claim except with the written consent of such Indemnified Party) which does not include as an unconditional term thereof the giving by the claimant or the plaintiff to such Indemnified Party a full release from all liability in respect of such Third Party Claim. Notwithstanding the foregoing, the Indemnifying Party shall not be entitled to control (but shall be entitled to participate at their own expense in the defense of), and the Indemnified Party shall be entitled to have sole control over, the defense or settlement of any Third Party Claim to the extent the Third Party Claim seeks an order, injunction or other equitable relief against the -53- Indemnified Party which, if successful, could materially interfere with the business, operations, assets, condition (financial or otherwise) or prospects of the Indemnified Party. 9.4. OFFSET In addition to and not in limitation of all rights of offset that an Indemnified Party may have under applicable law, the parties agree that, at any Indemnified Party's option, any or all amounts owing to such Indemnified Party under this Article 9 or any other provision of this Agreement (excluding any employment or consulting agreements and the Leases), may be recovered by the Indemnified Party by an offset against any or all amounts due to such other parties pursuant to this Agreement. 9.5. REMEDIES The rights of an Indemnified Party under this Article 9 are in addition to such other equitable rights and remedies which such Indemnified Party may have under this Agreement, applicable law or otherwise. 9.6. DEFINITIONS For purposes of this Article 9 "Costs" shall mean all liabilities, losses, costs, damages (not including consequential damages), expenses, claims, attorneys' fees, experts' fees, consultants' fees, and disbursements of any kind or of any nature whatsoever. For purposes of application of the indemnity provisions of this Article 9, the amount of any Cost arising from the breach of any representation, warranty, covenant or agreement shall be the entire amount of any Cost suffered, paid or required to be paid by the respective Indemnified Party as a result of such breach. 9.7. LIMITATION ON INDEMNIFICATION. (a) Indemnification by the Stockholders. (i) UAG Indemnified Party shall be entitled to indemnification in connection with a Mize Event of Breach only if the aggregate Costs incurred or sustained by all UAG Indemnified Parties in connection with all Mize Events of Breach exceed the applicable Basket; provided, however, that notwithstanding the preceding limitation, a UAG Indemnified Party shall be entitled to indemnification for all Costs incurred or sustained by such UAG Indemnified Party as a result of any untruth or inaccuracy in, or breach of, a representation, warranty or covenant (or failure to perform or observe any term, agreement or condition) contained in Article 1 or Sections 2.3, 2.4(a), 2.4(b)(i), 3.1 and 10.2 hereof or arising out of an act of fraud by Mize, Dyer, or Mize Ford. -54- (ii) A UAG Indemnified Party shall be entitled to indemnification in connection with a Wade Event of Breach only if the aggregate Costs incurred or sustained by all UAG Indemnified Parties in connection with all Wade Events of Breach exceed the applicable Basket; provided, however, that notwithstanding the preceding limitation, a UAG Indemnified Party shall be entitled to indemnification for all Costs incurred or sustained by such UAG Indemnified Party as a result of any untruth or inaccuracy in, or breach of, a representation, warranty or covenant (or failure to perform or observe any term, agreement or condition) contained in Article 1 or Sections 2.3, 2.4(a), 2.4(b)(i), 3.1 and 10.2 hereof or arising out of an act of fraud by Arnold, Billings, Wade Ford or Buford Ford. (iii) The aggregate Costs for which the Stockholders shall be obligated to indemnify the UAG Indemnified Parties shall not exceed the applicable Cap in the case of Costs incurred or sustained by all UAG Indemnified Parties in connection with a Mize Event of Breach or a Wade Event of Breach; provided, however, that a UAG Indemnified Party shall be entitled to indemnification for all Costs incurred or sustained by such UAG Indemnified Party as a result of any untruth or inaccuracy in, or breach of, a representation, warranty or covenant (or failure to perform or observe any term, agreement or condition) contained in Article 1 or Sections 2.3, 2.4(a), 2.4(b)(i), 2.8, 2.11, and 3.1 hereof or arising out of an act of fraud by the Stockholders. (iv) The "Basket" shall mean in the aggregate Two Hundred Fifty Thousand Dollars ($250,000) and the "Cap" shall mean in the aggregate Seven Million Five Hundred Thousand Dollars ($7,500,000). In each instance where either the Basket or the Cap is applied, the Basket or the Cap, as the case may be, shall be allocated to each Stockholder in accordance with the percentage interests set forth on Schedule 1.2(a). (b) Indemnification by UAG. (i) A Stockholder Indemnified Party shall be entitled to indemnification in connection with a UAG Event of Breach only if the aggregate Costs incurred or sustained by all Stockholder Indemnified Parties exceed Two Hundred Fifty Thousand Dollars ($250,000); provided, however, that, notwithstanding the preceding limitation, a Stockholder Indemnified Party shall be entitled to indemnification for all Costs incurred or sustained by such Stockholder Indemnified Party as a result of any untruth or inaccuracy in, or breach of, a representation, warranty or covenant (or failure to perform or observe any term, agreement or condition) contained in Article 1 or Section 4.3 or arising out of any act of fraud by UAG. -55- (ii) The aggregate Costs for which UAG shall be obligated to indemnify the Stockholder Indemnified Parties shall not exceed Seven Million Five Hundred Thousand Dollars ($7,500,000) in the case of Costs incurred or sustained by all Stockholder Indemnified Parties in connection with a UAG Event of Breach; provided, however, that a Stockholder Indemnified Party shall be entitled to indemnification for all Costs incurred or sustained by such Stockholder Indemnified Party as a result of any untruth or inaccuracy in, or breach of, a representation, warranty or covenant (or failure to perform or observe any term, agreement or condition) contained in Article 1 or Sections 4.3 hereof or arising out of an act of fraud by UAG. ARTICLE 10. MISCELLANEOUS 10.1. SURVIVAL OF PROVISIONS. (a) The respective representations, warranties, covenants and agreements of each of the parties to this Agreement (except covenants and agreements which are expressly required to be performed and are performed in full on or before the Closing Date) shall survive the Closing Date and the consummation of the transactions contemplated by this Agreement, subject to Section 10.1(b) below. (b) Each of the representations and warranties set forth in Article 2, Article 3 and Article 4 hereof and in any certificate delivered pursuant to Article 6 or Article 7 hereof shall survive, and not be affected in any respect by, the Closing for a period terminating on the later of (i) the date two years after the Closing Date, and (ii) with respect to any claim asserted with respect to any breach of such representation or warranty pursuant to Section 9.3 hereof before the expiration of such representation or warranty, on the date such claim is finally liquidated or otherwise resolved, except with respect to the representations and warranties in Sections 2.8 and 2.11 hereof, which shall survive the Closing Date for a period terminating on the later of (y) the date five years after the Closing Date and (z) with respect to any claim asserted with respect to any breach of such representations or warranties pursuant to Section 9.3 hereof before the expiration of such representations or warranties, on the date such claim is finally liquidated or otherwise resolved. Notwithstanding the above, the representations and warranties in Section 2.3 and 3.1 hereof and any breach of a representation or warranty arising out of an act of fraud shall not be limited by the provisions hereof. 10.2. FEES AND EXPENSES Except as otherwise expressly provided in this Agreement, all legal and other fees, costs and expenses incurred in connection with this Agreement and the transactions contemplated -56- hereby through the Closing Date shall be paid by the party incurring such fees, costs or expenses; provided, however, that if the Closing does not occur and Section 5.6 hereof is breached, then the Stockholders or the Companies shall pay to UAG, within five (5) Business Days after receipt of a request therefor, an amount equal to all of the legal and other fees, costs and expenses incurred by UAG in connection with this Agreement and the transactions contemplated hereby. Notwithstanding the above, UAG agrees to pay $30,000 of the fees, costs and expenses incurred by the Stockholders in connection with the transaction contemplated herein. 10.3. HEADINGS The section headings herein are for convenience of reference only, do not constitute part of this Agreement and shall not be deemed to limit or otherwise affect any of the provisions hereof. 10.4. NOTICES All notices or other communications required or permitted hereunder shall be given in writing and shall be deemed sufficient if delivered by hand, recognized overnight delivery service for next business day delivery or facsimile transmission (with original to follow by mail) or mailed by registered or certified mail, postage prepaid (return receipt requested), as follows: If to the Companies before the Closing Date: Marshal Mize Ford, Inc. 5348 Highway 153 Chattanooga, Tennessee 37421 Attn: Marshal D. Mize with a copy to: Wade Ford, Inc. 3860 South Cobb Drive Smyrna, Georgia 30080 Attn: Alan K. Arnold If to the Companies after the Closing Date (in addition to the foregoing addresses): United Auto Group, Inc. 375 Park Avenue New York, New York 10022 Attn: George G. Lowrance Executive Vice President -57- with a copy to: Rogers & Hardin 2700 International Tower 229 Peachtree Street, N.E. Atlanta, Georgia 30303 Attn: Michael Rosenzweig, Esq. If to the Stockholders: Marshal D. Mize 8 Brooks Edge Lane Signal Mountain, Tennessee 37377 Lewis J. Dyer 501 Shady Cove Chattanooga, Tennessee 37421 Alan K. Arnold 4415 Pemberton Cove Alpharetta, Georgia 30202 Gary Billings c/o Wade Ford Buford 4525 Nelson Brogden Blvd. Buford, Georgia 30518 with a copy to: Michael V. Elsberry Lowndes, Drosdick, Doster Kantor & Reed, P.A. 215 North Eola Drive Orlando, Florida 32802 and a copy to: Fred H. Moore Spears, Moore, Rebman, & Williams Eighth Floor Blue Cross Building P.O. Box 1749 Chattanooga, Tennessee 37401-1749 If to UAG: United Auto Group, Inc. 375 Park Avenue New York, New York 10022 Attn: George G. Lowrance Executive Vice President -58- with a copy to: Rogers & Hardin 2700 International Tower 229 Peachtree Street, N.E. Atlanta, Georgia 30303 Attn: Michael Rosenzweig, Esq. or such other address as shall be furnished in writing by such party, and any such notice or communication shall be effective and be deemed to have been given as of the date so delivered or three (3) days after the date so mailed; provided, however, that any notice or communication changing any of the addresses set forth above shall be effective and deemed given only upon its receipt. 10.5. ASSIGNMENT This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto (and with respect to the Stockholders, the personal representatives and heirs of the Stockholders) and their respective successors and permitted assigns, and the provisions of Article 9 hereof shall inure to the benefit of the Indemnified Parties referred to therein; provided, however, that neither this Agreement nor any of the rights, interests, or obligations hereunder may be assigned by any of the parties hereto without the prior written consent of the other parties. Notwithstanding the foregoing, UAG shall have the unrestricted right to assign this Agreement and to delegate all or any part of its obligations hereunder to any Affiliate of UAG, but in such event UAG shall remain fully liable for the performance of all of such obligations in the manner prescribed in this Agreement. 10.6. ENTIRE AGREEMENT This Agreement (including the Schedules hereto) and the Documents embody the entire agreement and understanding of the parties with respect to the transactions contemplated hereby and supersede all prior written or oral commitments, arrangements or understandings between the parties with respect thereto and all prior drafts of this Agreement. There are no restrictions, agreements, promises, warranties, covenants or undertakings with respect to the transactions contemplated hereby other than those expressly set forth herein or in the Documents. 10.7. WAIVER AND AMENDMENTS Each of the Stockholders and the Companies as one party, and UAG as the other party may by written notice to the other parties (i) extend the time for the performance of any of the obligations or other actions of the other parties, (ii) waive any inaccuracies in the representations or warranties of the other parties contained in this Agreement, (iii) waive compliance -59- with any of the covenants of the other parties contained in this Agreement, (iv) waive performance of any of the obligations of the other parties created under this Agreement, or (v) waive fulfillment of any of the conditions to its own obligations under this Agreement. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach, whether or not similar. This Agreement may be amended, modified or supplemented only by a written instrument executed by the parties hereto. 10.8. COUNTERPARTS This Agreement may be executed by facsimile signature(s) and in any number of counterparts, all of which shall be considered one and the same agreement and each of which shall be deemed an original. 10.9. ACCOUNTING TERMS All accounting terms used herein which are not expressly defined or modified in this Agreement shall have the respective meanings given to them in accordance with Company Accounting Principles. 10.10. SEVERABILITY If any one or more of the provisions of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected thereby. To the extent permitted by applicable law, each party waives any provision of law which renders any provision of this Agreement invalid, illegal or unenforceable in any respect. 10.11. GOVERNING LAW This Agreement shall be governed by and construed in accordance the laws of the State of Delaware without giving effect to any choice or conflict of law provision or rule that would cause the laws of any other jurisdiction to apply. 10.12. TIME IS OF THE ESSENCE Time is of the essence for purposes of this Agreement. -60- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. UNITED AUTO GROUP, INC. By: /s/ George G. Lowrance ------------------------------- George G. Lowrance Executive Vice President [Remainder of page left intentionally blank] [Signatures continued on following] MARSHAL MIZE FORD, INC. By: /s/ Marshal D. Mize ------------------------------- Its: President WADE FORD, INC. By: /s/ Alan K. Arnold ------------------------------- Its: President WADE FORD BUFORD, INC. D/B/A WADE FORD MERCURY By: /s/ Alan K. Arnold ------------------------------- Its: President /s/ Marshal D. Mize ---------------------------------- MARSHAL D. MIZE /s/ Alan K. Arnold ---------------------------------- ALAN K. ARNOLD /s/ Lewis J. Dyer ---------------------------------- LEWIS J. DYER /s/ Gary R. Billings ---------------------------------- GARY R. BILLINGS MARSHAL MIZE FORD, INC. By: ---------------------------------- Its: WADE FORD, INC. By: ---------------------------------- Its: WADE FORD BUFORD, INC. D/B/A WADE FORD MERCURY By: ---------------------------------- Its: ---------------------------------- MARSHAL D. MIZE ---------------------------------- ALAN K. ARNOLD ---------------------------------- LEWIS J. DYER ---------------------------------- GARY R. BILLINGS EX-10.21.1 12 STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT DATED: FEBRUARY 7, 1997 AMONG UNITED AUTO GROUP, INC. UAG NEVADA, INC., GARY HANNA NISSAN, INC., THE GARY W. HANNA FAMILY TRUST RESTATED DECEMBER 18, 1990 AND GARY W. HANNA TABLE OF CONTENTS Page ---- PURCHASE AND SALE OF SHARES................................................. 2 CERTAIN DEFINITIONS......................................................... 2 PURCHASE AND SALE OF THE SHARES............................................. 3 NET WORTH ADJUSTMENT........................................................ 5 STOCK PRICE ADJUSTMENT...................................................... 7 REPRESENTATIONS AND WARRANTIES.............................................. 8 ORGANIZATION AND GOOD STANDING.............................................. 8 SUBSIDIARIES................................................................ 8 CAPITALIZATION.............................................................. 8 AUTHORITY; APPROVALS AND CONSENTS........................................... 9 FINANCIAL STATEMENTS........................................................10 ABSENCE OF UNDISCLOSED LIABILITIES..........................................11 ABSENCE OF MATERIAL ADVERSE EFFECT; CONDUCT OF BUSINESS.....................11 TAXES.......................................................................13 LEGAL MATTERS...............................................................14 PROPERTY....................................................................14 ENVIRONMENTAL MATTERS.......................................................15 INVENTORIES.................................................................18 ACCOUNTS RECEIVABLE.........................................................18 INSURANCE...................................................................19 CONTRACTS; ETC..............................................................19 LABOR RELATIONS.............................................................20 EMPLOYEE BENEFIT PLANS......................................................21 OTHER BENEFIT AND COMPENSATION PLANS OR ARRANGEMENTS........................23 TRANSACTIONS WITH INSIDERS..................................................24 PROPRIETY OF PAST PAYMENTS..................................................25 INTEREST IN COMPETITORS.....................................................25 BROKERS.....................................................................26 ACCOUNTS....................................................................26 DISCLOSURE..................................................................26 NET WORTH...................................................................26 REPRESENTATIONS AND WARRANTIES..............................................26 OWNERSHIP OF SHARES; TITLE..................................................26 AUTHORITY...................................................................27 REAL PROPERTY AND IMPROVEMENTS..............................................27 INVESTMENT INTENT...........................................................28 QUALIFICATION OF STOCKHOLDER................................................28 REPRESENTATIONS AND WARRANTIES OF UAG.......................................29 ORGANIZATION AND GOOD STANDING..............................................29 SUBSIDIARIES................................................................29 CAPITALIZATION..............................................................29 SEC Filings.................................................................30 AUTHORITY; APPROVALS AND CONSENTS...........................................30 FINANCIAL STATEMENTS........................................................31 TAXES.......................................................................32 DISCLOSURE..................................................................32 COVENANTS AND ADDITIONAL AGREEMENTS.........................................33 ACCESS; CONFIDENTIALITY.....................................................33 FURNISHING INFORMATION; ANNOUNCEMENTS.......................................34 ANTITRUST IMPROVEMENTS ACT COMPLIANCE.......................................34 CERTAIN CHANGES AND CONDUCT OF BUSINESS.....................................35 NO INTERCOMPANY PAYABLES OR RECEIVABLES.....................................38 