Filed Pursuant to Rule 424(b)(3)
                                              Registration File No.: 333-35907
PROSPECTUS 

       OFFER FOR ALL OUTSTANDING 11% SENIOR SUBORDINATED NOTES DUE 2007 
            IN EXCHANGE FOR UP TO $150,000,000 PRINCIPAL AMOUNT OF 
                    11% SENIOR SUBORDINATED NOTES DUE 2007 
                                      OF 

                           UNITED AUTO GROUP, INC. 

THE NOTES ARE EFFECTIVELY SUBORDINATE TO SUBSTANTIALLY ALL OF THE OUTSTANDING 
 INDEBTEDNESS OF THE COMPANY AND THE GUARANTORS. THE COMPANY HAS NOT ISSUED, 
  AND DOES NOT HAVE ANY CURRENT FIRM ARRANGEMENTS TO ISSUE, ANY SIGNIFICANT 
         ADDITIONAL INDEBTEDNESS TO WHICH THE NOTES WOULD BE SENIOR. 

                              THE EXCHANGE OFFER 
      WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON DECEMBER 22, 1997 
                               UNLESS EXTENDED 

   United Auto Group, Inc., a Delaware corporation ("UAG" or the "Company"), 
hereby offers upon the terms and subject to the conditions set forth in this 
Prospectus and the accompanying Letter of Transmittal (which together 
constitute the "Exchange Offer"), to exchange $1,000 principal amount of its 
11% Senior Subordinated Notes due 2007 (the "New Notes") for each $1,000 
principal amount of its issued and outstanding 11% Senior Subordinated Notes 
due 2007 (the "Old Notes" and, together with the New Notes, the "Notes") from 
the holders thereof. The terms of the New Notes are identical in all material 
respects to the terms of the Old Notes, except that the New Notes have been 
registered under the Securities Act of 1933, as amended (the "Securities 
Act"), and therefore will not bear legends restricting their transfer and 
will not contain terms providing for an increase in the interest rate thereon 
under certain circumstances described in the Registration Rights Agreement 
(as defined). The New Notes evidence the same debt as the Old Notes and will 
be issued pursuant to, and entitled to the same benefits under, the Indenture 
(as defined) governing the Old Notes. 

   The Notes will mature on July 15, 2007. Interest on the Notes accrues at 
the rate of 11% per annum and is payable semiannually in arrears on January 
15 and July 15 of each year, commencing on January 15, 1998. The Notes are 
redeemable at the option of the Company, in whole or in part, at any time on 
or after July 15, 2002 at the redemption prices set forth herein, plus 
accrued and unpaid interest thereon to the redemption date. In addition, at 
any time prior to July 15, 2000, the Company may redeem the Notes at a 
redemption price equal to 111% of the principal amount thereof, plus accrued 
and unpaid interest thereon to the redemption date, with the net cash 
proceeds of one or more Public Equity Offerings (as defined); provided, 
however, that at least $100.0 million in aggregate principal amount of Notes 
shall remain outstanding after each such redemption. Upon the occurrence of a 
Change of Control (as defined), each holder of Notes will have the right to 
require the Company to repurchase all or any portion of such holder's Notes 
at a price equal to 101% of the principal amount thereof, plus accrued and 
unpaid interest thereon to the purchase date. There can be no assurance that 
upon a Change of Control the Company will have sufficient funds to purchase 
any of the Notes. 

                                                (Cover continued on next page) 

   SEE "RISK FACTORS" BEGINNING ON PAGE 15 FOR A DISCUSSION OF CERTAIN 
FACTORS THAT HOLDERS TO THE OLD NOTES SHOULD CONSIDER IN CONNECTION WITH THE 
EXCHANGE OFFER AND THAT PROSPECTIVE INVESTORS IN THE NEW NOTES SHOULD 
CONSIDER IN CONNECTION WITH SUCH INVESTMENT. 

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND 
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES 
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE 
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY 
                            IS A CRIMINAL OFFENSE. 

               The date of this Prospectus is November 21, 1997 


(Cover continued from previous page) 

   The Notes are unsecured obligations of the Company, subordinated in right 
of payment to all Senior Debt (as defined) of the Company, including all 
obligations under the Company's Senior Credit Facility (as defined). The 
Company may incur, under the Senior Credit Facility or otherwise, significant 
additional indebtedness to which the Notes would be subordinate, to the 
extent permitted under the Indenture, primarily to finance dealership 
acquisitions and the purchase of inventory. The Notes are fully and 
unconditionally guaranteed (subject to fraudulent conveyance laws) on a joint 
and several basis (the "Guarantees") by substantially all of the subsidiaries 
of the Company (the "Guarantors"). The Guarantees are unsecured obligations 
of the Guarantors, subordinated in right of payment to all Senior Debt of the 
Guarantors, including all of the Guarantors' obligations under their 
guarantees of the Senior Credit Facility and all floor plan notes payable (of 
which $243.0 million was outstanding as of September 30, 1997). Other than 
the Series B Notes (as defined), the Company has not issued, and does not 
have any current firm arrangements to issue, any significant indebtedness 
with which the Notes would rank pari passu in right of payment. 

   The New Notes will bear interest from and including the date of issuance 
thereof. Holders (as defined) whose Old Notes are accepted for exchange will 
receive accrued interest thereon to, but not including, the date of issuance 
of the New Notes, such interest to be payable with the first interest payment 
on the New Notes, but will not receive any payment in respect of interest on 
the Old Notes accrued after the issuance of the New Notes. 

   The Old Notes were originally issued and sold on July 23, 1997 in a 
transaction not registered under the Securities Act, in reliance upon the 
exemption provided in Section 4(2) of the Securities Act and Rule 144A under 
the Securities Act (the "Initial Offering"). The Company is making the 
Exchange Offer in reliance on the position of the staff of the Securities and 
Exchange Commission (the "Commission") as set forth in certain no-action 
letters addressed to other parties in other transactions. However, the 
Company has not sought its own no-action letter and there can be no assurance 
that the staff of the Commission would make a similar determination with 
respect to the Exchange Offer. 

   Each Holder desiring to participate in the Exchange Offer will be required 
to represent, among other things, that (i) it is not an "affiliate" (as 
defined in Rule 405 of the Securities Act) of the Company, (ii) it is not 
engaged in, and does not intend to engage in, and has no arrangement or 
understanding with any person to participate in, a distribution of the New 
Notes and (iii) it is acquiring the New Notes in the ordinary course of its 
business (a Holder unable to make the foregoing representations is referred 
to as a "Restricted Holder"). A Restricted Holder will not be able to 
participate in the Exchange Offer and may only sell its Old Notes pursuant to 
a registration statement containing the selling securityholder information 
required by Item 507 of Regulation S-K under the Securities Act, or pursuant 
to an exemption from the registration requirement of the Securities Act. 

   Each broker-dealer (other than a Restricted Holder) that receives New 
Notes for its own account pursuant to the Exchange Offer (a "Participating 
Broker-Dealer") is required to acknowledge in the Letter of Transmittal that 
it acquired the Old Notes as a result of market-making activities or other 
trading activities and that it will deliver a prospectus in connection with 
the resale of such New Notes. Based upon interpretations by the staff of the 
Commission, the Company believes that New Notes issued pursuant to the 
Exchange Offer to Participating Broker-Dealers may be offered for resale, 
resold, and otherwise transferred by a Participating Broker-Dealer upon 
compliance with the prospectus delivery requirements, but without compliance 
with the registration requirements, of the Securities Act. The Company has 
agreed that for a period of 120 days following consummation of the Exchange 
Offer it will make this Prospectus available, for use in connection with any 
such resale, to any Participating Broker-Dealer that notifies the Company in 
the Letter of Transmittal that it may be subject to such prospectus delivery 
requirements. The Company believes that during such period of time, delivery 
of this Prospectus, as it may be amended or supplemented, will satisfy the 
prospectus delivery requirements of a Participating Broker-Dealer engaged in 
market-making or other trading activities. See "Exchange Offer" and "Plan of 
Distribution". 

   Based upon interpretations by the staff of the Commission, the Company 
believes that New Notes issued pursuant to the Exchange Offer may be offered 
for resale, resold, and otherwise transferred by a Holder thereof (other than 
a Restricted Holder or a Participating Broker-Dealer) without compliance with 
the registration and prospectus delivery requirements of the Securities Act. 

                                                (Cover continued on next page) 

                                2           

(Cover continued from previous page) 

   The New Notes are new securities for which there is currently no market. 
The Company presently does not intend to apply for listing or quotation of 
the New Notes on any securities exchange or stock market. The Company has 
been advised by J.P. Morgan Securities Inc., Salomon Brothers Inc, CIBC Wood 
Gundy Securities Corp., Montgomery Securities and Scotia Capital Markets 
(USA) Inc. (the "Initial Purchasers") that, following completion of the 
Exchange Offer, they presently intend to make a market in the New Notes; 
however, the Initial Purchasers are not obligated to do so and any 
market-making activities with respect to the New Notes may be discontinued at 
any time without notice. There can be no assurance that an active public 
market for the New Notes will develop. 

   Any Old Notes not tendered and accepted in the Exchange Offer will remain 
outstanding and will be entitled to all the rights and preferences and will 
be subject to the limitations applicable thereto under the Indenture. 
Following consummation of the Exchange Offer, the holders of Old Notes will 
continue to be subject to the existing restrictions upon transfer thereof and 
the Company will have no further obligation to such holders to provide for 
the registration under the Securities Act of the Old Notes held by them. To 
the extent that Old Notes are tendered and accepted in the Exchange Offer, a 
holder's ability to sell untendered Old Notes could be adversely affected. It 
is not expected that an active market for the Old Notes will develop while 
they are subject to restrictions on transfer. See "Risk Factors -- 
Consequences of Failure to Exchange." 

   The Company will accept for exchange any and all Old Notes that are 
validly tendered and not withdrawn on or prior to 5:00 p.m., New York City 
time, on the date the Exchange Offer expires, which will be December 22, 1997 
(the "Expiration Date"), unless the Exchange Offer is extended by the Company 
in its sole discretion, in which case the term "Expiration Date" shall mean 
the latest date and time to which the Exchange Offer is extended. Tenders of 
Old Notes may be withdrawn at any time prior to 5:00 p.m., New York City 
time, on the Expiration Date. The Exchange Offer is not conditioned upon any 
minimum principal amount of Old Notes being tendered for exchange. However, 
the Exchange Offer is subject to certain conditions which may be waived by 
the Company and to the terms and provisions of the Registration Rights 
Agreement. Old Notes may be tendered only in denominations of $1,000 and 
integral multiples thereof. The Company has agreed to pay all of the expenses 
incurred by it in connection with the Exchange Offer. See "The Exchange 
Offer--Fees and Expenses." 

   This Prospectus, together with the Letter of Transmittal, is being sent to 
all registered holders of Old Notes as of November 19, 1997. 

   The Company will not receive any proceeds from this Exchange Offer. No 
dealer-manager has been retained in connection with this Exchange Offer. See 
"Use of Proceeds" and "Plan of Distribution." 

                                3           

NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY 
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN 
CONNECTION WITH THE EXCHANGE OFFER COVERED BY THIS PROSPECTUS. IF GIVEN OR 
MADE SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING 
BEEN AUTHORIZED BY THE COMPANY OR THE GUARANTORS. THIS PROSPECTUS DOES NOT 
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE NEW 
NOTES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO 
MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR 
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY 
IMPLICATIONS THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN 
THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY OR THE GUARANTORS SINCE THE 
DATE HEREOF. 

                              TABLE OF CONTENTS 



                                        PAGE 
                                      
Incorporation of Certain Documents by 
 Reference ...........................    5 
Prospectus Summary....................    6 
Risk Factors..........................   15 
Use of Proceeds.......................   22 
Capitalization........................   23 
Selected Consolidated Financial Data .   24 
The Exchange Offer....................   26 
Certain Relationships and Related 
 Transactions.........................   35 
Description of Senior Credit 
 Facility.............................   36 
Description of Notes..................   37 
Certain U.S. Federal Income Tax 
 Considerations.......................   62 
Plan of Distribution..................   64 
Legal Matters.........................   65 
Experts...............................   65 
Available Information.................   65 


               DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS 

   THIS PROSPECTUS INCLUDES "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING 
OF SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE SECURITIES 
EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"). ALL STATEMENTS OTHER 
THAN STATEMENTS OF HISTORICAL FACTS INCLUDED IN THIS PROSPECTUS OR 
INCORPORATED HEREIN BY REFERENCE, INCLUDING WITHOUT LIMITATION, CERTAIN 
STATEMENTS UNDER "PROSPECTUS SUMMARY," "MANAGEMENT'S DISCUSSION AND ANALYSIS 
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND "BUSINESS," REGARDING 
THE COMPANY'S FINANCIAL POSITION AND BUSINESS STRATEGY MAY CONSTITUTE 
FORWARD-LOOKING STATEMENTS. ALTHOUGH THE COMPANY BELIEVES THAT THE 
EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS ARE REASONABLE, IT 
CAN GIVE NO ASSURANCE THAT SUCH EXPECTATIONS WILL PROVE TO HAVE BEEN CORRECT. 
IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM 
THE COMPANY'S EXPECTATIONS ("CAUTIONARY STATEMENTS") ARE DISCLOSED IN THIS 
PROSPECTUS, INCLUDING WITHOUT LIMITATION IN CONJUNCTION WITH THE 
FORWARD-LOOKING STATEMENTS AND UNDER "RISK FACTORS." ALL SUBSEQUENT WRITTEN 
AND ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO THE COMPANY OR PERSONS 
ACTING ON ITS BEHALF ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE 
CAUTIONARY STATEMENTS. 

                                4           

   This Prospectus includes statistical data regarding the automotive 
retailing industry. Unless otherwise indicated, such data is taken or derived 
from information published by the Industry Analysis Division of the National 
Automobile Dealers Association in its NADA Data 1996, Crain Communications 
Inc. in its Automotive News 100-Year Almanac and 1997 Market Data Book and 
ADT Automotive, Inc. in its 1997 Used Car Market Report or provided to the 
Company by CNW Marketing Research. 

   NO AUTOMOBILE MANUFACTURER HAS BEEN INVOLVED, DIRECTLY, OR INDIRECTLY, IN 
THE PREPARATION OF THIS PROSPECTUS OR IN THE EXCHANGE OFFER BEING MADE 
HEREBY. NO MANUFACTURER HAS MADE ANY STATEMENTS OR REPRESENTATIONS IN 
CONNECTION WITH THE EXCHANGE OFFER OR HAS PROVIDED ANY INFORMATION OR 
MATERIALS THAT ARE USED IN CONNECTION WITH THE EXCHANGE OFFER, AND NO 
MANUFACTURER HAS ANY RESPONSIBILITY FOR THE ACCURACY OR COMPLETENESS OF THIS 
PROSPECTUS. 

               INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 

   The following documents filed by the Company with the Commission are 
incorporated herein by reference: 

   1. The Company's Annual Report on Form 10-K (File No. 1-12297) for the 
fiscal year ended December 31, 1996, filed pursuant to Section 13(a) of the 
Exchange Act. 

   2. The Company's Quarterly Reports on Form 10-Q (File No. 1-12297) for the 
fiscal periods ended March 31, 1997, June 30, 1997 and September 30, 1997. 

   3. The Company's Current Reports on Form 8-K (File No. 1-12297) filed by 
the Company on January 23, 1997, March 3, 1997, March 10, 1997, March 21, 
1997 (as amended by Form 8-K/A filed on April 30, 1997), April 21, 1997, May 
9, 1997, May 15, 1997 (as amended by Form 8-K/A filed on July 14, 1997), July 
8, 1997, July 15, 1997, August 7, 1997, September 24, 1997, October 31, 1997, 
November 6, 1997 and November 20, 1997. 

   All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 
or 15(d) of the Exchange Act after the date of this Prospectus and prior to 
the termination or consummation of the Exchange Offer shall be deemed to be 
incorporated by reference into this Prospectus and to be a part hereof from 
the dates of filing of such documents. 

   Any statement contained herein or in a document incorporated or deemed to 
be incorporated by reference herein shall be deemed to be modified or 
superseded for purposes of this Prospectus to the extent that a statement 
contained herein or in any other subsequently filed document which also is 
incorporated or deemed to be incorporated by reference herein modifies or 
supersedes such statement. Any such statement so modified or superseded shall 
not be deemed, except as so modified or superseded, to constitute a part of 
this Prospectus. 

                                5           

                              PROSPECTUS SUMMARY 

   The following summary is qualified in its entirety by, and should be read 
in conjunction with, the more detailed information and historical and pro 
forma financial statements included elsewhere in this Prospectus. Unless the 
context otherwise requires, references herein to the "Company" or "UAG" 
include United Auto Group, Inc. and its subsidiaries. 

                                 THE COMPANY 

   UAG is a leading acquirer, consolidator and operator of franchised 
automobile and light truck dealerships and related businesses. The Company is 
the second largest publicly-traded retailer of new motor vehicles in the 
United States. As of October 31, 1997, UAG operated 58 franchises located in 
Arizona, Arkansas, Connecticut, Florida, Georgia, Louisiana, Nevada, New 
Jersey, New York, North Carolina, South Carolina, Tennessee and Texas and 
representing 27 American, Asian and European brands. As an integral part of 
its dealership operations, UAG also sells used vehicles. All of UAG's 
franchised dealerships include integrated service and parts operations, which 
are an important source of recurring revenues. The Company also owns Atlantic 
Auto Finance Corporation ("Atlantic Finance"), an automobile finance company 
engaged in the purchase, sale and servicing of primarily prime credit quality 
automobile loans originated by both UAG and third-party dealerships. 

   The Company was incorporated in the State of Delaware in December 1990 and 
commenced dealership operations in October 1992. The Company's executive 
offices are located at 375 Park Avenue, New York, New York 10152, and its 
telephone number is (212) 223-3300. 

COMPETITIVE STRENGTHS 

   The Company has attained a leading position in its industry through a 
series of acquisitions. The Company attributes its success and its continued 
opportunities for growth and profitability to the following competitive 
strengths: 

  DIVERSE PRODUCT AND GEOGRAPHIC PORTFOLIO. Since its initial acquisition in 
  October 1992, the Company has completed 19 dealership acquisitions 
  organized into eight geographic hubs including the New York, Atlanta and 
  Phoenix metropolitan areas. Brand portfolio is carefully managed to reduce 
  the risks associated with both changes in consumer preferences and 
  dependence on any single manufacturer or market segment. Also, geographic 
  diversity mitigates the Company's exposure to regional economic and weather 
  conditions. The Company will continue to target dealerships in the South, 
  Southeast and Southwest regions of the United States, which benefit from 
  lower operating costs than those of other regions and favorable climatic 
  conditions throughout the year. 

  SCALE OF OPERATIONS. The Company's scale of operations allows it to enhance 
  revenues and reduce costs relative to smaller dealership groups and 
  stand-alone dealerships. For example, through its United AutoCare 
  subsidiary, UAG dealerships market a variety of aftermarket products and 
  services that generate additional revenues previously captured by 
  third-party vendors. The Company believes that United AutoCare's size and 
  large customer pool allow it to provide credit insurance at more favorable 
  rates than its smaller competitors. The Company's bulk purchasing of 
  appearance packages and other aftermarket products provides opportunities 
  for improved margins relative to smaller dealership groups. UAG also 
  benefits from its large number of dealerships and high sales volumes when 
  negotiating floor plan financing rates. Also, the Company believes that its 
  hub strategy provides opportunities to lower used vehicle acquisition costs 
  at the regional level. 

  ACCESS TO CAPITAL MARKETS. The Company believes that its proven ability to 
  access the capital markets is a competitive advantage. The capital raised 
  allows the Company to implement its acquisition program in order to 
  continue to participate in the consolidation of the automotive retailing 
  industry. The Company is often sought out by potential sellers who are 
  attracted by UAG's ability to acquire their dealerships for a combination 
  of cash and stock. 

  CUSTOMER FOCUS. Central to UAG's overall philosophy is customer-oriented 
  service designed to meet the needs of an increasingly sophisticated and 
  demanding automotive consumer. Each of the Company's dealerships is a 
  full-service operation, providing sales, service and parts departments. The 
  Company seeks to provide its customers with a satisfying, pleasant and 
  informative retailing experience, which entails "one-stop" shopping 
  convenience, competitive pricing and a sales staff that is knowledgeable 
  about product offerings and responsive to a customer's particular needs. 
  Continuous 

                                6           

  training of the sales force focuses on providing skills that improve its 
  interactions with customers. A key management tool at UAG is customer 
  service index ("CSI") scores, which are derived from data accumulated by 
  manufacturers through customer surveys. These scores are monitored 
  carefully by management to improve dealership operations and are used as a 
  factor in determining compensation of general managers. 

BUSINESS STRATEGY 

   UAG seeks to be a leader in the consolidation of the automotive retailing 
industry and to increase shareholder value through a strategy that includes 
the following principal elements: 

  ACQUIRE AND INTEGRATE PROFITABLE DEALERSHIP OPERATIONS. UAG seeks to 
  capitalize on continuing consolidation in the $675 billion U.S. automotive 
  retailing industry by selectively acquiring profitable dealerships. The 
  Company targets dealerships or dealership groups with established records 
  of profitability as well as with experienced management willing to remain 
  in place. The Company focuses on opportunities in geographic markets with 
  above-average projected population and job growth. Of the approximately 
  22,000 dealerships in the United States, the Company believes that at least 
  2,000 dealerships, some of which are members of dealership groups, meet its 
  acquisition criteria. The Company may also target dealerships in North 
  American markets outside the United States. The Company is also creating 
  regional hubs of dealerships that will be able to share administrative and 
  other operations to reduce costs. 

  GROW HIGHER-MARGIN OPERATING BUSINESSES. UAG is focusing on growing its 
  higher-margin businesses such as the retail sale of used vehicles, 
  aftermarket products and service and parts. UAG receives a steady supply of 
  used vehicles through trade-ins, vehicles coming off lease ("off-lease 
  vehicles") and used car auctions open only to new car dealers. In addition, 
  only new car dealers are able to sell used cars certified by manufacturers. 
  Through these programs, UAG is able to provide customers with 
  manufacturer-backed extended warranties and attractive financing on their 
  used car purchases. UAG also has the opportunity on each new or used 
  vehicle sold to generate incremental revenue from the sales of aftermarket 
  products, including accessories such as radios, cellular phones and alarms, 
  as well as agency services such as extended service contracts, credit 
  insurance policies and financing and lease contracts. Finally, each UAG new 
  car dealership offers an integrated service and parts department, which 
  provides an important recurring revenue stream to the Company's 
  dealerships. 

  IMPLEMENT "BEST PRACTICES." The Chairman's Committee, comprised of senior 
  executive officers and key managers, meets regularly to review the 
  operating performance of individual dealerships as well as to examine 
  important industry trends and, where appropriate, recommend specific 
  operating improvements. This facilitates implementation of successful 
  strategies throughout the organization so that each dealership can benefit 
  from the successes of the others as well as from the knowledge and 
  experience of UAG's senior management. Management also attends various 
  industry-sponsored leadership and management seminars and receives 
  continuing education in products, marketing strategies and management 
  information systems. The Company shares training techniques across its 
  dealership base and has made improving service absorption and aftermarket 
  revenues a Company-wide focus. 

  GENERATE INCREMENTAL REVENUE FROM AUTOMOBILE FINANCE BUSINESS. In 1996, 
  industry wide, greater than 70% of new and used automobiles purchased from 
  franchised dealerships and independent businesses were financed. To further 
  increase the incremental profit achievable through its vehicle sales by 
  capturing some of this financing business, the Company established Atlantic 
  Finance, an automobile finance company engaged in the purchase, sale and 
  servicing of primarily prime credit quality automobile loans originated by 
  both UAG and third-party dealerships. Led by an experienced management 
  team, Atlantic Finance seeks to grow by (i) increasing its business with 
  existing UAG dealerships, including those with which it has yet to commence 
  financing activities, (ii) commencing financing activities with dealerships 
  acquired by UAG in the future and (iii) using its presence in its local 
  operating markets to cultivate relationships with additional unaffiliated 
  dealerships. 

                                7           

PENDING ACQUISITIONS 

   Set forth below are all the material acquisitions with respect to which 
the Company has recently reached definitive agreements (the "Pending 
Acquisitions"). The automobile franchises to be acquired in the Pending 
Acquisitions are set forth in the chart below. The Exchange Offer is not 
conditioned upon the consummation of any of the Pending Acquisitions, and no 
assurance can be made that one or more of the Pending Acquisitions, each of 
which is subject to customary conditions (including manufacturer approvals), 
will not terminate prior to consummation. 

   On July 25, 1997, the Company reached a definitive agreement to acquire 
the Lynn Alexander Group, located in San Angelo, Texas, for a purchase price 
of $10.6 million in cash and a $1.3 million note. The Lynn Alexander Group 
had approximately $90.0 million in revenues in 1996. 

   On July 25, 1997, the Company reached a definitive agreement to acquire 
Classic Auto Group, located in the Philadelphia, Pennsylvania, metropolitan 
area, for a purchase price of $28.0 million in cash and a $2.0 million note. 
The Classic Auto Group had approximately $233.0 million in revenues in 1996. 

   On September 25, 1997, the Company reached a definitive agreement to 
acquire the Young Automotive Group, located in the Carolinas, Florida, 
Illinois and Indiana, for a purchase price of $50.0 million in cash and $25.0 
million in Common Stock. The Young Automotive Group had approximately $379.2 
million in revenues in 1996. 

ACQUISITION HISTORY 

   The following table sets forth information with respect to the dealerships 
that are owned as of October 31, 1997 by the Company and those that are 
proposed to be acquired in the Pending Acquisitions: 



                             DATE 
DEALERSHIP                   ACQUIRED   LOCATIONS            FRANCHISES HELD 
- ------------------------  ----------    -------------------- -------------------------------- 
                                                    
DiFeo Group 
 DiFeo Automotive Group         10/92   Danbury, CT          Chevrolet-Geo, Hyundai, Isuzu, 
                                                             Suzuki 
                                        Bound Brook, NJ      Lexus 
                                        Jersey City, NJ      Hyundai, Jeep-Eagle, Toyota 
                                        Tenafly, NJ          BMW 
                                        Nyack, NY            Mitsubishi, Toyota 
 DiFeo Nissan                   11/92   Jersey City, NJ      Nissan 
 DiFeo Chrysler-Plymouth        12/92   Jersey City, NJ      Chrysler-Plymouth 
 Fair Honda                      1/93   Danbury, CT          Honda 
 Fair Dodge                      2/93   Danbury, CT          Dodge 
 Gateway                         8/93   Toms River, NJ       Mitsubishi, Toyota 
Landers Auto                     8/95   Benton, AR           Chrysler-Plymouth, Dodge, GMC 
                                                             Truck, Jeep-Eagle 
Atlanta Toyota                   1/96   Duluth, GA           Toyota 
United Nissan (GA)               5/96   Morrow, GA           Nissan 
Peachtree Nissan                 7/96   Chamblee, GA         Nissan 
Sun Automotive Group            10/96   Phoenix, AZ          BMW, Land Rover 
                                        Scottsdale, AZ       Acura, Audi, Land Rover, Lexus, 
                                                             Porsche, Rolls-Royce/Bentley (a) 
Evans Group                     10/96   Duluth, GA           BMW 
                                        Conyers, GA          Nissan 
United Nissan (TN)              10/96   Chattanooga, TN      Nissan 
Crown Automotive                 3/97   Houston, TX          Chrysler-Plymouth, Dodge, 
                                                             Jeep-Eagle 
Hanna Nissan                     4/97   Las Vegas, NV        Nissan 
Staluppi Group                   4/97   Long Island, NY      Nissan(2), Toyota (2) 
                                        W. Palm Beach, FL    Chrysler-Plymouth, Infiniti, 
                                                             Jeep-Eagle, Nissan, Toyota 

                                8           

                             DATE 
DEALERSHIP                   ACQUIRED   LOCATIONS            FRANCHISES HELD 
- ------------------------  ----------    -------------------- -------------------------------- 
Reed Group                       5/97   Fayetteville, NC     Chevrolet 
                                        North Charleston, SC Chevrolet 
                                        Summerville, SC      Chevrolet-Geo, Oldsmobile 
Lance Landers                    6/97   Benton, AR           Buick, Isuzu, Pontiac 
Stone Mountain                   8/97   Stone Mountain, GA   Chrysler-Plymouth, Jeep-Eagle 
Shreveport Dodge                10/97   Shreveport, LA       Dodge 
Lynn Alexander Group              (b)   San Angelo, TX       Chevrolet, Chrysler-Plymouth, 
                                                             Dodge, Jeep-Eagle, Nissan 
Classic Auto Group                (b)   Cherry Hill, NJ      Buick, Saab 
                                        Moorestown, NJ       Chevrolet 
                                        Turnersville, NJ     Acura, BMW, Buick, Chevrolet, 
                                                             Honda, Nissan 
Young Automotive Group            (b)   Kissimmee, FL        Toyota 
                                        Bloomington, IL      Chevrolet 
                                        Indianapolis, IN     Chevrolet, Honda, Isuzu 
                                        Tipton, IN           Buick, Chevrolet, GMC Truck, 
                                                             Oldsmobile, Pontiac 
                                        Ashville, NC         Chevrolet 
                                        Goldsboro, NC        Cadillac, Chevrolet, Oldsmobile 
                                        Hilton Head, SC      BMW, Buick, GMC Truck, Pontiac 


(a)    Acquired February 1997. 
(b)    Acquisiton pending. 

SERIES B NOTES OFFERING 

   On September 16, 1997, the Company issued $50,000,000 aggregate principal 
amount of its 11% Senior Subordinated Notes due 2007, Series B (the "Series B 
Notes") in an offering exempt from registration under the Securities Act 
pursuant to Rule 144A thereunder. The Series B Notes are substantially 
identical to, and rank pari passu in right of payment with, the Notes. The 
Series B Notes were issued at 100.75% of their principal amount. The 
approximately $48.7 million in net proceeds of such offering were deposited 
with the Company's floor plan lenders and are available for working capital 
and general corporate purposes, including acquisitions. 