NEGOTIATIONS................................................................38 CONSENTS; COOPERATION.......................................................38 ADDITIONAL AGREEMENTS.......................................................39 INTERIM FINANCIAL STATEMENTS................................................39 NOTIFICATION OF CERTAIN MATTERS.............................................39 ASSURANCE BY THE STOCKHOLDER AND MR. HANNA..................................40 SECTION 338(H)(10) ELECTION.................................................40 CONDITIONS TO THE OBLIGATIONS...............................................42 REPRESENTATIONS AND WARRANTIES; AGREEMENTS; COVENANTS.......................42 AUTHORIZATION; CONSENTS.....................................................43 OPINIONS OF THE COMPANY'S AND THE STOCKHOLDER'S COUNSEL.....................43 ABSENCE OF LITIGATION.......................................................43 NO MATERIAL ADVERSE EFFECT..................................................44 NET WORTH...................................................................44 COMPLETION OF DUE DILIGENCE.................................................44 NET INCOME..................................................................45 LEASE.......................................................................45 BOARD APPROVAL..............................................................45 CERTIFICATES................................................................45 LEGAL MATTERS...............................................................45 APPROVAL OF MANUFACTURERS AND DISTRIBUTORS..................................45 ENVIRONMENTAL LAWS..........................................................45 NONDISTURBANCE AGREEMENT....................................................45 TITLE INSURANCE.............................................................46 SCHEDULES...................................................................46 LEASE TERMINATION AGREEMENT/MEMORANDUM OF LEASE.............................46 CONDITIONS TO THE OBLIGATIONS OF............................................46 REPRESENTATIONS AND WARRANTIES; AGREEMENTS..................................46 AUTHORIZATION OF THE AGREEMENT, CONSENTS....................................47 OPINIONS OF UAG'S AND SUB'S COUNSEL.........................................48 ABSENCE OF LITIGATION.......................................................48 CERTIFICATES................................................................48 LEGAL MATTERS...............................................................48 SCHEDULES...................................................................49 TERMINATION.................................................................49 TERMINATION.................................................................49 EFFECT OF TERMINATION.......................................................50 INDEMNIFICATION.............................................................50 INDEMNIFICATION BY THE STOCKHOLDER..........................................50 INDEMNIFICATION BY UAG AND SUB..............................................51 PROCEDURES..................................................................51 OFFSET......................................................................52 REMEDIES....................................................................53 DEFINITIONS.................................................................53 MISCELLANEOUS...............................................................53 SURVIVAL OF PROVISIONS......................................................53 FEES AND EXPENSES...........................................................53 HEADINGS....................................................................54 NOTICES.....................................................................54 ASSIGNMENT..................................................................55 ENTIRE AGREEMENT............................................................55 WAIVER AND AMENDMENTS.......................................................56 COUNTERPARTS................................................................56 ACCOUNTING TERMS............................................................56 SCHEDULES...................................................................56 SEVERABILITY................................................................56 REMEDIES....................................................................57 GOVERNING LAW...............................................................57 TIME IS OF THE ESSENCE......................................................57 STOCK PURCHASE AGREEMENT This STOCK PURCHASE AGREEMENT, dated February __, 1997, is by and among United Auto Group, Inc., a Delaware corporation ("UAG"), UAG Nevada, Inc., a Delaware corporation ("UAG Nevada" or "Sub"), Gary Hanna Nissan, Inc., a Nevada corporation (the "Company"), The Gary W. Hanna Family Trust Restated December 18, 1990 (the "Stockholder") and Gary W. Hanna, an individual resident of the state of Nevada ("Mr. Hanna"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, UAG Nevada is a wholly-owned subsidiary of UAG; WHEREAS, the Company operates a franchise automobile dealership and related businesses in Las Vegas, Nevada; WHEREAS, the Stockholder owns all of the issued and outstanding shares of the capital stock of the Company (the "Shares"); WHEREAS, UAG Nevada desires to purchase all of the Shares from the Stockholder, and the Stockholder desires to sell the Shares to UAG Nevada (in each case upon the terms and subject to the conditions set forth in this Agreement), such that immediately after giving effect to such purchase and sale, UAG Nevada will own one hundred percent (100%) of the issued and outstanding shares of the capital stock of the Company, on a fully diluted basis; NOW, THEREFORE, in consideration of the mutual terms, conditions and other agreements set forth herein, the parties hereto hereby agree as follows: 1 PURCHASE AND SALE OF SHARES .1 CERTAIN DEFINITIONS. As used in this Agreement, the following terms shall have the following meanings: (a) "Affiliate" of a specified Person shall mean a Person that directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, the Person specified, and in the case of a specified Person who is a natural person, his or her spouse, issue, parents, estate and any trust entirely for the benefit of his or her spouse and/or issue. (b) "Business Day" shall mean any day excluding Saturday, Sunday and any day which is a legal holiday under Federal law. (c) "Closing Date" shall have the meaning ascribed to it in Section 1.2(b). (d) "GAAP" shall mean generally accepted accounting principles which are in effect in the United States on the Closing Date. (e) "Knowledge" shall mean, with respect to the Stockholders, that the Stockholder knows, or in the exercise of reasonable diligence, would or should have known of the particular matter referred to and, with respect to UAG, that the President of UAG knows or, in the exercise of reasonable diligence, would or should have known of the particular matter referred to. (f) "Lease" shall have the meaning ascribed to it in Section 1.2(c)(iii). (g) "Liens" shall mean any mortgages, pledges, title defects or objections, liens, claims, security interests, prior assignments, conditional and installment sale agreements, encumbrances or charges of any kind. (h) "Material Adverse Effect" shall mean any change in, or effect on, the Company (including the business thereof) which is, or might be, materially adverse to the business, operations, assets, condition (financial or otherwise) or prospects of the Company. (i) "Person" shall mean and include an individual, corporation, partnership, limited liability company, joint venture, association, trust, any other incorporated or unincorporated organization or entity and a governmental entity or any department or agency thereto. 2 (j) "Pre-Tax Earnings" shall mean net earnings (or losses), before taxes, computed in accordance with GAAP. (k) "UAG Common Stock" shall mean the shares of common stock, par value $.0001 per share of UAG. (l) "UAG Market Value" shall mean the arithmetic average of the daily closing price per share of UAG Common Stock, rounded to four decimal places, as reported on the New York Stock Exchange Composite Tape for each of the twenty (20) consecutive trading days ending (and including) the trading day that occurs one trading day prior to the date on which the UAG Market Value is to be determined. .2 PURCHASE AND SALE OF THE SHARES. (a) Purchase and Sale. Upon the terms and subject to the conditions set forth in this Agreement, the Stockholder shall sell to Sub, and Sub shall purchase from the Stockholder, the Shares for an aggregate purchase price (the "Purchase Price") equal to (i) Seven Million Dollars ($7,000,000) (the "Base Price"), which Base Price is subject to adjustment after Closing as provided in Sections 1.3 below; and (ii) shares of UAG Common Stock (the "UAG Shares") having an aggregate UAG Market Value on the Closing Date equal to Five Million Five Hundred Thousand Dollars ($5,500,000). At the Closing referred to in Section 1.2(b) hereof: (i) the Stockholder shall sell, assign, transfer and deliver to Sub the Shares representing 100% of the issued and outstanding capital stock of the Company and deliver the certificates representing such Shares accompanied by stock powers duly executed in blank; and (ii) Sub shall accept and purchase the Shares from the Stockholder and in payment therefor shall (A) deliver to the Stockholder immediately available funds in an aggregate amount equal to the Base Price by wire transfer to an account designated in writing by the Stockholder or by certified funds; and (B) deliver to the Stockholder the certificates representing the UAG Shares. (b) Closing. Subject to the conditions set forth in this Agreement, the purchase and sale of the Shares pursuant to this Agreement (the "Closing") shall take place as soon as practicable following the date on which all conditions to the obligations of the parties hereunder (other than those requiring an exchange of certificates, opinions or other documents, or the taking of other action, at the Closing) have been satisfied or waived, but no later than April 30, 1997. The date on which the Closing occurs is herein referred to as the "Closing Date". (c) Deliveries at the Closing. Subject to the conditions set forth in this Agreement, at the Closing: 3 (i) the Stockholder shall deliver to Sub certificates representing the Shares bearing the restrictive legend customarily placed on securities that have not been registered under applicable federal and state securities laws and accompanied by stock powers as required by Section 1.2(a)(i) hereof, and any other documents that are necessary to transfer to Sub good title to all the Shares, and (B) all opinions, certificates and other instruments and documents required to be delivered by the Company, the Stockholder or Mr. Hanna at or prior to the Closing or otherwise required in connection herewith; (ii) the Sub shall (A) pay to the Stockholder funds and deliver the certificates representing the UAG Shares as required by Section 1.2(a)(ii) hereof; and (B) deliver to the Stockholder all opinions, certificates and other instruments and documents required to be delivered by UAG or Sub at or prior to the Closing or otherwise required in connection herewith; and (iii) the Company and the Stockholder shall enter into a lease for the real property used in the business of the Company in a form mutually acceptable to the parties (the "Lease"). The Lease shall be for a twenty (20) year term commencing on the Closing Date. The initial annual lease rate shall be the lease rate paid by the Company for the year ending December 31, 1996 (unless such lease rate exceeds the fair market rate in which case the initial lease rate shall be the fair market rate for the year ending December 31, 1996)("Base Rate"), payable monthly, and (x) on the fifth anniversary of the Closing Date (the "Fifth Anniversary") shall increase to an amount equal to the Base Rate plus an amount equal to a percentage of the Base Rate, which percentage shall be the percentage increase in the Consumer Price Index published from time to time by the United States Department of Labor ("CPI") between the Closing Date and the Fifth Anniversary (such increased lease rate hereinafter the "Increased Rate"), and (y) on the tenth anniversary of the Closing Date (the "Tenth Anniversary") shall increase to an amount equal to the Increased Rate plus an amount equal to a percentage of the Increased Rate, which percentage shall be the percentage increase in the CPI between the Fifth Anniversary and the Tenth Anniversary (such increased lease rate being referred to as the "Second Increased Rate"), and (z) on the fifteenth anniversary of the Closing Date (the "Fifteenth Anniversary") shall increase to an amount equal to the Second Increased Rate plus an amount equal to a percentage of the Second Increased Rate, which percentage shall be the percentage increase in the CPI between the Tenth Anniversary and the Fifteenth Anniversary (such increased lease rate being referred to as the "Third Increased Rate"). The lease shall provide the Company with the option to extend the lease term for an additional five-year period (the "First Option") commencing on the twentieth 4 anniversary of the Closing Date ("Twentieth Anniversary") at a rate equal to the Third Increased Rate plus a percentage of the Third Increased Rate, which percentage shall be the percentage increase in the CPI between the Fifteenth Anniversary and the Twentieth Anniversary (such increased lease rate being referred to as the "Fourth Increased Rate"). The lease shall further provide that, in the event the Company exercises the First Option, the Company shall have the option to extend the lease term for an additional five-year period commencing with the twenty-fifth anniversary of the Closing Date ("Twenty-Fifth Anniversary") at a rate equal to the Fourth Increased Rate plus a percentage of the Fourth Increased Rate, which percentage shall be the percentage increase in the CPI between the Twentieth Anniversary and the Twenty-Fifth Anniversary. 3. NET WORTH ADJUSTMENT. (a) On the Closing Date, or as soon as practicable after the Closing Date, the Stockholder shall deliver to UAG a balance sheet of the Company dated as of the Closing Date (such balance sheet so delivered is referred to herein as the "Closing Date Balance Sheet"). The Closing Date Balance Sheet shall be prepared in good faith on the same basis and in accordance with the accounting principles, methods and practices used in preparing the Company Financial Statements (as defined in Section 2.5 hereof) (such accounting principles, methods and practices and such procedures, are referred to herein as the "Accounting Principles"). In connection with the preparation of the Closing Date Balance Sheet, the Stockholder and the Company shall permit the Reviewer (as defined below) and other representatives of UAG to conduct a physical inventory at each location where inventory is held by the Company. (b) Within sixty (60) days after delivery of the Closing Date Balance Sheet, (i) Coopers & Lybrand or such other accounting firm (the "Reviewer") as may be selected by UAG shall audit or otherwise review the Closing Date Balance Sheet in such manner as UAG and the Reviewer deem appropriate, and (ii) UAG shall deliver such reviewed balance sheet (the "Reviewed Balance Sheet"), together with the Reviewer's report thereon, to the Stockholder. The Reviewed Balance Sheet (i) shall be prepared on the same basis and in accordance with the Accounting Principles and (ii) shall include a schedule showing the computation of the Final Net Worth (as defined in Section 1.3(g)(i) hereof), computed in accordance with the definition of Net Worth set forth in Section 1.3(g)(ii) hereof. UAG and the Reviewer shall have the opportunity to consult with the Stockholder, the Company and each of the accountants and other representatives of the Stockholder and the Company and to examine the work papers, schedules and other documents prepared by the Stockholder, the Company and each of such accountants and other representatives during the preparation of the Closing Date Balance Sheet. The Stockholder and the Stockholder's independent public accountants 5 shall have the opportunity to consult with the Reviewer and to examine the work papers, schedules and other documents prepared by the Reviewer during the preparation of the Reviewed Balance Sheet. (c) The Stockholder shall have a period of forty-five (45) days after delivery of the Reviewed Balance Sheet to present in writing to UAG all objections the Stockholder may have to any of the matters set forth or reflected therein, which objections shall be set forth in reasonable detail. If no objections are raised within such 45-day period, the Reviewed Balance Sheet shall be deemed accepted and approved by the Stockholder and a supplemental closing (the "Supplemental Closing") shall take place within five (5) Business Days following the expiration of such 45-day period, or on such other date as may be mutually agreed upon in writing by UAG and the Stockholder. (d) If the Stockholder shall raise any objection within such 45-day period, UAG and the Stockholder shall attempt to resolve the matter or matters in dispute and, if resolved, the Supplemental Closing shall take place within five (5) Business Days following such resolution. (e) If such dispute cannot be resolved by UAG and the Stockholder within sixty (60) days after the delivery of the Reviewed Balance Sheet, then the specific matters in dispute shall be submitted to a firm of independent public accountants mutually acceptable to UAG and the Stockholder, which firm shall make a final and binding determination as to such matter or matters. Such accounting firm shall send its written determination to UAG and the Stockholder and the Supplemental Closing, if any, shall take place five (5) Business Days following the receipt of such determination by UAG and the Stockholder. The fees and expenses of the accounting firm referred to in this Section 1.3(e) shall be paid one-half by UAG and one-half by the Stockholder. (f) UAG and the Stockholder agree to cooperate with each other and each other's authorized representatives and with any accounting firm selected by UAG and the Stockholder pursuant to Section 1.3(e) hereof in order that any and all matters in dispute shall be resolved as soon as practicable. (g) (i) If the aggregate Net Worth as shown on the Reviewed Balance Sheet as finally determined through the operation of Sections 1.3 (a) through (e) hereof (such amount being referred to herein as the "Final Net Worth") shall be less than the Net Worth of the Company as set forth on the November 30 Balance Sheet (as defined in Section 2.5) (the "November 30 Net Worth") (the amount of any such deficiency being referred to herein as the "Net Worth Deficiency"), the Stockholder shall pay to UAG at the 6 Supplemental Closing, by wire transfer of immediately available funds to an account designated in writing by UAG at least two (2) Business Days prior to the date of the Supplemental Closing, an amount equal to the Net Worth Deficiency, together with interest on such amount from the Closing Date to the date of the Supplemental Closing at the prime rate or its equivalent (as announced from time to time by Citibank, N.A.). (i) "Net Worth" computed in connection with the Closing Date Balance Sheet, the November 30 Balance Sheet and the Reviewed Balance Sheet shall mean the amount by which the total assets (not including intangible assets) exceed the total liabilities reflected, in each case, on the balance sheets of Company comprising the Closing Date Balance Sheet, the November 30 Balance Sheet or the Reviewed Balance Sheet, as the case may be. .4 STOCK PRICE ADJUSTMENT. If, on the Adjustment Date (as defined below), the UAG Shares have an aggregate UAG Market Value of less than Six Million Dollars ($6,000,000) (the amount of any such deficiency being referred to herein as the "Stock Price Deficiency") then, no later than thirty (30) days after the Adjustment Date, UAG shall pay the Stockholder cash in an amount (the "Adjustment Amount") equal to the Stock Price Deficiency. For purposes of this Agreement, the Adjustment Date shall mean the date on which the Stockholder may sell the UAG Shares in reliance on Rule 144 promulgated by the Securities and Exchange Commission ("SEC") pursuant to the Securities Act of 1933, as amended ("Rule 144"). (Remainder of page intentionally left blank) 7 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY, THE STOCKHOLDER AND MR. HANNA Subject to the parties' agreement and acknowledgement that certain of the Schedules referred to in this Article 2 are to be delivered by the Company and the Stockholder no later than thirty (30) days from the date hereof, the Company, the Stockholder and Mr. Hanna hereby jointly and severally represent and warrant to UAG and Sub as follows: .1 ORGANIZATION AND GOOD STANDING. The Company is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has the corporate power and authority to own, lease and operate the properties used in its business and to carry on its business as now being conducted. The Company is duly qualified to do business and is in good standing as a foreign corporation in each state and jurisdiction where qualification as a foreign corporation is required, except for such failures to be qualified and in good standing, if any, which when taken together with all other such failures of the Company would not, or could not reasonably be expected to, in the aggregate have a Material Adverse Effect. Schedule 2.1(a) hereto lists (i) the states and other jurisdictions where the Company is so qualified and (ii) the assumed names under which the Company conducts business. Attached to Schedule 2.1(b) hereto are complete and correct copies of the Company's Articles of Incorporation and Bylaws (including comparable governing instruments with different names), as amended and presently in effect. .2 SUBSIDIARIES. The Company does not have any interest or investment in any Person. .3 CAPITALIZATION. The authorized stock of the Company and the number of shares of capital stock which are issued and outstanding are set forth on Schedule 2.3 hereto. The shares listed on Schedule 2.3 hereto constitute all the issued and outstanding shares of capital stock of the Company and have been validly authorized and issued, are fully paid and nonassessable, have not been issued in violation of any preemptive rights or of any federal or state securities law and no personal liability attaches to the ownership thereof. There is no security, option, warrant, right, call, subscription, agreement, commitment or understanding of any nature whatsoever, fixed or contingent, that directly or indirectly (i) calls for the issuance, sale, pledge or other disposition of any shares of capital stock of the Company or any securities convertible into, or other rights to acquire, any shares of capital stock of the Company, or (ii) obligates the 8 Company to grant, offer or enter into any of the foregoing, or (iii) relates to the voting or control of such capital stock, securities or rights, except as set forth on Schedule 2.3 hereto. The Company has not agreed to register any securities under the Securities Act of 1933, as amended (the "Securities Act"). .4 AUTHORITY; APPROVALS AND CONSENTS. D CONSENTS The Company has the corporate power and authority to enter into this Agreement and the documents referred to herein (the "Documents") to which it is a party and to perform its obligations hereunder and thereunder. The execution, delivery and performance of this Agreement and the Documents to which it is a party and the consummation of the transactions contemplated hereby and thereby have been duly authorized and approved by the Board of Directors of the Company and no other corporate proceedings on the part of the Company is necessary to authorize and approve this Agreement and the Documents and the transactions contemplated hereby and thereby. This Agreement has been, and on the Closing Date the Documents will be, duly executed and delivered by, and constitute valid and binding obligations of, the Company, enforceable against the Company in accordance with its terms. The execution, delivery and performance by the Company, the Stockholder and Mr. Hanna of this Agreement and the Documents to which it or they are a party and the consummation of the transactions contemplated hereby and thereby do not and will not: (i) contravene any provisions of the Articles of Incorporation or Bylaws (including any comparable governing instrument with a different name) of the Company; (ii) (after notice or lapse of time or both) conflict with, result in a breach of any provision of, constitute a default under, result in the modification or cancellation of, or give rise to any right of termination or acceleration in respect of, any Company Agreement (as defined in Section 2.15 hereof) or, except as set forth on Schedule 2.4 hereto, require any consent or waiver of any party to any Company Agreement; (iii) result in the creation of any security interest upon, or any Person obtaining any right to acquire, any properties, assets or rights of the Company (other than the rights of Sub to acquire the Shares pursuant to this Agreement); (iv) violate or conflict with any Legal Requirements (as defined in Section 2.9 hereof) applicable to the Company or its business or properties; or (v) require any authorization, consent, order, permit or approval of, or notice to, or filing, registration or qualification with, any governmental, administrative or 9 judicial authority, except in connection with or in compliance with the provisions of the H-S-R Act (as defined in Section 5.3 hereof). Except as set forth or referred to above, no authorization, consent, order, permit or approval of, or notice to, or filing, registration or qualification with, any governmental administrative or judicial authority is necessary to be obtained or made by the Company to enable the Company to continue to conduct its business and operations and use its properties after the Closing in a manner which is in all material respects consistent with that in which it is presently conducted. .5 FINANCIAL STATEMENTS. Except as otherwise indicated below, attached as Schedule 2.5 are true and complete copies of: (i) (A) the balance sheet of the Company as of December 31, 1995, and the related consolidated statement of income, stockholders' equity and cash flow for the fiscal year ended December 31, 1995, together with the notes thereto and (B) the balance sheet of the Company as of December 31, 1994, and the related consolidated statement of income, stockholders' equity and cash flow for the fiscal year ended December 31, 1994, together with the notes thereto; (ii) the balance sheet of the Company as of December 31, 1996 (the "December 31 Balance Sheet") and the statement of income, stockholders' equity and cash flow for the month periods ended on such date, together with the notes thereto; (iii) the balance sheet of the Company as of November 30, 1996 (the "November 30 Balance Sheet"); and (iv) the most recent monthly and year-to-date financial statements provided to Nissan (the "Company Factory Statement"); (all the foregoing financial statements, including the notes thereto, being referred to herein collectively as the "Company Financial Statements"). The Company Financial Statements are consistent with and in accordance with the books and records of the Company, fairly present the financial position, results of operations, stockholders' equity and changes in financial position of the Company as of the dates and for the periods indicated, in the case of the financial statements referred to in clauses (i), (ii) and (iii) above in conformity with GAAP consistently applied (except as set forth on Schedule 2.5(b) hereto) during such periods, and can be legitimately reconciled with the financial statements and the financial records maintained and the accounting methods applied by the Company for 10 federal income tax purposes, and the unaudited financial statements included in the Company Financial Statements indicate all adjustments, which consist of only normal recurring accruals, necessary for such fair presentations. The statements of income included in the Company Financial Statements do not contain any items of special or nonrecurring income except as expressly specified therein, and the balance sheets included in the Company Financial Statements do not reflect any write-up or revaluation increasing the book value of any assets. The books and accounts of the Company are complete and correct in all material respects and fairly reflect all of the transactions, items of income and expense and all assets and liabilities of the businesses of the Company. .6 ABSENCE OF UNDISCLOSED LIABILITIES. The Company does not have any liability of any nature whatsoever (whether known or unknown, due or to become due, accrued, absolute, contingent or otherwise), including, without limitation, any unfunded obligation under employee benefit plans or arrangements as described in Section 2.17 and 2.18 hereof or liabilities for Taxes (as defined in Section 2.8 hereof), except for (i) liabilities reflected or reserved against on the most recent Company Financial Statements, (ii) current liabilities incurred in the ordinary course of business and consistent with past practice after the date of the November 30 Balance Sheet which, individually and in the aggregate, do not have, and cannot reasonably be expected to have, a Material Adverse Effect, and (iii) liabilities disclosed on Schedule 2.6 hereto. The Company is not a party to any Company Agreement, or subject to any charter or bylaw provision, any other corporate limitation or any Legal Requirement, which has, or can reasonably be expected to have, a Material Adverse Effect. .7 ABSENCE OF MATERIAL ADVERSE EFFECT; CONDUCT OF BUSINESS. (a) Since December 31, 1995, the Company has operated in the ordinary course of business consistent with past practice, except as set forth on Schedule 2.7(a) hereto, and there has not been: (i) any material adverse change in the assets, properties, business, operations, prospects, net income or financial condition of the Company, and no factor, event, condition, circumstance or prospective development exists which threatens or may threaten to have a Material Adverse Effect; (ii) any material loss, damage, destruction or other casualty to the property or other assets of the Company, whether or not covered by insurance; (iii) any change in any method of accounting or accounting practice of the Company; or 11 (iv) any loss of the employment, services or benefits of any key employee of the Company. (b) Since December 31, 1995, except as set forth in Schedule 2.7(b) hereto, the Company has not: (i) incurred any material obligation or liability (whether absolute, accrued, contingent or otherwise), except in the ordinary course of business consistent with past practice; (ii) failed to discharge or satisfy any lien or pay or satisfy any obligation or liability (whether absolute, accrued, contingent or otherwise), other than liabilities being contested in good faith and for which adequate reserves have been provided; (iii) mortgaged, pledged or subjected to any lien any of its property or other assets, except for mechanics liens and liens for taxes not yet due and payable; (iv) sold or transferred any assets or cancelled any debts or claims or waived any rights, except in the ordinary course of business consistent with past practice; (v) defaulted on any material obligation; (vi) entered into any material transaction, except in the ordinary course of business consistent with past practice; (vii) written down the value of any inventory or written off as uncollectible any accounts receivable or any portion thereof not reflected in the Company Financial Statements; (viii) granted any increase in the compensation or benefits of employees other than increases in accordance with past practice not exceeding 10% or entered into any employment or severance agreement or arrangement with any of them; (ix) made any individual capital expenditure in excess of $75,000, or aggregate capital expenditures in excess of $200,000, or additions to property, plant and equipment other than ordinary repairs and maintenance; (x) discontinued any franchise or the sale of any products or product line or program; (xi) incurred any obligation or liability for the payment of severance benefits; or 12 (xii) entered into any agreement or made any commitment to do any of the foregoing. .8 TAXES. The Company has made a valid election pursuant to Section 1362(a) of the Internal Revenue Code of 1986, as amended (the "Code"), to be an "S corporation" within the meaning of Section 1361(a)(1) of the Code and has continued to qualify as such for all taxable years since December 31, 1986 and will continue to so qualify through the Closing Date. The Company and, for any period during all or part of which the tax liability of any other corporation was determined on a combined or consolidated basis with the Company any such other corporation, has filed timely all federal, state, local and foreign tax returns, reports and declarations required to be filed (or have obtained or timely applied for an extension with respect to such filing) correctly reflecting the Taxes (as defined below) and all other information required to be reported thereon and have paid, or made adequate provision for the payment of, all Taxes which are due pursuant to such returns or pursuant to any assessment received by the Company or any such other corporation. As used herein, "Taxes" shall mean all taxes, fees, levies or other assessments, including but not limited to income, excise, property, sales, franchise, withholding, social security and unemployment taxes imposed by the United States, any state, county, local or foreign government, or any subdivision or agency thereof or taxing authority therein, and any interest, penalties or additions to tax relating to such taxes, charges, fees, levies or other assessments. Copies of all tax returns for the fiscal years ended since December 31, 1991 have been furnished or made available to UAG or its representatives and such copies are accurate and complete as of the date hereof. The Company has also furnished to UAG correct and complete copies of all notices and correspondence sent or received since December 31, 1991 by the Company to or from any federal, state or local tax authorities. The Company has adequately reserved for the payment of all Taxes with respect to periods ended on, prior to or through the Closing Date for which tax returns have not yet been filed. In the ordinary course, the Company makes adequate provision on its books for the payment of all Taxes (including for the current fiscal period) owed by the Company. Except to the extent reserves therefor are reflected on the Closing Date Balance Sheet, the Company is not liable, or will not become liable, for any Taxes for any period ending on, prior to or through the Closing Date. Except as set forth on Schedule 2.8 hereto, the Company has not been subject to a federal or state tax audit of any kind, and no adjustment has been proposed by the Internal Revenue Service ("IRS") with respect to any return for any subsequent year. With respect to the audits referred to on Schedule 2.8 hereto, no such audit has resulted in an adjustment in excess of $50,000. Neither the Company nor the Stockholder knows of any basis for an assertion of a deficiency for Taxes 13 against the Company. The Stockholder will cooperate, and will cause its Affiliates to cooperate, with the Company in the filing of any returns and in any audit or refund claim proceedings involving Taxes for which the Company may be liable or with respect to which the Company may be entitled to a refund. .9 LEGAL MATTERS. (a) Except as set forth on Schedule 2.9(a) hereto, (i) there is no claim, action, suit, litigation, investigation, inquiry, review or proceeding (collectively, "Claims") pending against, or, to the knowledge of the Company or the Stockholder, threatened against or affecting, the Company, any ERISA Plan (as defined in Section 2.17(a) hereof) or any of its properties or rights before or by any court, arbitrator, panel, agency or other governmental, administrative or judicial entity, domestic or foreign, nor is any basis known to the Stockholder or the Company for any such Claims, and (ii) the Company is not subject to any judgment, decree, writ, injunction, ruling or order (collectively, "Judgments") of any governmental, administrative or judicial authority, domestic or foreign. Schedule 2.9(a) hereto identifies each Claim and Judgment disclosed thereon which is fully covered by an insurance policy. (b) The business of the Company is being conducted in compliance with all laws, ordinances, codes, rules, regulations, standards, judgments and other requirements of all governmental, administrative or judicial entities (collectively, "Legal Requirements") applicable to the Company or its business or properties. The Company holds, and is in compliance with, all franchises, licenses, permits, registrations, certificates, consents, approvals or authorizations (collectively, "Permits") required by all applicable Legal Requirements. A list of all such permits is set forth on Schedule 2.9(b) hereof. (c) The Company owns or holds all Permits material to the conduct of its business. No event has occurred and is continuing which permits, or after notice or lapse of time or both would permit, any modification or termination of any Permit. .10 PROPERTY. The properties and assets, real and personal, owned by or leased to the Company are adequate for the conduct of the business of the Company as presently conducted. Set forth on Schedule 2.10(a) hereto is a list of all interests in real property owned by or leased to the Company (including all real property owned or leased by the Stockholder, directly or indirectly) and used in the business of the Company and of all options or other contracts to acquire any such interest (collectively, the "Real Property"). With respect to any leased Real Property there are no defaults by either parties under and no state of facts exist which with the giving of notice or the passage of time, or both, would constitute a default under such 14 leases and true and correct copies of such leases are attached as Schedule 2.10(b). All improvements to the Real Property ("Improvements") and all machinery, equipment and other tangible property owned or used by or leased to the Company are in good operating condition and in good repair and are fit for the particular purposes for which they are used by the Company, subject only to ordinary wear and tear. Such tangible properties and all Improvements owned or leased by the Company conform in all material respects with all applicable laws, ordinances, rules and regulations and other Legal Requirements and such Improvements do not encroach in any respect on property of others. There are no latent defects with respect to the Improvements. The Real Property is currently zoned to permit the conduct of the business of the Company as presently conducted. Certificates of Occupancy have been issued with respect to the Improvements without special conditions or restrictions. All utilities servicing the Real Property and the Improvements are provided by publicly-dedicated utility lines and are located within public rights-of-way and do not cross or encumber any private land. No notice of any pending, threatened or contemplated action by any governmental authority or agency having the power of eminent domain has been given to the Company or the Stockholder with respect to the Real Property. .11 ENVIRONMENTAL MATTERS. (a) Except as set forth on Schedule 2.11(a) hereto, (i) to the knowledge of the Stockholder and the Company, the Company, the Real Property, the Improvements and any property formerly owned, occupied or leased by the Company are in full compliance with all Environmental Laws (as defined below), (ii) the Company has obtained all Environmental Permits (as defined below), (iii) such Environmental Permits are in full force and effect, and (iv) the Company is in compliance with all terms and conditions of such Environmental Permits. The Stockholder and the Company did not engage in any activity or conduct, or cause