                                9           

                              THE EXCHANGE OFFER 

REGISTRATION RIGHTS AGREEMENT .  The Old Notes were sold by the Company on 
                                 July 23, 1997 to the Initial Purchasers, who 
                                 resold the Old Notes (i) to "qualified 
                                 institutional buyers" (as defined in Rule 
                                 144A under the Securities Act) in reliance 
                                 upon Rule 144A under the Securities Act and 
                                 (ii) outside the United States to persons 
                                 other than U.S. persons in reliance upon 
                                 Regulation S under the Securities Act. In 
                                 connection therewith, the Company, the 
                                 Guarantors named therein and the Initial 
                                 Purchasers entered into the Registration 
                                 Rights Agreement dated as of July 23, 1997 
                                 (the "Registration Rights Agreement"), 
                                 providing for, among other things, the 
                                 Exchange Offer. 

THE EXCHANGE OFFER ............  The Company is offering to exchange up to 
                                 $150,000,000 aggregate principal amount of 
                                 New Notes for up to $150,000,000 aggregate 
                                 principal amount of Old Notes issued in the 
                                 Initial Offering in reliance upon an 
                                 exemption from registration under the 
                                 Securities Act. Upon consummation of the 
                                 Exchange Offer, the terms of the New Notes 
                                 (including principal amount, interest rate, 
                                 maturity and ranking) will be identical in 
                                 all material respects to the terms of the 
                                 Old Notes for which they may be exchanged 
                                 pursuant to the Exchange Offer, except that 
                                 the New Notes have been registered under the 
                                 Securities Act and therefore will not bear 
                                 legends restricting their transfer and will 
                                 not contain terms providing for an increase 
                                 in the interest rate thereon under certain 
                                 circumstances described in the Registration 
                                 Rights Agreement. See "The Exchange 
                                 Offer--Purpose and Effect of the Exchange 
                                 Offer." 

MINIMUM CONDITION .............  The Exchange Offer is not conditioned upon 
                                 any minimum aggregate principal amount of 
                                 Old Notes being tendered for exchange. 

EXPIRATION DATE ...............  The Exchange Offer will expire at 5:00 p.m., 
                                 New York City time, on December 22, 1997, 
                                 unless extended (the "Expiration Date"). See 
                                 "The Exchange Offer--Expiration Date; 
                                 Extensions; Amendments." 

EXCHANGE DATE .................  The date of acceptance for exchange of the 
                                 Old Notes will be the first business day 
                                 practicable following the Expiration Date. 

CONDITIONS TO THE EXCHANGE 
OFFER .........................  The obligation of the Company to consummate 
                                 the Exchange Offer is subject to certain 
                                 conditions, including the absence of (i) 
                                 certain types of litigation or laws, (ii) 
                                 certain adverse changes relating to the 
                                 Company, (iii) certain financial or 
                                 political crises and (iv) unobtained 
                                 governmental approvals. See "The 

                               10           

                                 Exchange Offer--Conditions." The Company 
                                 reserves the right to terminate or amend the 
                                 Exchange Offer at any time prior to the 
                                 Expiration Date upon the occurrence of any 
                                 such condition. 

WITHDRAWAL RIGHTS .............  Tenders may be withdrawn at any time prior 
                                 to the Expiration Date. Any Old Notes not 
                                 accepted for any reason will be returned 
                                 without expense to the tendering holders 
                                 thereof as promptly as practicable after the 
                                 expiration or termination of the Exchange 
                                 Offer. See "The Exchange Offer--Withdrawal 
                                 of Tenders." 

PROCEDURES FOR TENDERING OLD 
NOTES .........................  See "The Exchange Offer--Procedures for 
                                 Tendering." 

FEDERAL INCOME TAX 
CONSEQUENCES ..................  The exchange of Old Notes for New Notes by 
                                 Holders will not be a taxable exchange for 
                                 federal income tax purposes, and Holders 
                                 should not recognize any taxable gain or 
                                 loss or any interest income as a result of 
                                 such exchange. See "Certain U.S. Federal 
                                 Income Tax Considerations." 

CERTAIN REPRESENTATIONS .......  Each Holder desiring to participate in the 
                                 Exchange Offer will be required to 
                                 represent, among other things, that (i) it 
                                 is not an "affiliate" (as defined in Rule 
                                 405 of the Securities Act) of the Company, 
                                 (ii) it is not engaged in, and does not 
                                 intend to engage in, and has no arrangement 
                                 or understanding with any person to 
                                 participate in, a distribution of the New 
                                 Notes and (iii) it is acquiring the New 
                                 Notes in the ordinary course of its business 
                                 (a Holder unable to make the foregoing 
                                 representations is referred to as a 
                                 "Restricted Holder"). 

TRANSFER RESTRICTIONS ON NEW 
NOTES .........................  Based upon interpretations by the staff of 
                                 the Commission, the Company believes that 
                                 New Notes issued pursuant to the Exchange 
                                 Offer to Participating Broker-Dealers may be 
                                 offered for resale, resold, and otherwise 
                                 transferred by a Participating Broker-Dealer 
                                 upon compliance with the prospectus delivery 
                                 requirements, but without compliance with 
                                 the registration requirements, of the 
                                 Securities Act. The Company has agreed that 
                                 for a period of 120 days following 
                                 consummation of the Exchange Offer it will 
                                 make this Prospectus available, for use in 
                                 connection with any such resale, to any 
                                 Participating Broker-Dealer that notifies 
                                 the Company in the Letter of Transmittal 
                                 that it may be subject to such prospectus 
                                 delivery requirements. The Company believes 
                                 that during such period of time, delivery of 
                                 this Prospectus, as it may be amended or 
                                 supplemented, will satisfy the prospectus 
                                 delivery requirements of a Participating 
                                 Broker-Dealer engaged in market-making or 
                                 other trading activities. See "Exchange 
                                 Offer" and "Plan of Distribution." Based 
                                 upon interpretations by 

                               11           

                                 the staff of the Commission, the Company 
                                 believes that New Notes issued pursuant to 
                                 the Exchange Offer may be offered for 
                                 resale, resold, and otherwise transferred by 
                                 a Holder thereof (other than a Restricted 
                                 Holder or a Participating Broker-Dealer) 
                                 without compliance with the registration and 
                                 prospectus delivery requirements of the 
                                 Securities Act. 

EFFECT ON HOLDERS OF OLD 
NOTES .........................  As a result of the making of this Exchange 
                                 Offer, and upon acceptance for exchange of 
                                 all validly tendered Old Notes pursuant to 
                                 the terms of this Exchange Offer, the 
                                 holders of the Old Notes will have no 
                                 further registration or other rights under 
                                 the Registration Rights Agreement, except 
                                 under certain limited circumstances. Holders 
                                 of the Old Notes who do not tender their Old 
                                 Notes in the Exchange Offer will continue to 
                                 hold such Old Notes and will be entitled to 
                                 all the rights and limitations applicable 
                                 thereto under the Indenture dated as of July 
                                 23, 1997 among the Company, the Guarantors 
                                 and The Bank of New York, as trustee (the 
                                 "Trustee"), relating to the Old Notes and 
                                 the New Notes (as amended, the "Indenture"). 
                                 All untendered, and tendered but unaccepted, 
                                 Old Notes will continue to be subject to the 
                                 restrictions on transfer provided for in the 
                                 Old Notes and the Indenture. To the extent 
                                 that Old Notes are tendered and accepted in 
                                 the Exchange Offer, the trading market, if 
                                 any, for the Old Notes could be adversely 
                                 affected. See "Risk Factors--Consequences of 
                                 Failure to Exchange." 

                               12           

                                THE NEW NOTES 

ISSUER ........................  United Auto Group, Inc. 

SECURITIES OFFERED ............  $150,000,000 aggregate principal amount of 
                                 11% Senior Subordinated Notes due 2007. 

MATURITY DATE .................  July 15, 2007. 

INTEREST PAYMENT DATES ........  January 15 and July 15, commencing January 
                                 15, 1998. 

OPTIONAL REDEMPTION ...........  The New Notes will be redeemable at the 
                                 option of the Company, in whole or in part, 
                                 at any time on or after July 15, 2002 at the 
                                 redemption prices set forth herein, plus 
                                 accrued and unpaid interest thereon to the 
                                 redemption date. In addition, on or prior to 
                                 July 15, 2000, the Company may redeem the 
                                 Notes at a redemption price equal to 111% of 
                                 the principal amount thereof, plus accrued 
                                 and unpaid interest thereon to the 
                                 redemption date, with the net cash proceeds 
                                 of one or more Public Equity Offerings; 
                                 provided, however, that at least $100.0 
                                 million in aggregate principal amount of 
                                 Notes shall remain outstanding after each 
                                 such redemption. See "Description of 
                                 Notes--Optional Redemption." 

GUARANTEES ....................  The New Notes will be fully and 
                                 unconditionally guaranteed (subject to 
                                 fraudulent conveyance laws) on a joint and 
                                 several basis by substantially all of the 
                                 subsidiaries of the Company, so long as such 
                                 subsidiaries are guarantors under the Senior 
                                 Credit Facility. See "Description of 
                                 Notes--The Guarantees." 

SUBORDINATION .................  The New Notes are unsecured obligations of 
                                 the Company, subordinated in right of 
                                 payment to all Senior Debt of the Company, 
                                 including all obligations under the 
                                 Company's Senior Credit Facility. The 
                                 Guarantees will be unsecured obligations of 
                                 the Guarantors, subordinated in right of 
                                 payment to all Senior Debt of the 
                                 Guarantors, including all of the Guarantors' 
                                 obligations under their guarantees of the 
                                 Senior Credit Facility and all floor plan 
                                 notes payable (of which $243.0 million was 
                                 outstanding as of September 30, 1997). The 
                                 Notes are effectively subordinate to 
                                 substantially all of the outstanding 
                                 Indebtedness of the Company and the 
                                 Guarantors. The Company has not issued, and 
                                 does not have any current firm arrangements 
                                 to issue, any significant additional 
                                 Indebtedness to which the Notes would be 
                                 senior. See "Description of 
                                 Notes--Subordination." 

CHANGE OF CONTROL .............  Upon the occurrence of a Change of Control, 
                                 each holder of New Notes will have the right 
                                 to require the 

                               13           

                                 Company to purchase all or any portion of 
                                 such holder's New Notes at a price equal to 
                                 101% of the principal amount thereof, plus 
                                 accrued and unpaid interest thereon to the 
                                 date of purchase. The terms of the Senior 
                                 Credit Facility may limit the Company's 
                                 ability to repurchase any New Notes upon a 
                                 Change of Control. There can be no assurance 
                                 that upon a Change of Control the Company 
                                 will have sufficient funds to purchase any 
                                 of the New Notes. See "Description of 
                                 Notes--Change of Control." 

COVENANTS .....................  The Indenture contains certain covenants 
                                 that, among other things, limit the ability 
                                 of the Company or any Restricted Subsidiary 
                                 to incur additional Indebtedness, make 
                                 certain Restricted Payments and Investments, 
                                 create Liens, enter into transactions with 
                                 Affiliates or consummate certain merger, 
                                 consolidation or similar transactions. In 
                                 addition, the Company will be required to 
                                 offer to purchase New Notes at 100% of the 
                                 principal amount thereof with the net 
                                 proceeds of certain asset sales. These 
                                 covenants are subject to a number of 
                                 significant exceptions and qualifications. 
                                 See "Description of Notes." 

   FOR THE DEFINITIONS OF CERTAIN CAPITALIZED TERMS USED IN THIS SUMMARY, SEE 
"DESCRIPTION OF NOTES." 

                                 RISK FACTORS 

   Before tendering their Old Notes for New Notes offered hereby, holders of 
Old Notes should consider carefully certain factors, including the following, 
which (other than the one referenced in clause (i) below) are generally 
applicable to the Old Notes as well as the New Notes: (i) holders of Old 
Notes who do not exchange pursuant to the Exchange Offer will suffer certain 
adverse consequences; (ii) the Company is subject to the influence of the 
various manufacturers whose franchises it holds; (iii) the Notes and the 
Guarantees are subordinated to all Senior Debt of the Company and the 
Guarantors, respectively; (iv) the Company is leveraged and subject to 
restrictions imposed by the terms of its indebtedness; (v) many of the 
Company's franchise agreements impose restrictions upon the transferability 
of the Common Stock; (vi) the Company's growth depends in large part on its 
ability to manage expansion, control costs in its operations and consolidate 
dealership acquisitions; (vii) the Company will require substantial 
additional capital to acquire automobile dealerships and purchase inventory; 
(viii) unit sales of motor vehicles historically have been cyclical; (ix) the 
automotive retailing industry is highly competitive; (x) the automotive 
retailing industry is a mature industry; (xi) the Company's success depends 
to a significant extent on key members of its management; and (xii) the 
Company's business is seasonal. For a fuller discussion of these and other 
risk factors, see "Risk Factors." 

                               14           

                                 RISK FACTORS 

   In addition to the other information in this Prospectus, before tendering 
their Old Notes for New Notes offered hereby, holders of Old Notes should 
consider carefully the following factors, which (other than "Consequences of 
Failure to Exchange") are generally applicable to the Old Notes as well as 
the New Notes. 

CONSEQUENCES OF FAILURE TO EXCHANGE 

   Holders of Old Notes who do not exchange their Old Notes for New Notes 
pursuant to the Exchange Offer will continue to be subject to the 
restrictions on transfer of such Old Notes as set forth in the legend thereon 
as a consequence of the issuance of the Old Notes pursuant to exemptions 
from, or in transactions not subject to, the registration requirements of the 
Securities Act and applicable state securities laws. In general, the Old 
Notes may not be offered or sold unless registered under the Securities Act 
and applicable state securities laws, or pursuant to an exemption therefrom. 
Except under certain limited circumstances, the Company does not intend to 
register the Old Notes under the Securities Act. In addition, any holder of 
Old Notes who tenders in the Exchange Offer for the purpose of participating 
in a distribution of the New Notes may be deemed to have received restricted 
securities and, if so, will be required to comply with the registration and 
prospectus delivery requirements of the Securities Act in connection with any 
resale transaction. To the extent Old Notes are tendered and accepted in the 
Exchange Offer, the trading market, if any, for the Old Notes not tendered 
could be adversely affected. See "The Exchange Offer." 

INFLUENCE OF AUTOMOBILE MANUFACTURERS 

   Each of the Company's dealerships operates pursuant to a franchise 
agreement between the applicable automobile manufacturer (or authorized 
distributor thereof, referred to herein as the "manufacturer") and the 
subsidiary of the Company that operates such dealership, and the Company is 
dependent to a significant extent on its relationship with such 
manufacturers. Manufacturers exercise a great degree of control over 
dealerships, and the franchise agreement provides for termination or 
non-renewal for a variety of causes. The Company from time to time has been 
in non-compliance with certain provisions of certain of its franchise 
agreements, such as the obligation to obtain prior manufacturer approval of 
changes in dealership management. Actions taken by manufacturers to exploit 
their superior bargaining position could have a material adverse effect on 
the Company. For example, Saturn Corporation's refusal to grant its approval 
for the IPO and its assertion of an alleged right of first refusal with 
respect to one franchise necessitated the Company's transfer of the two 
Saturn franchises in its DiFeo Group to an affiliated holding company. See 
"--Stock Ownership/Issuance Limits." Furthermore, prior manufacturer approval 
is required with respect to acquisitions of automobile dealerships, and a 
manufacturer may deny the Company's application to make an acquisition or 
seek to impose further restrictions on the Company as a condition to granting 
approval of an acquisition. See "--Risks Associated with Acquisitions." 

   Many manufacturers attempt to measure customers' satisfaction with their 
sales and warranty service experiences through systems, which vary from 
manufacturer to manufacturer, generally known as the CSI. These manufacturers 
may use a dealership's CSI scores as a factor in evaluating applications for 
additional dealership acquisitions and other matters. Certain dealerships of 
the Company have had difficulty from time to time meeting their 
manufacturers' CSI standards. The components of CSI have been modified from 
time to time in the past, and there is no assurance that such components will 
not be further modified or replaced by different systems in the future. 
Failure of the Company's dealerships to comply with the standards imposed by 
manufacturers at any given time may have a material adverse effect on the 
Company. 

   The success of each of the Company's franchises is, in large part, 
dependent upon the overall success of the applicable manufacturer. 
Accordingly, the success of the Company is linked to the financial condition, 
management, marketing, production and distribution capabilities of the 
manufacturers of which the Company is a franchisee. Accordingly, events, such 
as labor strikes, that may adversely affect a manufacturer may also adversely 
affect the Company. For example, a strike of the independent truckers who 
distribute Chrysler Corporation ("Chrysler") motor vehicles adversely 
affected the Company in the second half of 1995. Similarly, the delivery of 
vehicles from manufacturers later than scheduled, which may occur 
particularly during periods of new product introductions, can lead to reduced 
sales during such periods. This has been experienced at certain of the 
Company's dealerships from time to time, including in the third 

                               15           

quarter of 1996. Moreover, any event that causes adverse publicity involving 
such manufacturers may have an adverse effect on the Company regardless of 
whether such event involves any of the Company's dealerships. 

SUBORDINATION OF THE NOTES AND THE GUARANTEES; RELEASE OF GUARANTEES 

   The Notes are subordinated in right of payment to all Senior Debt of the 
Company, including all obligations under the Senior Credit Facility. In the 
event of the bankruptcy, liquidation or reorganization of the Company, the 
assets of the Company will be available to pay obligations on the Notes only 
after all Senior Debt of the Company has been paid in full, and sufficient 
assets may not remain to pay amounts due on any or all of the Notes then 
outstanding. Similarly, the Guarantees will be subordinated in right of 
payment to all Senior Debt of the Guarantors, including the Guarantors' 
obligations under their guarantees of the Senior Credit Facility and all 
floor plan notes payable (of which $243.0 million was outstanding as of 
September 30, 1997). In certain circumstances, provisions of the Senior Debt 
of the Company or the Guarantors could prohibit payments of amounts due to 
holders of the Notes. See "Description of Notes -- Subordination." Additional 
Senior Debt may be incurred by the Company and the Guarantors from time to 
time, subject to certain limitations. See "Description of Notes -- Covenants 
- -- Limitation on Incurrence of Indebtedness." 

   Any Guarantor may be released from its Guarantee if such Guarantor is 
released from its guarantee of the Senior Credit Facility. See "Description 
of Notes -- The Guarantees." Upon such release, the Notes will be 
structurally subordinated to all liabilities of such Guarantor. 

LEVERAGE; RESTRICTIONS IMPOSED BY TERMS OF THE COMPANY'S INDEBTEDNESS 

   As of September 30, 1997, the Company's total consolidated indebtedness 
(including floor plan notes payable) and total stockholders' equity was 
$494.6 million and $323.7 million, respectively, and total indebtedness 
represented 60.4% of total capitalization. 

   The degree to which the Company is leveraged could have important 
consequences to the holders of Notes, including: (i) the Company's ability to 
obtain additional financing for working capital (including inventory 
financing), capital expenditures, acquisitions or other purposes may be 
restricted; (ii) a substantial portion of the Company's cash flow from 
operations will be required to be used for debt service; and (iii) the 
Company's leveraged position may make it more vulnerable to economic 
downturns and may limit its ability to withstand competitive pressures. In 
addition, the Company's operating flexibility with respect to certain 
business matters will be limited by covenants contained in the Indenture and 
the Senior Credit Facility. 

   The Company believes that, based on its current level of operations, it 
will have sufficient capital to carry on its business and will be able to 
meet its scheduled debt service requirements. However, there can be no 
assurance that the future cash flow of the Company will be sufficient to meet 
the Company's obligations and commitments. If the Company is unable to 
generate sufficient cash flow from operations in the future to service its 
indebtedness and to meet its other commitments, the Company will be required 
to adopt one or more alternatives, such as refinancing or restructuring its 
indebtedness, selling material assets or operations or seeking to raise 
additional debt or equity capital. There can be no assurance that any of 
these actions could be effected on a timely basis or on satisfactory terms or 
that these actions would enable the Company to continue to satisfy its 
capital requirements. In addition, the terms of existing or future franchise 
agreements or debt agreements, including the Indenture and the Senior Credit 
Facility, may prohibit the Company from adopting any of these alternatives. 
See "--Stock Ownership/Issuance Limits," "Description of Senior Credit 
Facility" and "Description of Notes." 

STOCK OWNERSHIP/ISSUANCE LIMITS 

   A number of manufacturers impose restrictions upon the transferability of 
the Common Stock. The most prohibitive restrictions, imposed by American 
Honda Motor Co., Inc. ("Honda"), provide that, under certain circumstances, 
the Company may be forced to sell or surrender its Honda and Acura franchises 
if a person or entity acquires a 5% ownership interest in the Company if 
Honda objects to such acquisition within 180 days; however, so long as 
control of the Company is held by its original non-public stockholders, any 
bank, mutual fund, insurance company or pension fund may acquire up to a 10% 
ownership interest 

                               16           

(15% ownership interest in the case of any entity in its capacity as 
investment advisor, trustee or custodian for the benefit of third parties) in 
the Company without such consent but only if such bank, mutual fund, 
insurance company or pension fund is not owned or controlled by or does not 
own 15% or more of, or control, any entity (other than an automobile 
dealership) that competes with Honda or its affiliates in manufacturing, 
marketing or selling automotive products or services. Similarly, several 
manufacturers have the right to approve the acquisition of 20% ownership 
interests in the Company. 

   In addition, the Company has agreed with Honda that no more than 40% of 
the Company's capital stock (on a fully diluted basis) may be publicly held 
at any time. The Company believes that slightly less than 40% of the Common 
Stock (on a fully diluted basis) is currently publicly held. A substantial 
number of shares of Common Stock are eligible for public sale pursuant to the 
terms of Rule 144 under the Securities Act, and the Company is in the process 
of registering a substantial number of outstanding shares on a "shelf" 
registration statement. See "--Control by Principal Stockholders." Only the 
Company's three largest stockholders are prohibited from selling any of their 
shares without Honda's consent. Similarly, a number of manufacturers, 
including Chrysler, continue to prohibit changes in ownership that may affect 
management control of the Company. In connection with the IPO, Chrysler 
agreed that it will not consider the issuance of up to 40% of the Common 
Stock (on a fully diluted basis) to be a change of control. However, future 
acquisitions or sales of substantial amounts of shares in the market may 
affect management control. Actions by its stockholders or prospective 
stockholders which would violate any of the above restrictions are generally 
outside the control of the Company, and if the Company is unable to 
renegotiate such restrictions, it may be forced to terminate or sell one or 
more franchises, which could have a material adverse effect on the Company. 
Since Honda has recently expressed an unwillingness to relax its 
restrictions, the Company may be required to terminate or sell its two Honda 
franchises. Honda's current position may inhibit the Company's ability to 
acquire dealership groups that include Honda franchises. Finally, Honda has 
the right to approve any future public offerings of capital stock, and the 
consent of other manufacturers may be needed as well. This may impede the 
Company's ability to raise required capital, including to make payments in 
respect of the Notes. See "--Capital Requirements." 

RISKS ASSOCIATED WITH ACQUISITIONS 

   The Company's growth depends in large part on its ability to manage 
expansion, control costs in its operations and consolidate dealership 
acquisitions into existing operations. This strategy will entail reviewing 
and potentially reorganizing acquired dealership operations, corporate 
infrastructure and systems and financial controls. Unforeseen expenses, 
difficulties, complications and delays frequently encountered in connection 
with the rapid expansion of operations could inhibit the Company's growth. 

   There can be no assurance that the Company will identify acquisition 
candidates that would result in the most successful combinations or that 
acquisitions will be able to be consummated on acceptable terms. The 
magnitude, timing and nature of future acquisitions will depend upon various 
factors, including the availability of suitable acquisition candidates, the 
negotiation of acceptable terms, the Company's financial capabilities, the 
availability of skilled employees to manage the acquired companies and 
general economic and business conditions. In particular, the increasing 
competition among potential acquirers has resulted in higher prices being 
paid for attractive targets. 

   In addition, the Company's future growth via acquisition of automobile 
dealerships will depend on its ability to obtain the requisite manufacturer 
approvals. There can be no assurance that manufacturers will grant such 
approvals. A number of manufacturers have policies limiting the number of 
franchises that may be held by any one company. For example, it is currently 
the policy of Toyota Motor Sales ("Toyota") to restrict any company from 
holding more than seven Toyota or more than three Lexus franchises and 
restrict the number of franchises held within certain geographic areas. 
Toyota has also recently announced a policy requiring a nine-month waiting 
period between acquisitions of Toyota franchises and between acquisitions of 
Lexus franchises. Similarly, it is currently the policy of Honda to restrict 
any company from holding more than seven Honda or more than three Acura 
franchises and restrict the number of franchises held within certain 
geographic areas. Honda and Toyota have sued a competitor of the Company to 
enforce such policies. At October 31, 1997, the Company held 58 franchises, 
including 14 Chrysler franchises, ten Nissan franchises (of which one is 
Infiniti), nine Toyota franchises (of which two are Lexus), eight General 
Motors Corporation ("GM") franchises, three BMW franchises and two Honda 
franchises (of which one is Acura). 

                               17           

The Company is among the largest Chrysler, Toyota, Nissan and BMW dealers in 
the United States. See "--Influence of Automobile Manufacturers" and 
"Business -- Acquisition History." 

   Alternatively, in connection with acquisitions by the Company, one or more 
manufacturers may seek to impose further restrictions on the Company in 
connection with their approval of an acquisition. For example, each of GM and 
Chrysler conditioned its approval of the acquisition of Landers Auto upon the 
Company's agreement to implement certain measures at its existing GM and 
Chrysler dealerships, respectively, to provide certain additional training to 
the employees at such dealerships and to achieve and maintain higher CSI 
scores. If such goals are not attained, the Company may be precluded from 
acquiring, whether directly from GM or Chrysler or through acquisitions, 
additional GM or Chrysler franchises and it may lead GM or Chrysler to 
conclude that it has a basis pursuant to which it may seek to terminate or 
refuse to renew the Company's existing GM or Chrysler franchises. In 
addition, Nissan Motor Corporation U.S.A. ("Nissan") conditioned the 
Company's acquisitions of the Nissan franchises held by the Evans Group and 
United Nissan (TN) upon the Company's agreeing to grant to Nissan an option 
to acquire the Evans Group's Nissan franchise. Moreover, factors outside the 
Company's control may cause a manufacturer to reject the Company's 
application to make acquisitions. See "--Influence of Automobile 
Manufacturers." 

CAPITAL REQUIREMENTS 

   The Company requires substantial capital in order to acquire automobile 
dealerships. Such capital might be raised through additional public or 
private financings, as well as borrowings and other sources. Other than the 
Senior Credit Facility, which is temporarily unavailable (see "Description of 
Senior Credit Facility"), the Company does not have any commitments or 
immediate plans with respect to acquisition financing, and there can be no 
assurance that additional or sufficient financing will be available, or, if 
available, that it will be available on acceptable terms. Moreover, the 
Company may be impeded by certain manufacturers from accessing the public 
equity markets. See "--Stock Ownership/Issuance Limits." In addition, a 
decline in the market price of the Common Stock for any reason, including, 
without limitation, a perception that sales of substantial amounts of Common 
Stock could occur, may increase the amount of cash required by the Company to 
finance acquisitions. See "--Control by Principal Stockholders." If adequate 
funds are not available, the Company may be required to significantly curtail 
its acquisition program. 

   In addition, the Company is dependent to a significant extent on its 
ability to finance the purchase of inventory, which in the automotive retail 
industry involves significant sums of money in the form of floor plan 
financing. As of September 30, 1997, the Company had $243.0 million of floor 
plan notes payable. Substantially all the assets of the Company's dealerships 
are pledged to secure such indebtedness, which may impede the Company's 
ability to borrow from other sources. The Company currently has floor plan 
facilities with a variety of lenders, including primarily Chrysler Financial 
Corporation and World Omni Financial Corp. Most of such lenders are 
associated with manufacturers with whom the Company has franchise agreements. 
Consequently, deterioration of the Company's relationship with a manufacturer 
could adversely affect its relationship with the affiliated floor plan lender 
and vice versa. See "--Influence of Automobile Manufacturers." 

   The operations of Atlantic Finance also require substantial borrowings. 
See "--Risks Associated with Automobile Finance Subsidiary -- Capital 
Requirements; Interest Rate Fluctuations." 

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. There can be no assurance 
that the industry will not experience sustained periods of decline in vehicle 
sales in the future, and that such decline would not have a material adverse 
effect on the Company. 

                               18           

COMPETITION 

   The automotive retailing industry is highly competitive with respect to 
price, service, location and selection. The Company competes with numerous 
automobile dealerships in each of its market segments, many of which are 
large and have significant financial and marketing resources. The Company 
also competes with private market buyers and sellers of used cars, used car 
dealers, other franchised dealers, service center chains and independent 
shops for service and repair business. In recent years, automobile dealers 
have also faced increased competition in the sale of vehicles from automobile 
rental agencies, independent leasing companies and used-car "superstores," 
some of which employ sales techniques such as "haggle-free" pricing. Some of 
these recent market entrants are capable of operating on smaller gross 
margins than those on which the Company is capable of operating because they 
have lower overhead and sales costs. 

MATURE INDUSTRY 

   The automotive retailing industry is a mature industry in which minimal 
growth in unit sales of new vehicles is expected. Accordingly, growth in the 
Company's revenues and earnings will depend significantly on the Company's 
ability to acquire and consolidate profitable dealerships, to grow its 
higher-margin businesses and to expand its automobile finance business. 

DEPENDENCE ON KEY PERSONNEL 

   The Company believes that its success will depend to a significant extent 
upon the efforts and abilities of the executive management of the Company and 
its subsidiaries. The loss of the services of one or more of these key 
employees could have a material adverse effect on the Company. The Company's 
business will also be dependent upon its ability to continue to attract and 
retain qualified personnel, including key management in connection with 
future acquisitions. 

SEASONALITY 

   The Company's business is seasonal, with a disproportionate amount of 
vehicle sales occurring in the second and third fiscal quarters. The 
dealerships of the DiFeo Group and the Long Island dealerships of the 
Staluppi Group, which are located in the New York metropolitan area, are 
those affected most by seasonality. 

IMPORTED PRODUCTS 

   Certain motor vehicles retailed by the Company, as well as certain major 
components of vehicles retailed by the Company, are of foreign origin. 
Accordingly, the Company is subject to the import and export restrictions of 
various jurisdictions and is dependent to some extent upon general economic 
conditions in and political relations with a number of foreign countries, 
including Japan, Germany, South Korea and the United Kingdom. 