or permit any condition, that would not be in compliance with the Environmental Laws or Environmental Permits. As used herein, "Environmental Laws" shall mean all applicable requirements of environmental, public or employee health and safety, public or community right-to-know, ecological or natural resource laws or regulations or controls, including all applicable requirements imposed by any law (including without limitation common law), rule, order, or regulations of any federal, state, or local executive, legislative, judicial, regulatory, or administrative agency, board, or authority, or any applicable private agreement (such as covenants, conditions and restrictions), which relate to, (i) noise, (ii) pollution or protection of the air, surface water, groundwater, or soil, (iii) solid, gaseous, or liquid waste generation, treatment, storage, disposal or transportation, (iv) exposure to Hazardous Materials (as defined below), or (v) regulation of the manufacture, processing, distribution and commerce, use, or storage of Hazardous Materials. As used herein, "Environmental Permits" shall mean all permits, licenses, appro- 15 vals, authorizations, consents or registrations required under applicable Environmental Laws in connection with the ownership, use and/or operation of the Company's business or the Real Property or Improvements. As used in this Section 2.11, "Hazardous Materials" shall mean, collectively, (i) those substances included within the definitions of or identified as "hazardous chemicals," "hazardous waste," "hazardous substances," "hazardous materials," "toxic substances" or similar terms in or pursuant to, without limitation, the Comprehensive Environmental Response Compensation and Liability Act of 1980 (42 U.S.C. 9601 et seq.) ("CERCLA"), as amended by Superfund Amendments and Reauthorization Act of 1986 (Pub. L. 99-499, 100 State, 1613), the Resource Conservation and Recovery Act of 1976 (42 U.S.C. ss. 6901 et seq.) ("RCRA"), the Occupational Safety and Health Act of 1970 (29 U.S.C. ss. 651 et seq.) ("OSHA"), and the Hazardous Materials Transportation Act, 49 U.S.C. ss. 1801 et seq. ("HMTA"), and in the regulations promulgated pursuant to such laws, all as amended, (ii) those substances listed in the United States Department of Transportation Table (49 CFR 172.101 and amendments thereto) or by the Environmental Protection Agency (or any successor agency) as hazardous substances (40 CFR part 302 and amendments thereto), (iii) any material, waste or substance which is or contains (A) petroleum, including crude oil or any fraction thereof, natural gas, or synthetic gas usable for fuel or any mixture thereof, (B) asbestos, (C) polychlorinated biphenyls, (D) designated as a "hazardous substance" pursuant to Section 311 of the Clean Water Act, 33 U.S.C. ss. 1251 et seq. (33 U.S.C. ss. 1321) or listed pursuant to Section 307 of the Clean Water Act (33 U.S.C. ss. 1317), (E) flammable explosives, (F) radioactive materials, and (iv) such other substances, materials and wastes which are or become regulated or classified as hazardous, toxic or as "special wastes" under any Environmental Laws. (b) The Company and the Stockholder have not violated, done or suffered any act which could give rise to liability under, and, to the knowledge of the Stockholder and the Company, are not otherwise exposed to liability under, any Environmental Law. To the knowledge of the Stockholder and the Company, no event has occurred with respect to the Real Property, the Improvements or any property formerly owned, occupied or leased by the Company, which, with the passage of time or the giving of notice, or both, would constitute a violation of or non-compliance with any applicable Environmental Law. The Company has no contingent liability under any Environmental Law. There are no liens under any Environmental Law on the Real Property. (c) Except as set forth on Schedule 2.11(c) hereto, (i) neither the Company, the Real Property or any portion thereof, the Improvements or any property formerly owned, occupied or leased by the Company, nor, to the knowledge of the Company or the Stockholder, any property adjacent to the Real Property is being used or has been used (at such time as the 16 Stockholder owned or leased such property) for the treatment, generation, transportation, processing, handling, production or disposal of any Hazardous Materials or as a landfill or other waste disposal site and there has been no spill or release of any Hazardous Materials (provided, however, that certain petroleum products are stored and handled on the Real Property in the ordinary course of the Company's business in full compliance with all Environmental Laws including the existing regulations of the United States Environmental Protection Agency requiring spill protection, overfill protection and corrosion protection by December 22, 1998 and all secondary containment requirements with respect to above ground storage tanks), (ii) to the knowledge of the Stockholder and the Company none of the Real Property or portion thereof, the Improvements or any property formerly owned, occupied or leased by the Company has been subject to investigation by any governmental authority evaluating the need to investigate or undertake Remedial Action (as defined below) at such property, and (iii) to the knowledge of the Company and the Stockholder, none of the Real Property, the Improvements or any property formerly owned, occupied or leased by the Company or any site or location where the Company sent waste of any kind, is identified on the current or proposed (A) National Priorities List under 40 C.F.R. 300 Appendix B, (B) Comprehensive Environmental Response Compensation and Liability Inventory System list, or (C) any list arising from any statute analogous to CERCLA. As used herein, "Remedial Action" shall mean any action required to (i) clean up, remove or treat Hazardous Materials, (ii) prevent a release or threat of release of any Hazardous Material, (iii) perform pre-remedial studies, investigations or post-remedial monitoring and care, (iv) cure a violation of Environmental Law or (v) take corrective action under sections 3004(u), 3004(v) or 3008(h) of RCRA or analogous state law. (d) Except as set forth on Schedule 2.11(d) hereto, there have been and are no (i) aboveground or underground storage tanks, subsurface disposal systems, or wastes, drums or containers disposed of or buried on, in or under the ground or any surface waters, (ii) asbestos or asbestos containing materials or radon gas, (iii) polychlorinated biphenyls ("PCB") or PCB-containing equipment, including transformers, or (iv) wetlands (as defined under any Environmental Law) located within any portion of the Real Property, nor have any liens been placed upon any portion of the Real Property, the Improvements or any property formerly owned, occupied or leased by the Company in connection with any actual or alleged liability under any Environmental Law. (e) Except as set forth on Schedule 2.11(e) hereto, (i) there is no pending or threatened claim, litigation, or administrative proceeding, or known prior claim, litigation or administrative proceeding, arising under any Environmental Law involving the Company, the Real Property, the Improvements, any property formerly owned, leased or occupied by the Company, any offsite contamination affecting the business of the Company or 17 any operations conducted at the Real Property, (ii) there are no ongoing negotiations with or agreements with any governmental authority relating to any Remedial Action or other environmentally related claim, (iii) the Company has not submitted notice pursuant to Section 103 of CERCLA or analogous statute or notice under any other applicable Environmental Law reporting a release of a Hazardous Material into the environment, and (iv) the Company has not received any notice, claim, demand, suit or request for information from any governmental or private entity with respect to any liability or alleged liability under any Environmental Law, nor to the knowledge of the Stockholder and the Company, has any other entity whose liability therefor, in whole or in part, may be attributed to the Company, received such notice, claim, demand, suit or request for information. (f) The Stockholder and the Company have provided to UAG all environmental studies and reports obtained by them or known to them pertaining to the Real Property, the Improvements, the Company and any property formerly owned, occupied or leased by the Company, and have permitted (or will have permitted as of the Closing Date), the testing of the soil, groundwater, building components, tanks, containers and equipment on the Real Property, the Improvements, and any property formerly owned, occupied or leased by the Company, by UAG or UAG's agents or experts as they have or shall have deemed necessary or appropriate to confirm the condition of such properties. .12 INVENTORIES. The values at which inventories are carried on the Company Financial Statements reflect the normal inventory valuation policies of the Company, and, in the case of the December 31 Balance Sheet, such values are in conformity with GAAP consistently applied. All inventories reflected on the Company Financial Statements or arising since the date thereof are currently marketable and can reasonably be anticipated to be sold at normal mark-ups within ninety (90) days after the date hereof in the ordinary course of business, except for spare parts inventory which inventory is good and usable. .13 ACCOUNTS RECEIVABLE. All accounts receivable reflected on the December 31 Balance Sheet are, and all accounts receivable that will be or will have been reflected on the Closing Date Balance Sheet will be, good, and have been or will have been collected or are collectible, without resort to litigation, within 90 days of the Closing Date, and are subject to no defenses, setoffs or counterclaims other than normal cash discounts accrued in the ordinary course of business. 18 .14 INSURANCE. All material properties and assets of the Company which are of an insurable character are insured against loss or damage by fire and other risks to the extent and in the manner reasonable in light of the risks attendant to the businesses and activities in which the Company is engaged and customary for companies engaged in similar businesses or owning similar assets. Set forth on Schedule 2.14 hereto is a list and brief description (including the name of the insurer, the type of coverage provided, the amount of the annual premium for the current policy period, the amount of remaining coverage and deductibles and the coverage period) of all policies for such insurance and the Company have made or will make available to UAG true and complete copies of all such policies. All such policies are in full force and effect, are underwritten by financially secure insurers, are sufficient for all applicable requirements of law and will not in any way be affected by or terminated or lapsed by reason of the consummation of the transactions contemplated by this Agreement. No notice of cancellation or non-renewal with respect to, or disallowance of any claim under, any such policy has been received by the Company. .15 CONTRACTS; ETC. As used in this Agreement, the term "Company Agreements" shall mean all mortgages, indenture notes, agreements, contracts, leases, licenses, franchises, obligations, instruments or other commitments, arrangements or understandings of any kind, whether written or oral, binding or non-binding, (including all leases and other agreements referred to on Schedule 2.10 hereto) to which the Company is a party or by which the Company or any of its assets or properties (including the Real Property and the Improvements) may be bound or affected, including all amendments, modifications, extensions or renewals of any of the foregoing. Set forth on Schedule 2.15 hereto is a complete and accurate list of each Company Agreement which is material to the business, operations, assets, condition (financial or otherwise) or prospects of the Company. True and complete copies of all written Company Agreements referred to on Schedule 2.15 and Schedule 2.10 hereto, exclusive of individual vehicle titles and/or manufacturer's certificates of origin and floor plan liens applicable to individual vehicles, have been delivered or made available to UAG, and the Company has provided UAG with accurate and complete written summaries of all such Company Agreements which are unwritten. Except as set forth on Schedule 2.15, the Company is not, nor, to the knowledge of the Company and the Stockholder is, any other party thereto, in breach of or default under any Company Agreement, and no event has occurred which (after notice or lapse of time or both) would become a breach or default under, or would permit modification, cancellation, acceleration or termination of, any Company Agreement or result in the creation of any Lien upon, or any Person obtaining any right to acquire, any properties, assets or rights of the Company 19 in any such case where such breach, default or other event would have, or could reasonably be expected to have, a Material Adverse Effect. There are no material unresolved disputes involving the Company under any Company Agreement. .16 LABOR RELATIONS. (a) The Company has paid or made provision for the payment of all salaries and accrued wages and has complied in all material respects with all applicable laws, rules and regulations relating to the employment of labor, including those relating to wages, hours, collective bargaining and the payment and withholding of taxes, and have withheld and paid to the appropriate governmental authority, or are holding for payment not yet due to such authority, all amounts required by law or agreement to be withheld from the wages or salaries of their employees. (b) Except as set forth on Schedule 2.16(b) hereto, the Company is not a party to any (i) outstanding employment agreements or contracts with officers or employees that are not terminable at will, or that provide for payment of any bonus or commission, (ii) agreement, policy or practice that requires it to pay termination or severance pay to salaried, non-exempt or hourly employees (other than as required by law), (iii) collective bargaining agreement or other labor union contract applicable to persons employed by the Company, nor do the Stockholder or the Company know of any activities or proceedings of any labor union to organize any such employees. The Company has furnished to UAG complete and correct copies of all such agreements ("Employment and Labor Agreements"). The Company has not breached or otherwise failed to comply with any provisions of any Employment or Labor Agreement. (c) Except as set forth in Schedule 2.16(c) hereto, (i) there is no unfair labor practice charge or complaint pending before the National Labor Relations Board ("NLRB"), (ii) there is no labor strike, material slowdown or material work stoppage or lockout actually pending or, to the Stockholder's or the Company's knowledge, threatened, against or affecting the Company, and the Company has not experienced any strike, material slow down or material work stoppage, lockout or other collective labor action by or with respect to employees of the Company, (iii) there is no representation claim or petition pending before the NLRB or any similar foreign agency and no question concerning representation exists relating to the employees of the Company, (iv) there are no charges with respect to or relating to the Company pending before the Equal Employment Opportunity Commission or any state, local or foreign agency responsible for the prevention of unlawful employment practices, (v) the Company has not received formal notice from any federal, state, local or foreign agency responsible for the enforcement of labor or employment laws of an intention to conduct an investigation of the Company and, to the knowledge of the Company, no such investigation is in progress and (vi) the consents of the unions that are 20 parties to any Employment and Labor Agreements are not required to complete the transactions contemplated by this Agreement and the Documents. (d) The Company has never caused any "plant closing" or "mass layoff" as such actions are defined in the Worker Adjustment and Retraining Notification Act, as codified at 29 U.S.C. ss.ss. 2101-2109, and the regulations promulgated therein. .17 EMPLOYEE BENEFIT PLANS. (a) Set forth on Schedule 2.17(a) hereto is a true and complete list of: (i) each employee pension benefit plan, as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974 ("ERISA"), maintained by the Company or to which the Company is required to make contributions ("Pension Benefit Plan"); and (ii) each employee welfare benefit plan, as defined in Section 3(i) of ERISA, maintained by the Company or to which the Company is required to make contributions ("Welfare Benefit Plan"). True and complete copies of all Pension Benefit Plans and Welfare Benefit Plans (collectively, "ERISA Plans") have been delivered to or made available to UAG together with, as applicable with respect to each such ERISA Plan, trust agreements, summary plan descriptions, all IRS determination letters or applications therefor with respect to any Pension Benefit Plan intended to be qualified pursuant to Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and valuation or actuarial reports, accountant's opinions, financial statements, IRS Form 5500s (or 5500-C or 5500-R) and summary annual reports for the last three years. (b) With respect to the ERISA Plans, except as set forth on Schedule 2.17(b): (i) there is no ERISA Plan which is a " multiemployer" plan as that term is defined in Section 3(37) of ERISA ("Multiemployer Plan"); (ii) no event has occurred or (to the knowledge of the Company or the Stockholder) is threatened or about to occur which would constitute a prohibited transaction under Section 406 of ERISA or under Section 4975 of the Code; (iii) each ERISA Plan has operated since its inception in accordance with the reporting and disclosure requirements imposed under ERISA and the Code and has timely filed Form 5500e (or 5500-C or 5500-R) and predecessors thereof; and 21 (iv) no ERISA Plan is liable for any federal, state, local or foreign Taxes. (c) Each Pension Benefit Plan intended to be qualified under Section 401(a) of the Code: (i) has been qualified, from its inception, under Section 401(a) of the Code, and the trust established thereunder has been exempt from taxation under Section 501(a) of the Code and is currently in compliance with applicable federal laws; (ii) has been operated, since its inception, in accordance with its terms and there exists no fact which would adversely affect its qualified status; and (iii) is not currently under investigation, audit or review by the IRS or (to the knowledge of the Company and the Stockholder) no such action is contemplated or under consideration and the IRS has not asserted that any Pension Benefit Plan is not qualified under Section 401(a) of the Code or that any trust established under a Pension Benefit Plan is not exempt under Section 501(a) of the Code. (d) With respect to each Pension Benefit Plan which is a defined benefit plan under Section 414(j) and, for the purpose solely of Section 2.17(d)(iv) hereof, each defined contribution plan under Section 414(i) of the Code: (i) no liability to the Pension Benefit Guaranty Corporation ("PBGC") under Sections 4062-4064 of ERISA has been incurred by the Company since the effective date of ERISA and all premiums due and owing to the PBGC have been timely paid; (ii) the PBGC has not notified the Company or any Pension Benefit Plan of the commencement of proceedings under Section 4042 of ERISA to terminate any such plan; (iii) no event has occurred since the inception of any Pension Benefit Plan or (to the knowledge of the Company or the Stockholder) is threatened or about to occur which would constitute a reportable event within the meaning of Section 4043(b) of ERISA; (iv) no Pension Benefit Plan ever has incurred any "accumulated funding deficiency" (as defined in Section 302 of ERISA and Section 412 of the Code); and (v) if any of such Pension Benefit Plans were to be terminated on the Closing Date (A) no liability under