RISKS ASSOCIATED WITH AUTOMOBILE FINANCE SUBSIDIARY 

Capital Requirements; Interest Rate Fluctuations 

   Atlantic Finance, a wholly owned subsidiary of the Company, requires 
substantial borrowings to fund the purchase of retail installment contracts 
from automobile dealerships. Consequently, Atlantic Finance's profitability 
is affected by the difference, or "spread," between the rate of interest paid 
on the funds it borrows and the rate of interest charged on the installment 
contracts it purchases, which rate in most states is limited by law. In 
addition, since the interest rates at which Atlantic Finance borrows are 
variable and the interest rates at which Atlantic Finance purchases the 
retail installment contracts are fixed, Atlantic Finance assumes the risk of 
interest rate increases prior to the time contracts are sold. There can be no 
assurance that Atlantic Finance will be able to extend its present revolving 
credit facilities or enter into new warehouse financing facilities on 
reasonable terms in the future or that interest rate increases will not 
adversely affect its ability to achieve and maintain profitability with 
respect to the retail installment contracts it holds. 

Dependence on Securitization Transactions 

   Atlantic Finance relies on a strategy of periodically selling retail 
installment receivables on a securitized basis. The securitization proceeds 
are utilized to repay borrowings under its revolving credit facilities, 
thereby making such facility available to acquire additional retail 
installment contract receivables. The terms of any securitization transaction 
are affected by a number of factors, some of which are beyond 

                               19           

Atlantic Finance's control and any of which could cause substantial delays. 
These factors include, among other things, conditions in the securities 
markets in general, conditions in the asset-backed securitization market and 
approval by all parties to the terms of the transaction. Gains from the sale 
of receivables in securitized transactions generate a significant portion of 
Atlantic Finance's revenues. If Atlantic Finance were unable to securitize 
loans in a given financial reporting period, Atlantic Finance could incur a 
significant decline in total revenues and profitability for such period. 

Credit Risk 

   Payments by consumers on a number of the retail installment contracts 
purchased by Atlantic Finance become delinquent from time to time and some 
end up in default. There can be no assurance as to the future credit 
performance of Atlantic Finance's customers or that general economic 
conditions will not worsen and lead to higher rates of delinquency and 
default. For example, for the quarter ended March 31, 1997, Atlantic 
Finance's annualized default rate was 2.17%, a significant increase over 
comparable periods. In addition, Atlantic Finance commenced operations in the 
first quarter of 1995, and there can be no assurance that the rates of future 
delinquency and defaults will be at levels that will allow Atlantic Finance 
to achieve and maintain overall profitability. 

Regulation 

   Atlantic Finance is subject to regulation under various federal, state and 
local laws and in some jurisdictions is required to be licensed by the state 
banking authority. Most states in which Atlantic Finance operates limit the 
interest rate, fees and other charges that may be imposed by, or prescribe 
certain other terms of, the contracts that Atlantic Finance purchases and 
restrict its right to repossess and sell collateral. An adverse change in 
those laws or regulations could have a material adverse effect on Atlantic 
Finance's profitability by, among other things, limiting the states in which 
Atlantic Finance may operate or the interest rate that may be charged on 
retail installment contracts or restricting Atlantic Finance's ability to 
realize the value of the collateral securing the contracts. 

ENVIRONMENTAL MATTERS 

   The Company is subject to federal, state and local laws, ordinances and 
regulations which establish various health and environmental quality 
standards, and liability related thereto, and provide penalties for 
violations of those standards. Under certain laws and regulations, a current 
or previous owner or operator of real property may be liable for the costs of 
removal and remediation of hazardous or toxic substances or wastes on, under, 
in or emanating from such property. Such laws typically impose liability 
whether or not the owner or operator knew of, or was responsible for, the 
presence of such hazardous or toxic substances or wastes. Certain laws, 
ordinances and regulations may impose liability on an owner or operator of 
real property where on-site contamination discharges into waters of the 
state, including groundwater. Under certain other laws, generators of 
hazardous or toxic substances or wastes that send such substances or wastes 
to disposal, recycling or treatment facilities may be liable for remediation 
of contamination at such facilities. Other laws, ordinances and regulations 
govern the generation, handling, storage, transportation and disposal of 
hazardous and toxic substances or wastes, the operation and removal of 
underground storage tanks, the discharge of pollutants into surface waters 
and sewers, emissions of certain potentially harmful substances into the air 
and employee health and safety. 

   Past and present business operations of the Company subject to such laws, 
ordinances and regulations include the use, handling and contracting for 
recycling or disposal of hazardous or toxic substances or wastes, including 
environmentally sensitive materials such as motor oil, waste motor oil and 
filters, transmission fluid, antifreeze, refrigerants, waste paint and 
lacquer thinner, batteries, solvents, lubricants, degreasing agents, gasoline 
and diesel fuels. The Company is subject to other laws, ordinances and 
regulations as the result of the past or present existence of underground 
storage tanks at many of the Company's properties. In addition, soil and 
groundwater contamination has been known to exist at certain properties owned 
or leased by the Company and there can be no assurance that other properties 
have not been contaminated by any leakage from such tanks or any spillage of 
hazardous or toxic substances or wastes. 

   Certain laws and regulations, including those governing air emissions and 
underground storage tanks, have been amended so as to require compliance with 
new or more stringent standards as of future dates. The 

                               20           

Company cannot predict what other environmental legislation or regulations 
will be enacted in the future, how existing or future laws or regulations 
will be administered or interpreted or what environmental conditions may be 
found to exist in the future. Compliance with new or more stringent laws or 
regulations, stricter interpretation of existing laws or the future discovery 
of environmental conditions may require additional expenditures by the 
Company, some of which may be material. See "Business -- Environmental 
Matters." 

CONTROL BY PRINCIPAL STOCKHOLDERS 

   As of September 30, 1997, Trace International Holdings, Inc. ("Trace"), 
Aeneas Venture Corporation ("Aeneas"), an affiliate of Harvard Private 
Capital Group, Inc. ("Harvard Private Capital"), and AIF II, L.P. ("AIF"), an 
affiliate of Apollo Advisors, L.P. ("Apollo"), owned 22.0%, 15.6% and 10.1% 
of the outstanding Common Stock, respectively. As a result, such persons have 
the ability to control the Company and direct its affairs and business. 
Circumstances may occur in which the interests of such persons could be in 
conflict with the interests of the holders of Notes and holders of Common 
Stock generally. See "--Stock Ownership/Issuance Limits." In addition, such 
persons may have an interest in pursuing transactions that, in their 
judgment, enhance the value of their equity investment in the Company, even 
though such transactions may involve risks to the holders of Notes. 

   The Company is in the process of registering on a "shelf" registration 
statement under the Securities Act approximately 9,600,000 outstanding shares 
of Common Stock which were issued pursuant to an exemption from registration 
under the Securities Act and/or which are held by affiliates of the Company, 
including the approximately 8,700,000 shares held in the aggregate by Trace, 
Aeneas and AIF. Trace, Aeneas and AIF have informed the Company that they are 
registering such shares in order to provide themselves with more flexibility 
in pursuing their investment strategy, that, provided they are not 
contractually prohibited from doing so, they may pledge all or a portion of 
their shares from time to time to secure borrowings and that they do not have 
any present intention to sell any shares of Common Stock. 

CHANGE OF CONTROL 

   Upon the occurrence of a Change of Control, each holder of Notes will have 
the right to require the Company to repurchase all or any portion of such 
holder's Notes. (The same provision appears in the indenture governing the 
Series B Notes.) If a Change of Control were to occur, there can be no 
assurance that the Company would have sufficient financial resources, or 
would be able to arrange financing, to pay the repurchase price for all Notes 
tendered by holders thereof. Further, the provisions of the Indenture may not 
afford holders of Notes protection in the event of a highly leveraged 
transaction, reorganization, restructuring, merger or similar transaction 
involving the Company that may adversely affect holders of Notes, if such 
transaction does not result in a Change of Control. In addition, the terms of 
the Senior Credit Facility may limit the Company's ability to repurchase any 
Notes upon a Change of Control. Any future credit agreements or other 
agreements relating to other indebtedness to which the Company becomes a 
party may contain similar restrictions and provisions. In the event a Change 
of Control occurs at a time when the Company is prohibited from repurchasing 
Notes, the Company could seek the consent of its lenders to repurchase Notes 
or could attempt to refinance the borrowings that contain such prohibition. 
If the Company does not obtain such consent or repay such borrowing, the 
Company would remain prohibited from repurchasing Notes. In such case, the 
Company's failure to repurchase tendered Notes would constitute an Event of 
Default under the Indenture, which would, in turn, constitute a further 
default under certain of the Company's existing debt agreements and may 
constitute a default under the terms of other indebtedness that the Company 
may enter into from time to time. See "--Control by Principal Stockholders" 
and "Description of Notes -- Change of Control." 

FRAUDULENT CONVEYANCE CONSIDERATIONS 

   Each Guarantor's Guarantee of the obligations of the Company under the 
Notes may be subject to review under relevant federal and state fraudulent 
conveyance statutes in a bankruptcy, reorganization or rehabilitation case or 
similar proceeding or a lawsuit by or on behalf of unpaid creditors of such 
Guarantor. If a court were to find under relevant fraudulent conveyance 
statutes that, at the time the Notes were issued, (a) a Guarantor guaranteed 
the Notes with the intent of hindering, delaying or defrauding current or 
future creditors or (b) (i) a Guarantor received less than reasonably 
equivalent value or fair consideration for 

                               21           

guaranteeing the Notes and (ii) (A) was insolvent or was rendered insolvent 
by reason of such Guarantee, (B) was engaged, or about to engage, in a 
business or transaction for which its assets constituted unreasonably small 
capital or (C) intended to incur, or believed that it would incur, 
obligations beyond its ability to pay as such obligations matured (as all of 
the foregoing terms are defined in or interpreted under such fraudulent 
conveyance statutes), then such court could avoid or subordinate such 
Guarantee to presently existing and future indebtedness of such Guarantor and 
take other action detrimental to the holders of the Notes, including, under 
certain circumstances, invalidating such Guarantee. See "Description of Notes 
- -- The Guarantees." 

LACK OF PUBLIC MARKET FOR THE NEW NOTES 

   There is no established trading market for the New Notes, and there can be 
no assurance as to (i) the liquidity of any such market that may develop, 
(ii) the ability of holders of New Notes to sell their New Notes or (iii) the 
price at which the holders of New Notes would be able to sell their New 
Notes. If such a market were to exist, the New Notes could trade at prices 
that may be higher or lower than their principal amount or purchase price, 
depending on many factors, including prevailing interest rates, the market 
for similar notes and the financial performance of the Company. The Company 
has been advised by the Initial Purchasers that, following completion of the 
Exchange Offer, they presently intend to make a market in the New Notes. 
However, the Initial Purchasers are not obligated to do so, and any 
market-making activity with respect to the New Notes may be discontinued at 
any time without notice. In addition, such market making activity will be 
subject to the limits imposed by the Securities Act and the Exchange Act and 
may be limited during the pendency of a shelf registration statement filed 
pursuant to the Registration Rights Agreement. See "Description of Notes -- 
Registration Rights." 

                               USE OF PROCEEDS 

   The Company will not receive any cash proceeds from the issuance of the 
New Notes offered hereby. In consideration for issuing the New Notes as 
described in this Prospectus, the Company will receive in exchange Old Notes 
in like principal amount, the terms of which are identical in all material 
respects to those of the New Notes, except that the New Notes have been 
registered under the Securities Act and therefore will not bear any legends 
restricting their transfer and will not contain terms providing for an 
increase in the interest rate thereon under certain circumstances described 
in the Registration Rights Agreement. The Old Notes surrendered in exchange 
for the New Notes will be retired and cancelled. Accordingly, the issuance of 
the New Notes will not result in any change in the indebtedness of the 
Company or the Guarantors. 

   The net proceeds to the Company from the Initial Offering was 
approximately $140.8 million after deducting the discount to the initial 
purchasers of the Old Notes and offering expenses. $50.0 million of such net 
proceeds were used to repay amounts outstanding under the Senior Credit 
Facility. See "Description of Senior Credit Facility." The balance of such 
net proceeds was deposited with the Company's floor plan lenders, which 
deposits earn interest at floor plan rates. For a description of the 
Company's floor plan notes payable, see the notes to the Company's audited 
consolidated financial statements, incorporated herein by reference. The 
Company has such deposits available (in addition to other funds) for use for 
working capital and other general corporate purposes, including acquisitions. 
Since the closing of the Initial Offering, the Company has used approximately 
$2.0 million to finance the acquisition of Stone Mountain Jeep Eagle and 
approximately $3.5 million to finance the acquisition of Shreveport Dodge. 

                               22           

                                CAPITALIZATION 

   The following table sets forth the short-term debt and consolidated 
capitalization of the Company as of September 30, 1997. This table should be 
read in conjunction with the consolidated historical and pro forma financial 
statements of the Company and the notes thereto incorporated by reference 
into this Prospectus. 



                                            ------------------------ 
                                            AS OF SEPTEMBER 30, 1997 
                                            ------------------------ 
                                         
In thousands 
Short-term debt: 
 Short-term debt, excluding floor plan (1)          $  6,790 
 Current portion of long-term debt                     7,472 
                                            ------------------------ 
  Total short-term debt                             $ 14,262 
                                            ======================== 
Long-term debt (excluding current 
 portion): 
 Senior Credit Facility                             $     -- 
 Senior Subordinated Notes                           200,000 
 Other                                                37,356 
                                            ------------------------ 
  Total long-term debt                               237,356 
                                            ------------------------ 
Stockholders' equity                                 323,719 
                                            ------------------------ 
Total capitalization                                $561,075 
                                            ======================== 


- ------------ 
(1)    As of September 30, 1997, an aggregate of $243.0 million was 
       outstanding under the Company's floor plan facilities. 

                               23           

                     SELECTED CONSOLIDATED FINANCIAL DATA 

   The following table sets forth selected historical consolidated financial 
and other data of the Company (and, where indicated, of the Predecessor 
Company) as of the dates and for the periods indicated, including the results 
of operations of acquired dealerships from their respective dates of 
acquisition. The balance sheet data as of December 31, 1996, 1995, 1994, 1993 
and 1992 and the statements of operations data for the years ended December 
31, 1996, 1995, 1994, 1993 and for the three months ended December 31, 1992 
have been derived from the financial statements of the Company which have 
been audited by Coopers & Lybrand L.L.P., the Company's independent 
accountants. The selected consolidated financial data set forth below for the 
Company for the nine months ended September 30, 1997 and September 30, 1996 
and for the Predecessor Company for the nine months ended September 30, 1992 
are unaudited but have been prepared on the same basis as the audited 
consolidated financial statements and contain all adjustments, consisting of 
only normal recurring accruals, that the Company considers necessary for a 
fair presentation of the financial position and results of operations for the 
periods presented. Operating results for the nine months ended September 30, 
1997 are not necessarily indicative of the results that may be expected for 
the year ending December 31, 1997. The selected consolidated financial data 
should be read in conjunction with the consolidated financial statements and 
related notes and Pro Forma Condensed Consolidated Financial Statements of 
the Company. 



                                     -------------------------------------------------------------------------------------- 
                                                                           THE COMPANY 
                                     -------------------------------------------------------------------------------------- 
                                            NINE MONTHS                                                       THREE MONTHS 
                                               ENDED                                                             ENDED 
                                           SEPTEMBER 30,                 YEARS ENDED DECEMBER 31,             DECEMBER 31, 
Dollars in thousands                    1997(2)     1996(3)      1996(4)     1995(5)     1994        1993         1992 
                                     ------------ ----------  ------------ ---------- ---------- ---------- -------------- 
                                                                                       
STATEMENTS OF OPERATIONS DATA: 
Auto Dealerships 
 Total revenues                        $1,541,133   $954,784   $1,302,031   $805,621   $731,629    $606,091         $98,040 
 Cost of sales, including floor plan 
  interest                              1,344,730    848,479    1,157,368    720,344    647,643     537,688          85,712 
                                      ------------ ----------  ------------ ---------- ---------- ---------- -------------- 
 Gross profit                             196,403    106,305      144,663     85,277     83,986      68,403          12,328 
 Selling, general and administrative 
  expenses                                160,367     90,040      124,244     90,586     80,415      66,910          12,929 
                                      ------------ ----------  ------------ ---------- ---------- ---------- -------------- 
 Operating income (loss)                   36,036     16,265       20,419     (5,309)     3,571       1,493            (601) 
 Other interest expense                    (7,249)    (3,619)      (4,398)    (1,438)      (860)     (1,233)             -- 
 Other income (expense), net                  297      2,295        2,506      2,208     (2,899)         --              -- 
                                      ------------ ----------  ------------ ---------- ---------- ---------- -------------- 
Income (loss) before income 
 taxes--Auto Dealerships                   29,084     14,941       18,527     (4,539)      (188)        260            (601) 
Auto Finance 
 Revenues                                   2,472      1,604        1,798        530          2          --              -- 
 Interest expense                            (408)      (276)        (421)      (174)        --          --              -- 
 Operating and other expenses              (3,438)    (2,054)      (2,867)    (1,738)      (618)         --              -- 
                                      ------------ ----------  ------------ ---------- ---------- ---------- -------------- 
Loss before income taxes--Auto 
  Finance                                  (1,374)      (726)      (1,490)    (1,382)      (616)         --              -- 
                                      ------------ ----------  ------------ ---------- ---------- ---------- -------------- 
Total Company 
 Income (loss) before minority 
  interests, (provision) benefit for 
  income taxes and extraordinary 
  item                                     27,710     14,215       17,037     (5,921)      (804)        260            (601) 
 Minority interests                          (118)    (2,792)      (3,306)       366       (887)       (117)            152 
 (Provision) benefit for income 
  taxes                                   (11,106)    (5,305)      (6,270)     2,089         --         (47)             -- 
                                      ------------ ----------  ------------ ---------- ---------- ---------- -------------- 
 Income (loss) before extraordinary 
  item                                     16,486      6,118        7,461     (3,466)    (1,691)         96            (449) 
Extraordinary item (net of income 
 tax benefit)(6)                               --         --       (4,987)        --         --          --              -- 
                                      ------------ ----------  ------------ ---------- ---------- ---------- -------------- 
Net income (loss)                      $   16,486   $  6,118   $    2,474   $ (3,466)  $ (1,691)   $     96         $  (449) 
                                      ============ ==========  ============ ========== ========== ========== ============== 




                    (RESTUBBED TABLE CONTINUED FROM ABOVE) 



                                        PREDECESSOR COMPANY(1) 
                                      ------------------------ 
                                                   NINE MONTHS 
                                                         ENDED 
                                                 SEPTEMBER 30, 
Dollars in thousands                                      1992 
                                      ------------------------ 
                                   
STATEMENTS OF OPERATIONS DATA: 
Auto Dealerships 
 Total revenues                                       $297,010 
 Cost of sales, including floor plan 
  interest                                             257,845 
                                      ------------------------ 
 Gross profit                                           39,165 
 Selling, general and administrative 
  expenses                                              40,873 
                                      ------------------------ 
 Operating income (loss)                                (1,708) 
 Other interest expense                                     -- 
 Other income (expense), net                                -- 
                                      ------------------------ 
Income (loss) before income 
 taxes--Auto Dealerships                                (1,708) 
Auto Finance 
 Revenues                                                   -- 
 Interest expense                                           -- 
 Operating and other expenses                               -- 
                                      ------------------------ 
Loss before income taxes--Auto 
  Finance                                                   -- 
                                      ------------------------ 
Total Company 
 Income (loss) before minority 
  interests, (provision) benefit for 
  income taxes and extraordinary 
  item                                                  (1,708) 
 Minority interests                                         -- 
 (Provision) benefit for income 
  taxes                                                   (197) 
                                      ------------------------ 
 Income (loss) before extraordinary 
  item                                                  (1,905) 
Extraordinary item (net of income 
 tax benefit)(6)                                            -- 
                                      ------------------------ 
Net income (loss)                                     $ (1,905) 
                                      ======================== 



                               24           



                            ---------------------------------------------------------------------- 
                                                         THE COMPANY 
                            ---------------------------------------------------------------------- 
                               AS OF SEPTEMBER 30,           AS OF DECEMBER 31, 
Dollars in thousands             1997     1996        1995       1994        1993       1992 
                            ------------- ----------  ---------- ----------  ---------- --------- 
                                                                      
BALANCE SHEET DATA:
Auto Dealerships
 Total assets               $858,613     $505,693     $227,275   $169,766   $154,218   $ 87,084
 Floor plan notes payable    242,960      170,170       97,823     92,310     84,601     57,887
 Other debt                  251,297       23,968       44,538     29,440     24,209      3,630
Auto Finance                                         
 Net assets                   25,794       14,522        3,501        291       --         --   
Total Company                                        
 Total assets                887,603      522,950      236,027    170,342    154,218     87,084
 Floor plan notes payable    242,960      170,170       97,823     92,310     84,601     57,887
 Other debt                  251,618       24,969       49,199     29,440     24,209      3,630
 Total stockholders'                                 
  equity                     323,719      281,468       49,240     28,785     25,264     19,243
                                                   




                                        --------------------------------------------------------------------------- 
                                                                        THE COMPANY 
                                        --------------------------------------------------------------------------- 
                                            NINE MONTHS                                                THREE MONTHS 
                                               ENDED                                                          ENDED 
                                           SEPTEMBER 30,             YEARS ENDED DECEMBER 31,          DECEMBER 31, 
                                           1997      1996       1996       1995      1994      1993            1992 
                                        --------- ---------  --------- ----------  -------- --------  ------------- 
                                                                                 
Dollars in thousands 
OTHER DATA: 
EBITDA(7)                                $42,169    $20,660   $27,928    $(1,489)   $2,301    $2,417      $(322) 
EBITDA margin(8)                             2.7%       2.2%      2.1%      (0.2)%     0.3%      0.4%      (0.3)% 
Depreciation and amortization            $ 6,802    $ 2,550   $ 7,797    $ 2,820    $2,245    $  924      $ 279 
Capital expenditures                     $ 8,378    $ 3,595   $ 6,771    $ 1,739    $5,237    $1,624      $ 511 
Ratio of EBITDA to other interest 
 expense (9)                                5.51x      5.30x     5.80x        (7)     2.68x     1.96x        (7) 
Ratio of earnings to fixed charges(10)      4.62x      4.65x     4.54x       (10)      (10)     1.21x       (10) 



                    (RESTUBBED TABLE CONTINUED FROM ABOVE) 



                                        ------------------------ 
                                         PREDECESSOR COMPANY(1) 
                                        ------------------------ 
                                                     NINE MONTHS 
                                                           ENDED 
                                                   SEPTEMBER 30, 
                                                            1992 
                                        ------------------------ 

                                                              
Dollars in thousands 
OTHER DATA: 
EBITDA(7)                                        $(882) 
EBITDA margin(8)                                  (0.3)% 
Depreciation and amortization                    $ 826 
Capital expenditures                             $ 445 
Ratio of EBITDA to other interest 
 expense (9)                                        (7) 
Ratio of earnings to fixed charges(10)             (10) 



(1)    Predecessor Company represents the combined historical results of the 
       DiFeo Group acquired by the Company on October 1, 1992. 
(2)    Includes the results of Crown Automotive from March 1, 1997, Hanna 
       Nissan from April 22, 1997, the Staluppi Group from April 30, 1997, the 
       Reed Group from May 30, 1997, Lance Landers from June 9, 1997 and Stone 
       Mountain from August 22, 1997. 
(3)    Includes the results of Atlanta Toyota from January 1, 1996, United 
       Nissan (GA) from May 1, 1996, Peachtree Nissan from July 1, 1996 and 
       the Sun Automotive Group, the Evans Group and United Nissan (TN) from 
       October 28, 1996. 
(4)    Includes the results of Atlanta Toyota from January 1, 1996, United 
       Nissan (GA) from May 1, 1996, Peachtree Nissan from July 1, 1996 and 
       the Sun Automotive Group, the Evans Group and United Nissan (TN) from 
       October 28, 1996. 
(5)    Includes the results of Landers Auto from August 1, 1995. 
(6)    Represents the 10% call premium and the write-off of original issue 
       discount and related deferred financing costs arising from the October 
       1996 redemption of the Company's Series A and B Senior Notes due 2003. 
(7)    EBITDA is defined as income (loss) before minority interests, 
       (provision) benefit for income taxes, extraordinary item, interest 
       expense (exclusive of interest relating to floor plan notes payable) 
       and depreciation and amortization. For the purpose of calculating 
       EBITDA for the year ended December 31, 1996, amortization has been 
       reduced by $1.7 million for the write-off of original issue discount 
       arising from the early retirement of the Company's Series A and B 
       Senior Notes due 2003, during October 1996, which was included as an 
       extraordinary item in the Company's consolidated financial statements. 
       The Company has included information concerning EBITDA because it is 
       used by certain investors as a measure of a company's ability to 
       service its debt. EBITDA is not required by GAAP and should not be 
       considered an alternative to net income or any other measure of 
       performance required by GAAP, or as an indicator of the Company's 
       operating performance, and should be read in conjunction with the 
       consolidated statements of cash flows in the consolidated financial 
       statements of the Company included elsewhere herein. EBITDA was 
       insufficient to cover non-floor plan interest expense for the year 
       ended December 31, 1995, the three months ended December 31, 1992 and 
       the nine months ended September 30, 1992 by $3.1 million, $0.3 million 
       and $0.9 million, respectively. 
(8)    EBITDA margin is calculated as the ratio of EBITDA to consolidated 
       revenues for the period. 
(9)    Includes other interest expense from Auto Dealerships and interest 
       expense from Auto Finance. 
(10)   For the purpose of determining the ratio of earnings to fixed charges, 
       earnings consist of income (loss) before minority interests, 
       (provision) benefit for income taxes, extraordinary item and fixed 
       charges. Fixed charges consist of interest expense (excluding the 
       amount of interest capitalized during the period and interest expense 
       relating to floor plan notes payable and including amortization of 
       deferred financing costs). Earnings were insufficient to cover fixed 
       charges for the years ended December 31, 1995 and 1994, the three 
       months ended December 31, 1992, and the nine months ended September 30, 
       1992 by $5.9 million, $0.8 million, $0.6 million and $1.7 million, 
       respectively. 

                               25           

                              THE EXCHANGE OFFER 

PURPOSE AND EFFECT OF THE EXCHANGE OFFER 

   The Old Notes were sold by the Company on July 23, 1997 to the Initial 
Purchasers, who resold the Old Notes (i) to "qualified institutional buyers" 
(as defined in Rule 144A under the Securities Act) in reliance upon Rule 144A 
under the Securities Act and (ii) outside the United States to persons other 
than U.S. persons in reliance upon Regulation S under the Securities Act. In 
connection therewith, the Company, the Guarantors named therein and the 
Initial Purchasers entered into the Registration Rights Agreement, pursuant 
to which the Company and such Guarantors agreed, for the benefit of the 
Holders of the Old Notes, that they would, at their sole cost, (i) within 60 
days following the original issuance of the Old Notes, file with the 
Commission the Exchange Offer Registration Statement (of which this 
Prospectus is a part) under the Securities Act with respect to an issue of a 
series of new notes of the Company identical in all material respects to the 
series of Old Notes and (ii) use their reasonable best efforts to cause such 
Exchange Offer Registration Statement to become effective under the 
Securities Act within 135 days following the original issuance of the Old 
Notes. Upon the effectiveness of the Exchange Offer Registration Statement, 
the Company will offer to the Holders of the Old Notes the opportunity to 
exchange their Old Notes for a like principal amount of New Notes, to be 
issued without a legend restricting their transfer and which may, subject to 
certain exceptions described below, be reoffered and resold by the Holder 
without restrictions or limitations under the Securities Act. The term 
"Holder" with respect to any Note means any person in whose name such Note is 
registered on the books of the Company. 

   Each Holder desiring to participate in the Exchange Offer will be required 
to represent, among other things, that (i) it is not an "affiliate" (as 
defined in Rule 405 of the Securities Act) of the Company, (ii) it is not 
engaged in, and does not intend to engage in, and has no arrangement or 
understanding with any person to participate in, a distribution of the New 
Notes and (iii) it is acquiring the New Notes in the ordinary course of its 
business (a Holder unable to make the foregoing representations is referred 
to as a "Restricted Holder"). A Restricted Holder will not be able to 
participate in the Exchange Offer and may only sell its Old Notes pursuant to 
a registration statement containing the selling securityholder information 
required by Item 507 of Regulation S-K under the Securities Act, or pursuant 
to an exemption from the registration requirement of the Securities Act. 

   Each broker-dealer (other than a Restricted Holder) that receives New 
Notes for its own account pursuant to the Exchange Offer (a "Participating 
Broker-Dealer") is required to acknowledge in the Letter of Transmittal that 
it acquired the Old Notes as a result of market-making activities or other 
trading activities and that it will deliver a prospectus in connection with 
the resale of such New Notes. Based upon interpretations by the staff of the 
Commission, the Company believes that New Notes issued pursuant to the 
Exchange Offer to Participating Broker-Dealers may be offered for resale, 
resold, and otherwise transferred by a Participating Broker-Dealer upon 
compliance with the prospectus delivery requirements, but without compliance 
with the registration requirements, of the Securities Act. The Company has 
agreed that for a period of 120 days following consummation of the Exchange 
Offer it will make this Prospectus available, for use in connection with any 
such resale, to any Participating Broker-Dealer that notifies the Company in 
the Letter of Transmittal that it may be subject to such prospectus delivery 
requirements. The Company believes that during such period of time, delivery 
of this Prospectus, as it may be amended or supplemented, will satisfy the 
prospectus delivery requirements of a Participating Broker-Dealer engaged in 
market-making or other trading activities. See "Exchange Offer" and "Plan of 
Distribution". 

   Based upon interpretations by the staff of the Commission, the Company 
believes that New Notes issued pursuant to the Exchange Offer may be offered 
for resale, resold, and otherwise transferred by a Holder thereof (other than 
a Restricted Holder or a Participating Broker-Dealer) without compliance with 
the registration and prospectus delivery requirements of the Securities Act. 