Title IV of ERISA would be incurred by the Company and (B) all benefits accrued to the day prior to the Closing Date (whether or not vested) would be fully funded in accordance 22 with the actuarial assumptions and method utilized by such plan for valuation purposes. (e) With respect to each Pension Benefit Plan, Schedule 2.17(e) contains a list of all Pension Benefit Plans to which ERISA has applied which have been or are being terminated, or for which a termination is contemplated, and a description of the actions taken by the PBGC and the IRS with respect thereto. (f) The approximate aggregate of the amounts of contributions by the Company to be paid or accrued under ERISA Plans for the current fiscal year is set forth on Schedule 2.17(f) (the "Aggregate ERISA Contributions"), and the Aggregate ERISA Contributions are not expected to exceed the total amount set forth on Schedule 2.17(f). To the extent required in accordance with GAAP, the December 31 Balance Sheet reflects in the aggregate an accrual of all amounts of employer contributions accrued but unpaid by the Company under the ERISA Plans as of the date of the December 31 Balance Sheet. (g) With respect to any Multiemployer Plan (1) the Company has not, since its formation, made or suffered a "complete withdrawal" or "partial withdrawal" as such terms are respectively defined in Sections 4203 and 4205 of ERISA; (2) there is no withdrawal liability of the Company under any Multiemployer Plan, computed as if a "complete withdrawal" by the Company had occurred under each such Plan as of December 31, 1995; and (3) the Company has not received notice to the effect that any Multiemployer Plan is either in reorganization (as defined in Section 4241 of ERISA) or insolvent (as defined in Section 4245 of ERISA). (h) With respect to the Welfare Benefit Plans: (i) There are no liabilities of the Company under Welfare Benefit Plans with respect to any condition which relates to a claim filed on or before the Closing Date. (ii) No claims for benefits are in dispute or litigation. .18 OTHER BENEFIT AND COMPENSATION PLANS OR ARRANGEMENTS. (a) Set forth on Schedule 2.18(a) hereto is a true and complete list of: (i) each employee stock purchase, employee stock option, employee stock ownership, deferred compensation, performance, bonus, incentive, vacation pay, holiday pay, insurance, severance, retirement, excess benefit or other plan, trust or arrangement which is not an ERISA Plan whether written or oral, which the Company maintains or is required to make contributions to; 23 (ii) each other agreement, arrangement, commitment and understanding of any kind, whether written or oral, with any current or former officer, director or consultant of the Company pursuant to which payments may be required to be made at any time following the date hereof (including, without limitation, any employment, deferred compensation, severance, supplemental pension, termination or consulting agreement or arrangement); and (iii) each employee of the Company whose aggregate compensation for the fiscal year ended December 31, 1996 exceeded $50,000. True and complete copies of all of the written plans, arrangements and agreements referred to on Schedule 2.18(a) ("Compensation Commitments") have been provided to UAG together with, where prepared by or for the Company, any valuation, actuarial or accountant's opinion or other financial reports with respect to each Compensation Commitment for the last three years. An accurate and complete written summary has been provided to UAG with respect to any Compensation Commitment which is unwritten. (b) Each Compensation Commitment: (i) since its inception, has been operated in all material respects in accordance with its terms; (ii) is not currently under investigation, audit or review by the IRS or any other federal or state agency and (to the knowledge of the Company or the Stockholder) no such action is contemplated or under consideration; (iii) has no liability for any federal, state, local or foreign Taxes; (iv) has no claims subject to dispute or litigation; (v) has met all applicable requirements, if any, of the Code; and (vi) has operated since its inception in material compliance with the reporting and disclosure requirements imposed under ERISA and the Code. .19 TRANSACTIONS WITH INSIDERS. Set forth on Schedule 2.19 hereto is a complete and accurate description of all material transactions between the Company or any ERISA Plan, on the one hand, and any Insider, on the other hand, that have occurred since January 1, 1995. For purposes of this Agreement: (i) the term "Insider" shall mean the Stockholder, any director or officer of the Company, and any 24 Affiliate, Associate or Relative of any of the foregoing persons; (ii) the term "Associate" used to indicate a relationship with any person means (A) any corporation, partnership, joint venture or other entity of which such person is an officer or partner or is, directly or indirectly, through one or more intermediaries, the beneficial owner of 30% or more of (1) any class or type of equity securities or other profits interest or (2) the combined voting power of interests ordinarily entitled to vote for management or otherwise, and (B) any trust or other estate in which such person has a substantial beneficial interest or as to which such person serves as trustee or in a similar fiduciary capacity; and (iii) a "Relative" of a person shall mean such person's spouse, such person's parents, sisters, brothers, children and the spouses of the foregoing, and any member of the immediate household of such person. .20 PROPRIETY OF PAST PAYMENTS. No funds or assets of the Company have been used for illegal purposes; no unrecorded funds or assets of the Company have been established for any purpose; no accumulation or use of the Company's corporate funds or assets have been made without being properly accounted for in the respective books and records of the Company; all payments by or on behalf of the Company have been duly and properly recorded and accounted for in their respective books and records; no false or artificial entry has been made in the books and records of the Company for any reason; no payment has been made by or on behalf of the Company with the understanding that any part of such payment is to be used for any purpose other than that described in the documents supporting such payment; and the Company has not made, directly or indirectly, any illegal contributions to any political party or candidate, either domestic or foreign. Neither the IRS nor any other federal, state, local or foreign government agency or entity has initiated or threatened any investigation of any payment made by the Company of, or alleged to be of, the type described in this Section 2.20. .21 INTEREST IN COMPETITORS. Except as set forth on Schedule 2.21, neither the Company nor the Stockholder, nor any of their Affiliates, have any interest, either by way of contract or by way of investment (other than as holder of not more than 2% of the outstanding capital stock of a publicly traded Person, so long as such holder has no other connection or relationship with such Person) or otherwise, directly or indirectly, in any Person other than the Company that is engaged in the retail sale of automobiles or light duty trucks. 25 .22 BROKERS. Neither the Company, nor any director, officer or employee thereof, nor the Stockholder or any representative of the Stockholder, has employed any broker or finder or has incurred or will incur any broker's, finder's or similar fees, commissions or expenses, in each case in connection with the transactions contemplated by this Agreement or the Documents except that the Stockholder has employed Ben Hicks (the "Broker") in connection with this transaction. The Stockholder will satisfy any obligations of UAG, Sub, the Stockholder, Mr. Hanna and the Company relating to the employment of Broker, and will hold UAG, Sub and the Company harmless therefrom. .23 ACCOUNTS. Schedule 2.23 hereof correctly identifies each bank account maintained by or on behalf or for the benefit of the Company and the name of each Person with any power or authority to act with respect thereto. .24 DISCLOSURE. Neither the Company nor the Stockholder have made any material misrepresentation to UAG or the Sub relating to the Company or the Shares or the Real Property or Improvements and neither the Company nor the Stockholder have omitted to state to UAG any material fact relating to the Company or the Shares or the Real Property or Improvements which is necessary in order to make the information given by or on behalf of the Company or the Stockholder to UAG not misleading or which if disclosed would reasonably affect the decision of a person considering an acquisition of the Shares. No fact, event, condition or contingency exists or has occurred which has, or in the future can reasonably be expected to have, a Material Adverse Effect, which has not been disclosed in the Company Financial Statements or the Schedules to this Agreement. .25 NET WORTH. On the Closing Date, the Net Worth of the Company will be equal to or greater than the November 30 Net Worth. 3 REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER Subject to the parties' agreement and acknowledgement that certain of the Schedules referred to in this Article 3 are to be delivered by the Company and the Stockholder no later than thirty (30) days after the date hereof, the Stockholder hereby represents and warrants to UAG as follows: .1 OWNERSHIP OF SHARES; TITLE. 26 The Stockholder is the owner of record and beneficially of the Shares as set forth on Schedule 3.1 hereof and has, and shall transfer to Sub at the Closing, good and marketable title to the Shares owned by it, free and clear of any and all security interests, pledge agreements, Liens, proxies and voting or other agreements except restrictions on transfer imposed by applicable federal and state securities laws. .2 AUTHORITY. The Stockholder has all requisite power and authority and has full legal capacity and is competent to execute, deliver and perform this Agreement and the Documents to which it is a party and to consummate the transactions contemplated hereby and thereby (including the disposition of the Shares to Sub as contemplated by this Agreement). This Agreement has been duly executed and delivered by the Stockholder and constitutes, and the Documents to which the Stockholder is a party when executed and delivered by the Stockholder will constitute, a valid and binding obligation of the Stockholder, enforceable against it in accordance with its terms. Except as set forth on Schedule 3.2, the execution, delivery and performance of this Agreement and the Documents by the Stockholder and the consummation of the transactions contemplated hereby and thereby do not and will not: (i) (after notice or lapse of time or both) conflict with, result in a breach of any provision of, constitute a default under, result in the modification or cancellation of, or give rise to any right of termination or acceleration in respect of, any material contract, agreement, commitment, understanding, arrangement or restriction to which the Stockholder is a party or to which the Stockholder or any of its property is subject; (ii) violate or conflict with any Legal Requirements applicable to the Stockholder or any of Stockholder's businesses or properties; or (iii) require any authorization, consent, order, permit or approval of, or notice to, or filing, registration or qualification with, any governmental, administrative or judicial authority, except in connection with or in compliance with the provisions of the H-S-R Act (as defined in Section 5.3 hereof). .3 REAL PROPERTY AND IMPROVEMENTS. The Stockholder owns the Real Property and Improvements in fee simple, free and clear of all Liens, except those disclosed in Schedule 3.3(a), none of which currently or, to its knowledge, in the future will affect the use of the Real Property or the Improvements for the conduct of the business of the Company as presently conducted. No assessments have been made against any portion of the Real Property which are unpaid (except 27 ad valorem taxes for the current year that are not yet due and payable), whether or not they have become Liens. There are no disputes concerning the location of the lines and corners of the Real Property. No one has been granted any right to purchase or lease the Real Property or Improvements other than the existing leases in favor of the Company, which are to be terminated at the Closing by agreement between the parties and pursuant to which the Stockholder shall acknowledge that there are no defaults under any such leases and that the Company has no liability arising out of or relating to such leases. .4 INVESTMENT INTENT. The Stockholder has no present plan, intention or arrangement to dispose of any of the UAG Common Stock received by it pursuant to the terms of this Agreement. .5 QUALIFICATION OF STOCKHOLDER. The Stockholder and Mr. Hanna (i) are "accredited investors" within the meaning of Regulation D of the Securities Act, and the Stockholder is acquiring the UAG Common Stock to be issued pursuant to the terms of this Agreement for its own account and not with a view to, or for resale in connection with, any distribution thereof; (ii) the Stockholder was not formed for the purpose of acquiring UAG Common Stock; (iii) the Stockholder and Mr. Hanna understand and acknowledge that such UAG Common Stock has not been registered under the Securities Act or any state securities laws by reason of certain exemptions from the registration provisions thereof which depend upon, among other things, the bona fide nature of the Stockholder's investment intent as expressed herein; (iv) the Stockholder and Mr. Hanna are able to bear the economic risk of investment in such UAG Common Stock and have such knowledge and experience in financial and business matters that they are capable of evaluating the risks and merits of such UAG Common Stock; (v) the Stockholder and Mr. Hanna acknowledge that the UAG Shares were not offered to them by means of publicly disseminated advertisements or sales literature, or as part of a general solicitation; (vi) the Stockholder and Mr. Hanna acknowledge that in deciding to proceed with the transaction set forth herein they have relied solely on their own independent investigation of UAG; and (vii) the Stockholder and Mr. Hanna understand and acknowledge that such UAG Common Stock will be "restricted securities" as that term is defined in Rule 144 under the Securities Act and that the certificates representing such UAG Common Stock will bear a legend restricting transfer unless (A) the transfer is exempt from the registration requirements under the Securities Act and any applicable state securities law and an opinion of counsel reasonably satisfactory to UAG that such transfer is exempt therefrom is delivered to UAG or (B) the transfer is made pursuant to an effective registration statement under the Securities Act and any applicable state securities law. 28 4 REPRESENTATIONS AND WARRANTIES OF UAG Subject to the parties' agreement and acknowledgment that certain of the Schedules referred to in this Article 4 are to be delivered by the UAG no later than thirty (30) days after the date hereof, UAG and Sub hereby represent and warrant to the Company and the Stockholder as follows: .1 ORGANIZATION AND GOOD STANDING. UAG is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the corporate power and authority to own, lease and operate the properties used in its business and to carry on its business as now being conducted. UAG is duly qualified to do business and is in good standing as a foreign corporation in each state and jurisdiction where qualification as a foreign corporation is required, except for such failures to be qualified and in good standing, if any, which when taken together with all other such failures of UAG and the Sub would not, or could not reasonably be expected to, in the aggregate have a Material Adverse Effect on UAG and the Sub, taken as a whole. UAG has made available to the Stockholder complete and correct copies of its charter and bylaws, as amended and presently in effect. .2 SUBSIDIARIES. The Sub is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, has the corporate power and authority to own, lease and operate the properties and assets used in its business and to carry on its business as now being conducted, and is duly qualified to do business and in good standing as a foreign corporation in each jurisdiction where qualification as a foreign corporation is required, except for such failures to be qualified and in good standing, if any, which when taken together with all other such failures of UAG and the Sub would not, or could not reasonably be expected to, in the aggregate have a material adverse effect on UAG and the Sub, taken as a whole. All of the outstanding shares of capital stock of the Sub have been validly authorized and issued, are fully paid and non-assessable, have not been issued in violation of any preemptive rights or of any federal or state securities law. .3 CAPITALIZATION. The authorized stock of UAG and the number of shares of capital stock which are issued and outstanding are set forth on Schedule 4.3 hereto. The shares listed on Schedule 4.3 hereto constitute all the issued and outstanding shares of capital stock of UAG and have been validly authorized and issued, are fully paid and nonassessable, have not been issued in violation of any 29 preemptive rights or of any federal or state securities law and no personal liability attaches to the ownership thereof. .4 SEC FILINGS. UAG has heretofore made available to the Company, the Stockholder and Mr. Hanna UAG's Registration Statement on Form S-1 as declared effective by the SEC on October 23, 1996 and UAG's Quarterly Report on Form 10-Q for the period ending September 30, 1996 (the "SEC Filings"). As of their respective dates, the SEC filings did not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. .5 AUTHORITY; APPROVALS AND CONSENTS. UAG and Sub have the corporate power and authority to enter into this Agreement and the Documents to which they are a party and to perform its obligations hereunder and thereunder. At the time of the Closing, the execution, delivery and performance of this Agreement and the Documents to which it is a party and the consummation of the transactions contemplated hereby and thereby will have been duly authorized and approved by the Board of Directors of UAG and Sub and no other corporate proceedings on the part of UAG or Sub will be necessary to authorize and approve this Agreement and the Documents and the transactions contemplated hereby and thereby. This Agreement has been, and on the Closing Date the Documents will be, duly executed and delivered by, and constitute a valid and binding obligation of, UAG and Sub, enforceable against UAG and Sub in accordance with their respective terms. Except as set forth on Schedule 4.5 hereto, the execution, delivery and performance by UAG and Sub of this Agreement and the Documents to which they are a party and the consummation of the transactions contemplated hereby and thereby do not and will not: (i) contravene any provisions of the Certificate of Incorporation or Bylaws of UAG or Sub; (ii) (after notice or lapse of time or both) conflict with, result in a breach of any provision of, constitute a default under, result in the modification or cancellation of, or give rise to any right of termination or acceleration in respect of, any UAG Agreement (as defined below) or require any consent or waiver of any party to any UAG Agreement; (iii) result in the creation of any security interest upon, or any person obtaining any right to acquire, any properties, assets or rights of UAG; (iv) violate or conflict with any Legal Requirements applicable to UAG or its respective businesses or properties that would or 30 could reasonably be expected to have a Material Adverse Effect on UAG and the UAG Subsidiaries, taken as a whole; or (v) require any authorization, consent, order, permit or approval of, or notice to, or filing, registration or qualification with, any governmental, administrative or judicial authority, except in connection with or in compliance with the provisions of the H-S-R Act (as defined in Section 5.3 hereof). Except as set forth or referred to above, no authorization, consent, order, permit or approval of, or notice to, or filing, registration or qualification with, any governmental administrative or judicial authority is necessary to be obtained or made by UAG to enable UAG to continue to conduct its business and operations and use its properties after the Closing in a manner which is in all material respects consistent with that in which they are presently conducted. As used in this Agreement, the term "UAG Agreement" shall mean all mortgages, indenture notes, agreements, contracts, leases, licenses, franchises, obligations, instruments or other commitments, arrangements or understandings of any kind, whether written or oral, binding or non-binding, to which UAG or the UAG Subsidiaries is a party or by which UAG or the UAG Subsidiaries or any of its assets or properties may be bound or affected, including all amendments, modifications, extensions or renewals of any of the foregoing, and which involve receipts or payments by UAG or UAG Subsidiaries which exceed $100,000 per year. "UAG Subsidiary" shall mean any corporation or other entity in which UAG, directly or indirectly, owns beneficially securities representing 50% or more of (i) the aggregate equity or profit interests or (ii) the combined voting power of voting interests ordinarily entitled to vote for management or otherwise. .6 FINANCIAL STATEMENTS. Attached as Schedule 4.6 are true and complete copies of: (a) the consolidated balance sheet of UAG and its consolidated UAG Subsidiaries as of December 31 in each of the years 1994 and 1995, and the related consolidated statements of income, stockholders' equity and cash flows for the fiscal years ended on such dates, together with the notes thereto, in each case examined by and accompanied by the report of Coopers & Lybrand, independent certified public accountants; and (b) the unaudited consolidated balance sheet of UAG and its consolidated UAG Subsidiaries as of September 30, 1996 (the "UAG Balance Sheet"), and the unaudited consolidated statements of income, stockholders' equity and cash flows for the month periods ended on such dates, together with the notes thereto; 31 (all the foregoing financial statements, including the notes thereto, being referred to herein collectively as the "UAG Financial Statements"). The UAG Financial Statements are in accordance with the books and records of UAG and the UAG Subsidiaries, fairly present the consolidated financial position, results of operations, stockholders' equity and changes in financial position of UAG and the UAG Subsidiaries as of the dates and for the periods indicated, in each case in conformity with GAAP consistently applied (except as otherwise indicated in such statements) during such periods, and can be legitimately reconciled with the financial statements and the financial records maintained and the accounting methods applied by UAG and the UAG Subsidiaries for federal income tax purposes, and the unaudited financial statements included in the UAG Financial Statements indicate all adjustments, which consist of only normal recurring accruals, necessary for such fair presentations. The statements of income included in the UAG Financial Statements do not contain any items of special or nonrecurring income except as expressly specified therein, and the balance sheets included in the UAG Financial Statements do not reflect any write-up or revaluation increasing the book value of any assets. The books and accounts of UAG and the UAG Subsidiaries are complete and correct in all material respects and fairly reflect all of the transactions, items of income and expense and all assets and liabilities of the businesses of UAG and the UAG Subsidiaries consistent with prior practices of UAG and the UAG Subsidiaries. .7 TAXES. UAG, each UAG Subsidiary and, for any period during all or part of which the tax liability of any other corporation was determined on a combined or consolidated basis with UAG or any UAG Subsidiary, any such other corporation, have filed timely all federal, state, local and foreign tax returns, reports and declarations required to be filed (or have obtained or timely applied for an extension with respect to such filing) correctly reflecting the Taxes and all other information required to be reported thereon and have paid, or made adequate provision for the payment of, all Taxes which are due pursuant to such returns or pursuant to any assessment received by UAG or any UAG Subsidiary or any such other corporation. In the ordinary course, UAG makes adequate provision on its books for the payment of all Taxes (including for the current fiscal period) owed by UAG and the UAG Subsidiaries. Neither UAG nor any UAG Subsidiary has been subject to a federal or state tax audit of any kind, and no adjustment has been proposed by the IRS with respect to any return for any subsequent year. UAG knows of no basis for an assertion of a deficiency for Taxes against UAG or any UAG Subsidiary. .8 DISCLOSURE. Neither UAG nor any UAG Subsidiary has made any material misrepresentation to the Company or the Stockholder 32 relating to this Agreement and neither UAG nor any UAG Subsidiary has omitted to state to the Company or the Stockholder any material fact relating to this Agreement which is necessary in order to make the information given by or on behalf of UAG or any UAG Subsidiary to the Company or the Stockholder or their representatives at or prior to Closing not misleading. No fact, event, condition or contingency exists or has occurred which has, or in the future can reasonably be expected to have, a material adverse effect on UAG and the UAG Subsidiaries, taken as a whole, which has not been disclosed in the SEC Filings or the Schedules to this Agreement. 5 COVENANTS AND ADDITIONAL AGREEMENTS .1 ACCESS; CONFIDENTIALITY. Between the date hereof and the Closing Date, the Stockholder, the Company and Mr. Hanna will (i) provide to the officers and other authorized representatives of UAG and Sub full access, during normal business hours, to any and all premises, properties, files, books, records, documents, and other information of the Company and will cause their officers to furnish to UAG and Sub and their authorized representatives any and all financial, technical and operating data and other information pertaining to the businesses and properties of the Company, and (ii) make available for inspection and copying by UAG and Sub true and complete copies of any documents relating to the foregoing. UAG and Sub will hold in confidence (unless and to the extent compelled to disclose by judicial or administrative process or, in the opinion of its counsel, by other requirements of law) all Confidential Information (as defined below) and will not disclose the same to any third party except in connection with obtaining financing and otherwise as may reasonably be necessary to carry out this Agreement and the transactions contemplated hereby, including any due diligence review by or on behalf of UAG and Sub. If this Agreement is terminated, UAG and Sub will promptly return to the Company, upon the reasonable request of the Company, all Confidential Information furnished by the Company and held by UAG and Sub, including all copies and summaries thereof. As used herein, "Confidential Information" shall mean all information concerning the Company obtained by UAG or Sub from the Company in connection with the transactions contemplated by this Agreement, except information (x) ascertainable or obtained from public information, (y) received from a third party not employed by or otherwise affiliated with the Company or (z) which is or becomes known to the public, other than through a breach by UAG of this Agreement. The Stockholder will hold in confidence (unless and to the extent compelled to disclose by judicial or administrative process, or, in the opinion of their counsel, by other requirements of law) all UAG Confidential Information (as defined below) and will not disclose the same to any third party except as may reasonably be necessary to carry out this Agreement and the transactions contemplated 33 hereby. If this Agreement is terminated, the Stockholder will promptly return to UAG, upon the reasonable request of UAG, all UAG Confidential Information furnished by UAG and held by the Stockholder, including all copies and summaries thereof. As used herein, "UAG Confidential Information" shall mean all information concerning UAG obtained by the Stockholder, the Company and Mr. Hanna in connection with the transactions contemplated by this Agreement, except information (x) ascertained or obtained from public information, (y) received from a third party not employed or otherwise affiliated with UAG or (z) which is or becomes known to the public, other than a breach by the Stockholder, the Company and Mr. Hanna of this Agreement. .2 FURNISHING INFORMATION; ANNOUNCEMENTS. The Stockholder and the Company, on the one hand, and UAG and Sub, on the other hand, will, as soon as practicable after reasonable request therefor, furnish to the other all the information concerning the Stockholder and the Company or UAG and Sub, respectively, required for inclusion in any statement or application made by UAG or the Company to any governmental or regulatory body or in connection with obtaining any third party consent in connection with the transactions contemplated by this Agreement. Neither the Stockholder nor the Company, on the one hand, nor UAG nor Sub, on the other hand, or any representative thereof, shall issue any press releases or otherwise make any public statement with respect to the transactions contemplated hereby without the prior consent of the other, except as may be required by law (including federal or state securities laws) as determined by such parties' counsel. .3 ANTITRUST IMPROVEMENTS ACT COMPLIANCE. UAG and Sub and the Stockholder, Mr. Hanna and the Company, as applicable, shall each file or cause to be filed with the Federal Trade Commission and the United States Department of Justice any notifications required to be filed by the respective "ultimate parent" entities under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "H-S-R Act"), and the rules and regulations promulgated thereunder, with respect to the transactions contemplated herein. The parties shall use their best efforts to make such filings promptly, to respond to any requests for additional information made by either of such agencies, to cause the waiting periods under the H-S-R Act to terminate or expire at the earliest possible date and to resist vigorously, at their respective cost and expense (including, without limitation, the institution or defense of legal proceedings), any assertion that the transactions contemplated herein constitute a violation of the antitrust laws, all to the end of expediting consummation of the transactions contemplated herein; provided, however, that if UAG or the Stockholder shall determine after issuance of any preliminary injunction that continuing such resistance is not in its or their best interests, UAG or the Stockholder, as the case may be, may, by written 34 notice to the other party, terminate this Agreement with the effect set forth in Section 8.2 hereof. .4 CERTAIN CHANGES AND CONDUCT OF BUSINESS. (a) From and after the date of this Agreement and until the Closing Date, the Company shall, and the Stockholder and Mr. Hanna shall cause the Company to, conduct its business solely in the ordinary course consistent with past practices and, without the prior written consent of UAG, neither the Stockholder, Mr. Hanna, nor the Company will, except as required or permitted pursuant to the terms hereof, permit the Company to: (i) make any material change in the conduct of its business and operations or enter into any transaction other than in the ordinary course of business consistent with past practices; (ii) make any change in its Articles of Incorporation or Bylaws, issue any additional shares of capital stock or equity securities or grant any option, warrant or right to acquire any capital stock or equity securities or issue any security convertible into or exchangeable for its capital stock or alter any term of any of its outstanding securities or make any change in its outstanding shares of capital stock or other ownership interests or its capitalization, whether by reason of a reclassification, recapitalization, stock split or combination, exchange or readjustment of shares, stock dividend or otherwise; (iii) (A) incur, assume or guarantee any indebtedness for borrowed money, issue any notes, bonds, debentures or other corporate securities or grant any option, warrant or right to purchase any thereof, except pursuant to transactions in the ordinary course of business consistent with past practices, (B) issue any securities convertible or exchangeable for debt securities of the Company, or (C) issue any options or other rights to acquire from the Company, directly or indirectly, debt securities of the Company or any security convertible into or exchangeable for such debt securities; (iv) make any sale, assignment, transfer, abandonment or other conveyance of any of its assets or any part thereof, except transactions pursuant to existing contracts set forth in Schedule 2.15 hereto and dispositions of inventory or of worn-out or obsolete equipment for fair or reasonable value in the ordinary course of business consistent with past practices; (v) subject any of its assets, or any part thereof, to any Lien or suffer such to be imposed other than such Liens as may arise in the ordinary course of business 35 consistent with past practices by operation of law which will not have, or cannot reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; (vi) declare, set aside or pay any dividends or other distributions (whether in cash, stock, property or any combination thereof) in respect of any shares of its capital stock (other than distributions of net income attributable to periods after November 30, 1996) or redeem, retire, purchase or otherwise acquire, directly or indirectly, any shares of its capital stock; (vii) acquire any assets, raw materials or properties, or enter into any other transaction, other than in the ordinary course of business consistent with past practices; (viii) enter into any new (or amend any existing) employee benefit plan, program or arrangement or any new (or amend any existing) employment, severance or consulting agreement, grant any general increase in the compensation of officers or employees (including any such increase pursuant to any bonus, pension, profit-sharing or other plan or commitment) or grant any increase in the compensation payable or to become payable to any employee, except in accordance with pre-existing contractual provisions or consistent with past practices; (ix) make or commit to make any individual material capital expenditure in excess of $50,000, or aggregate capital expenditures in excess of $150,000; (x) pay, loan or advance any amount to, or sell, transfer or lease any properties or assets to, or enter into any agreement or arrangement with, any of their Affiliates; (xi) guarantee any indebtedness for borrowed money or any other obligation of any other Person, other than in the ordinary course of business consistent with past practice; (xii) fail to keep in full force and effect insurance comparable in amount and scope to coverage maintained by the Company (or on behalf of the Company) on the date hereof; (xiii) make any loan, advance or capital contribution to or investment in any Person; (xiv) make any change in any method of accounting or accounting principle, method, estimate or practice except for any such change required by reason of a concurrent change in GAAP or write-down the value of any inventory or write-off as uncollectible any accounts receivable except in 36 the ordinary course of business consistent with past practices; (xv) settle, release or forgive any material claim or litigation or waive any material right; (xvi) make, enter into, modify, amend in any material respect or terminate any material commitment, bid or expenditure, other than in the ordinary course of business consistent with past practice; (xvii) take any other action that would cause any of the representations and warranties made by the Company in this Agreement not to remain true and correct; or (xviii) commit itself to do any of the foregoing. (b) From and after the date hereof and until the Closing Date, the Stockholder, Mr. Hanna and the Company will cause the Company to use its reasonable best efforts to: (i) continue to maintain, in all material respects, its properties in accordance with present practices in a condition suitable for their current use; (ii) comply with all applicable Environmental Laws, and, in the event the Company shall receive notice that there exists a violation of any Environmental Law with respect to its operations or any Real Property, promptly (and in any event within the time period permitted by the applicable governmental authority) remove or remedy such violation in accordance with all applicable Environmental Laws; provided, however, that any remediation or removal shall be subject to the prior approval of UAG; (iii) file, when due or required, federal, state, foreign and other tax returns and other reports required to be filed and pay when due all taxes, assessments, fees and other charges lawfully levied or assessed against the Company unless the validity thereof is contested in good faith and by appropriate proceedings diligently conducted; (iv) keep its books of account, records and files in the ordinary course and in accordance with existing practices; (v) preserve its business organization intact and continue to maintain existing business relationships with suppliers, customers and others with whom business relationships exist other than relationships that are, at the same time, not economically beneficial to it; and (vi) continue to conduct its business in the ordinary course consistent with past practices. 