   If (i) prior to the consummation of the Exchange Offer, it is reasonably 
determined in good faith that (A) the New Notes upon receipt would not be 
tradable by Holders thereof, other than Restricted Holders, without 
registration under the Securities Act and applicable state securities laws or 
(B) the Commission is unlikely to permit the consummation of the Exchange 
Offer or (ii) the Exchange Offer is commenced but not consummated prior to 
March 5, 1998 for any reason, then the Company is required under the 

                               26           

Registration Rights Agreement to file with the Commission a shelf 
registration statement (the "Shelf Registration Statement") to cover resales 
of Transfer Restricted Securities (as defined) by the Holders thereof who 
satisfy certain conditions relating to the provision of information for 
inclusion in the Shelf Registration Statement. The Company is required under 
the Registration Rights Agreement to file the Shelf Registration Statement as 
promptly as reasonably practicable but in no event later than 60 days after 
the date on which the Company becomes obligated to file same, to use its 
reasonable best efforts to cause the Shelf Registration Statement to be 
declared effective within 135 days after the filing thereof and, except under 
certain circumstances, to keep the Shelf Registration Statement continuously 
effective under the Securities Act until July 23, 1999. For purposes of the 
foregoing, "Transfer Restricted Securities" means each Old Note and each New 
Note to which clause (i)(A) of the first sentence of this paragraph is 
applicable, until in the case of any such Notes (i) such Notes have been sold 
pursuant to an effective registration statement, (ii) such Notes have been 
sold in compliance with Rule 144 under the Securities Act or would be 
permitted to be sold pursuant to Rule 144(k) thereunder or (iii) such Notes 
cease to be outstanding. 

   The Company will, in the event of the filing of the Shelf Registration 
Statement, provide to each Holder of Transfer Restricted Securities covered 
by the Shelf Registration Statement copies of any Shelf Registration 
Statement or any prospectus which is a part thereof, notify each such Holder 
when the Shelf Registration Statement has become effective and take certain 
other actions as are required to permit unrestricted resales of Transfer 
Restricted Securities. A Holder of Transfer Restricted Securities that sells 
such Transfer Restricted Securities pursuant to the Shelf Registration 
Statement generally will be required to be named as a selling security holder 
in the related prospectus and to deliver a prospectus to the purchaser, will 
be subject to certain of the civil liability provisions under the Securities 
Act in connection with such sales and will be bound by the provisions of the 
Registration Rights Agreement which are applicable to such Holder (including 
certain indemnification obligations). In addition, Holders of Transfer 
Restricted Securities will be required to deliver information to be used in 
connection with the Shelf Registration Statement within a reasonable time in 
order to have their Transfer Restricted Securities included in the Shelf 
Registration Statement and receive any Additional Interest (as defined). The 
Company will notify such Holders of the occurrence of any event that makes 
any statement made in the Shelf Registration Statement untrue in any material 
respect or that requires the making of any changes so that it will 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 not misleading, in which case such Holders will be prohibited from 
using the Shelf Registration Statement and any prospectus which is a part 
thereof until the Company amends or supplements the same. 

   If (i) the Company is required to file the Shelf Registration Statement 
and (A) it has not been filed on or prior to the date by which it is required 
to be filed, (B) it is not declared effective by the Commission on or prior 
to the 135th day after filing thereof or (C) it is declared effective but 
thereafter ceases to be effective or usable in connection with resales of 
Transfer Restricted Securities during the period specified in the 
Registration Rights Agreement or (ii) the Exchange Offer is not consummated 
on or prior to January 4, 1998 (each such event referred to in clauses (i) 
and (ii) above, a "Registration Default"), then the Company will pay 
liquidated damages in the form of additional interest ("Additional Interest") 
(in addition to the interest otherwise due thereon) to each Holder of 
affected Notes, if any, in an amount equal to 25 basis points per annum on 
the principal amount thereof for each day during the first 90-day period that 
the Registration Default continues. The amount of Additional Interest, if 
any, will increase by an additional 25 basis points per annum with respect to 
each subsequent 90-day period until all Registration Defaults have been 
cured, up to a maximum amount of Additional Interest of 100 basis points per 
annum. Following the cure of all Registration Defaults, Additional Interest, 
if any, will cease to accrue. 

   Payment of Additional Interest is the sole remedy available to the Holders 
of Transfer Restricted Securities in the event that the Company does not 
comply with the deadlines set forth in the Registration Rights Agreement with 
respect to the registration of Transfer Restricted Securities for resale 
under the Shelf Registration Statement. 

                               27           

TERMS OF THE EXCHANGE OFFER 

   Upon the terms and subject to the conditions set forth in this Prospectus 
and in the Letter of Transmittal, the Company will accept any and all Old 
Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City 
time, on the Expiration Date. The Company will issue $1,000 principal amount 
of New Notes in exchange for each $1,000 principal amount of outstanding Old 
Notes accepted in the Exchange Offer. Holders may tender some or all of their 
Old Notes pursuant to the Exchange Offer. However, Old Notes may be tendered 
only in integral multiples of $1,000. 

   The terms of the New Notes will be identical in all material respects to 
the terms of the Old Notes, except that the New Notes have been registered 
under the Securities Act and therefore will not bear legends restricting 
their transfer and will not be entitled to Additional Interest, if any, under 
certain circumstances described in the Registration Rights Agreement. The New 
Notes will evidence the same debt as the Old Notes and will be entitled to 
the benefits of the Indenture under which the Old Notes were, and the New 
Notes will be, issued. 

   As of the date of this Prospectus, $150.0 million aggregate principal 
amount of the Old Notes is outstanding. The Company has fixed the close of 
business on November 19, 1997 as the record date for the Exchange Offer for 
purposes of determining the persons to whom this Prospectus, together with 
the Letter of Transmittal, will initially be sent. As of such date, there was 
one registered Holder of the Old Notes. 

   Holders of the Old Notes do not have any appraisal or dissenters' rights 
under law or the Indenture in connection with the Exchange Offer. The Company 
intends to conduct the Exchange Offer in accordance with the applicable 
requirements of the Exchange Act and the rules and regulations of the 
Commission thereunder. 

   Holders who tender Old Notes in the Exchange Offer will not be required to 
pay brokerage commissions or fees or, subject to the instructions in the 
Letter of Transmittal, transfer taxes with respect to the exchange of Old 
Notes pursuant to the Exchange Offer. The Company will pay all charges and 
expenses, other than certain applicable taxes, in connection with the 
Exchange Offer. See "--Fees and Expenses." 

EXPIRATION DATE; EXTENSIONS; AMENDMENTS 

   The term "Expiration Date" shall mean 5:00 p.m., New York City time, on 
December 22, 1997, unless the Company, in its sole discretion, extends the 
Exchange Offer, in which case the term "Expiration Date" shall mean the 
latest date and time to which the Exchange Offer is extended. 

   In order to extend the Exchange Offer, the Company will notify the 
Exchange Agent (as defined) of any extension by oral or written notice and 
will make a public announcement thereof prior to 9:00 a.m., New York City 
time, on the next business day after each previously scheduled Expiration 
Date, unless otherwise required by applicable law or regulation. 

   The Company reserves the right, in its reasonable discretion, (i) to delay 
accepting any Old Notes, to extend the Exchange Offer or, if any of the 
conditions set forth below under the caption "--Conditions" shall not have 
been satisfied, to terminate the Exchange Offer, by giving oral or written 
notice of such delay, extension or termination to the Exchange Agent or (ii) 
to amend the terms of the Exchange Offer in any manner. Any such delay in 
acceptance, extension, termination or amendment will be followed as promptly 
as practicable by a public announcement thereof. If the Exchange Offer is 
amended in a manner determined by the Company to constitute a material 
change, the Company will promptly disclose such amendment by means of a 
prospectus supplement that will be distributed to the registered Holders, and 
the Company will extend the Exchange Offer for a period of five to ten 
business days, depending upon the significance of the amendment and the 
manner of disclosure to the registered Holders, if the Exchange Offer would 
otherwise expire during such five to ten business day period. 

   Without limiting the manner in which the Company may choose to make a 
public announcement of any delay, extension, termination or amendment of the 
Exchange Offer, the Company shall have no obligation to publish, advertise or 
otherwise communicate any such public announcement, other than by making a 
timely release to the Dow Jones News Service. 

                               28           

PROCEDURES FOR TENDERING 

   Only a Holder of Old Notes may tender such Old Notes in the Exchange 
Offer. A Holder who wishes to tender Old Notes for exchange pursuant to the 
Exchange Offer must transmit a properly completed and duly executed Letter of 
Transmittal, or a facsimile thereof, together with any required signature 
guarantees, or, in the case of a book-entry transfer, an Agent's Message (as 
defined), and any other required documents, to the Exchange Agent prior to 
5:00 p.m., New York City time, on the Expiration Date. In addition, either 
(i) certificates for such Old Notes must be received by the Exchange Agent 
prior to the Expiration Date along with the Letter of Transmittal, (ii) a 
timely confirmation of a book-entry transfer (a "Book-Entry Confirmation") of 
such Old Notes into the Exchange Agent's account at The Depository Trust 
Company ("DTC" or the "Book-Entry Transfer Facility") pursuant to the 
procedure for book-entry transfer described below, must be received by the 
Exchange Agent prior to the Expiration Date or (iii) the Holder must comply 
with the guaranteed delivery procedures described below. To be tendered 
effectively, the Old Notes, or Book-Entry Confirmation, as the case may be, 
the Letter of Transmittal and other required documents must be received by 
the Exchange Agent at the address set forth below under "--Exchange Agent" 
prior to 5:00 p.m., New York City time, on the Expiration Date. DELIVERY OF 
DOCUMENTS TO THE BOOK ENTRY TRANSFER FACILITY IN ACCORDANCE WITH ITS 
PROCEDURE DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. 

   DTC has authorized DTC participants that hold Old Notes on behalf of 
beneficial owners of Old Notes through DTC to tender their Old Notes as if 
they were Holders. To effect a tender of Old Notes, DTC participants should 
either (i) complete and sign the Letter of Transmittal (or a manually signed 
facsimile thereof), have the signature thereon guaranteed if required by the 
instructions to the Letter of Transmittal, and mail or deliver the Letter of 
Transmittal (or such manually signed facsimile) to the Exchange Agent 
pursuant to the procedure set forth in "Procedures for Tendering" or (ii) 
transmit their acceptance to DTC through the DTC Automated Tender Offer 
Program ("ATOP") for which the transaction will be eligible and follow the 
procedure for book-entry transfer set forth in "--Book-Entry Transfer." 

   The tender by a Holder will constitute an agreement between such Holder 
and the Company in accordance with the terms and subject to the conditions 
set forth herein and in the Letter of Transmittal. 

   The method of delivery of the Old Notes and the Letter of Transmittal and 
all other required documents to the Exchange Agent is at the election and 
risk of the Holder. Instead of delivery by mail, it is recommended that 
Holders use an overnight or hand delivery service. In all cases, sufficient 
time should be allowed to assure delivery to the Exchange Agent before the 
Expiration Date. No Letter of Transmittal or Old Notes, or Book-Entry 
Confirmation, as the case may be, should be sent to the Company. 

   Any beneficial owner whose Old Notes are registered in the name of a 
broker, dealer commercial bank, trust company or other nominee and who wishes 
to tender should contact the registered Holder promptly and instruct such 
registered Holder to tender on such beneficial owner's behalf. If such 
beneficial owner wishes to tender on such beneficial owner's own behalf, such 
owner must, prior to completing and executing the Letter of Transmittal and 
delivering such beneficial owner's Old Notes, either make appropriate 
arrangement to register ownership of the Old Notes in such owner's name or 
obtain a properly completed bond power from the registered Holder. The 
transfer of registered ownership may take considerable time. 

   If the Letter of Transmittal is signed by a person other than the 
registered Holder of any Old Notes listed therein, such Old Notes must be 
endorsed or accompanied by a properly completed bond power and signed by such 
registered Holder as such registered Holder's name appears on such Old Notes. 

   If the Letter of Transmittal or any Old Notes or bond powers are signed by 
trustees, executors, administrators, guardians, attorneys-in-fact, officers 
of corporations or others acting in a fiduciary or representative capacity, 
such persons should so indicate when signing, and unless waived by the 
Company, evidence satisfactory to the Company of their authority to so act 
must be submitted with the Letter of Transmittal. 

   Signatures on a Letter of Transmittal or a notice of withdrawal, as the 
case may be, must be guaranteed by an Eligible Institution (as defined below) 
unless the Old Notes tendered pursuant thereto are tendered (i) by a 
registered Holder who has not completed the box entitled "Special Issuance 
Instructions" or "Special 

                               29           

Delivery Instructions" on the Letter of Transmittal or (ii) for the account 
of an Eligible Institution. In the event that signatures on a Letter of 
Transmittal or a notice of withdrawal, as the case may be, are required to be 
guaranteed, such guarantee must be by a member firm of a registered national 
securities exchange or of the National Association of Securities Dealers, 
Inc., a commercial bank or trust company having an office or correspondent in 
the United States or an "eligible guarantor institution" within the meaning 
of Rule 17Ad15 under the Exchange Act (an "Eligible Institution"). 

   All questions as to the validity, form, eligibility (including time of 
receipt), acceptance and withdrawal of tendered Old Notes will be determined 
by the Company in its sole discretion, which determination shall be final and 
binding. The Company reserves the absolute right to reject any and all Old 
Notes not properly tendered or any Old Notes the Company's acceptance of 
which would, in the opinion of counsel for the Company, be unlawful. The 
Company also reserves the right to waive any defects, irregularities or 
conditions of tender as to particular Old Notes. The Company's interpretation 
of the terms and conditions of the Exchange Offer (including the instructions 
in the Letter of Transmittal) shall be final and binding on all parties. 
Unless waived, any defects or irregularities in connection with tenders of 
Old Notes must be cured within such time as the Company shall determine. 
Neither the Company, the Exchange Agent nor any other person shall incur any 
liability for failure to give notice of any defect or irregularity with 
respect to any tender of Old Notes. Tenders of Old Notes will not be deemed 
to have been made until such defects or irregularities have been cured or 
waived. Any Old Notes received by the Exchange Agent that are not properly 
tendered and as to which the defects or irregularities have not been cured or 
waived will not be deemed to have been properly tendered. Such Old Notes will 
be returned by the Exchange Agent to the tendering Holders, unless otherwise 
provided in the Letter of Transmittal, as soon as practicable following the 
Expiration Date. 

   By tendering, each Holder will represent to the Company, among other 
things, that such Holder is not a Restricted Holder. In addition, each 
Participating Broker-Dealer must acknowledge that it will deliver a 
prospectus in connection with any resale of such New Notes. See "Plan of 
Distribution." 

ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES 

   For each Old Note accepted for exchange, the Holder of such Old Note will 
receive a New Note having a principal amount equal to that of the surrendered 
Old Note. For purposes of the Exchange Offer, the Company shall be deemed to 
have accepted properly tendered Old Notes for exchange when, as and if the 
Company has given oral or written notice thereof to the Exchange Agent. 

In all cases, issuance of New Notes for Old Notes that are accepted for 
exchange pursuant to the Exchange Offer will be made only after timely 
receipt by the Exchange Agent of certificates for such Old Notes or a timely 
Book-Entry Confirmation of such Old Notes into the Exchange Agent's account 
at the Book-Entry Transfer Facility, a properly completed and duly executed 
Letter of Transmittal or Agent's Message and all other required documents. If 
any tendered Old Notes are not accepted for any reason set forth in the terms 
and conditions of the Exchange Offer or if Old Notes are submitted for a 
greater principal amount than the Holder desires to exchange, such unaccepted 
or non-exchanged Old Notes will be returned without expense to the tendering 
Holder thereof (or, in the case of Old Notes tendered by book-entry transfer 
into the Exchange Agent's account at the Book-Entry Transfer Facility 
pursuant to the book-entry transfer procedures described below, such 
non-exchanged Old Notes will be credited to an account maintained with such 
Book-Entry Transfer Facility) as promptly as practicable after the Expiration 
Date. 

BOOK-ENTRY TRANSFER 

   The Exchange Agent will establish a new account or utilize an existing 
account with respect to the Old Notes at DTC promptly after the date of this 
Prospectus, and any financial institution that is a participant in DTC and 
whose name appears on a security position listing as the owner of Old Notes 
may make a book-entry tender of Old Notes by causing DTC to transfer such Old 
Notes into the Exchange Agent's account in accordance with DTC's procedures 
for such transfer. However, although tender of Old Notes may be effected 
through book-entry transfer into the Exchange Agent's account at DTC, the 
Letter of Transmittal (or a manually signed facsimile thereof), properly 
completed and validly executed, with any required signature guarantees, or an 
Agent's Message in lieu of the Letter of Transmittal, and any other required 
documents, must, in any case, be received by the Exchange Agent at its 
address set forth below under the 

                               30           

caption "Exchange Agent" on or prior to the Expiration Date, or the 
guaranteed delivery procedures described below must be complied with. The 
confirmation of book-entry transfer of Old Notes into the Exchange Agent's 
account at DTC as described above is referred to herein as a "Book-Entry 
Confirmation." Delivery of documents to DTC in accordance with DTC's 
procedures does not constitute delivery to the Exchange Agent. 

   The term "Agent's Message" means a message transmitted by DTC to, and 
received by, the Exchange Agent and forming a part of a Book-Entry 
Confirmation, which states that DTC has received an express acknowledgment 
from the participant in DTC tendering the Old Notes stating (i) the aggregate 
principal amount of Old Notes which have been tendered by such participant, 
(ii) that such participant has received and agrees to be bound by the term of 
the Letter of Transmittal and (iii) that the Company may enforce such 
agreement against the participant. 

GUARANTEED DELIVERY PROCEDURES 

   Holders who wish to tender their Old Notes and (i) whose Old Notes are not 
immediately available, (ii) who cannot deliver their Old Notes, the Letter of 
Transmittal or any other required documents to the Exchange Agent prior to 
the Expiration Date or (iii) who cannot complete the procedure for book-entry 
transfer on a timely basis, may effect a tender if: 

     (a) the tender is made through an Eligible Institution; 

     (b) prior to the Expiration Date, the Exchange Agent receives from such 
    Eligible Institution a properly completed and duly executed Notice of 
    Guaranteed Delivery (by facsimile transmission, mail or hand delivery) 
    setting forth the name and address of the Holder, the certificate 
    number(s) of such Old Notes and the principal amount of Old Notes 
    tendered, stating that the tender is being made thereby and guaranteeing 
    that, within three New York Stock Exchange trading days after the 
    Expiration Date, the Letter of Transmittal (or facsimile thereof) or, in 
    the case of a book-entry transfer, an Agent's Message, together with the 
    certificate(s) representing the Old Notes, or a Book-Entry Confirmation, 
    as the case may be, and any other documents required by the Letter of 
    Transmittal will be deposited by the Eligible Institution with the 
    Exchange Agent; and 

     (c) such properly completed and executed Letter of Transmittal (or 
    facsimile thereof) or, in the case of a book-entry transfer, an Agent's 
    Message, as well as the certificate(s) representing all tendered Old Notes 
    in proper form for transfer, or a Book-Entry Confirmation, as the case may 
    be, and all other documents required by the Letter of Transmittal are 
    received by the Exchange Agent within three New York Stock Exchange 
    trading days after the Expiration Date. 

WITHDRAWAL OF TENDERS 

   Except as otherwise provided herein, tenders of Old Notes may be withdrawn 
at any time prior to 5:00 p.m., New York City time, on the Expiration Date. 

   To withdraw a tender of Old Notes in the Exchange Offer, a written or 
facsimile transmission notice of withdrawal must be received by the Exchange 
Agent at its address set forth herein prior to 5:00 p.m., New York City time, 
on the Expiration Date. Any such notice of withdrawal must (i) specify the 
name of the person having deposited the Old Notes to be withdrawn (the 
"Depositor"), (ii) identify the Old Notes to be withdrawn (including the 
certificate number or numbers and principal amount of such Old Notes), (iii) 
be signed by the Holder in the same manner as the original signature on the 
Letter of Transmittal by which such Old Notes were tendered (including any 
required signature guarantees) or be accompanied by documents of transfer 
sufficient to have the Trustee with respect to the Old Notes register the 
transfer of such Old Notes into the name of the person withdrawing the tender 
and (iv) specify the name in which any such Old Notes are to be registered, 
if different from that of the Depositor. If certificates for Old Notes have 
been delivered or otherwise identified to the Exchange Agent, then, prior to 
the release of such certificates, the withdrawing Holder must also submit the 
serial numbers of the particular certificates to be withdrawn and a signed 
notice of withdrawal with signatures guaranteed by an Eligible Institution 
unless such Holder is an Eligible Institution. If Old Notes have been 
tendered pursuant to the procedure for book-entry transfer described above, 
any notice of withdrawal must specify the name and number of the account at 
the Book-Entry Transfer Facility to be credited with the withdrawn Old Notes 
and otherwise comply with the 

                               31           

procedures of the Book-Entry Transfer Facility. All questions as to the 
validity, form and eligibility (including time of receipt) of such notices 
will be determined by the Company in its sole discretion, which determination 
shall be final and binding on all parties. Any Old Notes so withdrawn will be 
deemed not to have been validly tendered for purposes of the Exchange Offer 
and no New Notes will be issued with respect thereto unless the Old Notes so 
withdrawn are validly retendered. Properly withdrawn Old Notes may be 
retendered by following one of the procedures described above under 
"--Procedures for Tendering" at any time prior to the Expiration Date. 

   Any Old Notes which have been tendered but which are not accepted for 
payment due to withdrawal, rejection of tender or termination of the Exchange 
Offer will be returned as soon as practicable after withdrawal, rejection of 
tender or termination of the Exchange Offer to the Holder thereof without 
cost to such Holder (or, in the case of Old Notes tendered by book-entry 
transfer into the Exchange Agent's account at the Book-Entry Transfer 
Facility pursuant to the book-entry transfer procedures described above, such 
Old Notes will be credited to an account maintained with such Book-Entry 
Transfer Facility for the Old Notes). 

CONDITIONS 

   Notwithstanding any other term of the Exchange Offer, the Company shall 
not be required to accept for exchange, or exchange New Notes for, any Old 
Notes, and may terminate the Exchange Offer as provided herein before the 
acceptance of such Old Notes, if: 

     (a) any action or proceeding is instituted or threatened in any court or 
    by or before any governmental agency with respect to the Exchange Offer 
    which, in the reasonable judgment of the Company, might materially impair 
    the ability of the Company to proceed with the Exchange Offer or 
    materially impair the contemplated benefits of the Exchange Offer to the 
    Company, or any material adverse development has occurred in any existing 
    action or proceeding with respect to the Company or any of its 
    subsidiaries; 

     (b) any change, or any development involving a prospective change, in the 
    business or financial affairs of the Company or any of its subsidiaries 
    has occurred which, in the reasonable judgment of the Company, might 
    materially impair the ability of the Company to proceed with the Exchange 
    Offer or materially impair the contemplated benefits of the Exchange Offer 
    to the Company; 

     (c) any law, statute, rule or regulation is proposed, adopted or enacted, 
    which, in the reasonable judgment of the Company, might materially impair 
    the ability of the Company to proceed with the Exchange Offer or 
    materially impair the contemplated benefits of the Exchange Offer to the 
    Company; 

     (d) there shall have occurred (i) any general suspension of trading in, 
    or general limitation on prices for securities on the New York Stock 
    Exchange, (ii) a declaration of a banking moratorium or any suspension of 
    payments in respect of banks in the United States or any limitation by any 
    governmental agency or authority that adversely affects the extension of 
    credit to the Company or (iii) a commencement of war, armed hostilities or 
    other similar international calamity directly or indirectly involving the 
    United States; or, in the case any of the foregoing exists at the time of 
    commencement of the Exchange Offer, a material acceleration or worsening 
    thereof; or 

     (e) any governmental approval has not been obtained, which approval the 
    Company shall, in its reasonable judgment, deem necessary for the 
    consummation of the Exchange Offer as contemplated hereby. 

   The foregoing conditions are for the sole benefit of the Company and may 
be asserted by the Company regardless of the circumstances giving rise to any 
such condition or may be waived by the Company in whole or in part at any 
time and from time to time in its reasonable discretion. The failure by the 
Company at any time to exercise any of the foregoing rights shall not be 
deemed a waiver of such right and each such right shall be deemed an ongoing 
right which may be asserted at any time and from time to time. 

   If the Company determines in its reasonable judgment that any of the 
conditions are not satisfied, the Company may (i) refuse to accept any Old 
Notes and return all tendered Old Notes to the tendering Holders, (ii) extend 
the Exchange Offer and retain all Old Notes tendered prior to the expiration 
of the Exchange 

                               32           

Offer, subject, however, to the rights of Holders to withdraw such Old Notes 
(see "--Withdrawal of Tenders" above) or (iii) waive such unsatisfied 
conditions with respect to the Exchange Offer and accept all properly 
tendered Old Notes which have not been withdrawn. If such waiver constitutes 
a material change to the Exchange Offer, the Company will promptly disclose 
such waiver by means of a prospectus supplement that will be distributed to 
the registered Holders, and the Company will extend the Exchange Offer for a 
period of five to ten business days, depending upon the significance of the 
waiver and the manner of disclosure to the registered Holders, if the 
Exchange Offer would otherwise expire during such five to ten business day 
period. 

EXCHANGE AGENT 

   The Bank of New York has been appointed as Exchange Agent for the Exchange 
Offer. Requests for additional copies of this Prospectus or of the Letter of 
Transmittal should be directed to the Exchange Agent addressed as follows: 

                           To: The Bank of New York 
                          By Hand/Overnight Courier: 
                             The Bank of New York 
                              101 Barclay Street 
                           New York, New York 10286 
                             Attn: Benjamin Post 
                            Reorganization Section 
                            Facsimile Transmission 
                                (212) 815-6339 
                     Confirm by Telephone: (212) 815-6335 

FEES AND EXPENSES 

   The expenses of soliciting tenders will be borne by the Company. The 
principal solicitation is being made by mail; however, additional 
solicitation may be made by telephone or in person by officers and regular 
employees of the Company and its affiliates. 

   The Company has not retained any dealer-manager in connection with the 
Exchange Offer and will not make any payments to brokers, dealers or others 
soliciting acceptances of the Exchange Offer. The Company, however, will pay 
the Exchange Agent reasonable and customary fees for its services and will 
reimburse it for its reasonable out-of-pocket expenses in connection 
therewith. 

   The cash expenses to be incurred in connection with the Exchange Offer 
will be paid by the Company. Such expenses include fees and expenses of the 
Exchange Agent and Trustee, accounting and legal fees and printing costs, 
among others. 

   The Company will pay all transfer taxes, if any, applicable to the 
exchange of Old Notes pursuant to the Exchange Offer. If, however, 
certificates representing New Notes, or Old Notes for principal amounts not 
tendered or accepted for exchange, are to be delivered to, or are to be 
issued in the name of, any person other than the registered Holder of the Old 
Notes tendered, or if tendered Old Notes are registered in the name of any 
person other than the person signing the Letter of Transmittal, or if a 
transfer tax is imposed for any reason other than the exchange of Old Notes 
pursuant to the Exchange Offer, then the amount of any such transfer taxes 
(whether imposed on the registered Holder or any other persons) will be 
payable by the tendering Holder. If satisfactory evidence of payment of such 
taxes or exemption therefrom is not submitted with the Letter of Transmittal, 
the amount of such transfer taxes will be billed directly to such tendering 
Holder. 

ACCOUNTING TREATMENT 

   The New Notes will be recorded at the same carrying value as the Old 
Notes, which is the principal amount as reflected in the Company's accounting 
records on the date of the exchange. Accordingly, no gain or loss for 
accounting purposes will be recognized. The expenses of the Exchange Offer 
and the unamortized expenses related to the issuance of the Old Notes will be 
amortized over the term of the Notes. 

                               33           

REGULATORY APPROVALS 

   The Company does not believe that the receipt of any material federal or 
state regulatory approvals will be necessary in connection with the Exchange 
Offer, other than the effectiveness of the Exchange Offer Registration 
Statement under the Securities Act. 

OTHER 

   Participation in the Exchange Offer is voluntary and Holders of Old Notes 
should carefully consider whether to accept the terms and conditions thereof. 
Holders of the Old Notes are urged to consult their financial and tax 
advisors in making their own decisions on what action to take with respect to 
the Exchange Offer. 

CONSEQUENCES OF FAILURE TO PROPERLY TENDER OLD NOTES IN THE EXCHANGE OFFER 

   Issuance of the New Notes in exchange for the Old Notes pursuant to the 
Exchange Offer will be made only after timely receipt by the Exchange Agent 
of such Old Notes, a properly completed and duly executed Letter of 
Transmittal and all other required documents. Therefore, Holders of the Old 
Notes desiring to tender such Old Notes in exchange for New Notes should 
allow sufficient time to ensure timely delivery. The Company is under no duty 
to give notification of defects or irregularities with respect to tenders of 
Old Notes for exchange. Old Notes that are not tendered or that are tendered 
but not accepted by the Company for exchange, will, following consummation of 
the Exchange Offer, continue to be subject to the existing restrictions upon 
transfer thereof under the Securities Act and, upon consummation of the 
Exchange Offer, certain rights under the Registration Rights Agreement will 
terminate. 

   In the event the Exchange Offer is consummated, the Company will not be 
required to register the unexchanged Old Notes. Unexchanged Old Notes will 
continue to be subject to the following restrictions on transfer: (i) the 
unexchanged Old Notes may be resold only if registered pursuant to the 
Securities Act, if any exemption from registration is available thereunder or 
if neither such registration nor such exemption is required by law and (ii) 
the unexchanged Old Notes will bear a legend restricting transfer in the 
absence of registration or an exemption therefrom. The Company does not 
currently anticipate that it will register the unexchanged Old Notes under 
the Securities Act. To the extent that Old Notes are tendered and accepted in 
connection with the Exchange Offer, any trading market for unexchanged Old 
Notes could be adversely affected. 

                               34           

                CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 

   Pursuant to an agreement between United AutoCare and a wholly-owned 
subsidiary of Trace, effective as of January 1, 1997, the Company's exposure 
with respect to United AutoCare's extended service contracts are assumed by 
such subsidiary in exchange for certain fees. As of September 30, 1997, 
aggregate fees paid under such agreement totaled approximately $750,000. 