37 (c) From and after the date of this Agreement and until the Closing Date, the Stockholder shall not, except with the prior written consent of UAG and except as required or permitted pursuant to the terms hereof: (i) make any material change to the Real Property or the Improvements; (ii) subject the Real Property or the Improvements, or any part thereof, to any new Lien or suffer such to be imposed; (iii) take any other action that would cause any of the representations or warranties made by the Stockholder in this Agreement not to remain true and correct; or (iv) commit themselves to do any of the foregoing. .5 NO INTERCOMPANY PAYABLES OR RECEIVABLES. Except as disclosed on Schedule 5.5 hereto, at the Closing there will be no intercompany payables or intercompany receivables due and/or owing between the Stockholder, Mr. Hanna and their Affiliates (other than the Company) on the one hand, and the Company, on the other hand. .6 NEGOTIATIONS. Until the earlier of 180 days from the date hereof, the Closing and the termination of this Agreement pursuant to clause (ii) of Section 8.1 hereof, neither the Stockholder, nor the Company, nor Mr. Hanna nor their officers, directors, employees, advisors, agents, representatives, Affiliates or anyone acting on behalf of the Stockholder, the Company, Mr. Hanna or such Persons, shall, directly or indirectly, encourage, solicit, initiate or engage in discussions or negotiations with, or provide any information to, any person (other than UAG or its representatives) concerning any merger, sale of assets (other than in the ordinary course of business), purchase or sale of shares of capital stock or similar transaction involving the Company or purchase or sale of any of the Real Property or Improvements. The Stockholder and Mr. Hanna shall promptly communicate to UAG any inquiries or communications concerning any such transaction (including the identity of any person making such inquiry or communication) which the Company, the Stockholder or Mr. Hanna may receive or of which any of such parties may become aware. .7 CONSENTS; COOPERATION. Subject to the terms and conditions hereof, the Stockholder, Mr. Hanna and the Company and UAG will use their respective best efforts at their own expense: 38 (i) to obtain prior to the earlier of the date required (if so required) or the Closing Date, all waivers, permits, licenses, approvals, authorizations, qualifications, orders and consents of all third parties and governmental authorities, and make all filings and registrations with governmental authorities which are required on their respective parts for (A) the consummation of the transactions contemplated by this Agreement, (B) the ownership or leasing and operating after the Closing by the Company of all of its material properties and (C) the conduct after the Closing by the Company of its business as conducted by it on the date hereof; (ii) to defend, consistent with applicable principles and requirements of law, any lawsuit or other legal proceedings, whether judicial or administrative, whether brought derivatively or on behalf of third persons (including governmental authorities) challenging this Agreement or the transactions contemplated hereby and thereby; and (iii) to furnish each other such information and assistance as may reasonably be requested in connection with the foregoing. .8 ADDITIONAL AGREEMENTS. Subject to the terms and conditions of this Agreement, each of the parties hereto agrees to use its best efforts at its own expense to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement. The Stockholder agrees to execute and deliver any and all documents that the manufacturer typically requires a selling dealer to execute in connection with the transfer of a dealership. In case at any time after the Closing any further action is necessary or desirable to carry out the purposes of this Agreement, the Stockholder and the proper officers of the Company shall take all such necessary action. .9 INTERIM FINANCIAL STATEMENTS. Within thirty (30) days after the end of each calendar month after the date of this Agreement and continuing until the Closing Date, the Company will deliver to UAG the most recent monthly and year-to-date financial statements provided to Nissan. All such statements shall fairly present the financial position, results of operations and cash flow of the Company as of the date or for the periods indicated and shall be prepared on a basis consistent with the Company Factory Statement attached hereto as part of Schedule 2.5. .10 NOTIFICATION OF CERTAIN MATTERS. 39 Between the date hereof and the Closing, each party to this Agreement will give prompt notice in writing to the other parties hereto of: (i) any information that indicates that any representation and warranty of such party contained herein was not true and correct as of the date hereof or will not be true and correct as of the Closing, (ii) the occurrence of any event which could result in the failure to satisfy a condition specified in Article 6 or Article 7 hereof, as applicable, (iii) any notice or other communication from any third person alleging that the consent of such third person is or may be required in connection with the transactions contemplated by this Agreement, and (iv) in the case of the Stockholder, Mr. Hanna and the Company, any notice of, or other communication relating to, any default or event which, with notice or lapse of time or both, would become a default under any Company Agreement. Mr. Hanna shall (x) promptly advise UAG of any event that has, or could in the future have, a Material Adverse Effect (y) confer on a regular basis with one or more designated representatives of UAG to report operational matters and to report the general status of ongoing operations, and (z) notify UAG of any emergency or other change in the normal course of business or in the operation of the properties of the Company and of any governmental complaints, investigations or hearings (or communications indicating that the same may be contemplated) or adjudicatory proceedings involving the Company or any of their assets or operations, and will keep UAG fully informed of such events and permit UAG's representatives access to all materials prepared in connection therewith. The Stockholder and Mr. Hanna shall give prompt notice to UAG of any notice or other communication from any third person asserting any right, title or interest in any of the Shares held by the Stockholder (including, without limitation, any threat to commence, or notice of the commencement of any action or other proceeding with respect to any of the Shares) or the occurrence of any other event of which the Stockholder or Mr. Hanna has knowledge which could result in any failure to consummate the sale of the Shares as contemplated hereby. .11 ASSURANCE BY THE STOCKHOLDER AND MR. HANNA. The Stockholder and Mr. Hanna shall cause the Company to comply with its covenants set forth in this Agreement and Mr. Hanna shall cause the Stockholder to comply with its covenants set forth in this Agreement. .12 SECTION 338(H)(10) ELECTION. The Stockholder agrees to join with UAG or Sub, if UAG or Sub so requests, in making a timely election to treat the purchase and sale of the Shares pursuant to this Agreement as a sale of all of the Company's assets under Section 338(h)(10) of the Internal Revenue Code of 1986, as amended, as permitted pursuant to Section 1.338(h)(10)-1(a) of the Treasury Regulations promulgated thereunder. 40 .13 NON-INTERFERENCE. From the Closing Date until the later of (i) five years or (ii) such other period of time as may be the maximum permissible period of enforceability of this covenant, the Stockholder, Mr. Hanna and their Affiliates shall not interfere with or disrupt, or attempt to interfere with or disrupt, the relationship, contractual or otherwise, between the Company and any customer, client, supplier, manufacturer, distributor, consultant, independent contractor or employee of the Company and agree not to solicit or hire any employee of the Company unless such employee has already terminated his employment with the Company. (Remainder of page intentionally left blank) 41 .14 DISTRIBUTION OF EARNINGS TO STOCKHOLDER. At the Supplemental Closing, the Company shall make a final distribution to the Stockholder of any earnings attributable to the period from December 1, 1996 to the Closing Date (to the extent such earnings have not previously been distributed); provided, however, that such distribution shall only be made to the extent that the Final Net Worth as determined in accordance with Section 1.3 hereof exceeds the November 30 Net Worth. .15 ACCOUNTANT'S FEES. To the extent that Coopers & Lybrand determines that it is necessary to have the Company's accountant certify or audit any of the Company Financial Statements, then the Stockholder and UAG shall each pay one-half (1/2) of the Company's accountant's fees relating hereto. .16 S SHORT YEAR. The parties hereto acknowledge that upon the closing of the transactions contemplated by this Agreement, the Company's status as an S-corporation for federal income tax purposes shall cease, that the taxable year of the Company in which such closing occur shall be divided into two (2) short taxable years (an S Short Year and C Short Year). Each of the parties hereto covenants and agrees to make all elections, consents, statements, and filings that may be required by the Internal Revenue Code of 1986 to close the Company's books on the last applicable day of the S Short Year. 6 CONDITIONS TO THE OBLIGATIONS OF UAG AND SUB TO EFFECT THE CLOSING The obligations of UAG and Sub required to be performed by them at the Closing shall be subject to the satisfaction, at or prior to the Closing, of each of the following conditions, each of which may be waived by UAG or Sub as provided herein except as otherwise required by applicable law: .1 REPRESENTATIONS AND WARRANTIES; AGREEMENTS; COVENANTS. 42 Each of the representations and warranties of the Company, the Stockholder and Mr. Hanna contained in this Agreement shall be true and correct as of the date hereof and (having been deemed to have been made again at and as of the Closing) shall be true and correct in all material respects as of the Closing. Each of the obligations of the Company, the Stockholder and Mr. Hanna required by this Agreement to be performed by them at or prior to the Closing shall have been duly performed and complied with in all respects as of the Closing. At the Closing, UAG shall have received a certificate, dated the Closing Date and duly executed by the Stockholder and Mr. Hanna, to the effect that the conditions set forth in the two preceding sentences have been satisfied. .2 AUTHORIZATION; CONSENTS. (a) All corporate action necessary to authorize the execution, delivery and performance of this Agreement and the Documents, and the consummation of the transactions contemplated hereby and thereby shall have been duly and validly taken by the Company. All filings required to be made under the H-S-R Act in connection with the transactions contemplated hereby shall have been made and all applicable waiting periods with respect to each such filing, including any extensions thereof, shall have expired or been terminated. (b) All notices to, and declarations, filings and registrations with, and consents, authorizations, approvals and waivers from, governmental and regulatory bodies and third persons (including, but not limited to, Nissan required to consummate the transactions contemplated hereby and all consents or waivers shall have been made or obtained. .3 OPINIONS OF THE COMPANY'S AND THE STOCKHOLDER'S COUNSEL. UAG and Sub shall have been furnished with the opinion of counsel for the Company and the Stockholder, dated the Closing Date, in form and substance satisfactory to UAG and its counsel, which opinion shall have been rendered with respect to those matters contained in Sections 2.1, 2.2, 2.3, 2.4, 2.9, 3.1 and 3.2 hereof. In rendering the foregoing opinion, such counsel may rely as to factual matters upon certificates or other documents furnished by officers and directors of the Company and by government officials and upon such other documents and data as such counsel deem appropriate as a basis for their opinions. Such counsel may specify the state or states in which they are admitted to practice, that they are not admitted to the Bar in any other state or experts in the law of any other state and that such opinions are limited to the State of Nevada and federal laws. .4 ABSENCE OF LITIGATION. 43 No order, stay, injunction or decree of any court of competent jurisdiction in the United States shall be in effect (i) that prevents or delays the consummation of any of the transactions contemplated hereby or (ii) would impose any limitation on the ability of UAG or Sub effectively to exercise full rights of ownership of the Shares. No action, suit or proceeding before any court or any governmental or regulatory entity shall be pending (or threatened by any governmental or regulatory entity), and no investigation by any governmental or regulatory entity shall have been commenced (and be pending), seeking to restrain or prohibit (or questioning the validity or legality of) the consummation of the transactions contemplated by this Agreement or seeking damages in connection therewith which UAG or Sub, in good faith and with the advice of counsel, believes makes it undesirable to proceed with the consummation of the transactions contemplated hereby. .5 NO MATERIAL ADVERSE EFFECT. During the period from December 31, 1995 to the Closing Date, there shall not have been any material adverse change in the assets, properties, business, operations, prospects, net income or financial condition of the Company. .6 NET WORTH. On the Closing Date, the Stockholder shall deliver to UAG a balance sheet of the Company dated as of the most recent practicable date preceding the Closing Date, prepared in accordance with the Accounting Principles (the "Estimated Closing Date Balance Sheet"). The Estimated Closing Date Balance Sheet shall show as of the date thereof, after taking into account the payment of any of the fees, costs and expenses by the Company incurred in connection with this Agreement, a Net Worth not more than $250,000 less than the November 30, 1996 Net Worth. .7 COMPLETION OF DUE DILIGENCE. UAG and Sub shall have completed their due diligence examination of the Company, the Real Property and the Improvements and the results of such examination, including any Phase I or Phase II environmental audits of the Company, shall be satisfactory to UAG and Sub. UAG will pay the costs for a Phase I environmental audit. If, after obtaining the results of the Phase I environmental audit, UAG determines that a Phase II environmental audit is required, then the expenses of performing the Phase II environmental audit shall be paid one-half by UAG and one-half by the Stockholder; provided, however, that the Stockholder may elect not to pay any costs of the Phase II audit but, if the Stockholder elects not to pay one-half of the costs of the Phase II audit and the results of the Phase II audit conclude that remediation is recommended, the Stockholder shall pay the entire costs of the Phase II audit. 44 .8 NET INCOME. Coopers & Lybrand shall have confirmed to UAG that the Pre-Tax Earnings of the Company for the year ending December 31, 1996 are no less than the pre-tax earnings set forth on the Company's December 31, 1996 income statement. .9 LEASE. The Company and the Stockholder shall have entered into the Lease. .10 BOARD APPROVAL. The Board of Directors of UAG and Sub shall have approved the consummation of all of the transactions contemplated by this Agreement. .11 CERTIFICATES. The Stockholder, the Company and Mr. Hanna shall have furnished UAG and Sub with a certificate, dated as of the Closing Date, executed by the Stockholder and Mr. Hanna certifying to the fulfillment of the conditions set forth in Sections 6.4, 6.5, 6.6 and 6.14 hereof and shall have furnished UAG and Sub with such any other certificates of its officers and others as UAG and Sub may reasonably request to evidence compliance with the conditions set forth in this Article 6. .12 LEGAL MATTERS. All certificates, instruments, opinions and other documents required to be executed or delivered by or on behalf of the Stockholder and the Company under the provisions of this Agreement, and all other actions and proceedings required to be taken by or on behalf of the Stockholder and the Company in furtherance of the transactions contemplated hereby, shall be reasonably satisfactory in form and substance to counsel for UAG and Sub. .13 APPROVAL OF MANUFACTURERS AND DISTRIBUTORS. The Stockholder and the Company shall have obtained the consent, authorization and approval of Nissan for the transfer of the Company to Sub on terms no less favorable to those granted to the Stockholder and the Company immediately prior to the execution of this Agreement. .14 ENVIRONMENTAL LAWS. The Company shall be in compliance with all applicable Environmental Laws. .15 NONDISTURBANCE AGREEMENT. 45 UAG shall have been provided with a nondisturbance agreement in form and substance satisfactory to UAG with respect to the properties that are the subject of the Lease. .16 TITLE INSURANCE. UAG shall have obtained title insurance on behalf of the Company with respect to the leasehold estates arising out of the Lease in form and substance satisfactory to UAG. .17 SCHEDULES. The Company and the Stockholder shall have delivered to UAG and Sub all Schedules referred to in Articles 2 and 3 and such Schedules shall be acceptable in form and substance to UAG and Sub. .18 LEASE TERMINATION AGREEMENT/MEMORANDUM OF LEASE. The appropriate parties shall have executed a lease termination agreement and memorandum of lease in form and substance satisfactory to UAG. 7 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY, THE STOCKHOLDER AND MR. HANNA TO EFFECT THE CLOSING The obligations of the Company, the Stockholder and Mr. Hanna required to be performed by them at the Closing shall be subject to the satisfaction, at or prior to the Closing, of each of the following conditions, each of which may be waived by the Company, the Stockholder and Mr. Hanna as provided herein except as otherwise required by applicable law: .1 REPRESENTATIONS AND WARRANTIES; AGREEMENTS. Each of the representations and warranties of UAG and Sub contained in this Agreement shall be true and correct on the date made and shall be true and correct in all material respects as of the Closing. Each of the obligations of UAG and Sub required by this Agreement to be performed by them at or prior to the Closing shall have been duly performed and complied with in all material respects as of the Closing. At the Closing, the Stockholder shall have received a certificate, dated the Closing Date and duly executed by UAG and Sub to the effect that the conditions set forth in the preceding two sentences have been satisfied. 46 .2 AUTHORIZATION OF THE AGREEMENT, CONSENTS. (a) All corporate action necessary to authorize the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby shall have been duly and validly taken by UAG and Sub. All filings required to be made under the H-S-R Act in connection with the transactions contemplated hereby shall have been made and all applicable waiting periods with respect to each such filing, including extensions thereof, shall have expired or been terminated. (b) All notices to, and declarations, filings and registrations with, and consents, authorizations, approvals and waivers from, governmental and regulatory bodies and third persons (including, but not limited to, [Nissan] required to consummate the transactions contemplated hereby and all consents or waivers shall have been made or obtained. .3 OPINIONS OF UAG'S AND SUB'S COUNSEL. The Stockholder shall have been furnished with the opinion of Rogers & Hardin, counsel to UAG and Sub, dated the Closing Date, in form and substance reasonably satisfactory to the Stockholder and its counsel, which opinion shall have been rendered with respect to those matters contained in Sections 4.1, 4.2 and 4.5 hereof. In rendering the foregoing opinions, such counsel may rely as to factual matters upon certificates or other documents furnished by officers and directors of UAG and the Sub and by government officials, and upon such other documents and data as such counsel deems appropriate as a basis for its opinion. Such opinions may be limited to federal laws and the General Corporation Law of the State of Delaware. .4 ABSENCE OF LITIGATION. No order, stay, injunction or decree of any court of competent jurisdiction in the United States shall be in effect (i) that prevents or delays the consummation of any of the transactions contemplated hereby or (ii) would impose any limitation on the ability of the Stockholder effectively to exercise full rights of ownership of the Shares. No action, suit or proceeding before any court or any governmental or regulatory entity shall be pending (or threatened by any governmental or regulatory entity), and no investigation by any governmental or regulatory entity shall have been commenced (and be pending), seeking to restrain or prohibit (or questioning the validity or legality of) the consummation of the transactions contemplated by this Agreement or seeking damages in connection therewith which the Stockholder, in good faith and with the advice of counsel, believes makes it undesirable to proceed with the consummation of the transactions contemplated hereby. .5 CERTIFICATES. UAG and Sub shall have furnished the Stockholder with such certificates of its officers and others to evidence compliance with the conditions set forth in this Article 7 as may be reasonably requested by the Stockholder. .6 LEGAL MATTERS. All certificates, instruments, opinions and other documents required to be executed or delivered by or on behalf of UAG or Sub under the provisions of this Agreement, and all other actions and proceedings required to be taken by or on behalf of UAG or Sub in furtherance of the transactions contemplated hereby, shall be reasonably satisfactory in form and substance to counsel for the Stockholder. .7 SCHEDULES. UAG shall have delivered to the Stockholder all Schedules referred to in Article 4 and such Schedules shall be acceptable in form and substance to the Stockholder. 8 TERMINATION .1 TERMINATION. This Agreement may be terminated at any time prior to Closing: (i) by mutual consent of UAG and the Stockholder; (ii) by either UAG or the Stockholder if the Closing shall not have taken place on or prior to April 30, 1997, or such later date as shall have been approved by UAG and the Stockholder (provided that the terminating party is not otherwise in material breach of its representations, warranties, covenants or agreements under this Agreement); (iii) by UAG or the Stockholder if any court of competent jurisdiction in the United States or other United States governmental body shall have issued an order, decree or ruling or taken any other action restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement, and such order, decree, ruling or other action shall have become final and non-appealable; (iv) by UAG or Sub if any of the conditions specified in Article 6 hereof have not been met or waived by UAG and Sub at such time as such condition is no longer capable of satisfaction (provided UAG and Sub are not otherwise in material breach of their or its representations, warranties, covenants or agreements under this Agreement); (v) by the Stockholder if any of the conditions specified in Article 7 hereof have not been met or waived by the Stockholder at such time as such condition is no longer capable of satisfaction (provided that neither the Stockholder nor the Company is otherwise in material breach of their or its representations, warranties covenants or agreements under this Agreement); or (vi) by either UAG or the Stockholder if there has been a material breach on the part of the other of any representation, warranty, covenant or agreement set forth in this Agreement, which breach has not been cured within ten (10) Business Days following receipt by the breaching party of written notice of such breach. If UAG or the Stockholder shall terminate this Agreement pursuant to the provisions hereof, such termination shall be effected by notice to the other party specifying the provision hereof pursuant to which such termination is made. .2 EFFECT OF TERMINATION. Except (i) for any breach of this Agreement prior to its termination, (ii) for the obligations contained in Sections 5.1 and 10.2 hereof and (iii) as set forth in Sections 9.1 and 9.2 hereof, upon the termination of this Agreement pursuant to Section 8.1 hereof, this Agreement shall forthwith become null and void and none of the parties hereto or any of their respective officers, directors, employees, agents, Affiliates, consultants, stockholders or principals shall have any liability or obligation hereunder or with respect hereto. 9 INDEMNIFICATION .1 INDEMNIFICATION BY THE STOCKHOLDER. Notwithstanding the Closing or the delivery of the Shares, the Stockholder and Mr. Hanna indemnify and agree to fully defend, save and hold harmless on an after-tax basis UAG, Sub, the Company (after Closing), and any of their respective officers, directors, employees, stockholders, advisors, representatives, agents and Affiliates (each a "UAG Indemnified Party"), if a UAG Indemnified Party (including the Company after the Closing Date) shall at any time or from time to time suffer any Costs (as defined in Section 9.6 below) arising, directly or indirectly, out of or resulting from, or shall pay or become obligated to pay any sum on account of, (i) any and all Events of Breach (as defined below) or (ii) any Claim before or by any court, arbitrator, panel, agency or other governmental, administrative or judicial entity, which Claim involves, affects or relates to any assets, properties or operations of the Company or the conduct of the business of the Company prior to the Closing Date (a "Stockholder Third Party Claim"). As used herein, "Event of Breach" shall be and mean any one or more of the following: (i) any untruth or inaccuracy in any representation of the Stockholder, the Company or Mr. Hanna or the breach of any warranty of the Stockholder, the Company or Mr. Hanna contained in this Agreement, including, without limitation, any misrepresentation in, or omission from, any statement, certificate, schedule, exhibit, annex or other document furnished pursuant to this Agreement by the Stockholder, the Company or Mr. Hanna (or any representative of the Stockholder, the Company or Mr. Hanna) to UAG (or any representative of UAG) and any misrepresentation in or omission from any document furnished to UAG in connection with the Closing, and (ii) any failure of the Stockholder, the Company or Mr. Hanna duly to perform or observe any term, provision, covenant, agreement or condition on the part of the Stockholder, the Company or Mr. Hanna to be performed or observed. .2 INDEMNIFICATION BY UAG AND SUB. Notwithstanding the Closing, UAG and Sub indemnifies and agrees to fully defend, save and hold harmless on an after-tax basis the Stockholder, the Company (prior to Closing) and Mr. Hanna and any of their respective officers, directors, employees, stockholders, advisors, representatives, agents and Affiliates (each a "Stockholder Indemnified Party"), if a Stockholder Indemnified Party shall at any time or from time to time suffer any Costs arising, directly or indirectly, out of or resulting from, or shall pay or become obligated to pay any sum on account of, (i) any and all UAG Events of Breach (as defined below) or (ii) any Claim before or by any court, arbitrator, panel, agency or other governmental, administrative or judicial entity, which Claim involves, affects or relates to any assets, properties or operations of UAG or the conduct of the business of UAG and Sub after the Closing Date (a "UAG Third Party Claim"). As used herein, "UAG Event of Breach" shall be and mean any one or more of the following: (i) any untruth or inaccuracy in any representation of UAG or Sub or the breach of any warranty of UAG or Sub contained in this Agreement, including, without limitation, any misrepresentation in, or omission from, any statement, certificate, schedule, exhibit, annex or other document furnished pursuant to this Agreement by UAG (or any representative of UAG) to the Stockholder, the Company or Mr. Hanna (or any representative of the Stockholder, the Company or Mr. Hanna) and any misrepresentation in or omission from any document furnished to the Stockholder, the Company or Mr. Hanna in connection with the Closing, and (ii) any failure of UAG or Sub duly to perform or observe any term, provision, covenant, agreement or condition on the part of UAG or Sub to be performed or observed. .3 PROCEDURES. If (i) any Event of Breach occurs or is alleged and a UAG Indemnified Party asserts that the Stockholder, the Company or Mr. Hanna have become obligated to a UAG Indemnified Party pursuant to Section 9.1, or if any Stockholder Third Party Claim is begun, made or instituted as a result of which the Stockholder, the Company or Mr. Hanna may become obligated to a UAG Indemnified Party hereunder, or (ii) a UAG Event of Breach occurs or is alleged and a Stockholder Indemnified Party asserts that UAG has become obligated to a Stockholder Indemnified Party pursuant to Section 9.2, or if any UAG Third Party Claim is begun, made or instituted as a result of which UAG may become obligated to a Stockholder Indemnified Party hereunder (for purposes of this Article 9, any UAG Indemnified Party and any Stockholder Indemnified Party is sometimes referred to as an "Indemnified Party" and UAG, Sub, the Stockholder and Mr. Hanna are sometimes referred to as an "Indemnifying Party," and any UAG Third Party Claim and any Stockholder Third Party Claim is sometimes referred to as a "Third Party Claim," in each case as the context so requires), such Indemnified Party shall give written notice to the Indemnifying Party of its obligation to provide indemnification hereunder, provided that any failure to so notify the Indemnifying Party shall not relieve them from any liability that it may have to the Indemnified Party under this Article 9. If such notice relates to a Third Party Claim, each Indemnifying Party, jointly and severally, agrees to defend, contest or otherwise protect such Indemnified Party against any such Third Party Claim at its sole cost and expense. Such Indemnified Party shall have the right, but not the obligation, to participate at its own expense in the defense thereof by counsel of such Indemnified Party's choice and shall in any event cooperate with and assist the Indemnifying Party to the extent reasonably possible. If the Indemnifying Party fails timely to defend, contest or otherwise protect against such Third Party Claim, such Indemnified Party shall have the right to do so, including, without limitation, the right to make any compromise or settlement thereof, and such Indemnified Party shall be entitled to recover the entire Cost thereof from the Indemnifying Party, including, without limitation, attorneys' fees, disbursements and amounts paid (or of which such Indemnified Party has become obligated to pay) as the result of such Third Party Claim. Failure by the Indemnifying Party to notify such Indemnified Party of its or their election to defend any such Third Party Claim within fifteen (15) days after notice thereof shall have been given to the Indemnifying Party shall be deemed a waiver by the Indemnifying Party of its or their right to defend such Third Party Claim. If the Indemnifying Party assumes the defense of the particular Third Party Claim, the Indemnifying Party shall not, in the defense of such Third Party Claim, consent to entry of any judgment or enter into any settlement, except with the written consent of such Indemnified Party. In addition, the Indemnifying Party shall not enter into any settlement of any Third Party Claim except with the written consent of such Indemnified Party, which does not include as an unconditional term thereof the giving by the claimant or the plaintiff to such Indemnified Party a full release from all liability in respect of such Third Party Claim. Notwithstanding the foregoing, the Indemnifying Party shall not be entitled to control (but shall be entitled to participate at their own expense in the defense of), and the Indemnified Party shall be entitled to have sole control over, the defense or settlement of any Third Party Claim to the extent the Third Party Claim seeks an order, injunction or other equitable relief against the Indemnified Party which, if successful, could materially interfere with the business, operations, assets, condition (financial or otherwise) or prospects of the Indemnified Party. .4 OFFSET. In addition to and not in limitation of all rights of offset that an Indemnified Party may have under applicable law, the parties agree that, at any Indemnified Party's option, any or all amounts owing to such Indemnified Party under this Article 9 or any other provision of this Agreement or any other liability of the other parties (or any Affiliate of the other parties) to such Indemnified Party in connection with any of the Documents, may be recovered by the Indemnified Party by an offset against any or all amounts due to such other parties pursuant to this Agreement or the Documents. .5 REMEDIES. The rights of an Indemnified Party under this Article 9 are in addition to such other rights and remedies which such Indemnified Party may have under this Agreement, applicable law or otherwise. .6 DEFINITIONS. For purposes of this Article 9 "Costs" shall mean all liabilities, losses, costs, damages (not including consequential damages), expenses, claims, attorneys' fees, experts' fees, consultants' fees, and disbursements of any kind or of any nature whatsoever. For purposes of application of the indemnity provisions of this Article 9, the amount of any Cost arising from the breach of any representation, warranty, covenant or agreement shall be the entire amount of any Cost suffered, paid or required to be paid by the respective Indemnified Party as a result of such breach. 10 MISCELLANEOUS .1 SURVIVAL OF PROVISIONS. The respective representations, warranties, covenants and agreements of each of the parties to this Agreement (except covenants and agreements which are expressly required to be performed and are performed in full on or before the Closing Date) shall survive the Closing Date and the consummation of the transactions contemplated by this Agreement. In the event of a breach of any such representations, warranties or covenants, the party to whom such representations, warranties or covenants have been made shall have all rights and remedies for such breach available to it under the provisions of this Agreement or otherwise, whether at law or in equity, regardless of any disclosure to, or investigation made by or on behalf of, such party on or before the Closing Date. .2 FEES AND EXPENSES. If the Closing does not occur and Section 5.6 hereof is breached, then the Stockholder or the Company shall pay to UAG, within five (5) Business Days after receipt of a request therefor, an amount equal to all of the legal and other fees, costs and expenses incurred by UAG in connection with this Agreement and the transactions contemplated hereby. .3 HEADINGS. The section headings herein are for convenience of reference only, do not constitute part of this Agreement and shall not be deemed to limit or otherwise affect any of the provisions hereof. .4 NOTICES. All notices or other communications required or permitted hereunder shall be given in writing and shall be deemed sufficient if delivered by hand, recognized overnight delivery service for next business day delivery or facsimile transmission (with original to follow by mail) or mailed by registered or certified mail, postage prepaid (return receipt requested), as follows: If to the Company before the Closing Date: Gary Hanna Nissan 2850 Augusta Drive Las Vegas, Nevada 89109 with a copy to: Clark Greene & Associates, Ltd. 3770 Howard Hughes Parkway, Suite 195 Las Vegas, Nevada 89109-0940 Attn: A. Kent Greene, Esq. If to the Company after the Closing Date (in addition to the foregoing addresses): United Auto Group, Inc. 375 Park Avenue New York, New York 10022 Attn: George G. Lowrance Executive Vice President with a copy to: Rogers & Hardin 2700 International Tower 229 Peachtree Street, N.E. Atlanta, Georgia 30303 Attn: Michael Rosenzweig, Esq. If to the Stockholder or Mr. Hanna: 2850 Augusta Drive Las Vegas, Nevada 89109 with a copy to: Clark Greene & Associates, Ltd. 3770 Howard Hughes Parkway, Suite 195 Las Vegas, Nevada 89109-0940 Attn: A. Kent Greene, Esq. If to UAG or Sub: United Auto Group, Inc. 375 Park Avenue New York, New York 10022 Attn: George G. Lowrance Executive Vice President with a copy to: Rogers & Hardin 2700 International Tower 229 Peachtree Street, N.E. Atlanta, Georgia 30303 Attn: Michael Rosenzweig, Esq. or such other address as shall be furnished in writing by such party, and any such notice or communication shall be effective and be deemed to have been given as of the date so delivered or three (3) days after the date so mailed; provided, however, that any notice or communication changing any of the addresses set forth above shall be effective and deemed given only upon its receipt. .5 ASSIGNMENT. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, and the provisions of Article 9 hereof shall inure to the benefit of the Indemnified Parties referred to therein; provided, however, that neither this Agreement nor any of the rights, interests, or obligations hereunder may be assigned by any of the parties hereto without the prior written consent of the other parties. Notwithstanding the foregoing, UAG and Sub shall have the unrestricted right to assign this Agreement and to delegate all or any part of its obligations hereunder to any Affiliate of UAG or Sub, but in such event UAG shall remain fully liable for the performance of all of such obligations in the manner prescribed in this Agreement. .6 ENTIRE AGREEMENT. This Agreement (including the Schedules hereto) and the Documents embody the entire agreement and understanding of the parties with respect to the transactions contemplated hereby and supersede all prior written or oral commitments, arrangements or understandings between the parties with respect thereto and all prior drafts of this Agreement. There are no restrictions, agreements, promises, warranties, covenants or undertakings with respect to the transactions contemplated hereby other than those expressly set forth herein or in the Documents. Prior drafts of this Agreement shall not be used as a basis for interpreting this Agreement. .7 WAIVER AND AMENDMENTS. Each of the Stockholder, Mr. Hanna and the Company as one party, and UAG and Sub as the other party may by written notice to the other parties (i) extend the time for the performance of any of the obligations or other actions of the other parties, (ii) waive any inaccuracies in the representations or warranties of the other parties contained in this Agreement, (iii) waive compliance with any of the covenants of the other parties contained in this Agreement, (iv) waive performance of any of the obligations of the other parties created under this Agreement, or (v) waive fulfillment of any of the conditions to its own obligations under this Agreement. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach, whether or not similar. This Agreement may be amended, modified or supplemented only by a written instrument executed by the parties hereto. .8 COUNTERPARTS. This Agreement may be executed by facsimile signature(s) and in any number of counterparts, all of which shall be considered one and the same agreement and each of which shall be deemed an original. .9 ACCOUNTING TERMS. All accounting terms used herein which are not expressly defined or modified in this Agreement shall have the respective meanings given to them in accordance with GAAP. .10 SCHEDULES. Disclosure of any matter in any Schedule hereto or in the Financial Statements shall not be considered as disclosure pursuant to any other provision, subprovision, section or subsection of this Agreement or Schedule to this Agreement and shall not be deemed to limit any representations or warranties made herein. .11 SEVERABILITY. If any one or more of the provisions of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected thereby. To the extent permitted by applicable law, each party waives any provision of law which renders any provision of this Agreement invalid, illegal or unenforceable in any respect. .12 REMEDIES. None of the remedies provided for in this Agreement, including termination of this Agreement as set forth in Article 8, indemnification as set forth in Article 9, or the payment of certain fees, costs and expenses as set forth in Section 10.2, shall be the exclusive remedy of either party for a breach of this Agreement. The parties hereto shall have the right to seek any other remedy in law or equity in lieu of or in addition to any remedies provided in this Agreement, including an action for damages for breach of contract. .13 GOVERNING LAW. This Agreement shall be governed by and construed in accordance the laws of the State of Nevada without giving effect to any choice or conflict of law provision or rule that would cause the laws of any other jurisdiction to apply. .14 TIME IS OF THE ESSENCE. Time is of the essence for purposes of this Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. UNITED AUTO GROUP, INC. By: /s/ George G. Lowrance -------------------------------- George G. Lowrance Executive Vice President UAG NEVADA, INC. By: /s/ George G. Lowrance -------------------------------- Its: Vice President GARY HANNA NISSAN, INC. By: /s/ Gary W. Hanna -------------------------------- Gary W. Hanna President THE GARY W. HANNA FAMILY TRUST By: /s/ Gary W. Hanna -------------------------------- Trustee /s/ Gary W. Hanna ----------------------------------- GARY W. HANNA, INDIVIDUALLY EX-27 13 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS YEAR DEC-31-1997 DEC-01-1996 JAN-01-1997 JAN-01-1996 MAR-31-1997 DEC-31-1996 36,083 66,875 0 0 62,461 53,241 1,147 1,223 213,629 168,855 324,699 299,571 28,879 25,967 4,020 3,626 571,664 522,950 266,344 221,455 11,777 11,121 0 0 0 0 2 2 283,461 281,466 571,664 522,950 388,200 1,302,031 389,185 1,303,829 340,588 1,157,368 383,281 1,284,479 172 103 0 0 144 4,716 5,552 13,731 2,235 6,270 3,317 7,461 0 0 0 4,987 0 0 3,317 2,474 0.19 0.23 0.19 0.23
-----END PRIVACY-ENHANCED MESSAGE-----