                               35           

                    DESCRIPTION OF SENIOR CREDIT FACILITY 

   The Company has entered into a Credit Agreement, dated as of March 20, 
1997, providing for revolving loans of up to $50.0 million from a syndicate 
of banks led by The Bank of Nova Scotia and Morgan Guaranty Trust Company of 
New York (as amended, the "Senior Credit Facility"). Of the available 
commitments under the Senior Credit Facility, $45.0 million may be used to 
finance acquisitions of automobile dealerships and related expenses and $5.0 
million may be used for working capital purposes. All loans outstanding under 
the Senior Credit Facility were repaid out of the proceeds of the Initial 
Offering. 

   To permit the offering of the Series B Notes, the consent of the banks 
representing a majority of the aggregate amount of the commitments under the 
Senior Credit Facility was required to amend certain terms thereof, such as 
the debt incurrence covenant and various financial ratios. Prior to such 
offering, such banks waived, until January 15, 1998, any violations caused by 
such offering and agreed to commence the requisite internal procedures to 
effect a formal amendment. Pending such amendment, the Company will not be 
permitted to borrow funds under the Senior Credit Facility. No assurance can 
be given that such amendment will be effected, and if it is not, the Company 
will need to secure a new credit facility. 

Interest on outstanding loans is payable quarterly in arrears at the rate per 
annum, at the option of the Company, of either (a) the Base Rate Margin plus 
the higher of (i) the prime rate announced by The Bank of Nova Scotia or (ii) 
the federal funds rate plus 0.5%, or (b) the Euro-Dollar Margin plus an 
amount based on the applicable Euro-Dollar Reserve Percentage (as defined). 
Through December 31, 1997, the Base Rate Margin is 1.75% and the Euro-Dollar 
Margin is 2.75%. The interest rate at June 30, 1997 was 9.9%. After December 
31, 1997, based upon the Company's Leverage Ratio (as defined) as of the end 
of the last fiscal quarter for which the Company has delivered financial 
statements to the banks, the Base Rate Margin will be between 1.75% and 3.0% 
and the Euro-Dollar will be between 2.75% and 4.0%. Any overdue principal or 
interest will bear interest at the rate per annum of 2.0% plus the applicable 
margin. In addition, the Company is required to pay a quarterly commitment 
fee of 0.5% per annum on the amount of unused commitments. 

Subject to certain conditions, the Company is entitled to borrow money under 
the Senior Credit Facility at any time until March 19, 1998. The Company is 
required to repay loans outstanding thereunder, unless otherwise accelerated 
upon an event of default, in accordance with the following schedule: 



 PRINCIPAL REPAYMENT DATE     AMOUNT OF REPAYMENT 
 ------------------------     ------------------- 
                           
      June 20, 1998               $ 4,000,000 
      September 20, 1998            4,000,000 
      December 20, 1998             4,000,000 
      March 20, 1999                4,000,000 
      June 20, 1999                 4,000,000 
      September 20, 1999            4,000,000 
      December 20, 1999             4,000,000 
      March 20, 2000               22,000,000 


   If the aggregate principal amount of loans outstanding on March 19, 1998 
is less than $50.0 million, the amount of later required repayments will be 
reduced. In addition, the Company is required to repay loans in an amount 
equal to (i) 80% of the net proceeds of certain types of equity issuances and 
(ii) 50% of any Excess Cash Flow (as defined) for the 1997 or 1998 fiscal 
year. The Company may make prepayments at any time without payment of any 
penalty or premium (other than breakage costs in connection with Euro-Dollar 
loans). 

The Senior Credit Facility contains various covenants and events of default 
customary for agreements of this type. 

Indebtedness under the Senior Credit Facility ranks senior to the Notes. The 
Senior Credit Facility is guaranteed by substantially all of the Company's 
subsidiaries, is secured by the pledge of the ownership interests of most of 
such subsidiaries and requires the Company, to the extent permitted, to 
deliver a guarantee and a pledge with respect to each newly acquired 
subsidiary. Such requirement, as well as certain other covenants under the 
Senior Credit Facility, may be waived with the consent of the banks 
representing a majority of the aggregate amount of the commitments 
thereunder. 

                               36           

                             DESCRIPTION OF NOTES 

   As used below in this "Description of Notes" section, the "Company" means 
United Auto Group, Inc. but not any of its subsidiaries. The Old Notes were 
issued, and the New Notes are to be issued, under an Indenture dated as of 
July 23, 1997 (as amended, the "Indenture") among the Company, the Guarantors 
and The Bank of New York, as Trustee (the "Trustee"). The terms of the New 
Notes are identical in all material respects to the terms of the Old Notes, 
except that the New Notes have been registered under the Securities Act and 
therefore will not bear legends restricting their transfer and will not 
contain terms providing for an increase in the interest rate thereon under 
certain circumstances described in the Registration Rights Agreement. The 
terms of the Notes include those stated in the Indenture and those made part 
of the Indenture by reference to the Trust Indenture Act of 1939, as amended 
(the "Trust Indenture Act"). The Notes are subject to all such terms, and 
holders of the Notes are referred to the Indenture and the Trust Indenture 
Act for a statement thereof. A copy of the Indenture and the Registration 
Rights Agreement are filed as exhibits to the Registration Statement of which 
this Prospectus is a part. The statements under this caption relating to the 
Notes, the Indenture and the Registration Rights Agreement are summaries of 
all the material terms thereof but do not purport to be complete, and where 
reference is made to particular provisions of the Indenture or the 
Registration Rights Agreement, such provisions, including the definitions of 
certain terms, are qualified in their entirety by such reference. Terms 
defined under "--Certain Definitions" have the meanings in this "Description 
of Notes" as set forth therein. 

   The Notes are unsecured obligations of the Company, limited to $150.0 
million aggregate principal amount. The Notes are issued only in fully 
registered form, without coupons, in denominations of $1,000 and any integral 
multiple thereof. No service charge will be made for any registration of 
transfer or exchange of Notes, but the Company may require payment of a sum 
sufficient to cover any tax or other governmental charge payable in 
connection therewith. Initially, the Trustee will act as paying agent and 
registrar for the Notes. 

PRINCIPAL, MATURITY AND INTEREST 

   The Notes were issued on the Issue Date at 98.529% of their principal 
amount and will mature on July 15, 2007. The Notes bear interest at the rate 
of 11% per annum from the Issue Date or from the most recent interest payment 
date to which interest has been paid or provided for. Interest is payable 
semiannually on January 15 and July 15 of each year, commencing January 15, 
1998, to the Person in whose name a Note is registered (a "Holder") at the 
close of business on the preceding January 1 or July 1 (each, a "Record 
Date"), as the case may be. Interest on the Notes is computed on the basis of 
a 360-day year of twelve 30-day months. Holders must surrender the Notes to 
the paying agent for the Notes to collect principal payments. The Company 
will pay principal and interest by check and may mail interest checks to a 
Holder's registered address. 

OPTIONAL REDEMPTION 

   The Notes are subject to redemption, at the option of the Company, in 
whole or in part, at any time on or after July 15, 2002 and prior to 
maturity, upon not less than 30 or more than 60 days' notice mailed to each 
Holder of Notes to be redeemed, in amounts of $1,000 or an integral multiple 
thereof, at the following redemption prices (expressed as percentages of 
principal amount), plus accrued interest to but excluding the date fixed for 
redemption (subject to the right of Holders on the relevant Record Date to 
receive interest due on an interest payment date that is on or prior to the 
date fixed for redemption), if redeemed during the 12-month period beginning 
July 15 of the years indicated: 



 YEAR                  PERCENTAGE 
- --------------------  ------------ 
                   
2002 ................    105.500% 
2003 ................    103.667 
2004 ................    101.833 
2005 and thereafter      100.000 


   In addition, prior to July 15, 2000, the Company may redeem Notes with the 
net cash proceeds received by the Company from one or more Public Equity 
Offerings, at a redemption price equal to 111% of the 

                               37           

principal amount thereof, plus accrued and unpaid interest to (but excluding) 
the date fixed for redemption; provided, however, that at least $100.0 
million in aggregate principal amount of Notes remains outstanding 
immediately after any such redemption (excluding any Notes owned by the 
Company or any of its Affiliates). Notice of redemption pursuant to this 
paragraph must be mailed to Holders of Notes to be redeemed not later than 60 
days following the consummation of the relevant Public Equity Offering. 

   Selection of Notes for any partial redemption shall be made by the 
Trustee, in accordance with the rules of any national securities exchange on 
which the Notes may be listed or, if the Notes are not so listed, pro rata or 
by lot or in such other manner as the Trustee shall deem appropriate and 
fair. Notes in denominations larger than $1,000 may be redeemed in part but 
only in integral multiples of $1,000. Notice of redemption will be mailed to 
each Holder of Notes to be redeemed at such Holder's registered address. On 
and after the date fixed for redemption, interest will cease to accrue on 
Notes or portions thereof called for redemption. 

   The Notes do not have the benefit of any sinking fund. 

CHANGE OF CONTROL 

   Within 30 days following a Change of Control, the Company will commence an 
Offer to Purchase all outstanding Notes at a purchase price in cash equal to 
101% of their principal amount, plus accrued and unpaid interest to the 
Purchase Date. Such Offer to Purchase will be consummated not earlier than 30 
days and not later than 60 days after the commencement thereof. Each Holder 
shall be entitled to tender all or any portion of the Notes owned by such 
Holder pursuant to the Offer to Purchase, subject to the requirement that any 
portion of a Note tendered must bear an integral multiple of $1,000 principal 
amount. 

   A "Change of Control" will be deemed to have occurred in the event that 
(whether or not otherwise permitted by the Indenture) after the Issue Date 
(a) any transaction (including, without limitation, any merger or 
consolidation) shall be consummated after which any Person or any Persons 
acting together that would constitute a group (for purposes of Section 13(d) 
of the Exchange Act, or any successor provision thereto) (a "Group"), 
together with any Affiliates, other than Permitted Holders, shall 
"beneficially own" (as defined in Rule 13d-3 under the Exchange Act, or any 
successor provision thereto) at least (x) 50% of the voting power of the 
outstanding Voting Stock of the Company or (y) 40% of the voting power of the 
Voting Stock of the Company, and the Permitted Holders own in the aggregate 
less than such Person or Group (in doing the "own less than" comparison in 
this clause (ii), the holdings of the Permitted Holders who are members of 
the new Group shall not be counted in the voting power of such new Group); 
(b) (x) the Company or any Restricted Subsidiary sells, leases or otherwise 
transfers all or substantially all of the assets of the Company and the 
Restricted Subsidiaries, taken as a whole, to any Person other than a Wholly 
Owned Subsidiary, or (y) the Company consolidates with or merges with or into 
another Person or any Person consolidates with, or merges with or into, the 
Company, in either case under this clause (b), in one transaction or series 
of related transactions in which immediately after the consummation thereof 
Persons owning a majority of the voting power of the Voting Stock of the 
Company immediately prior to such consummation shall cease to own a majority 
of the voting power of the Voting Stock of the Company or the surviving or 
transferee entity if other than the Company; (c) Continuing Directors cease 
to constitute at least a majority of the Board of Directors of the Company; 
or (d) the stockholders of the Company approve any plan or proposal for the 
liquidation or dissolution of the Company. 

   In the event that the Company makes an Offer to Purchase the Notes, the 
Company shall comply with any applicable securities laws and regulations, 
including any applicable requirements of Section 14(e) of, and Rule 14e-1 
under, the Exchange Act. The Company will not be required to make an Offer to 
Purchase upon a Change of Control if a third party makes the Offer to 
Purchase in the manner, at the times and otherwise in compliance with the 
requirements set forth in the Indenture applicable to an Offer to Purchase 
made by the Company and purchases all Notes validly tendered and not 
withdrawn under such Offer to Purchase. 

   With respect to the sale of assets referred to in the definition of 
"Change of Control," the phrase "all or substantially all" of the assets of 
the Company and the Restricted Subsidiaries, taken as a whole, will likely be 
interpreted under applicable law and will be dependent upon particular facts 
and circumstances. As a result, there may be a degree of uncertainty in 
ascertaining whether a sale or transfer of "all or substantially 

                               38           

all" of the assets of the Company and the Restricted Subsidiaries, taken as a 
whole, has occurred. In addition, no assurances can be given that the Company 
will be able to acquire Notes tendered upon the occurrence of a Change of 
Control. The ability of the Company to pay cash to the Holders upon a Change 
of Control may be limited by its then existing financial resources. The 
Senior Credit Facility contains certain covenants that may limit or impede 
the Company's ability to repurchase Notes upon a Change of Control, and 
future debt agreements of the Company may prohibit or limit such repurchase. 
If the Company does not obtain a waiver or consent from the holders of such 
Indebtedness (if required) or repay such Indebtedness, the Company may be 
prohibited from repurchasing Notes. In such event, the Company's failure to 
purchase tendered Notes would constitute an Event of Default under the 
Indenture which would in turn constitute a default under the Senior Credit 
Facility and possibly other Indebtedness. None of the provisions relating to 
a repurchase upon a Change of Control are waivable by the Board of Directors 
of the Company or the Trustee. See "Risk Factors -- Change of Control." 

   The foregoing provisions will not prevent the Company from entering into 
transactions of the types described above with management or their 
affiliates. In addition, such provisions may not necessarily afford the 
Holders protection in the event of a highly leveraged transaction, including 
a reorganization, restructuring, merger or similar transaction involving the 
Company that may adversely affect the Holders because such transactions may 
not involve a shift in voting power or beneficial ownership, or even if they 
do, may not involve a shift of the magnitude required under the definition of 
Change of Control to trigger the provisions. 

SUBORDINATION 

   The Company's obligations with respect to the payment of the principal of 
and interest on the Notes is subordinated in right of payment, to the extent 
and in the manner provided in the Indenture, to the prior payment in full of 
all Senior Debt of the Company. 

   Upon any payment or distribution of assets or securities of the Company of 
any kind or character (whether in cash, property or securities) upon any 
dissolution or winding up or total or partial liquidation or reorganization 
of the Company, whether voluntary or involuntary or in bankruptcy, 
insolvency, receivership or other proceedings, all amounts due or to become 
due with respect to Senior Debt of the Company (including any interest 
accruing subsequent to an event of bankruptcy or insolvency, whether or not 
allowed or allowable thereunder) shall first be paid in full, or payment 
provided for, before the Holders or the Trustee on their behalf shall be 
entitled to receive any payment by the Company of the principal of or 
interest on the Notes, or any payment to acquire any of the Notes for cash, 
property or securities, or any distribution with respect to the Notes of any 
cash, property or securities. Before any payment may be made by or on behalf 
of the Company of the principal of or interest on the Notes upon any such 
dissolution or winding up or liquidation or reorganization, any payment or 
distribution of assets or securities of the Company of any kind or character, 
whether in cash, property or securities, to which the Holders or the Trustee 
on their behalf would be entitled, but for the subordination provisions of 
the Indenture, shall be made by the Company, or by any receiver, trustee in 
bankruptcy, liquidating trustee, agent or other person making such payment or 
distribution, directly to the holders of Senior Debt of the Company (pro rata 
to such holders on the basis of the respective amounts of Senior Debt held by 
such holders) or their representative(s) or to the trustee(s) under any 
indenture pursuant to which any such Senior Debt may have been issued as 
their respective interests may appear, to the extent necessary to pay all 
such Senior Debt in full after giving effect to any concurrent payment, 
distribution or provision therefor to or for the holders of such Senior Debt. 

   No direct or indirect payment by or on behalf of the Company of principal 
of or interest on the Notes (other than payments to Holders from funds held 
in trust for the benefit of Holders pursuant to the defeasance provisions of 
the Indenture), whether pursuant to the terms of the Notes or upon 
acceleration or otherwise, will be made if, at the time of such payment, 
there exists a default in the payment of all or any portion of the 
obligations on any Designated Senior Debt, whether at maturity, on account of 
mandatory redemption or prepayment, acceleration or otherwise, and such 
default shall not have been cured or waived. In addition, during the 
continuance of any non-payment default or non-payment event of default with 
respect to any Designated Senior Debt pursuant to which the maturity thereof 
may be accelerated, and upon 

                               39           

receipt by the Trustee of written notice (a "Payment Blockage Notice") from a 
holder or holders of such Designated Senior Debt or the trustee or agent 
acting on behalf of such Designated Senior Debt, then, unless and until such 
default or event of default has been cured or waived or has ceased to exist 
or such Designated Senior Debt has been discharged or repaid in full, or the 
requisite holders of such Designated Senior Debt have otherwise agreed in 
writing, no payment or distribution will be made by or on behalf of the 
Company on account of or with respect to the Notes (except payments to 
Holders from funds held in trust for the benefit of Holders pursuant to the 
defeasance provisions of the Indenture) during a period (a "Payment Blockage 
Period") commencing on the date of receipt of such Payment Blockage Notice by 
the Trustee and ending 179 days thereafter. Notwithstanding anything herein 
to the contrary, (x) in no event will a Payment Blockage Period extend beyond 
179 days from the date of the Payment Blockage Notice in respect thereof was 
given and (y) there must be 180 days in any 365 day period during which no 
Payment Blockage Period is in effect. Not more than one Payment Blockage 
Period may be commenced with respect to the Notes during any period of 365 
consecutive days. No default or event of default that existed or was 
continuing on the date of commencement of any Payment Blockage Period with 
respect to the Designated Senior Debt initiating such Payment Blockage Period 
may be, or be made, the basis for the commencement of any other Payment 
Blockage Period by the holder or holders of such Designated Senior Debt or 
the trustee or agent acting on behalf of such Designated Senior Debt, whether 
or not within a period of 365 consecutive days, unless such default or event 
of default has been cured or waived for a period of not less than 90 
consecutive days. 

   The failure to make any payment or distribution for or on account of the 
Notes by reason of the provisions of the Indenture described under this 
section will not be construed as preventing the occurrence of an Event of 
Default described in clause (a), (b) or (c) of the first paragraph under 
"--Events of Default." 

   By reason of the subordination provisions described above, in the event of 
insolvency of the Company, funds which would otherwise be payable to Holders 
will be paid to holders of Senior Debt of the Company to the extent necessary 
to repay such Senior Debt in full, and the Company may be unable to fully 
meet its obligations with respect to the Notes. Subject to the restrictions 
set forth in the Indenture, in the future the Company may incur additional 
Senior Debt. See "Risk Factors -- Subordination of the Notes and the 
Guarantees; Release of Guarantees." 

   At September 30, 1997, there was an aggregate of $294.6 million of Senior 
Debt of the Company and the Guarantors outstanding. 

THE GUARANTEES 

   The Guarantors, jointly and severally, fully and unconditionally guarantee 
(subject to fraudulent conveyance laws) on a senior subordinated basis all of 
the obligations of the Company under the Indenture, including its obligation 
to pay principal of and interest on the Notes. The obligation of each 
Guarantor is limited to the maximum amount which, after giving effect to all 
other contingent and fixed liabilities of such Guarantor, will result in the 
obligations of such Guarantor under its Guarantee not constituting a 
fraudulent conveyance or fraudulent transfer under federal or state law. See 
"Risk Factors -- Fraudulent Conveyance Considerations." Except as provided in 
"--Covenants," the Company is not restricted from selling or otherwise 
disposing of a Guarantor. 

   The Company will not permit any Subsidiary to become an obligor (including 
as guarantor) under, or in respect of, the Senior Credit Facility without 
causing such Subsidiary to become a Guarantor. Any such Subsidiary shall (a) 
execute and deliver a supplemental indenture in form reasonably satisfactory 
to the Trustee pursuant to which such Subsidiary shall unconditionally 
guarantee all of the Company's obligations under the Notes and the Indenture 
on the terms set forth in the Indenture and (b) deliver to the Trustee an 
opinion of counsel that such supplemental indenture has been duly authorized, 
executed and delivered by such Subsidiary and constitutes a valid and legally 
binding and enforceable obligation of such Subsidiary (subject, in the case 
of enforceability, to customary bankruptcy, insolvency, fraudulent conveyance 
and similar exceptions). 

                               40           

   Any Subsidiary of the Company that ceases to be an obligor (including as 
guarantor) under, or in respect of, the Senior Credit Facility shall be 
released from its Guarantee upon delivery of an officers' certificate to the 
Trustee certifying to such effect. 

   In addition, the Indenture provides that if all of the Capital Stock of a 
Guarantor is sold by the Company or any Subsidiary in a transaction 
constituting an Asset Disposition (or which, but for the provisions of clause 
(c) of the definition of such term, would constitute an Asset Disposition), 
and, if required by the Indenture, (x) the Net Available Proceeds from such 
Asset Disposition are used in accordance with the covenant described under 
"--Covenants -- Limitation on Certain Asset Dispositions" or (y) the Company 
delivers to the Trustee an Officers' Certificate to the effect that the Net 
Available Proceeds from such Asset Disposition will be used in accordance 
with the covenant described under "--Covenants -- Limitation on Certain Asset 
Dispositions" within the time limits specified by such covenant, then such 
Guarantor shall be released and discharged from its Guarantee upon such use 
in the case of clause (x) or upon such delivery in the case of clause (y). 

   The Company may, at its option, cause any of its Subsidiaries to be a 
Guarantor. 

   The obligations of each Guarantor under its Guarantee are subordinated to 
the prior payment in full of all Senior Debt of such Guarantor on the same 
basis as the obligations of the Company on the Notes are subordinated to 
Senior Debt of the Company. See "Risk Factors -- Subordination of the Notes 
and the Guarantees; Release of Guarantees." Each Guarantee ranks pari passu 
in right of payment with any other senior subordinated indebtedness of the 
Guarantor thereof and senior to any future Subordinated Indebtedness of such 
Guarantor. 

   Separate financial statements of the Guarantors are not included herein 
because (i) the Company is a holding company with no independent operations, 
(ii) the Guarantees are full and unconditional (except to the extent 
necessary to comply with fraudulent conveyance laws), (iii) the Guarantors 
are jointly and severally liable with respect to the Notes and (iv) Atlantic 
Finance and its subsidiaries are the sole subsidiaries of the Company that 
are not Guarantors and financial information with respect to such entities is 
set forth separately on the face of the Company's consolidated financial 
statements under the caption "Auto Finance." 

COVENANTS 

   The Indenture contains, among others, the following covenants: 

Limitation on Incurrence of Indebtedness 

   The Company will not, and will not permit any Restricted Subsidiary to, 
directly or indirectly, Incur any Indebtedness, except: 

     (i) Indebtedness of the Company or any Restricted Guarantor, if the 
    Consolidated Cash Flow Ratio for the four full fiscal quarters for which 
    quarterly or annual financial statements are available next preceding the 
    Incurrence of such Indebtedness would be greater than 2.0 to 1.0, and 
    Permitted Refinancings thereof; 

     (ii) Indebtedness of the Company Incurred under the Senior Credit 
    Facility in an aggregate amount not to exceed $100.0 million less any 
    amount of Indebtedness repaid from the proceeds of Asset Dispositions as 
    provided under "--Limitation on Certain Asset Dispositions," which 
    repayment results in a permanent reduction of the commitments under the 
    Senior Credit Facility; 

     (iii) Indebtedness owed by the Company to any Restricted Guarantor or 
    Indebtedness owed by a Restricted Subsidiary to the Company or a 
    Restricted Guarantor; provided, however, upon either (x) the transfer or 
    other disposition by such Restricted Guarantor or the Company of any 
    Indebtedness so permitted under this clause (iii) to a Person other than 
    the Company or another Restricted Guarantor or (y) such Restricted 
    Guarantor's ceasing to be a Restricted Guarantor, the provisions of this 
    clause (iii) shall no longer be applicable to such Indebtedness and such 
    Indebtedness shall be deemed to have been Incurred at the time of any such 
    issuance, sale, transfer or other disposition, as the case may be; 

     (iv) Interest Rate Obligations of the Company or any Restricted 
    Subsidiary relating to Indebtedness of the Company or such Restricted 
    Subsidiary permitted to be Incurred under the Indenture; provided, 

                               41           

    however, that the notional amount of such Interest Rate Obligations does 
    not exceed the amount of the Indebtedness to which such Interest Rate 
    Obligations relate; 

     (v) Indebtedness of the Company or any Restricted Subsidiary under 
    Currency Agreements to the extent relating to (x) Indebtedness of the 
    Company or any Restricted Subsidiary permitted to be Incurred under the 
    Indenture and/or (y) obligations to purchase assets, properties or 
    services incurred in the ordinary course of business of the Company or any 
    Restricted Subsidiary; provided, however, that such Currency Agreements do 
    not increase the Indebtedness or other obligations of the Company and the 
    Restricted Subsidiaries outstanding other than as a result of fluctuations 
    in foreign currency exchange rates or by reason of fees, indemnities or 
    compensation payable thereunder; 

     (vi) Permitted Refinancings of any Indebtedness to the extent outstanding 
    on the Issue Date; 

     (vii) Indebtedness of the Company under the Notes and the Exchange Notes, 
    and Permitted Refinancings thereof; 

     (viii) Floor Plan Notes; 

     (ix) Acquired Indebtedness and Permitted Refinancings thereof; 

     (x) guarantees by the Company or any Restricted Guarantor of Indebtedness 
    of the Company or any Restricted Subsidiary otherwise permitted to be 
    Incurred under the Indenture; 

     (xi) Purchase Money Debt, and Permitted Refinancings thereof, in an 
    aggregate amount not to exceed $35.0 million at any time outstanding; 

     (xii) Atlantic Finance Loans; and 

     (xiii) Indebtedness of the Company or any Restricted Guarantor not 
    otherwise permitted to be Incurred pursuant to clauses (i) through (xii) 
    above which, together with any other outstanding Indebtedness Incurred 
    pursuant to this clause (xiii), does not exceed $20.0 million in the 
    aggregate at any time outstanding. 

Limitation on Restricted Payments 

   The Company will not, and will not permit any Restricted Subsidiary to, 
directly or indirectly, 

     (i) declare or pay any dividend, or make any distribution of any kind or 
    character (whether in cash, property or securities), in respect of any 
    class of Capital Stock of the Company or any Restricted Subsidiary 
    (excluding any (x) dividends or distributions payable solely in shares of 
    Qualified Stock or in options, warrants or other rights to acquire such 
    shares, or (y) in the case of any Restricted Subsidiary, dividends or 
    distributions payable to the Company or a Restricted Subsidiary), 

     (ii) purchase, redeem or otherwise acquire or retire for value any shares 
    of Capital Stock of the Company or any Restricted Subsidiary, any options, 
    warrants or rights to purchase or acquire such shares or any securities 
    convertible or exchangeable into such shares (excluding any such shares, 
    options, warrants, rights or securities that are owned by the Company or a 
    Restricted Subsidiary), 

     (iii) make any Investment (other than a Permitted Investment), or make 
    any payment on a guarantee of any obligation of any Person other than the 
    Company or a Restricted Subsidiary, or 

     (iv) redeem, defease, repurchase, retire or otherwise acquire or retire 
    for value, prior to any scheduled maturity, repayment or sinking fund 
    payment, Subordinated Indebtedness (each of the transactions described in 
    clauses (i) through (iv) (other than any exception to any such clause) 
    being a "Restricted Payment") 

     if, at the time thereof: 

        (1) a Default shall have occurred and be continuing, or 

        (2) upon giving effect to such Restricted Payment, the Company could 
       not Incur at least $1.00 of additional Indebtedness pursuant to the 
       terms of the Indenture described in clause 
       (i) of "--Limitation on Incurrence of Indebtedness," or 

                               42           

        (3) upon giving effect to such Restricted Payment, the aggregate 
       amount of all Restricted Payments (other than any Restricted Payment 
       described in clause (ii), (iii), (iv), (v), (vi), (vii) or (viii) of 
       the next paragraph) (including the Fair Market Value of all Restricted 
       Payments not made in cash or Cash Equivalents, valued at the time of 
       each such Restricted Payment) declared or made on or after the Issue 
       Date exceeds the sum of the following (the "Basket"): 

            (a) 50% of cumulative Consolidated Net Income of the Company (or, 
           in the case cumulative Consolidated Net Income of the Company 
           shall be negative, less 100% of such deficit) for the period 
           (treated as one accounting period) from the beginning of the 
           fiscal quarter in which the Issue Date occurs through the last day 
           of the fiscal quarter for which financial statements are 
           available; plus 

            (b) the aggregate net cash proceeds received (other than from a 
           Subsidiary of the Company) after the Issue Date from the issuance 
           of, or equity contribution with respect to, shares of Qualified 
           Stock and warrants, rights or options to purchase or acquire such 
           shares; plus 

            (c) the amount by which Indebtedness of the Company or any 
           Restricted Subsidiary (other than Subordinated Indebtedness) is 
           reduced on the Company's balance sheet upon the conversion or 
           exchange (other than by a Subsidiary of the Company) subsequent to 
           the Issue Date into Qualified Stock (less the amount of any cash, 
           or the Fair Market Value of any other property, distributed by the 
           Company or any Restricted Subsidiary upon such conversion or 
           exchange to the extent such cash or other property reduced the 
           amount of such Indebtedness); plus 

            (d) the aggregate after-tax net proceeds (consisting of cash and 
           Cash Equivalents) from the sale or other disposition of, or any 
           distribution in respect of, any Investment (other than any such 
           proceeds that the Company elects to be applied toward the 
           calculation of Net Investment under clause (vii) or (viii) of the 
           next paragraph) constituting a Restricted Payment made after the 
           Issue Date; provided, however, that any gain (or loss) on such 
           sale or disposition or any such distribution included in such 
           after-tax net proceeds shall not be included in determining 
           Consolidated Net Income for purposes of clause (a) above; 
           provided, further, that amounts included in this clause (d) shall 
           not exceed the Net Investment by the Company in the Person (or its 
           Subsidiaries) in respect of which such Investment was made; plus 

            (e) $10.0 million. 

   The foregoing provision will not prohibit any of the following: 

     (i) any dividend on any class of Capital Stock of the Company or any 
    Restricted Subsidiary paid within 60 days after the declaration thereof 
    if, on the date when the dividend was declared, the Company or such 
    Restricted Subsidiary, as the case may be, could have paid such dividend 
    in accordance with the provisions of the Indenture; 

     (ii) the Refinancing of any Subordinated Indebtedness otherwise permitted 
    pursuant to the terms of the Indenture described in clause (v) of 
    "--Limitation on Incurrence of Indebtedness"; 

     (iii) the exchange or conversion of any Indebtedness of the Company or 
    any Restricted Subsidiary for or into Qualified Stock; 

     (iv) any Restricted Payment made with the proceeds of a substantially 
    concurrent sale (other than to a Subsidiary of the Company) for cash of 
    Qualified Stock; 

     (v) any Investment to the extent that the consideration therefor consists 
    of Qualified Stock; 

     (vi) required or ratable payments to holders of minority interests in any 
    Restricted Subsidiary; 

     (vii) any Investments in Atlantic Finance or any of its Subsidiaries; 
    provided, however, that the Net Investment in respect of Investments made 
    pursuant to this clause (vii) shall not exceed $25.0 million in the 
    aggregate at any time outstanding; and 

                               43           

     (viii) Investments not otherwise permitted pursuant to clauses (i) 
    through (vii) above; provided, however, that the Net Investment in respect 
    of Investments made pursuant to this clause (viii) shall not exceed $20.0 
    million in the aggregate at any time outstanding; 

   provided, however, that (I) with respect to each of clauses (iv), (v), 
(vi), (vii) and (viii) no Default shall have occurred and be continuing and 
(II) no issuance of Qualified Stock pursuant to clause (ii), (iii), (iv), 
(v), (vi), (vii) or (viii) shall increase the Basket. 

   The Indenture provides that for purposes of this covenant, (i) an 
"Investment" shall be deemed to be made at the time any Restricted Subsidiary 
is designated as an Unrestricted Subsidiary in an amount (proportionate to 
the Company's equity interest in such Restricted Subsidiary) equal to the 
Fair Market Value of such Restricted Subsidiary at such time; provided, 
however, that in the event that any Subsidiary acquired after the Issue Date 
is designated an Unrestricted Subsidiary, the amount of Investment deemed 
made at such time shall be equal to the Net Investment of the Company and the 
Restricted Subsidiaries in such Restricted Subsidiary at such time; (ii) upon 
the redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary, 
the Basket shall be increased by the amount (proportionate to the Company's 
equity interest in such Unrestricted Subsidiary) equal to the lesser of (x) 
the Fair Market Value of such Unrestricted Subsidiary at the time of such 
redesignation and (y) the Net Investment of the Company and the Restricted 
Subsidiaries in such Unrestricted Subsidiary; provided, however, that in the 
event that any Subsidiary acquired after the Issue Date is redesignated a 
Restricted Subsidiary, the amount of such increase shall be equal to the Net 
Investment of the Company and the Restricted Subsidiaries in such 
Unrestricted Subsidiary at such time; and (iii) an "Investment" shall be 
deemed to be made at the time that the ownership or voting power of the 
Company and the Restricted Subsidiaries in any Restricted Subsidiary is 
reduced to below majority (but greater than zero) in an amount equal to the 
Fair Market Value of such former Restricted Subsidiary at such time 
multiplied by the percentage ownership or voting power (whichever is less) of 
the Company and the Restricted Subsidiaries in such former Restricted 
Subsidiary; provided, however, that in the event that the ownership or voting 
power of any Subsidiary acquired after the Issue Date is so reduced, the 
amount of Investment deemed made at such time shall be equal to the Net 
Investment of the Company and the Restricted Subsidiaries in such former 
Restricted Subsidiary at such time. Notwithstanding the foregoing, Atlantic 
Finance and its Subsidiaries shall be designated Unrestricted Subsidiaries as 
of the Issue Date and such designation shall not be deemed an Investment. 

Limitation on Restrictions Affecting Restricted Subsidiaries 

   The Company will not, and will not permit any Restricted Subsidiary (other 
than a Restricted Guarantor) to, directly or indirectly, create or otherwise 
cause or suffer to exist any consensual encumbrance or restriction on the 
ability of any Restricted Subsidiary to (i) pay dividends or make any other 
distributions in respect of its Capital Stock or pay any Indebtedness or 
other obligation owed to the Company or any Restricted Subsidiary, (ii) make 
loans or advances to, or guarantee any Indebtedness of, the Company or any 
Restricted Subsidiary or (iii) transfer any of its property or assets to the 
Company or any Restricted Subsidiary, except for (a) any encumbrance or 
restriction existing under or by reason of any agreement in effect on the 
Issue Date (including the Senior Credit Facility) as any such agreement is in 
effect on such date or as such agreement is amended thereafter but only if 
such encumbrance or restriction is no more restrictive than in the agreement 
being amended, (b) any encumbrance or restriction under any agreement of or 
relating to such Restricted Subsidiary prior to the date on which such 
Restricted Subsidiary was acquired by the Company and outstanding on such 
date and not Incurred in anticipation or contemplation of becoming a 
Restricted Subsidiary and provided such encumbrance or restriction shall not 
apply to any assets of the Company or any Restricted Subsidiary other than 
the Restricted Subsidiary so acquired or its assets, (c) customary provisions 
contained in an agreement that has been entered into for the sale or 
disposition of all or substantially all of the Capital Stock or assets of a 
Restricted Subsidiary; provided, however, that such encumbrance or 
restriction is applicable only to such Restricted Subsidiary or assets, (d) 
any encumbrance or restriction existing under or by reason of applicable law, 
(e) customary provisions restricting subletting or assignment of any lease 
governing any leasehold interest of any Restricted Subsidiary, (f) covenants 
in franchise agreements with car manufacturers customary for franchise 
agreements in the automobile retailing industry, (g) covenants in purchase 
money obligations for property restricting transfer of such property, (h) 
covenants in security agreements securing Indebtedness of a Restricted 
Subsidiary (to the 

                               44           

extent that such Liens were otherwise incurred in accordance with 
"--Limitation on Liens" below) that restrict the transfer of property subject 
to such agreements and (i) customary covenants in Floor Plan Notes. 

Limitation on Liens 

   The Company will not, and will not permit any Restricted Subsidiary to, 
incur or suffer to exist any Lien on or with respect to any property or 
assets of the Company or any Restricted Subsidiary owned on the Issue Date or 
thereafter acquired or on the income or profits thereof to secure 
Indebtedness, without making, or causing such Restricted Subsidiary to make, 
effective provision for securing the Notes or the Guarantee of such 
Restricted Subsidiary (and, if the Company shall so determine, any other 
Indebtedness of the Company or such Restricted Subsidiary, including 
Subordinated Indebtedness; provided, however, that Liens securing the Notes 
and any Indebtedness pari passu with the Notes are senior to such Liens 
securing such Subordinated Indebtedness) equally and ratably with such 
Indebtedness or, in the event such Indebtedness is subordinate in right of 
payment to the Notes or the Guarantee, prior to such Indebtedness, as to such 
property or assets for so long as such Indebtedness shall be so secured. 

   The foregoing restrictions shall not apply to (i) Liens existing on the 
Issue Date securing Indebtedness existing on the Issue Date; (ii) Liens 
securing Senior Debt (including Liens securing Floor Plan Notes and 
Indebtedness under the Senior Credit Facility) and any guarantees thereof to 
the extent that the Indebtedness secured thereby is permitted to be incurred 
under the covenant described under "--Limitation on Incurrence of 
Indebtedness;" (iii) Liens securing only the Notes and the Guarantees, if 
any; (iv) Liens in favor of the Company or a Guarantor, if any; (v) Liens to 
secure Indebtedness Incurred for the purpose of financing all or any part of 
the purchase price or the cost of construction or improvement of the property 
(or any other capital expenditure financing) subject to such Liens; provided, 
however, that (a) the aggregate principal amount of any Indebtedness secured 
by such a Lien does not exceed 100% of such purchase price or cost, (b) such 
Lien does not extend to or cover any other property other than such item of 
property and any improvements on such item, (c) the Indebtedness secured by 
such Lien is Incurred by the Company within 180 days of the acquisition, 
construction or improvement of such property and (d) the Incurrence of such 
Indebtedness is permitted by the provisions of the Indenture described under 
"--Limitation on Incurrence of Indebtedness;" (vi) Liens on property existing 
immediately prior to the time of acquisition thereof (and not created in 
anticipation or contemplation of the financing of such acquisition); (vii) 
Liens on property of a Person existing at the time such Person is acquired or 
merged with or into or consolidated with the Company or any such Restricted 
Subsidiary (and not created in anticipation or contemplation thereof); (viii) 
Liens to secure Indebtedness Incurred to Refinance, in whole or in part, any 
Indebtedness secured by Liens referred to in the foregoing clauses (i)-(vii) 
so long as such Liens do not extend to any property other than the property 
securing the Indebtedness being Refinanced and the principal amount of 
Indebtedness so secured is not increased except for the amount of any premium 
required to be paid in connection with such Refinancing pursuant to the terms 
of the Indebtedness Refinanced or the amount of any premium reasonably 
determined by the Company as necessary to accomplish such Refinancing by 
means of a tender offer, exchange offer or privately negotiated repurchase, 
plus the expenses of the issuer of such Indebtedness reasonably incurred in 
connection with such Refinancing; and (viii) Liens in favor of the Trustee as 
provided for in the Indenture on money or property held or collected by the 
Trustee in its capacity as Trustee. 

Limitation on Certain Asset Dispositions 

   The Company will not, and will not permit any Restricted Subsidiary to, 
directly or indirectly, make one or more Asset Dispositions unless: (i) the 
Company or such Restricted Subsidiary, as the case may be, receives 
consideration for such Asset Disposition at least equal to the Fair Market 
Value of the assets sold or disposed of; and (ii) not less than 80% of the 
consideration for the disposition consists of (A) cash or Cash Equivalents 
(including any held in escrow); (B) the assumption of Indebtedness (other 
than non-recourse Indebtedness or any Subordinated Indebtedness) of the 
Company or such Restricted Subsidiary or other obligations relating to such 
assets (provided, however, that the Company and the Restricted Subsidiaries 
are released from any liability for such Indebtedness); (C) Replacement 
Assets or (D) any combination of the foregoing clauses (A), (B) and (C). All 
Net Available Proceeds of an Asset Disposition shall be applied within 

                               45           

360 days of such Asset Disposition (i) to capital investments in properties 
or assets that will be used in a business of the Company and the Restricted 
Subsidiaries conducted on the Issue Date or in a business reasonably related 
thereto and/or (ii) to the permanent reduction and prepayment of any Senior 
Debt of the Company then outstanding (including a permanent reduction of 
commitments in respect thereof). Any Net Available Proceeds from any Asset 
Disposition that are not applied as provided in the immediately preceding 
sentence shall be used not later than the 361st day after such Asset 
Disposition to make an Offer to Purchase outstanding Notes at a purchase 
price in cash equal to 100% of their principal amount, plus accrued and 
unpaid interest to the Purchase Date. Notwithstanding the foregoing, the 
Company may defer making any Offer to Purchase outstanding Notes until there 
are aggregate unutilized Net Available Proceeds from Asset Dispositions 
otherwise subject to the two immediately preceding sentences equal to or in 
excess of $10.0 million (at which time, the entire unutilized Net Available 
Proceeds from Asset Dispositions otherwise subject to the two immediately 
preceding sentences, and not just the amount in excess of $10.0 million, 
shall be applied as required pursuant to this paragraph). Any remaining Net 
Available Proceeds following the completion of the required Offer to Purchase 
may be used by the Company for any other purpose (subject to the other 
provisions of the Indenture) and the amount of Net Available Proceeds then 
required to be otherwise applied in accordance with this covenant shall be 
reset to zero, subject to any subsequent Asset Disposition. These provisions 
will not apply to a transaction consummated in compliance with the provisions 
of the Indenture described under "--Mergers, Consolidations and Certain Sales 
of Assets." 

   In the event that the Company makes an Offer to Purchase the Notes, the 
Company shall comply with any applicable securities laws and regulations, 
including any applicable requirements of Section 14(e) of, and Rule 14e-1 
under, the Exchange Act. 

Limitation on Senior Subordinated Indebtedness 

   The Company (i) will not Incur any Indebtedness that by its terms (or by 
the terms of the agreement or instrument governing such Indebtedness) is 
subordinate in right of payment to any other Indebtedness of the Company 
unless such Indebtedness is also by its terms (or by the terms of the 
agreement or instrument governing such Indebtedness) made expressly either 
(x) pari passu in right of payment with the Notes or (y) subordinate in right 
of payment to the Notes in the same manner and at least to the same extent as 
the Notes are subordinate to Senior Debt of the Company, and (ii) will not 
permit any Guarantor to Incur any Indebtedness that by its terms (or by the 
terms of the agreement or instrument governing such Indebtedness) is 
subordinate in right of payment to any other Indebtedness of such Guarantor 
unless such Indebtedness is also by its terms (or by the terms of the 
agreement governing such Indebtedness) made expressly either (x) pari passu 
in right of payment with the Guarantee of such Guarantor or (y) subordinate 
in right of payment to the Guarantee of such Guarantor in the same manner and 
at least to the same extent as the Guarantee of such Guarantor is subordinate 
to Senior Debt of such Guarantor. 

Limitation on Transactions with Affiliates 

   The Company will not, and will not permit any Restricted Subsidiary to, 
directly or indirectly, enter into any transaction with any of their 
respective Affiliates, including, without limitation, the purchase, sale, 
lease or exchange of property, the rendering of any service, or the making of 
any guarantee, loan, advance or Investment, unless the terms of such 
transaction are at least as favorable as the terms that could be obtained at 
such time by the Company or such Restricted Subsidiary, as the case may be, 
in a comparable transaction made on an arms-length basis with a Person that 
is not such an Affiliate; provided, however, that (x) if the aggregate 
consideration exceeds $1.0 million, the Company shall deliver an officers' 
certificate to the Trustee stating that a majority of the Disinterested 
Directors have determined, in their good faith judgment, that the terms of 
such transaction are at least as favorable as the terms that could be 
obtained at such time by the Company or such Restricted Subsidiary, as the 
case may be, in a comparable transaction made on an arms-length basis with a 
Person that is not such an Affiliate and (y) if the aggregate consideration 
exceeds $5.0 million, the Company shall also deliver to the Trustee, prior to 
the consummation of the transaction, the favorable written opinion of a 
nationally recognized accounting, appraisal or investment banking firm as to 
the fairness of the transaction to the Company or such Restricted Subsidiary, 
from a financial point of view; provided, however, that this clause (y) shall 
not apply to (I) transactions relating to the assumption 

                               46           

by Trace of liabilities of the Company or any Restricted Subsidiary under 
extended service contracts (or Trace's indemnification of the Company or any 
Restricted Subsidiary for liabilities thereof) or (II) the writing of 
extended service contracts by Trace to customers of the Company or any 
Restricted Subsidiary. The provisions of this covenant shall not apply to (i) 
transactions permitted by the provisions of the Indenture described above 
under the caption "--Limitation on Restricted Payments," (ii) reasonable fees 
and compensation paid to, and indemnity provided on behalf of, officers, 
directors and employees of the Company or any Restricted Subsidiary in the 
ordinary course of business and on ordinary business terms or as determined 
in good faith by the Board of Directors of the Company and (iii) transactions 
solely between or among the Company and/or one or more Restricted 
Subsidiaries. 

Provision of Financial Information 

   Whether or not the Company is subject to Section 13(a) or 15(d) of the 
Exchange Act, or any successor provision thereto, the Company shall file with 
the Commission the annual reports, quarterly reports and other documents 
which the Company would have been required to file with the Commission 
pursuant to such Section 13(a) or 15(d) or any successor provision thereto if 
the Company were so required, such documents to be filed with the Commission 
on or prior to the respective dates (the "Required Filing Dates") by which 
the Company would have been required so to file such documents if the Company 
were so required. The Company shall also in any event (a) within 15 days of 
each Required Filing Date (i) transmit by mail to all holders of Notes, as 
their names and addresses appear in the Note Register, without cost to such 
holders, and (ii) file with the Trustee, copies of the annual reports, 
quarterly reports and other documents which the Company is required to file 
with the Commission pursuant to the preceding sentence, and (b) if, 
notwithstanding the preceding sentence, filing such documents by the Company 
with the Commission is not permitted under the Exchange Act, promptly upon 
written request supply copies of such documents to any prospective holder of 
Notes. 

Mergers, Consolidations and Certain Sales of Assets 

   The Company will not consolidate or merge with or into any Person, or 
sell, assign, lease, convey or otherwise dispose of (or cause or permit any 
Restricted Subsidiary to sell, assign, lease, convey or otherwise dispose of 
(however effected, including, without limitation, by merger or 
consolidation)) all or substantially all of the Company's assets (determined 
on a consolidated basis for the Company and the Restricted Subsidiaries), 
whether as an entirety or substantially an entirety in one transaction or a 
series of related transactions, including by way of liquidation or 
dissolution, to any Person unless, in each such case: (i) the entity formed 
by or surviving any such consolidation or merger (if other than the Company 
or such Restricted Subsidiary, as the case may be), or to which such sale, 
assignment, lease, conveyance or other disposition shall have been made (the 
"Surviving Entity"), is a corporation organized and existing under the laws 
of the United States, any state thereof or the District of Columbia; (ii) the 
Surviving Entity assumes by supplemental indenture all of the obligations of 
the Company on the Notes and under the Indenture and the Registration Rights 
Agreement (upon which assumption the Company will be discharged of any and 
all obligations on the Notes and under the Indenture and the Registration 
Rights Agreement); (iii) immediately after giving effect to such transaction 
and the use of any net proceeds therefrom on a pro forma basis, the Company 
or the Surviving Entity, as the case may be, (A) shall have a Consolidated 
Net Worth equal to or greater than the Consolidated Net Worth of the Company 
immediately prior to such transaction and (B) could Incur at least $1.00 of 
additional Indebtedness pursuant to clause (i) of the provisions of the 
Indenture described under "--Limitation on Incurrence of Indebtedness;" (iv) 
immediately before and after giving effect to such transaction and treating 
any Indebtedness that becomes an obligation of the Company or any Restricted 
Subsidiary as a result of such transaction as having been Incurred by the 
Company or such Restricted Subsidiary, as the case may be, at the time of the 
transaction, no Default shall have occurred and be continuing; and (v) if, as 
a result of any such transaction, property or assets of the Company or a 
Restricted Subsidiary would become subject to a Lien not excepted from the 
provisions of the Indenture described under "--Limitation on Liens," the 
Company, Restricted Subsidiary or the Surviving Entity, as the case may be, 
shall have secured the Notes or its Guarantee, as applicable, as required by 
said covenant. The provisions of this paragraph shall not apply to any merger 
of a Restricted Subsidiary with or into the Company or a Wholly Owned 
Subsidiary or any transaction pursuant to which a Guarantor is to be released 

                               47           

in accordance with the terms of its Guarantee and the Indenture in connection 
with any transaction complying with the provisions of the Indenture described 
under "--Limitation on Certain Asset Dispositions." 

EVENTS OF DEFAULT 

   The following are Events of Default under the Indenture: 

     (a) failure to pay principal of any Note when due (whether or not 
    prohibited by the provisions of the Indenture described under 
    "--Subordination"); 

     (b) failure to pay any interest on any Note when due, continued for 30 
    days (whether or not prohibited by the provisions of the Indenture 
    described under "--Subordination"); 

     (c) default in the payment of principal of and interest on Notes required 
    to be purchased pursuant to an Offer to Purchase as described under 
    "--Change of Control" or "--Covenants -- Limitation on Certain Asset 
    Dispositions" when due and payable (whether or not prohibited by the 
    provisions of the Indenture described under "--Subordination"); 

     (d) failure to perform or comply with any of the provisions described 
    under "--Covenants -- Mergers, Consolidations and Certain Sales of 
    Assets"; 

     (e) failure to perform any other covenant or agreement of the Company 
    under the Indenture or the Notes continued for 60 days after written 
    notice to the Company by the Trustee or holders of at least 25% in 
    aggregate principal amount of outstanding Notes; 

     (f) default under the terms of one or more instruments evidencing or 
    securing Indebtedness of the Company or any Restricted Subsidiary having 
    an outstanding principal amount of $10.0 million or more individually or 
    in the aggregate that has resulted in the acceleration of the payment of 
    such Indebtedness or failure to pay principal when due at the stated final 
    maturity of any such Indebtedness; 

     (g) the rendering of a final judgment or judgments (not subject to 
    appeal) against the Company or any Restricted Subsidiary in an amount of 
    $10.0 million or more which remains undischarged or unstayed for a period 
    of 60 days after the date on which the right to appeal has expired; 

     (h) certain events of bankruptcy, insolvency or reorganization affecting 
    the Company or any Restricted Subsidiary; and 

     (i) any Guarantee, ceases to be in full force and effect or is declared 
    null and void and unenforceable or is found to be invalid or any Guarantor 
    denies its liability under its Guarantee (other than by reason of a 
    release of such Guarantor from its Guarantee in accordance with the terms 
    of the Indenture and such Guarantee). 

   If an Event of Default (other than an Event of Default with respect to the 
Company described in clause (h) of the preceding paragraph) shall occur and 
be continuing, either the Trustee or the Holders of at least 25% in aggregate 
principal amount of the outstanding Notes may accelerate the maturity of all 
Notes; provided, however, that after such acceleration, but before a judgment 
or decree based on acceleration, the Holders of a majority in aggregate 
principal amount of outstanding Notes may, under certain circumstances, 
rescind and annul such acceleration if all Defaults, other than the 
non-payment of accelerated principal, have been cured or waived as provided 
in the Indenture; provided, however, that so long as the Senior Credit 
Facility shall be in full force and effect, if an Event of Default shall have 
occurred and be continuing (other than an Event of Default with respect to 
the Company described in clause (h) of the preceding paragraph), the Notes 
shall not become due and payable until the earlier to occur of (x) five 
business days following delivery of a written notice of such acceleration of 
the Notes to the agent under the Senior Credit Facility and (y) the 
acceleration of any Indebtedness under the Senior Credit Facility. If an 
Event of Default with respect to the Company described in clause (h) of the 
preceding paragraph occurs, the outstanding Notes will ipso facto become 
immediately due and payable without any declaration or other act on the part 
of the Trustee or any Holder. For information as to waiver of defaults, see 
"--Modification and Waiver." 

                               48           

   The Indenture provides that the Trustee shall, within 30 days after the 
occurrence of any Default with respect to the Notes, give the Holders notice 
of all uncured Defaults known to it; provided, however, that, except in the 
case of an Event of Default or a Default in payment with respect to the Notes 
or a Default in complying with "--Covenants -- Mergers, Consolidations and 
Certain Sales of Assets," the Trustee shall be protected in withholding such 
notice if and so long as the Board of Directors or responsible officers of 
the Trustee in good faith determine that the withholding of such notice is in 
the interest of the Holders. 

   No Holder will have any right to institute any proceeding with respect to 
the Indenture or for any remedy thereunder, unless the Trustee (i) shall have 
failed to act for a period of 60 days after receiving written notice of a 
continuing Event of Default by such Holder and a request to act by Holders of 
at least 25% in aggregate principal amount of Notes outstanding, (ii) shall 
have been offered indemnity reasonably satisfactory to it and (iii) shall not 
have received from the Holders of a majority in aggregate principal amount of 
the outstanding Notes a direction inconsistent with such request. However, 
such limitations do not apply to a suit instituted by a Holder of a Note for 
enforcement of payment of the principal of or interest on such Note on or 
after the respective due dates expressed in such Note. 

   The Company will be required to furnish to the Trustee annually a 
statement as to its performance of certain of its obligations under the 
Indenture and as to any default in such performance. 

SATISFACTION AND DISCHARGE OF INDENTURE; DEFEASANCE 

   The Company may terminate its substantive obligations and the substantive 
obligations of the Guarantors in respect of the Notes and the Guarantees by 
delivering all outstanding Notes to the Trustee for cancellation and paying 
all sums payable by the Company on account of principal of and interest on 
all Notes or otherwise. In addition to the foregoing, the Company may, 
provided that no Default has occurred and is continuing or would arise 
therefrom (or, with respect to a Default specified in clause (h) of "--Events 
of Default," any time on or prior to the 91st calendar day after the date of 
such deposit (it being understood that this condition shall not be deemed 
satisfied until after such 91st day)) and provided that no default under any 
Senior Debt would result therefrom, terminate its substantive obligations and 
the substantive obligations of the Guarantors in respect of the Notes and the 
Guarantees (except for the Company's obligation to pay the principal of and 
the interest on the Notes and such Guarantors' guarantee thereof) by (i) 
depositing with the Trustee, under the terms of an irrevocable trust 
agreement, money or United States Government Obligations sufficient (without 
reinvestment) to pay all remaining indebtedness on the Notes to maturity or 
to redemption, (ii) delivering to the Trustee either an Opinion of Counsel or 
a ruling directed to the Trustee from the Internal Revenue Service to the 
effect that the holders of the Notes will not recognize income, gain or loss 
for federal income tax purposes as a result of such deposit and termination 
of obligations, (iii) delivering to the Trustee an Opinion of Counsel to the 
effect that the Company's exercise of its option under this paragraph will 
not result in the Company, the Trustee or the trust created by the Company's 
deposit of funds pursuant to this provision becoming or being deemed to be an 
"investment company" under the Investment Company Act of 1940, as amended, 
and (iv) complying with certain other requirements set forth in the 
Indenture. In addition, the Company may, provided that no Default has 
occurred and is continuing or would arise therefrom (or, with respect to a 
Default specified in clause (h) of "--Events of Default," any time on or 
prior to the 91st calendar day after the date of such deposit (it being 
understood that this condition shall not be deemed satisfied until after such 
91st day)) and provided that no default under any Senior Debt would result 
therefrom, terminate all of its substantive obligations and all of the 
substantive obligations of the Guarantors in respect of the Notes and the 
Guarantees (including the Company's obligation to pay the principal of and 
interest on the Notes and such Guarantors' guarantee thereof) by (i) 
depositing with the Trustee, under the terms of an irrevocable trust 
agreement, money or United States Government Obligations sufficient (without 
reinvestment) to pay all remaining indebtedness on the Notes to maturity or 
to redemption, (ii) delivering to the Trustee either a ruling directed to the 
Trustee from the Internal Revenue Service to the effect that the holders of 
the Notes will not recognize income, gain or loss for federal income tax 
purposes as a result of such deposit and termination of obligations or an 
Opinion of Counsel based upon such a ruling addressed to the Trustee or a 
change in the applicable Federal tax law since the date of the Indenture, to 
such effect, (iii) delivering to the Trustee an Opinion of Counsel to the 
effect that the Company's exercise of its option under this paragraph will 
not result in the Company, the Trustee or the trust created by the Company's 
deposit of funds pursuant to this provision becoming or 

                               49           

being deemed to be an "investment company" under the Investment Company Act 
of 1940, as amended, and (iv) complying with certain other requirements set 
forth in the Indenture. 

   The Company may make an irrevocable deposit pursuant to this provision 
only if at such time it is not prohibited from doing so under the 
subordination provisions of the Indenture or certain covenants in the 
instruments governing Senior Debt, and the Company has delivered to the 
Trustee and any Paying Agent an Officers' Certificate to that effect. 

GOVERNING LAW 

   The Indenture, the Notes and the Guarantees are governed by the laws of 
the State of New York without regard to principles of conflicts of laws. 

MODIFICATION AND WAIVER 

   Modifications and amendments of the Indenture may be made by the Company 
and the Trustee with the consent of the holders of a majority in aggregate 
principal amount of the outstanding Notes; provided, however, that no such 
modification or amendment may, without the consent of the holder of each Note 
affected thereby, (a) change the Stated Maturity of the principal of any 
Note, (b) alter the optional redemption or repurchase provisions of any Note 
or the Indenture in a manner adverse to the holders of the Notes (other than 
the provisions of the Indenture relating to any Offer to Purchase required 
under the covenants described under "--Covenants -- Limitation on Certain 
Asset Dispositions" or "--Change of Control"), (c) reduce the principal 
amount of any Note, (d) reduce the rate of or extend the time for payment of 
interest on any Note, (e) change the place or currency of payment of 
principal of or interest on any Note, (f) modify any provisions of the 
Indenture relating to the waiver of past defaults (other than to add sections 
of the Indenture subject thereto) or the right of the holders to institute 
suit for the enforcement of any payment on or with respect to any Note or the 
Guarantee, or the modification and amendment of the Indenture and the Notes 
(other than to add sections of the Indenture or the Notes which may not be 
amended, supplemented or waived without the consent of each holder affected), 
(g) reduce the percentage of the principal amount of outstanding Notes 
necessary for amendment to or waiver of compliance with any provision of the 
Indenture or the Notes or for waiver of any Default, (h) waive a default in 
the payment of principal of, interest on, or redemption payment with respect 
to, any Note (except a rescission of acceleration of the Notes by the holders 
as provided in the Indenture and a waiver of the payment default that 
resulted from such acceleration), (i) modify the ranking or priority of the 
Notes or the Guarantee, or modify the definition of Senior Debt or Designated 
Senior Debt or amend or modify the subordination provisions of the Indenture 
in any manner adverse to the Holders, or (j) release any Guarantor from its 
Guarantee or the Indenture otherwise than in accordance with the Indenture 
(it being understood that nothing in this clause (j) requires the consent of 
the holders of more than a majority in aggregate principal amount of the 
outstanding Notes to amend or modify the provisions of the Indenture 
described under "--Covenants -- Limitation on Certain Asset Dispositions"); 
provided, further, however, that no such modification or amendment may, 
without the consent of the holders of three-fourths of the aggregate 
principal amount of Notes affected thereby, modify any of the provisions 
(including the definitions relating thereto) relating to any Offer to 
Purchase required under the covenant described under "--Change of Control" in 
a manner materially adverse to the Holders. 

   The holders of a majority in aggregate principal amount of the outstanding 
Notes, on behalf of all holders of Notes, may waive compliance by the Company 
with certain restrictive provisions of the Indenture. Subject to certain 
rights of the Trustee, as provided in the Indenture, (i) the holders of a 
majority in aggregate principal amount of the outstanding Notes, on behalf of 
all holders of Notes, may waive any past default under the Indenture, except 
a default in the payment of principal or interest or a default arising from 
failure to effect an Offer to Purchase required under the covenant described 
under "--Change of Control," or a default in respect of a provision that 
under the Indenture cannot be modified or amended without the consent of the 
holder of each outstanding Note affected and (ii) the holders of 
three-fourths of the aggregate principal amount of Notes affected thereby, on 
behalf of all holders of Notes, may waive a default arising from failure to 
effect an Offer to Purchase required under the covenant described under 
"--Change of Control." 

                               50           

NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, 
EMPLOYEES AND STOCKHOLDERS 

   No director, officer, employee or stockholder of the Company or any of its 
Subsidiaries, as such, will have any liability for any obligations of the 
Company or any Guarantor under the Notes, the Indenture, the Guarantees or 
any claim based on, in respect of, or by reason of, such obligations or their 
creation. Each Holder by accepting a Note waives and releases all such 
liability. The waiver and release are part of the consideration for issuance 
of the Notes. Such waiver may not be effective to waive liabilities under the 
federal securities laws, and it is the view of the Commission that such a 
waiver is against public policy. 

THE TRUSTEE 

   The Indenture provides that, except during the continuance of a Default, 
the Trustee will perform only such duties as are specifically set forth in 
the Indenture. During the existence of a Default, the Trustee will exercise 
such rights and powers vested in it under the Indenture and use the same 
degree of care and skill in their exercise as a prudent person would exercise 
under the circumstances in the conduct of such person's own affairs. The 
Indenture and provisions of the Trust Indenture Act incorporated by reference 
therein contain limitations on the rights of the Trustee, should it become a 
creditor of the Company, the Guarantors, or any other obligor upon the Notes, 
to obtain payment of claims in certain cases or to realize on certain 
property received by it in respect of any such claim as security or 
otherwise. The Trustee is permitted to engage in other transactions with the 
Company and its Affiliates; provided, however, that if it acquires any 
conflicting interest (as defined in the Indenture or in the Trust Indenture 
Act), it must eliminate such conflict or resign. 

CERTAIN DEFINITIONS 

   Set forth below is a summary of certain of the defined terms used in the 
Indenture or the Registration Rights Agreement. Reference is made to the 
Indenture or the Registration Rights Agreement for the full definition of all 
such terms, as well as any other terms used herein for which no definition is 
provided. 

   "Acquired Indebtedness" means Indebtedness of a Person (a) assumed in 
connection with an Acquisition of such Person or (b) existing at the time 
such Person becomes a Restricted Subsidiary or is merged or consolidated with 
or into the Company or any Restricted Subsidiary; provided, however, that 
such Indebtedness (x) was not Incurred in connection with, or in 
contemplation of, such Acquisition, such Person becoming a Restricted 
Subsidiary or such merger or consolidation and (y) is not recourse to any 
Person or assets other than such Person or its assets (including its 
Subsidiaries and their assets). 

   "Acquisition" means (i) any capital contribution (by means of transfers of 
cash or other property to others or payments for property or services for the 
account or use of others, or otherwise) by the Company or any Restricted 
Subsidiary to any other Person, or any acquisition or purchase of Capital 
Stock of any other Person by the Company or any Restricted Subsidiary, in 
either case pursuant to which such Person shall become a Restricted 
Subsidiary or shall be consolidated or merged with or into the Company or any 
Restricted Subsidiary or (ii) any acquisition by the Company or any 
Restricted Subsidiary of the assets of any person which constitute 
substantially all of an operating unit or line of business of such Person or 
which is otherwise outside of the ordinary course of business. 

   "Affiliate" of any specified Person means any other Person directly or 
indirectly controlling or controlled by or under direct or indirect common 
control with any specified Person. For purposes of this definition, "control" 
when used with respect to any Person means the power to direct the management 
and policies of such Person, directly or indirectly, whether through the 
ownership of voting securities, by contract or otherwise; and the terms 
"controlling" and "controlled" have meanings correlative to the foregoing. 

   "Asset Disposition" means any sale, transfer or other disposition 
(including, without limitation, by merger, consolidation or 
sale-and-leaseback transaction) of (i) shares of Capital Stock of any 
Restricted Subsidiary (other than directors' qualifying shares) or (ii) 
property or assets (other than any cash or Cash Equivalents) of the Company 
or any Restricted Subsidiary; provided, however, that an Asset Disposition 
shall not include (a) any such sale, transfer or other disposition to the 
Company or to any Restricted 

                               51           

Guarantor, (b) any sale, transfer or other disposition of defaulted 
receivables for collection or any sale, transfer or other disposition of 
property or assets in the ordinary course of business, (c) any sale, transfer 
or other disposition that does not (together with all related sales, 
transfers or dispositions) involve aggregate consideration in excess of $2.5 
million, (d) the granting of any Lien (or foreclosure thereon) to the extent 
that such Lien is granted in compliance with "--Covenants -- Limitation on 
Liens," (e) any Restricted Payment permitted by "--Covenants -- Limitation on 
Restricted Payments," (f) the sale, assignment, lease, conveyance or 
disposition or other transfer (however effected, including, without 
limitation, by merger or consolidation) of all or substantially all of the 
assets of the Company and the Restricted Subsidiaries, taken as a whole, in 
accordance with "--Covenants -- Mergers, Consolidations and Certain Sales of 
Assets" or (g) any disposition that constitutes a Change of Control. 

   "Atlantic Finance Loan" means any loan by Atlantic Finance to the Company 
which is due not later than the business day next following the day such loan 
was made; provided, however, that (x) the proceeds of such loan are deposited 
with a floor plan lender (including any bank holding Floor Plan Notes) and 
(y) such loan bears interest at a rate not higher than that accruing on such 
deposit. 

   "Average Life" means, as of the date of determination, with respect to any 
Indebtedness for borrowed money or Preferred Stock, the quotient obtained by 
dividing (i) the sum of the products of the number of years from the date of 
determination to the dates of each successive scheduled principal or 
liquidation value payments of such Indebtedness or Preferred Stock, 
respectively, and the amount of such principal or liquidation value payments, 
by (ii) the sum of all such principal or liquidation value payments. 

   "Bankruptcy Code" means Title 11, United States Code. 

   "Basket" has the meaning set forth in "--Covenants -- Limitation on 
Restricted Payments." 

   "Capital Lease Obligations" of any Person means the obligations to pay 
rent or other amounts under a lease of (or other Indebtedness arrangements 
conveying the right to use) real or personal property of such Person which 
are required to be classified and accounted for as a capital lease or 
liability on the face of a balance sheet of such Person in accordance with 
GAAP. The amount of such obligations shall be the capitalized amount thereof 
in accordance with GAAP and the stated maturity thereof shall be the date of 
the last payment of rent or any other amount due under such lease prior to 
the first date upon which such lease may be terminated by the lessee without 
payment of a penalty. 

   "Capital Stock" of any Person means any and all shares, interests, 
partnership interests, participations or other equivalents (however 
designated) of ownership of such Person. 

   "Cash Equivalents" means (i) marketable direct obligations issued or 
guaranteed by the United States of America, or any governmental entity or 
agency or political subdivision thereof (provided, that the full faith and 
credit of the United States of America is pledged in support thereof), 
maturing within one year of the date of purchase; (ii) commercial paper 
issued by corporations or financial institutions maturing within 180 days 
from the date of the original issue thereof, and rated "P-1" or better by 
Moody's Investors Service or "A-1" or better by Standard & Poor's Ratings 
Group or an equivalent rating or better by any other nationally recognized 
securities rating agency; (iii) certificates of deposit issued or acceptances 
accepted by or guaranteed by any bank or trust company organized under the 
laws of the United States of America or any state thereof or the District of 
Columbia, in each case having capital, surplus and undivided profits totaling 
more than $500,000,000, maturing within one year of the date of purchase; and 
(iv) money market funds substantially all of whose assets comprise securities 
of the type described in clauses (i) through (iii). 

   "Common Stock" of any Person means Capital Stock of such Person that does 
not rank prior, as to the payment of dividends or as to the distribution of 
assets upon any voluntary or involuntary liquidation, dissolution or winding 
up of such Person, to shares of Capital Stock of any other class of such 
Person. 

   "Consolidated Cash Flow Available For Fixed Charges" means for any period 
the Consolidated Net Income for such period (x) increased (to the extent 
Consolidated Net Income for such period has been reduced thereby) by the sum 
of (without duplication) (i) Consolidated Fixed Charges for such period, plus 
(ii) Consolidated Income Tax Expense for such period, plus (iii) the 
consolidated depreciation and amortization expense included in the income 
statement of the Company prepared in accordance with GAAP 

                               52           

for such period, plus (iv) any other non-cash charges to the extent deducted 
from or reflected in such Consolidated Net Income except for any non-cash 
charges that represent accruals of, or reserves for, cash disbursements to be 
made in any future accounting period and (y) decreased by interest income on 
deposits with floor plan lenders (including any bank holding Floor Plan 
Notes) made with proceeds of Atlantic Finance Loans. 

   "Consolidated Cash Flow Ratio" means for any period the ratio of (i) 
Consolidated Cash Flow Available for Fixed Charges for such period to (ii) 
Consolidated Fixed Charges for such period; provided, however, that all 
Incurrences and repayments of Indebtedness (including the Incurrence giving 
rise to such calculation and any repayments in connection therewith) and all 
dispositions (including discontinued operations) or acquisition of assets 
(other than in the ordinary course of business) made during or after such 
period and on or prior to the date of determination shall be given pro forma 
effect as if they occurred on the first day of such four-quarter period, 
except that Indebtedness under the Senior Credit Facility shall be deemed to 
be the average daily balance of such Indebtedness during such four-quarter 
period. Calculations of pro forma amounts in accordance with this definition 
may take into account a reduction of cost of goods sold in the amount of 
interest earned on financing proceeds deposited with any holder of Floor Plan 
Notes. 

   "Consolidated Fixed Charges" means for any period, without duplication, 
(a) the consolidated interest expense included in a consolidated income 
statement (without deduction of interest or finance charge income) of the 
Company and the Restricted Subsidiaries for such period calculated on a 
consolidated basis in accordance with GAAP (it being understood that the 
foregoing does not include interest on Floor Plan Notes), but excluding (x) 
the amortization of deferred financing costs and (y) interest on Atlantic 
Finance Loans, and (b) dividend requirements of the Company and the 
Restricted Subsidiaries with respect to Disqualified Stock and with respect 
to all other Preferred Stock of Restricted Subsidiaries (in each case (i) 
whether in cash or otherwise (except dividends payable solely in shares of 
Capital Stock (other than any Disqualified Stock) of the Company or any 
Restricted Subsidiary) and (ii) other than dividends with respect to Capital 
Stock held by the Company or any Restricted Guarantor) paid, declared, 
accrued or accumulated during such period times, in the case of this clause 
(b), a fraction the numerator of which is one and the denominator of which is 
one minus the then effective consolidated Federal, state and local income tax 
rate of the Company, expressed as a decimal. 

   "Consolidated Income Tax Expense" means for any period the consolidated 
provision for income taxes of the Company and the Restricted Subsidiaries for 
such period calculated on a consolidated basis in accordance with GAAP. 

   "Consolidated Net Income" means for any period the consolidated net income 
(or loss) of the Company and the Restricted Subsidiaries for such period 
determined on a consolidated basis in accordance with GAAP; provided, 
however, that there shall be excluded therefrom (a) the net income (or loss) 
of any Person acquired by the Company or any Restricted Subsidiary in a 
pooling-of-interests transaction for any period prior to the date of such 
transaction, (b) the net income (or loss) of any Restricted Subsidiary (other 
than any Guarantor) which is then subject to restrictions that prevent or 
limit the payment of dividends or the making of distributions to such Person 
to the extent of such restrictions (regardless of any waiver thereof), (c) 
non-cash gains and losses due solely to fluctuations in currency values, (d) 
the net income (or loss) of any Person that is not a Restricted Subsidiary, 
except to the extent of the amount of dividends or other distributions 
representing the Company's proportionate share of such Person's net income 
for such period actually paid in cash to the Company by such Person during 
such period, (e) other than for calculating the Basket, gains or losses on 
Asset Dispositions by the Company or any Restricted Subsidiary, (f) other 
than for calculating the Basket, all extraordinary or non-recurring gains or 
losses determined in accordance with GAAP, (g) the effect of FASB 52 
(hyperinflationary accounting) and interpretations by the Commission thereof 
and (h) in the case of a successor to the Company by consolidation or merger 
or as a transferee of the Company's assets, any earnings (or losses) of the 
successor corporation prior to such consolidation, merger or transfer of 
assets. 

   "Consolidated Net Worth" of any Person means the consolidated 
stockholders' equity of such Person, determined on a consolidated basis in 
accordance with GAAP, less (without duplication) amounts attributable to 
Disqualified Stock of such Person or attributable to Unrestricted 
Subsidiaries. 

                               53           

   "Continuing Director" means a director who either was a member of the 
Board of Directors of the Company on the Issue Date or who became a director 
of the Company subsequent to the Issue Date and whose election, or nomination 
for election by the Company's stockholders, was duly approved by a majority 
of the Continuing Directors then on the Board of Directors of the Company, 
either by a specific vote or by approval of the proxy statement issued by the 
Company on behalf of the entire Board of Directors of the Company in which 
such individual is named as nominee for director. 

   "Currency Agreement" means, with respect to any Person, any foreign 
exchange contract, currency swap agreement or other similar agreement or 
arrangement, which may include the use of derivatives, designed to protect 
such Person against, or to expose such Person to, fluctuations in currency 
values. 

   "Default" means any event that is, or after notice or lapse of time or 
both would become, an Event of Default. 

   "Designated Senior Debt" means (i) so long as the Senior Credit Facility 
is in effect, the Senior Debt incurred thereunder and (ii) any other Senior 
Debt which has at the time of initial issuance an aggregate outstanding 
principal amount in excess of $25 million which has been so designated as 
Designated Senior Debt by the Board of Directors of the Company at the time 
of initial issuance in a resolution delivered to the Trustee. 

   "Disinterested Director" means a member of the Board of Directors of the 
Company who does not have any material direct or indirect financial interest 
in or with respect to the transaction being considered. 

   "Disqualified Stock" of any Person means any Capital Stock of such Person 
which, by its terms (or by the terms of any security into which it is 
convertible or for which it is exchangeable), or upon the happening of any 
event, matures or is mandatorily redeemable, pursuant to a sinking fund 
obligation or otherwise, or is redeemable at the option of the holder 
thereof, in whole or in part, on or prior to the final maturity of the Notes; 
provided, however, that any such Capital Stock that so matures or is 
redeemable in part shall be deemed Disqualified Stock only to the extent that 
it so matures or is so redeemable. 

   "Exchange Act" means the Securities Exchange Act of 1934, as amended, and 
the rules and regulations promulgated by the Commission thereunder. 

   "Fair Market Value" means, with respect to any asset, the price (after 
taking into account any liabilities relating to such assets) which could be 
negotiated in an arm's-length transaction, for cash, between a willing seller 
and a willing and able buyer, neither of which is under any compulsion to 
complete the transaction; provided, however, that the Fair Market Value of 
any such asset or assets shall be determined conclusively (i) for any 
determination pursuant to the covenant described under "--Covenants -- 
Limitation on Restricted Payments" or "--Covenants -- Limitation on Certain 
Asset Dispositions," by the Board of Directors of the Company acting in good 
faith, which determination shall be evidenced by a resolution of such Board 
delivered to the Trustee, and (ii) for any other determination, by an officer 
of the Company acting in good faith. 

   "Floor Plan Notes" means Indebtedness of the Company or any Restricted 
Subsidiary all of the proceeds of which are used to purchase vehicles and/or 
vehicle parts and supplies to be sold in the ordinary course of business of 
the Company and the Restricted Subsidiaries. 

   "GAAP" means generally accepted accounting principles, consistently 
applied, as in effect on the Issue Date in the United States of America, as 
set forth in the opinions and pronouncements of the Accounting Principles 
Board of the American Institute of Certified Public Accountants and 
statements and pronouncements of the Financial Accounting Standards Board or 
in such other statements by such other entity as is approved by a significant 
segment of the accounting profession in the United States. 

   "Guarantee" means a guarantee of the Notes by a Guarantor under the 
Indenture. 

   "guarantee" means, as applied to any obligation, (i) a guarantee (other 
than by endorsement of negotiable instruments for collection in the ordinary 
course of business), direct or indirect, in any manner, of any part or all of 
such obligation and (ii) an agreement, direct or indirect, contingent or 
otherwise, the practical effect of which is to assure in any way the payment 
or performance (or payment of damages in the 

                               54           

event of non-performance) of all or any part of such obligation, including, 
without limiting the foregoing, the payment of amounts drawn down by letters 
of credit. A guarantee shall include, without limitation, any agreement to 
maintain or preserve any other Person's financial condition or to cause any 
other Person to achieve certain levels of operating results. It is understood 
that the obligations of the Company under the Support Agreement dated as of 
June 14, 1996 between the Company and Atlantic Auto Second Funding 
Corporation constitute a guarantee for purposes of the Indenture only to the 
extent of the accrued liability, if any, of the Company for any breach of the 
representations and warranties of Atlantic Finance contained in Section 3.2 
of the Purchase Agreement dated as of June 14, 1996 between Atlantic Auto 
Second Funding Corporation and Atlantic Finance, and that obligations of the 
Company under similar agreements will constitute a guarantee for purposes of 
the Indenture only to the extent of similar accrued liabilities. 

   "Guarantor" means (i) each Subsidiary of the Company that, on the Issue 
Date, is an obligor (including as guarantor) under, or in respect of, the 
Senior Credit Facility and (ii) each Subsidiary of the Company that pursuant 
to the terms of the Indenture executes a supplemental indenture to the 
Indenture as a Guarantor, in each case, until such Subsidiary is released 
from its Guarantee. 

   "Incur" means, with respect to any Indebtedness or other obligation of any 
Person, to create, issue, incur (including by conversion, exchange or 
otherwise), assume, guarantee or otherwise become liable in respect of such 
Indebtedness or other obligation or the recording, as required pursuant to 
GAAP or otherwise, of any such Indebtedness or other obligation on the 
balance sheet of such Person (and "Incurrence," "Incurred" and "Incurring" 
shall have meanings correlative to the foregoing). Indebtedness of any Person 
or any of its Subsidiaries existing at the time such Person becomes a 
Restricted Subsidiary (or is merged into or consolidates with the Company or 
any Restricted Subsidiary), whether or not such Indebtedness was incurred in 
connection with, or in contemplation of, such Person becoming a Restricted 
Subsidiary (or being merged into or consolidated with the Company or any 
Restricted Subsidiary), shall be deemed Incurred at the time any such Person 
becomes a Restricted Subsidiary or merges into or consolidates with the 
Company or any Restricted Subsidiary. Neither the accrual of interest, nor 
the accretion of accreted value, shall be deemed to be an Incurrence. 

   "Indebtedness" means (without duplication), with respect to any Person, 
whether recourse is to all or a portion of the assets of such Person and 
whether or not contingent, (i) all indebtedness of such Person for money 
borrowed, (ii) all indebtedness of such Person evidenced by bonds, 
debentures, notes or other similar instruments, including obligations 
incurred in connection with the acquisition of property, assets or 
businesses, (iii) every reimbursement obligation of such Person with respect 
to letters of credit, bankers' acceptances or similar facilities issued for 
the account of such Person, (iv) all indebtedness of such Person issued or 
assumed as the deferred purchase price of property or services (but excluding 
trade accounts payable or accrued liabilities arising in the ordinary course 
of business), (v) every Capital Lease Obligation of such Person, (vi) every 
net obligation under interest rate swap or similar agreements or foreign 
currency hedge, exchange or similar agreements of such Person and (vii) every 
obligation of the type referred to in clauses (i) through (vi) of another 
Person and all dividends of another Person the payment of which, in either 
case, such Person has guaranteed or is responsible or liable for, directly or 
indirectly, as obligor, guarantor or otherwise. Indebtedness (a) shall 
include (without duplication) the liquidation preference and any mandatory 
redemption payment obligations in respect of any Disqualified Stock of the 
Company, and any Preferred Stock of a Subsidiary of the Company, (b) shall 
never be calculated taking into account any cash and cash equivalents held by 
such Person, (c) shall not include obligations arising from agreements of the 
Company or a Subsidiary to provide for indemnification, adjustment of 
purchase price, earn-out or other similar obligations, in each case, Incurred 
in connection with the acquisition or disposition of any business or assets 
of a Subsidiary, (d) which provides that an amount less than the principal 
amount thereof shall be due upon any declaration of acceleration thereof 
shall be deemed to be incurred or outstanding in an amount equal to the 
accreted value thereof at the date of determination determined in accordance 
with GAAP and (e) shall not be deemed to be Incurred upon the issuance of a 
guarantee by the Company, in connection with an Acquisition, of the price of 
its Common Stock, unless such guarantee is evidenced by a bond, debenture, 
note or similar instrument. 

   "Interest Rate Obligations" means, with respect to any Person, the 
obligations of such Person under (i) interest rate swap agreements, interest 
rate cap agreements and interest rate collar agreements, and (ii) other 
agreements or arrangements designed to protect such Person against, or to 
expose such Person to, fluctuations in interest rates. 

                               55           

   "interest" means, with respect to the Notes, the sum of any cash interest 
and any Additional Interest (as defined in the Registration Rights Agreement) 
on the Notes. 

   "Investment" by any Person means any direct or indirect loan, advance, 
guarantee or other extension of credit or capital contribution to (by means 
of transfers of cash or other property to others or payments for property or 
services for the account or use of others, or otherwise), or purchase or 
acquisition of Capital Stock, bonds, notes, debentures or other securities or 
evidence of Indebtedness issued by, any other Person. 

   "Issue Date" means July 23, 1997, the original issue date of the Notes. 

   "Issuers" means the Company and the Guarantors. 

   "Lien" means, with respect to any property or assets, any mortgage or deed 
of trust, pledge, hypothecation, assignment, security interest, lien, charge, 
easement (other than any easement not materially impairing usefulness or 
marketability), encumbrance, preference, priority or other security agreement 
with respect to such property or assets (including, without limitation, any 
conditional sale or other title retention agreement having substantially the 
same economic effect as any of the foregoing). 

   "Net Available Proceeds" from any Asset Disposition by any Person means 
cash or Cash Equivalents received (including by way of sale or discounting of 
a note, installment receivable or other receivable, but excluding any other 
consideration received (x) in the form of assumption by the acquirer of 
Indebtedness or other obligations relating to such properties or assets or 
(y) in any other non-cash form) therefrom by such Person, including any cash 
received by way of deferred payment or upon the monetization or other 
disposition of any non-cash consideration (including notes or other 
securities) received in connection with such Asset Disposition, net of (i) 
all legal, title and recording tax expenses, commissions, any relocation 
expenses incurred as a result thereof and other fees and expenses incurred 
and all federal, state, foreign and local taxes required to be accrued as a 
liability as a consequence of such Asset Disposition, (ii) all payments made 
by such Person or any of its Restricted Subsidiaries on, or in respect of, 
any Indebtedness (A) which is secured by such assets in accordance with the 
terms of any Lien upon or with respect to such assets or (B) which must, by 
the terms of such Lien or otherwise (including the obtaining of any necessary 
consent in respect thereof to such Asset Disposition) or by applicable law, 
be repaid as a result of such Asset Disposition, (iii) all payments made with 
respect to liabilities associated with the assets which are the subject of 
the Asset Disposition, including, without limitation, trade payables and 
other accrued liabilities, (iv) appropriate amounts to be provided by such 
Person or any Restricted Subsidiary thereof, as the case may be, as a reserve 
in accordance with GAAP against any liabilities associated with such assets 
and retained by such Person or any Restricted Subsidiary thereof, as the case 
may be, after such Asset Disposition, including, without limitation, 
liabilities under any indemnification obligations and severance and other 
employee termination costs associated with such Asset Disposition, until such 
time as such amounts are no longer reserved or such reserve is no longer 
necessary (at which time any remaining amounts will become Net Available 
Proceeds to be allocated in accordance with the provisions of the second and 
third sentences under 
"--Covenants -- Limitation on Certain Asset Dispositions") and (v) all 
distributions and other payments made to minority interest holders in 
Restricted Subsidiaries of such Person or joint ventures as a result of such 
Asset Disposition. 

   "Net Investment" means, in respect of any Investment and the issuer 
thereof (and its Subsidiaries), the excess of (i) the aggregate amount of all 
Investments made therein by the Company or any Restricted Subsidiary on or 
after the Issue Date (including the Fair Market Value of all such Investments 
not made in cash or Cash Equivalents, valued at the time of each such 
Investment) over (ii) the aggregate amount returned in cash or Cash 
Equivalents on or with respect to Investments in such Person (whenever such 
Investment was made) whether through the sale or other disposition of the 
Investment in such Person (or portion thereof) or through interest payments, 
principal payments, dividends or other distributions or payments; provided, 
however, that such payments or distributions shall not be (and have not been) 
included in clause (3) (d) of the first paragraph described under 
"--Covenants -- Limitation on Restricted Payments." 

   "Offer to Purchase" means a written offer (the "Offer") sent by the 
Company by first class mail, postage prepaid, to each holder at his address 
appearing in the register for the Notes on the date of the Offer offering 

                               56           

to purchase up to the principal amount of Notes specified in such Offer at 
the purchase price specified in such Offer (as determined pursuant to the 
Indenture). Unless otherwise required by applicable law, the Offer shall 
specify an expiration date (the "Expiration Date") of the Offer to Purchase 
which shall be not less than 30 days nor more than 60 days after the date of 
such Offer and a settlement date (the "Purchase Date") for purchase of Notes 
within five Business Days after the Expiration Date. The Company shall notify 
the Trustee in writing at least 15 Business Days (or such shorter period as 
is acceptable to the Trustee) prior to the mailing of the Offer of the 
Company's obligation to make an Offer to Purchase, and the Offer shall be 
mailed by the Company or, at the Company's written request, by the Trustee in 
the name and at the expense of the Company. The Offer shall contain all the 
information required by applicable law to be included therein. The Offer 
shall contain all instructions and materials necessary to enable such holders 
to tender Notes pursuant to the Offer to Purchase. The Offer shall also 
state: 

     (i) the Section of the Indenture pursuant to which the Offer to Purchase 
    is being made; 

     (ii) the Expiration Date and the Purchase Date; 

     (iii) the aggregate principal amount of the outstanding Notes offered to 
    be purchased by the Company pursuant to the Offer to Purchase (including, 
    if less than 100%, the manner by which such amount has been determined 
    pursuant to the Section of the Indenture requiring the Offer to Purchase) 
    (the "Purchase Amount"); 

     (iv) the purchase price to be paid by the Company for each $1,000 
    aggregate principal amount of Notes accepted for payment (as specified 
    pursuant to the Indenture) (the "Purchase Price"); 

     (v) that the holder may tender all or any portion of the Notes registered 
    in the name of such holder and that any portion of a Note tendered must be 
    tendered in an integral multiple of $1,000 principal amount; 

     (vi) the place or places where Notes are to be surrendered for tender 
    pursuant to the Offer to Purchase; 

     (vii) that interest on any Note not tendered or tendered but not 
    purchased by the Company pursuant to the Offer to Purchase will continue 
    to accrue; 

     (viii) that on the Purchase Date the Purchase Price will become due and 
    payable upon each Note being accepted for payment pursuant to the Offer to 
    Purchase and that interest thereon shall cease to accrue on and after the 
    Purchase Date; 

     (ix) that each holder electing to tender all or any portion of a Note 
    pursuant to the Offer to Purchase will be required to surrender such Note 
    at the place or places specified in the Offer prior to the close of 
    business on the Expiration Date (such Note being duly endorsed by, or 
    accompanied by a written instrument of transfer in form satisfactory to 
    the Company and the Trustee duly executed by, the holder thereof or his 
    attorney duly authorized in writing); 

     (x) that holders will be entitled to withdraw all or any portion of Notes 
    tendered if the Company (or its Paying Agent) receives, not later than the 
    close of business on the fifth Business Day next preceding the Expiration 
    Date, a facsimile transmission or letter setting forth the name of the 
    holder, the principal amount of the Notes the holder tendered, the 
    certificate number of the Notes the holder tendered and a statement that 
    such holder is withdrawing all or a portion of his tender; 

     (xi) that (a) if Notes in an aggregate principal amount less than or 
    equal to the Purchase Amount are duly tendered and not withdrawn pursuant 
    to the Offer to Purchase, the Company shall purchase all such Notes and 
    (b) if Notes in an aggregate principal amount in excess of the Purchase 
    Amount are tendered and not withdrawn pursuant to the Offer to Purchase, 
    the Company shall purchase Notes having an aggregate principal amount 
    equal to the Purchase Amount on a pro rata basis (with such adjustments as 
    may be deemed appropriate so that only Notes in denominations of $1,000 or 
    integral multiples thereof shall be purchased); and 

     (xii) that in the case of any Holder whose Note is purchased only in 
    part, the Company shall execute and the Trustee shall authenticate and 
    deliver to the holder of such Note without service charge, 

                               57           

    a new Note or Notes, of any authorized denomination as requested by such 
    holder in writing, in an aggregate principal amount equal to and in 
    exchange for the unpurchased portion of the Note so tendered. 

   An Offer to Purchase shall be governed by and effected in accordance with 
the provisions above pertaining to any Offer. An Offer to Purchase may be 
conditioned on the consummation of the applicable Change of Control events. 
See "--Change of Control." 

   "Permitted Holder" means any of Trace International Holdings, Inc., 
Harvard Private Capital Group, Inc., Aeneas Venture Corporation and Apollo 
Advisors, L.P. and their Affiliates. 

   "Permitted Investments" means (i) Investments in Cash Equivalents; (ii) 
Investments representing Capital Stock or obligations issued to the Company 
or any Restricted Subsidiary in the course of the good faith settlement of 
claims against any other Person or by reason of a composition or readjustment 
of debt or a reorganization of any debtor of the Company or any Restricted 
Subsidiary; (iii) deposits, including interest-bearing deposits, maintained 
in the ordinary course of business in banks or with floor plan lenders; (iv) 
trade receivables and prepaid expenses, in each case arising in the ordinary 
course of business; provided, however, that such receivables and prepaid 
expenses would be recorded as assets of such Person in accordance with GAAP; 
(v) endorsements for collection or deposit in the ordinary course of business 
by such Person of bank drafts and similar negotiable instruments of such 
other Person received as payment for ordinary course of business trade 
receivables; (vi) any Interest Rate Obligations or Currency Agreements with 
an unaffiliated Person permitted by clause (iv) or (v) under "--Covenants -- 
Limitation on Incurrence of Indebtedness"; (vii) Investments received as 
consideration for an Asset Disposition in compliance with the provisions of 
the Indenture described under "--Covenants -- Limitation on Certain Asset 
Dispositions" above; (viii) Investments in the Company or any Restricted 
Subsidiary or any Person that after giving effect to such Investment will be 
a Restricted Subsidiary; and (ix) prepaid expenses and loans or advances to 
employees of the Company or any Restricted Subsidiary in the ordinary course 
of business. 

   "Permitted Refinancing" means, with respect to any Indebtedness, 
Indebtedness to the extent representing a Refinancing of such Indebtedness; 
provided, however, that (a) such Indebtedness does not exceed the amount of 
Indebtedness so Refinanced plus the amount of any premium required to be paid 
in connection with such Refinancing pursuant to the terms of the Indebtedness 
Refinanced or the amount of any premium reasonably determined by the issuer 
of such Indebtedness as necessary to accomplish such Refinancing by means of 
a tender offer, exchange offer or privately negotiated repurchase, plus the 
expenses of such issuer reasonably incurred in connection therewith, (b) in 
the case of any Refinancing of Indebtedness that is pari passu with the 
Notes, such Refinancing Indebtedness is made pari passu with or subordinate 
in right of payment to the Notes, and, in the case of any Refinancing of 
Indebtedness that is subordinate in right of payment to the Notes, such 
Refinancing Indebtedness is subordinate in right of payment to the Notes on 
terms no less favorable to the Holders than those contained in the 
Indebtedness being Refinanced, (c) the Refinancing Indebtedness by its terms, 
or by the terms of any agreement or instrument pursuant to which such 
Indebtedness is issued, does not have an Average Life that is less than the 
remaining Average Life of the Indebtedness being Refinanced and does not 
permit redemption or other retirement (including pursuant to any required 
offer to purchase to be made by the Company or a Restricted Subsidiary) of 
such Indebtedness at the option of the holder thereof prior to the final 
stated maturity of the Indebtedness being Refinanced, other than a redemption 
or other retirement at the option of the holder of such Indebtedness 
(including pursuant to a required offer to purchase made by the Company or a 
Restricted Subsidiary) which is conditioned upon a change of control of the 
Company pursuant to provisions substantially similar to those contained in 
the Indenture described under "--Change of Control" or which is otherwise on 
terms substantially similar to those in such Indebtedness being Refinanced 
and (d) such Refinancing Indebtedness is Incurred by the obligor on the 
Indebtedness being Refinanced or by the Company or any Restricted Guarantor. 

   "Person" means any individual, corporation, limited or general 
partnership, limited liability company, limited liability partnership, joint 
venture, association, joint stock company, trust, unincorporated organization 
or government or any agency or political subdivision thereof. 

                               58           

   "Preferred Stock" means Capital Stock of any Person of any class or 
classes (however designated) that ranks prior, as to the payment of dividends 
or as to the distribution of assets upon any voluntary or involuntary 
liquidation, dissolution or winding up of such Person, to Capital Stock of 
any other class of such Person. 

   "principal" of any Note, means principal of, and premium, if any, with 
respect to, such Note. 

   "Public Equity Offering" means an underwritten public offering of Common 
Stock of the Company pursuant to an effective registration statement filed 
under the Securities Act (excluding any registration statements filed on Form 
S-8 or any successor form). 

   "Purchase Date" has the meaning set forth in the definition of "Offer to 
Purchase." 

   "Purchase Money Debt" means Indebtedness of the Company or any Restricted 
Subsidiary Incurred for the purpose of financing all or any part of the 
purchase price, or the cost of construction or improvement, of any property; 
provided, however, that the aggregate amount of such Indebtedness shall not 
exceed the lesser of (x) the Fair Market Value of such property or (y) such 
purchase price or cost. 

   "Qualified Stock" means any Capital Stock of the Company other than 
Disqualified Stock. 

   "Refinance" means refinance, renew, extend, replace, defease or refund; 
and "Refinancing" and "Refinanced" have correlative meanings. 

   "Replacement Assets" means (x) properties and assets (other than cash or 
any Capital Stock or other security) that will be used in a business of the 
Company and the Restricted Subsidiaries conducted on the Issue Date or in a 
business reasonably related thereto or (y) Capital Stock of any Person that 
will become on the date of Acquisition thereof a Restricted Subsidiary as a 
result of such Acquisition. 

   "Restricted Guarantor" means, at any time of determination, a Restricted 
Subsidiary that is a Guarantor at such time. 

   "Restricted Subsidiary" means any Subsidiary of the Company other than an 
Unrestricted Subsidiary. 

   "Senior Credit Facility" means the Credit Agreement, dated as of March 20, 
1997, among the Company, as borrower, the guarantors party thereto, The Bank 
of Nova Scotia, as administrative agent, Morgan Guaranty Trust Company of New 
York, as documentation agent, and the lenders named therein, including any 
deferrals or Refinancings thereof, or amendments, modifications or 
supplements thereto (including, without limitation, any amendment increasing 
the amount borrowed thereunder), and any agreement providing therefor whether 
by or with the same or any other lender, creditors or group of creditors and 
including related notes, guarantee agreements and other instruments and 
agreements executed in connection therewith. 

   "Senior Debt" means, with respect to any Person at any date, (i) in the 
case of the Company or any Guarantor, all Indebtedness under the Senior 
Credit Facility, including principal, premium, if any, and interest on such 
Indebtedness and all other amounts due on or in connection with such 
Indebtedness, including all charges, fees and expenses, (ii) all other 
Indebtedness of such Person for borrowed money, including principal, premium, 
if any, and interest on such Indebtedness, unless the agreement or instrument 
under which such Indebtedness for money borrowed is created, incurred, 
assumed or guaranteed expressly provides that such Indebtedness for money 
borrowed is not senior or superior in right of payment to the Notes, and all 
Refinancings or amendments thereof and (iii) all interest on any Indebtedness 
referred to in clauses (i) and (ii) accruing during the pendency of any 
bankruptcy or insolvency proceeding, whether or not allowed or allowable as a 
claim in such proceeding thereunder. Notwithstanding the foregoing, Senior 
Debt of any Person shall not include (a) Indebtedness which is pursuant to 
its terms or any agreement or instrument relating thereto subordinated or 
junior in right of payment or otherwise to any other Indebtedness of such 
Person (including, without limitation, Indebtedness represented by 
Disqualified Stock); provided, however, that no Indebtedness shall be deemed 
to be subordinate or junior in right of payment or otherwise to any other 
Indebtedness of a Person solely by reason of such other Indebtedness being 
secured and such Indebtedness not being secured, (b) the Notes or the 
Guarantees, (c) any Indebtedness of such Person to any of its Subsidiaries, 
(d) Indebtedness Incurred in violation of the 

                               59           

provisions of the Indenture described under "--Covenants -- Limitation on 
Incurrence of Indebtedness," (e) obligations for goods, materials or services 
purchased or rendered in the ordinary course of business or obligations 
consisting of trade payables, (f) any liability for federal, state, local or 
other taxes owed or owing by such Person and (g) any Indebtedness which, when 
incurred and without respect to any election under Section 1111(b) of the 
Bankruptcy Code, is without recourse to such Person. 

   "Subordinated Indebtedness" of the Company or any Guarantor means any 
Indebtedness (whether outstanding on the date hereof or hereafter Incurred) 
which is by its terms expressly subordinate or junior in right of payment to 
the Notes or the Guarantee of such Guarantor, as the case may be. 

   "Subsidiary" of any Person means (i) a corporation more than 50% of the 
outstanding Voting Stock of which is owned, directly or indirectly, by such 
Person or by one or more other Subsidiaries of such Person or by such Person 
and one or more other Subsidiaries thereof or (ii) any other Person (other 
than a corporation) in which such Person, or one or more other Subsidiaries 
of such Person or such Person and one or more other Subsidiaries thereof, 
directly or indirectly, has at least a majority ownership and voting power 
relating to the policies, management and affairs thereof. 

   "Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at 
the time of determination has been designated an Unrestricted Subsidiary by 
the Board of Directors in the manner provided below and (ii) any Subsidiary 
of an Unrestricted Subsidiary. Any such designation by the Board of Directors 
will be evidenced to the Trustee by promptly filing with the Trustee a copy 
of the board resolution giving effect to such designation and an officers' 
certificate certifying that such designation complied with the foregoing 
provisions. The Indenture will provide that the Company shall not, and shall 
not permit any Restricted Subsidiary to, directly or indirectly, at any time, 
(a) be liable for any Indebtedness of any Unrestricted Subsidiary (other than 
in the form of an Investment therein in accordance with "--Covenants -- 
Limitation on Restricted Payments") or (b) be liable for any Indebtedness 
that provides that the holder thereof may (upon notice, lapse of time or 
both) declare a default thereon or cause the payment thereof to be 
accelerated or payable prior to its stated final maturity upon the occurrence 
of a default with respect to any Indebtedness of any Unrestricted Subsidiary. 
The Board of Directors may redesignate any Unrestricted Subsidiary to be a 
Restricted Subsidiary; provided, however, that (i) no Default shall have 
occurred and be continuing and (ii) Indebtedness of such Unrestricted 
Subsidiary and all Liens on any asset of such Unrestricted Subsidiary 
outstanding immediately following such redesignation would, if Incurred at 
such time, be permitted to be Incurred under the Indenture. As of the Issue 
Date, Atlantic Finance was designated an Unrestricted Subsidiary. 

   "Voting Stock" of any Person means the Capital Stock of such Person which 
ordinarily has voting power for the election of directors (or persons 
performing similar functions) of such Person, whether at all times or only so 
long as no senior class of securities has such voting power by reason of any 
contingency. 

   "Wholly Owned Subsidiary" means a Restricted Subsidiary, all of the 
outstanding Capital Stock or other ownership interests of which (other than 
directors' qualifying shares) shall at the time be owned by the Company 
and/or by one or more Wholly Owned Subsidiaries. 

BOOK-ENTRY; DELIVERY AND FORM 

   The certificates representing the New Notes will be issued in fully 
registered form without interest coupons (each, a "Global Note"). Upon 
issuance, each Global Note will be deposited with, or on behalf of, The 
Depository Trust Company (the "Depositary") and registered in the name of 
Cede & Co., as nominee of the Depositary, and the Depositary or its custodian 
will credit, on its internal system, the respective principal amount of the 
individual beneficial interests represented by each Global Note to the 
accounts of persons who have accounts with the Depositary. Ownership of 
beneficial interests in a Global Note will be limited to persons who have 
accounts with the Depositary ("participants") or persons who hold interests 
through participants. Ownership of beneficial interests in a Global Note will 
be shown on, and the transfer of that ownership will be effected only 
through, records maintained by the Depositary or its nominee (with respect to 
interests of participants) and the records of participants (with respect to 
interests of persons other than participants). 

                               60           

   So long as the Depositary, or its nominee, is the registered holder of a 
Global Note, the Depositary or such nominee, as the case may be, will be 
considered the sole owner or holder of the Notes represented by such Global 
Note for all purposes under the Indenture and the Notes. No beneficial owner 
of an interest in a Global Note will be able to transfer that interest except 
in accordance with the Depositary's applicable procedures. 

   Payments of the principal of, and interest on, the Global Notes will be 
made to the Depositary or its nominee, as the case may be, as the registered 
owner thereof. None of the Company, the Trustee or any Paying Agent will have 
any responsibility or liability for any aspect of the records relating to or 
payments made on account of beneficial ownership interests in the Global 
Notes or for maintaining, supervising or reviewing any records relating to 
such beneficial ownership interests. 

   The Company expects that the Depositary or its nominee, upon receipt of 
any payment of principal or interest in respect of a Global Note, will credit 
participants' accounts with payments in amounts proportionate to their 
respective beneficial interests in the principal amount of such Global Note 
as shown on the records of the Depositary or its nominee. The Company also 
expects that payments by participants to owners of beneficial interests in 
such Global Note held through such participants will be governed by standing 
instructions and customary practices, as is now the case with securities held 
for the accounts of customers registered in the name of nominees for such 
customers. Such payments will be the responsibility of such participants. 
Transfers between participants in the Depositary will be effected in the 
ordinary way in accordance with the Depositary's rules and will be settled in 
same-day funds. 

   The Depositary has advised the Company that it will take any action 
permitted to be taken by a holder of Notes (including the presentation of 
Notes for exchange as described below) only at the direction of one or more 
participants to whose accounts an interest in the Global Notes is credited 
and only in respect of such portion of the aggregate principal amount of 
Notes as to which such participant or participants has or have given such 
direction. 

   The Depositary has advised the Company as follows: the Depositary is a 
limited purpose trust company organized under the laws of the State of New 
York, a "banking organization" within the meaning of New York Banking Law, a 
member of the Federal Reserve System, a "clearing corporation" within the 
meaning of the Uniform Commercial Code and a "Clearing Agency" registered 
pursuant to the provisions of Section 17A of the Exchange Act. The Depositary 
was created to hold securities for its participants and facilitate the 
clearance and settlement of securities transactions between participants 
through electronic book-entry changes in accounts of its participants, 
thereby eliminating the need for physical movement of certificates. 
Participants include securities brokers and dealers, banks, trust companies 
and clearing corporations and certain other organizations. Indirect access to 
the Depositary system is available to others such as banks, brokers, dealers 
and trust companies that clear through or maintain a custodial relationship 
with a participant, either directly or indirectly ("indirect participants"). 

   Although the Depositary has agreed to the foregoing procedures in order to 
facilitate transfers of interests in the Global Notes among participants of 
the Depositary, it is under no obligation to perform or continue to perform 
such procedures, and such procedures may be discontinued at any time. Neither 
the Company nor the Trustee will have any responsibility for the performance 
by the Depositary or its participants or indirect participants of their 
respective obligations under the rules and procedures governing their 
operations. 

CERTIFICATED NOTES 

   If (i) the Depositary is at any time unwilling or unable to continue as a 
depositary for the Global Notes and a successor depositary is not appointed 
by the Company within 120 days or (ii) the Company in its sole discretion 
determines that the Global Notes (in whole but not in part) should be 
exchanged for certificated notes, the Company will issue certificated notes 
in exchange for the Global Notes. In addition, any person having a beneficial 
interest in a Global Note may, upon request to the Trustee following an Event 
of Default under the Indenture, exchange such beneficial interest for 
certificated notes. 

                               61           

                CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS 

   The following is a discussion of certain material U.S. federal income tax 
consequences of the acquisition, ownership and disposition of the Notes. 
Unless otherwise stated, this discussion addresses the U.S. federal income 
tax consequences to persons that hold New Notes as capital assets and that 
are (i) citizens or residents of the United States, (ii) corporations 
organized in or under the laws of the United States or any political 
subdivision thereof or therein, (iii) estates the income of which is subject 
to U.S. federal income tax regardless of its source or (iv) a trust (A) for 
taxable years beginning after December 31, 1996 (or ending after August 20, 
1996, if the trustee has made an applicable election), if a court within the 
United States is able to exercise primary supervision over the trust's 
administration and one or more U.S. fiduciaries have the authority to control 
all its substantial decisions or (B) for taxable years not described in 
clause (A), if the income of the trust is subject to U.S. federal income 
taxation regardless of its source ("U.S. Holders"). This discussion does not 
purport to address specific tax consequences that may be relevant to 
particular persons (including, for example, financial institutions, 
broker-dealers, insurance companies, tax-exempt organizations and persons in 
special situations, such as those who hold Notes as part of a straddle, 
hedge, conversion transaction or other integrated investment or investors in 
pass-through entities). This discussion does not address the tax consequences 
to persons that have a "functional currency" other than the U.S. dollar. In 
addition, this discussion does not address U.S. federal alternative minimum 
tax consequences or federal estate and gift tax consequences or any aspect of 
state, local or foreign taxation. This discussion is based upon the Internal 
Revenue Code of 1986, as amended (the "Code"), the Treasury Department 
regulations promulgated thereunder and administrative and judicial 
interpretations thereof, all of which are subject to change, possibly on a 
retroactive basis. 

   PROSPECTIVE PURCHASERS OF THE NOTES ARE URGED TO CONSULT THEIR TAX 
ADVISORS CONCERNING THE U.S. FEDERAL INCOME TAX CONSEQUENCES TO THEM OF 
ACQUIRING, OWNING AND DISPOSING OF THE NOTES, AS WELL AS THE APPLICATION OF 
STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS. 

THE EXCHANGE OFFER 

   The exchange of Old Notes for New Notes pursuant to the Exchange Offer 
should be treated as a continuation of the corresponding Old Notes because 
the terms of the New Notes are not materially different from the terms of the 
Old Notes. Accordingly, such exchange should not constitute a taxable event 
to U.S. Holders and, therefore, (i) no gain or loss should be realized by a 
U.S. Holder upon receipt of a New Note, (ii) the holding period of the New 
Note should include the holding period of the Old Note exchanged therefor and 
(iii) the adjusted tax basis of the New Note should be the same as the 
adjusted tax basis of the Old Note exchanged therefor immediately prior to 
the exchange. 

DEBT CHARACTERIZATION 

   The Company will treat the Notes as indebtedness for federal income tax 
purposes, and the following discussion assumes that such treatment is 
correct. If the Notes were not respected as debt, they likely would be 
treated as equity ownership interests in the Company. In such event, the 
Company would not be entitled to claim a deduction for interest payable on 
the Notes. As a result, the Company's after-tax cash flow and, consequently, 
its ability to make payments with respect to the Notes could be reduced. 

INTEREST INCOME 

   A U.S. Holder will recognize ordinary income when it receives or accrues 
interest on Notes in accordance with such U.S. Holder's method of tax 
accounting. 

The Old Notes were not issued with "original issue discount" ("OID") within 
the meaning of Section 1273 of the Code. A U.S. Holder that purchased an Old 
Note at a discount that exceeds a statutorily defined de minimis amount will 
be subject to the "market discount" rules of the Code, and a U.S. Holder that 
purchased an Old Note at a premium will be subject to the bond premium 
amortization rules of the Code. 

DISPOSITION OF NOTES 

   If a U.S. Holder sells or otherwise disposes of a Note in a taxable 
transaction (including redemption or retirement of the Note), the U.S. Holder 
will recognize gain or loss equal to the difference between the amount 
realized on the sale (excluding any such amount attributable to accrued but 
previously unrecognized 

                               62           

interest, which will be taxable as ordinary interest income) and the U.S. 
Holder's adjusted tax basis in the Note. A U.S. Holder's adjusted tax basis 
in a Note will be equal to the amount the U.S. Holder paid to purchase the 
Note, (i) increased by any unpaid interest that has accrued on the Note and 
any accrued market discount that, in each case, has previously been included 
by such U.S. Holder in taxable income and (ii) decreased by any bond premium 
previously amortized and any principal payments previously received by such 
U.S. Holder with respect to the Note. Subject to the market discount rules, 
any such gain or loss will be capital gain or loss, long-term or short-term 
depending upon whether the Holder has held the Note for more than one year. 
Under recently enacted legislation, the maximum regular individual U.S. 
federal income tax rate on capital gains is 20% for property held for more 
than 18 months and 28% for property held for more than one year but not more 
than 18 months. Capital gains on the sale of property held for one year or 
less are subject to U.S. federal income tax at ordinary income rates. Subject 
to certain limited exceptions, capital losses cannot be used to offset 
ordinary income. 

FOREIGN HOLDERS 

   For purposes of this discussion, a "Foreign Holder" is any holder of a 
Note other than a U.S. Holder. A Foreign Holder generally will not be subject 
to U.S. federal withholding tax on interest paid on the Notes so long as the 
Foreign Holder (i) is not actually or constructively a "10 percent 
shareholder" of the Company or a "controlled foreign corporation" with 
respect to which the Company is a "related person" within the meaning of the 
Code and (ii) provides an appropriate statement, signed under penalties of 
perjury, certifying that the beneficial owner of the Note is a Foreign Holder 
and providing that foreign person's name and address. If the information 
provided in this statement changes, the foreign person must so inform the 
payor within 30 days of such change. The statement generally must be provided 
in the year a payment occurs or in either of the two preceding years. If the 
foregoing conditions are not satisfied, then interest paid on the Notes will 
be subject to U.S. withholding tax at a rate of 30%, unless such rate is 
reduced or eliminated pursuant to an applicable tax treaty. 

Any capital gain a Foreign Holder realizes on the sale, redemption, 
retirement or other taxable disposition of a Note will be exempt from U.S. 
federal income and withholding tax, provided that (i) the gain is not 
effectively connected with the Foreign Holder's conduct of a trade or 
business in the United States, (ii) in the case of a Foreign Holder that is 
an individual, the Foreign Holder is not present in the United States for 183 
days or more in the taxable year of the disposition and (iii) the Foreign 
Holder is not subject to tax pursuant to the provisions of U.S. tax law 
applicable to certain U.S. expatriates. 

If the interest, gain or other income a Foreign Holder recognizes on a Note 
is effectively connected with the Foreign Holder's conduct of a trade or 
business in the United States, the Foreign Holder (although exempt from the 
withholding tax previously discussed if an appropriate statement is 
furnished) generally will be subject to U.S. federal income tax on the 
interest, gain or other income at regular federal income tax rates. In 
addition, if the Foreign Holder is a foreign corporation, it may be subject 
to a branch profits tax equal to 30% of its "effectively connected earnings 
and profits," as adjusted for certain items, unless it qualifies for a lower 
rate under an applicable tax treaty. 

INFORMATION REPORTING AND BACKUP WITHHOLDING 

   The Company will be required to report annually to the IRS, and to each 
U.S. Holder of record, the amount of interest paid on the Notes (and the 
amount, if any, withheld) for each calendar year, except as to exempt holders 
(generally, corporations and tax-exempt entities). Each U.S. Holder subject 
to the reporting requirements will be required to provide under penalties of 
perjury, a certificate containing the U.S. Holder's name, address, correct 
federal taxpayer identification number and a statement that the U.S. Holder 
is not subject to backup withholding. Should a nonexempt U.S. Holder fail to 
provide the required certificate, the Company or its paying agent will be 
required to withhold 31% of the interest and other payments on the Notes 
otherwise payable to the U.S. Holder and to remit the withheld amount to the 
IRS as a payment against the U.S. Holder's federal income tax liability. 

A Foreign Holder will generally be exempt from backup withholding and 
information reporting requirements, but may be required to comply with 
certification and identification procedures in order to obtain an exemption 
from backup withholding and information reporting. Any amount paid as backup 
withholding will be creditable against the Foreign Holder's U.S. Federal 
income tax liability. 

                               63           

                             PLAN OF DISTRIBUTION 

   Each Holder desiring to participate in the Exchange Offer will be required 
to represent, among other things, that (i) it is not an "affiliate" (as 
defined in Rule 405 of the Securities Act) of the Company, (ii) it is not 
engaged in, and does not intend to engage in, and has no arrangement or 
understanding with any person to participate in, a distribution of the New 
Notes and (iii) it is acquiring the New Notes in the ordinary course of its 
business (a Holder unable to make the foregoing representations is referred 
to as a "Restricted Holder"). A Restricted Holder will not be able to 
participate in the Exchange Offer and may only sell its Old Notes pursuant to 
a registration statement containing the selling securityholder information 
required by Item 507 of Regulation S-K under the Securities Act, or pursuant 
to an exemption from the registration requirement of the Securities Act. 

   Each broker-dealer (other than a Restricted Holder) that receives New 
Notes for its own account pursuant to the Exchange Offer (a "Participating 
Broker-Dealer") is required to acknowledge in the Letter of Transmittal that 
it acquired the Old Notes as a result of market-making activities or other 
trading activities and that it will deliver a prospectus in connection with 
the resale of such New Notes. Based upon interpretations by the staff of the 
Commission, the Company believes that New Notes issued pursuant to the 
Exchange Offer to Participating Broker-Dealers may be offered for resale, 
resold, and otherwise transferred by a Participating Broker-Dealer upon 
compliance with the prospectus delivery requirements, but without compliance 
with the registration requirements, of the Securities Act. The Company has 
agreed that for a period of 120 days following consummation of the Exchange 
Offer it will make this Prospectus available, for use in connection with any 
such resale, to any Participating Broker-Dealer that notifies the Company in 
the Letter of Transmittal that it may be subject to such prospectus delivery 
requirements. Such Participating Broker-Dealer must also undertake in the 
Letter of Transmittal to use its reasonable best efforts to notify the 
Company when, prior to the expiration of such 120-day period, it is no longer 
subject to such requirements. If the Company is not so notified by any 
Participating Broker-Dealers that they may be subject to such requirements or 
if it is later notified by all such Participating Broker-Dealers that they 
are no longer subject to such requirements, the Company will not be required 
to maintain the effectiveness of the Exchange Offer Registration Statement or 
to amend or supplement this Prospectus following the consummation of the 
Exchange Offer or following such date of notification, as the case may be. 
The Company believes that during such period of time, delivery of this 
Prospectus, as it may be amended or supplemented, will satisfy the prospectus 
delivery requirements of a Participating Broker-Dealer engaged in 
market-making or other trading activities. 

   Based upon interpretations by the staff of the Commission, the Company 
believes that New Notes issued pursuant to the Exchange Offer may be offered 
for resale, resold, and otherwise transferred by a Holder thereof (other than 
a Restricted Holder or a Participating Broker-Dealer) without compliance with 
the registration and prospectus delivery requirements of the Securities Act. 

The Company will not receive any proceeds from any sale of New Notes by 
broker-dealers. New Notes received by Participating Broker-Dealers for their 
own account pursuant to the Exchange Offer may be sold from time to time in 
one or more transactions in the over-the-counter market, in negotiated 
transactions, through the writing of options on the New Notes or a 
combination of such methods of resale, at market prices prevailing at the 
time of resale, at prices related to such prevailing market prices or at 
negotiated prices. Any such resale may be made directly to purchasers or to 
or through brokers or dealers who may receive compensation in the form of 
commissions or concessions from any such Participating Broker-Dealer and/or 
the purchasers of any such New Notes. Any Participating Broker-Dealer that 
resells New Notes may be deemed to be an "underwriter" within the meaning of 
the Securities Act. The Letter of Transmittal states that by acknowledging 
that it will deliver and by delivering a prospectus, a Participating 
Broker-Dealer will not be deemed to admit that it is an "underwriter" within 
the meaning of the Securities Act. 

The Company has agreed to pay all expenses incidental to the Exchange Offer 
other than commissions and concessions of any brokers or dealers and will 
indemnify holders of the Notes (including any broker-dealers) against certain 
liabilities, including liabilities under the Securities Act, as set forth in 
the Registration Rights Agreement. 

                               64           

                                LEGAL MATTERS 

   Certain legal matters in connection with the New Notes offered hereby will 
be passed upon for the Company and Guarantors by Willkie Farr & Gallagher, 
New York, New York. 

                                   EXPERTS 

   The consolidated balance sheets as of December 31, 1996 and 1995, and the 
consolidated statements of operations, stockholders' equity, and cash flows 
for each of the three years in the period ended December 31, 1996 of the 
Company, and the financial statements of Shannon Automotive Ltd., the 
Staluppi Automotive Group, Gary Hanna Nissan, Inc. and the Gene Reed 
Automotive Group, each of which is as of and for the year ended December 31, 
1996, incorporated by reference in this Registration Statement, have been 
incorporated herein in reliance on the reports of Coopers & Lybrand L.L.P., 
independent accountants, given on the authority of that firm as experts in 
accounting and auditing. 

                            AVAILABLE INFORMATION 

   The Company and the Guarantors have filed with the Commission a 
Registration Statement on Form S-4 (the "Registration Statement," which term 
shall include all amendments, exhibits, annexes and schedules thereto) 
pursuant to the Securities Act, and the rules and regulations promulgated 
thereunder, covering the New Notes being offered hereby. This Prospectus does 
not contain all the information set forth in the Registration Statement, 
certain parts of which are omitted in accordance with the rules and 
regulations of the Commission. Statements made in this Prospectus as to the 
contents of any contract, agreement or other document referred to in the 
Registration Statement are not necessarily complete. With respect to each 
such contract, agreement or other document filed as an exhibit to the 
Registration Statement, reference is made to the exhibit for a more complete 
description of the matter involved, and each such statement shall be deemed 
qualified in its entirety by such reference. 

The Company is subject to the informational reporting requirements of the 
Exchange Act and, in accordance therewith, files reports, proxy statements 
and other information with the Commission. Such reports, proxy statements and 
other information can be inspected and copied at the public reference 
facilities of the Commission at Room 1024, 450 Fifth Street, N.W., 
Washington, D.C. 20549 and at the regional offices of the Commission located 
at 7 World Trade Center, 13th Floor, Suite 1300, New York, New York 10048 and 
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, 
Illinois 60661. Copies of such material can also be obtained at prescribed 
rates by writing to the Public Reference Section of the Commission at 450 
Fifth Street, N.W., Washington, D.C. 20549 or its public reference facilities 
in New York, New York and Chicago, Illinois. Such material may also be 
accessed electronically by means of the Commission's Web site 
(http://www.sec.gov.). The Common Stock is listed on the New York Stock 
Exchange, Inc. at which such material may be inspected. 

The Company hereby undertakes to provide without charge to each person to 
whom a copy of this Prospectus is delivered, upon the written or oral request 
of such person, a copy of any and all documents incorporated by reference 
herein. See "Incorporation of Certain Documents by Reference." Such requests 
should be addressed to United Auto Group, Inc., 375 Park Avenue, New York, 
New York 10152, Attention: Secretary. The Company's Secretary may also be 
reached at (212) 230-0400. 

In the event that the Company ceases to be subject to the informational 
reporting requirements of the Exchange Act, the Company has agreed that, 
whether or not it is required to do so by the rules and regulations of the 
Commission, for so long as any of the Notes remain outstanding, it will 
furnish to the holders of the Notes and file with the Commission (unless such 
filings are not permitted under the Exchange Act) the quarterly and annual 
reports and other documents that would be required to be filed if the Company 
were subject to such reporting requirements. In addition, for so long as any 
of the Notes remain outstanding, the Company has agreed to make available to 
any beneficial owner of the Old Notes in connection with any sale thereof, 
the information required by Rule 144A(d)(4) under the Securities Act. 

                               65           


                       [United Auto Group, Inc. Logo]
 
                           UNITED AUTO GROUP, INC.